Steers-owner Famous Brands faces earnings dip amid UK burger chain flop

Famous Brands informed shareholders today that it expects a significant decrease in earnings for the first half of the 2023 financial year, largely due to its failed UK burger chain. 

Famous Brands owns local brands such as Steers, Wimpy, Mugg & Bean, Debonairs and Fishaways.

The company said its basic earnings per share (BEPS) for the six months ended 31 August 2023 will differ by at least 20% from those reported for the six months ended 31 August 2022.

Famous Brands said it has continued to improve its revenue performance mainly due to further improvements across the value chain. 

However, the high levels of sustained load-shedding, related cost pressures and a challenging economic environment impacted the company’s profitability.

The reported headline earnings per share for the review period is expected to be between 221 cents and 178 cents per share, representing a change of between 3% and -17% compared to the prior period. 

The reported BEPS is expected to be between 225 cents and 174 cents per share, representing a decrease of between 13% and 33%. 

The reduction in BEPS is predominantly due to the Gourmet Burger Kitchen (GBK) liquidation dividend of R75 million received in August 2022. 

Famous Brands bought UK-based GBK in September 2016. However, the restaurant chain faced several challenges, including low consumer confidence following the UK’s exit from the EU and the Covid-19 pandemic.

In 2018, GBK was placed under a form of bankruptcy protection called a company voluntary arrangement. The chain also restructured, closing more than 20 stores, Business Day reported. 

In 2020, Famous Brands announced that GBK had entered into administration in accordance with the UK’s insolvency legislation. The company also said that it would not be able to provide the chain with any further financial assistance.

Business Day reported in 2020 that Famous Brands had impaired about R2.6 billion of its investment in GBK since 2018.

Excluding the GBK liquidation dividend, Famous Brands’ reported BEPS would have been between 180 cents and 217 cents per share for August 2022.

The company’s results for the six months ended 31 August 2023 will be published on or about Tuesday, 24 October 2023.