Famous Brands hopeful on UK burger chain. The restaurant group says remedial action taken at Gourmet Burger Kitchen should result in the chain adding value in time

Famous Brands is giving Gourmet Burger Kitchen (GBK) a facelift and has strengthened its management team after the upmarket burger chain reported an increased first-half loss.

The quick-service restaurant and supply chain group says management oversight at GBK has improved after it took steps to turn the chain around. It has also closed six stores under a targeted closure programme for distressed sites. Last week, it announced that GBK had entered a Company Voluntary Movement in a move that would ensure the financial viability and sustainability of the business.

GBK's operating loss tripled to 2.6 million in the six months to end-August from a year earlier. Due to the adverse trading conditions and sustained underperformance of the brand, it's impaired its investment by R874 million before tax.

The board is satisfied that the positive impact of remedial interventions underway in the operation and the inherent strength of the GBK brand will, in time, add value to the group," Famous Brands said. "The brand remains the leader in the premium burger category in the UK in terms of consumer sentiment, and management's focus is on re-establishing the gold standard across the entire value chain and customer journey to leverage that position."

Famous Brands said with the exception of its Coega Concentrate tomato paste plant, its operations in SA, the rest of Africa and the Middle East delivered good growth and a solid operating performance over the six-month period. It's also taken remedial measures at Coega, which reported an operating loss of R17.8 million due to underutilisation of capacity.

Group revenue rose 5.4% to R3.58 billion in the six months to end-August. Before accounting for the impairment, earnings before interest, tax, depreciation and amortisation increased by 4.8% to R526 million, while headline earnings per share rose 10.6% to 188c. However, the impairment resulted in a basic loss per share of 572c, down from earnings of 171c last year. It hasn't declared an interim dividend.

Famous Brands said it continued to comply with its financial covenants and meet its debt repayment obligations. Net debt decreased by 24% to R1.84 billion from a year earlier.

Its shares gained 1.9% to R102.60 yesterday.

Famous Brands: CVA process is a clear admission that not only is GBK in serious trouble, but there is no prospect of a buyer. And losses are not abating, with an operating loss of R45m matching that of the preceding 6mths. Impairment of R874m in addition to the R304m in FY18.

-- Karin Richards (@Richards_Karin) October 29, 2018

-FAMOUS BRANDS LTD HY HEPS 188 CENTS-CONTINUES TO COMPLY WITH FINANCIAL COVENANTS AND COMFORTABLY MEET DEBT REPAYMENT OBLIGATIONS-HY REV 3,583.6 MLN RAND, UP 5.4 PCT-NO DIVIDEND IS DECLARED FOR THE PERIOD UNDER REVIEW

-- Nick Kunze (@NickKunze2) October 29, 2018