JSE-listed branded food services business Famous Brands reports that early 2020 Covid-19 lockdowns in South Africa impacted its franchise, master licence and company-owned restaurant business, with its “leading” or mainstream brands’ system-wide sales in South Africa having declined by 28.6% for the 12 months ended February 28, while like-for-like sales decreased by 29.1%.
System-wide sales refer to sales reported by all restaurants across the network, including new restaurants opened during the period.
Over the period, the group’s “signature” or niche brands’ system-wide sales deteriorated 66.6%, while like-for-like sales reduced by 55.1%.
Across its trading markets, in South Africa, the rest of Africa and the Middle East (AME) and the UK, Famous Brands says the financial impact of the Covid-19 global pandemic and resultant national lockdowns and trading restrictions has been severe.
The announcement of the Covid-19 Alert Level 5 lockdown in South Africa in March 2020 coincided with the first month of Famous Brands’ review period, and the company says its impact has been evident over the entire 12 months under review.
During the lockdowns, and in line with regulations, the group's South African and UK operations were shut in April 2020, apart from the South African retail division.
Prescribed restrictions in the AME region were slightly less onerous, affording some trading activity. The gradual easing of restrictions in South Africa and the UK in the first and second half of the reporting period enabled improved performance of the business while complying with regulations, notes Famous Brands.
In the context of less stringent trading restrictions, Famous Brands reports that the AME region delivered solid results, despite system-wide sales in this region having declined by 22.9%.
Famous Brands reports that its supply chain (manufacturing and logistics divisions), which supports the front-end brands division in South Africa, was particularly hard hit by restrictions. Compared with the prior corresponding period, manufacturing revenue declined by 24% while logistics revenue decreased by 27%.
The group's retail division, which supplies third-party retailers and wholesalers in South Africa with branded licensed products, was permitted to trade throughout the lockdown. Sales reported for the period were R151-million.
Famous Brands’ GBK Restaurants in the UK and Ireland, was placed into administration on October 14, 2020, in accordance with the insolvency legislation in the UK. As such, the group’s investment in GBK was impaired in full, at R1.3-billion, net of tax, when the group published its interim results for the six-month period ended August 31 2020.
Going forward, Famous Brands is awaiting the finalisation of the administration process being handled by the administrator. However, it reports that there will be no further operating losses impacting on the group’s results from the date on which GBK entered into administration as the group no longer has control over GBK.
Meanwhile, Famous Brands notes that in alignment with its three-year roadmap, and accelerated by the Covid-19 pandemic, the group’s focus over the review period was to rightsize the business, reduce costs, and preserve cash to facilitate balance sheet flexibility.