Famous Brands profit plunges as it struggles to digest Gourmet Burger Kitchen
The company plans to exit some of its second-string brands where turnaround plans have not worked
Famous Brands, owner of Steers, Debonairs Pizza and Wimpy, reported its net profit in its 2018 financial year plunged to less than seventh of the prior year’s as it battled to digest its £120m acquisition of UK chain Gourmet Burger Kitchen (GBK).
Shareholders have not received a dividend since 2016, and Famous Brands said in its results for the year to end-February, released on Thursday morning, that it was skipping a dividend again while it whittled down its debt.
The acquisition of GBK more than doubled the UK’s revenue contribution to R1.6bn from R704m, helping the group’s overall revenue grow 23% to R7bn.
But the combination of GBK with its British Wimpy outlets switched the UK’s contribution into an operating loss of R45m from an operating profit of R55m, dragging the group’s overall operating profit down by 5% to R890m.
Finance costs nearly doubled, to R305m, while "nonoperational items" cut net profit by a further R373m. These were R121m in the prior year.
These costs contributed to Famous Brands’ bottom line plummeting to R63m from R455m.
"After several consecutive years of intense acquisition activity, management’s deliberate strategic focus during the year was on entrenching sustainable organic growth," Famous Brands CEO Darren Hele said in the results statement.
The group slowed its roll-out of new outlets during the reporting period, to 182 from 192 in the prior financial year.
It increased the number of restaurants it revamped to 248 from 231.
Famous Brands ended its 2018 financial year with 2,853 restaurants split between 25 different brands.
The group segments itself into "leading brands" — Steers, Debonairs Pizza, Wimpy, Mugg & Bean, Fishaways, Milky Lane, Fego Caffé and Wakaberry — and "signature brands", which include Europa, Giramundo, The Bread Basket, Juicy Lucy, Brewers Guild and McGinty’s.
Hele said its leading brands delivered solid results, but the group was exiting various signature brands "that, despite remedial efforts, offer no potential for growth under our stewardship".