Branded food services franchisor Famous Brands on Wednesday reported a basic loss a share of 480c for the year ended February 28, while basic headline earnings per share (HEPS) decreased to 319c.

This decrease in HEPS was attributable to an impairment of R873.9-million, relating to the Gourmet Burger Kitchen (GBK) UK business and one-off costs of R17.2-million related to the company voluntary agreement (CVA) completed at GBK UK during the period under review.

Additionally, an impairment of R25.5-million recognised in an associate company, in which Famous Brands has a minority stake, also impacted on HEPS.

Meanwhile, cash generated from operations was R1-billion, with cash and cash equivalents totaling R454-million for the year. The net debt to equity ratio was 108%, with net debt having reduced to R1.7-billion from R2.1-billion the year before.

Revenue for the period increased to R7.2-billion, while operating profit before non-operational items declined to R850-million.

CEO Darren Hele said the results for the period reflected difficult trading conditions and the decisions the company had to make to ensure the long-term financial viability of its GBK UK business, while also containing any potentially adverse impacts on its local operations.

With drastic measures implemented at GBK UK, Hele believes the operation to be “on a sound footing” while having also positioned the entire business for growth.

Under an operational review of the company’s brands, the franchisor said evidence of the brands’ appeal is strong revenue growth of 5% to R895-million, while operating profit rose by 10% to R476-million.

Given the subdued economy, Famous Brands’ expansion programme was measured, with the company having only opened 162 new restaurants and revamped, relocated or converted 260 sites during the full year period.

Combined system wide sales in South Africa increased by 6% and like-for-like sales grew by 2.5%. Its leading brands’ system wide sales rose 5.3% and like-for-like sales improved 2.9%. Signature brands’ system wide sales increased by 10.7%, while like-for-like sales declined by 0.6%.

“The strong economic growth reported by these brands in the first half of the year was not sustained in the latter six months. This downturn is primarily a reflection of weak consumer spend and confidence in the current uncertain economic and sociopolitical environment,” Hele commented.

Across the rest of Africa and the Middle East, combined revenue reported for the region grew by 7% to R270-million, while operating profit decreased by 52% to R22-million, primarily owing to the re-measurement of put options entered into with joint venture partners in relation to the acquisition of Retail Group, in Botswana, in August 2015, the company said.

The region contributed 10.2% to the group’s total system wide sales.

In the UK, Famous Brands continued consolidating the estate to “ensure optimum health” of its Wimpy UK portfolio. Notwithstanding the closure programme, positive like-for-like sales growth of 5.5% was recorded, with revenue in rand terms having increased to R113-million.

For GBK, across the UK and Ireland, the company’s goal to deliver sustainable returns to its shareholders is underpinned by ensuring that GBK outperforms the UK casual dining market segment and its targets.

In the 52 weeks to February 24, the business recorded an operating loss before nonoperational items of £4.6-million. GBK UK system wide sales for the period declined by 7%, while like-for-like sales decreased by 4.2%.

“Despite the constrained consumer spend environment, GBK started to perform better as our remedial interventions gained momentum, reflected by the stronger trading results reported for the second half of the year compared to the first half,” Hele explained.

He elaborated that GBK’s improving results were largely based on the company’s intensified focus on “re-establishing the gold standard” across the product and customer experience, streamlining the operation to deliver enhanced efficiencies, targeted investment in refurbishments and a high street storefront facelift programme, and growing online sales through a multi-vendor delivery platform.

Under its supply chain division, Famous Brands reported revenue of R4.4-billion, while operating profit increased to R513-million. Its operating margin decreased to 11.5% reflecting sustained low food inflation and the impact of the reallocation of corporate costs previously allocated across business segments.

Capital expenditure of R47-million was employed primarily on fleet and plant upgrades, machinery and equipment.

In light of the company’s commitment to shareholders and with consideration of its operating requirements and optimal capital allocation programme, the board has declared a dividend of 100c for the year under review.

Looking ahead, Famous Brands intends to focus on its long-term growth and ensure that its investments are “optimally aligned with the returns”.