Investec’s London-based MD Bernard Kantor admits that it took him years to settle down. The world’s financial centre is a complicated city. Easy enough to make a deal, but rather more difficult to secure a good one. It’s a place where marrying in haste is guaranteed to repenting at leisure. Ask Old Mutual and, more recently, Brait whose horrible experience with UK fashion retailer New Look has been well documented.
Latest to get the London treatment is Famous Brands, SA’s fast food giant which yesterday announced interim profits to end August have fallen more than half. Major reason is a reverse into losses at its recently acquired 75-store UK chain Gourmet Burger Kitchen which Famous Brands bought a year ago for R2.1bn (£120m).
That’s a big bet for a R12bn business, especially when financed by fresh borrowings. At the time critics were shushed by management’s assertion that the burger chain was poised for growth from an annual operating profit of R168m (£9.6m) at the then exchange rate of R17.53 to the pound.
In yesterday’s trading update we learnt that previously profitable GBK slumped to a R16m loss for the six months to August. Famous Brands’ misery is compounded by debt servicing costs surging from R8m to R138m. In the past year, the JSE-listed company’s share price has fallen from R166 to R118. After the UK news, don’t expect a rebound anytime soon.
