Brexit and Eskom trip up trade for Famous Brands

Fears of a hard or a no-deal Brexit have already spread beyond Britain’s borders in the shape of a Commonwealth cold, knocking the results of South Africa fast foods franchiser Famous Brands.

Speaking ahead of its results announcement, the successful multi-national enterprise primed shareholders for bad news on the back of what it termed adverse trading conditions in the UK.

Competition and cautious consumer spending in a market that’s holding its breath as Prime Minister Theresa May appears to be at sixes and sevens over a separation agreement with the EU, have all contributed to Famous Brands’ underperformance abroad.

Primary among reasons for its poor showing in the UK is Gourmet Burger, the UK franchise it acquired in 2016, ironically the same year British voters came out in favour of splitting from the common market.

Last year CEO Darren Hele said the company’s performance in the UK was entirely dependent on Brexit and now, as the UK’s self-selected moment of truth is at hand, Famous Brands is on the verge of reporting an operating loss of ₤2.6 million (R49.02m).

One of the contributors to the company’s struggles in the UK is the hardship it has experienced in securing better rental agreements, made worse by diminishing margins as consumers apply intensified discretionary spending ahead of Brexit and competitors further erode profits.

At home the company has also hardly fared better, recording losses of R874 million before tax.

Thankfully East Africa’s taste for Wimpy, Steers and Debonairs, all of them part of the Famous Brands group, have swelled the company’s earnings.

It nevertheless affected Famous Brands’ position on the bourse, cleaving 1.77% off its share price, representing a dip of 12% so far this year.

Most of it, said Hele, because of Brexit and Eskom’s failure to keep the home fires burning.

More News