Famous Brands earnings warning as it counts the cost of Covid-19

Famous Brands says it expects its headline earnings for the six months ended 31 August to tank, dipping into a loss.

In a trading statement published on Friday (25 September) the group warned shareholders to expect headline earnings per share to drop from 159 cents per share in 2019, to a loss of 216 to 264 cents per share.

The decrease in HEPS relates primarily to operational losses due to the impact of the pandemic, Famous Brands said.

The company described the national lockdown and trading restrictions in its trading markets, including South Africa, as “extremely severe”.

“The announcement of the pandemic in March 2020 coincided with the first month of the Group’s review period, and its impact has been evident over the entire six months, in varying degrees, as the respective countries’ risk-adjusted strategies progressed from total lockdown to gradual easing of restrictions,” the company said.

Its supply chain business, which includes manufacturing and logistics, was hard hit by restrictions. Lamberts Bay Foods was the only manufacturing plant permitted to operate, because it was deemed as an essential service provider.

Other operational updates include:

  • Leading brands’ system-wide sales declined by 48.0%;
  • Like-for-like sales decreased 48.7%;
  • Signature brands’ system-wide sales deteriorated 70.1%;
  • Like-for-like sales reduced by 70.4%.
  • Manufacturing sales declined by 45%;
  • Logistics sales decreased by 46%; and
  • It managed to raise a R300 million contingency facility, which has not yet been used.

The group also renewed its cautionary announcement over the UK GBK Restaurants, which it dropped financial support for earlier in August 2020.

The group’s basic loss per share is expected to be within the range of 1,382 to 1,689 cents per share, compared to the prior comparable period’s basic earnings of 159 cents per share. This is attributed primarily to an impairment of R1.3 billion (net of tax) in relation to the Group’s investment in the GBK UK business.

This impairment means that GBK UK has now been impaired in full at Famous Brands Group level, it said.

“As deliberations in respect of this matter are still in progress, shareholders are advised to continue exercising caution when dealing in the company’s securities until a further announcement is made in this regard,” it said.

The final results for the six months ended will be released on 26 October.

Read: Famous Brands parts ways with Tashas café, but aims to increase Wimpy and Mugg & Bean deliveries

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Famous Brands earnings warning as it counts the cost of Covid-19