South Africa's Famous Brands warns on profits, shares drop

JOHANNESBURG, Aug 16 (Reuters) - Famous Brands, South Africa’s biggest fast-food restaurant chain, on Wednesday warned of lower half-year results and cut its margin forecast, sending its shares down more than 8 percent.

The company, owner of Debonairs Pizza and Mugg & Bean in South Africa, has been expanding at home, across Africa and in Britain through acquisitions in dining and fast food, including the UK restaurant chain Gourmet Burger Kitchen.

But the group said trading conditions in its local and international markets were challenging and would remain so for the coming year. This reflected constrained consumer demand and tougher competition, it said.

“In light of these factors, the Group expects that its results for the full six months to 31 August 2017 will be weaker than those reported in the prior comparable period,” Famous Brands said in a statement.

In its home market South Africa, the economy has gone into recession and business and consumer confidence have been dented by high unemployment.

On margins, Famous Brands said continued pressure was anticipated over the short-term. It also said Gourmet Burger Kitchen’s profitable contribution to the business would take longer than initially anticipated.

Famous Brands opened a total of 52 restaurants in South Africa, eight in the Africa and Middle East region, and six in Britain as at July 31, it said.

But it also said given the weaker operating environment in Britain, its store roll-out programme there would be more conservative “for the foreseeable future.”

Shares in Famous Brands were on course for their biggest daily loss in 1-1/2-years. At 0956 GMT, shares were down 8.15 percent to 113.89 rand.

In May, the company scrapped its dividend for the year which ended in February to conserve capital after a string of acquisitions. ($1 = 13.2396 rand) ($1 = 0.7766 pounds) (Reporting by Olwethu Boso. Editing by Jane Merriman)


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