Famous Brands takes impairment charge of $60 million as UK burger business struggles

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Famous Brands, a South African food chain owner, which owns Wimpy, Steers and Debonairs pizza said it will take a pre-tax impairment charge of $60 million. A decision which ended up reducing the company’s shares by 7 percent.

The impairment was blamed on the difficult trading conditions and the sustained underperformance of Famous Brands’ UK Gourmet Burger Kitchen (GBK) business. For six months ended 31 August 2018, Famous brands expects GBK to record an operating loss of 2.6million pounds, up from a loss of 872,000 pounds in the corresponding period last year.

Famous brands notes that the basic headline earnings per share (which strips out certain one-off items and is the most widely watched profit gauge in South Africa) will increase between 175 cents and 194 cents compared to the 170 cents recorded a year earlier. Famous Brands however reveals that basic earnings will turn into a loss of between 566 cents and 623 cents.

The South African food chain owner acquired Britain’s GBK in 2016, but its contribution to the company’s profitability has taken longer than initially anticipated. The business has been constrained by lower consumer spending in the context of Brexit, as disposable incomes come under pressure.

Britain’s BGK operating loss has also been caused by increased input costs, higher property rates in Britain, declining foot traffic in malls, which is exacerbated by the oversupply of restaurants as landlords continue to replace failing retailers with more food offerings.

 

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