Famous Brands Looking Up Now That Brexit Is Done

Famous Brands is a company that we have held for years in some local portfolios. It remains a recommended Vestact stock, even though we have not bought them for anyone in quite a while. At this point, 63 clients own the shares and the aggregate value thereof is just R2,7 million.

The group was founded by George Halamandres in the 1950s when he decided that South Africa needed an American style steak house. The first Steers steakhouse restaurant was opened in the early 1960s. It was listed on the JSE in 1994. They bought Debonairs Pizza in 1997 and Wimpy in 2003.



Sadly, the company has done very poorly over the last four years, falling from an all-time high of around R165 per share in October 2016 to just R55 a share today. The reasons are not hard to pinpoint - a disastrous acquisition in the UK and a very slack consumer spending environment in South Africa.

The company had interim results out last October, in which they emphasised that the UK-based Gourmet Burger Kitchen (GBK) chain had stabilised. They actually completed a company voluntary arrangement (CVA) procedure with their landlords, which allowed them to write off some debt and exit other leases.

Locally, they continued to open some restaurants and close some others. Online food ordering and delivery systems are a key focus area. Revenue was flat and profits were down a bit. The management team keeps taking steps to right-size the business.

If you own these shares, you might wonder if they will ever recover. The market capitalisation of the company has shrunk to R5.5 billion. The outlook for the local economy is not very promising. One potential bright spot is the UK, where the mood after the eventual conclusion of the Brexit is slightly more positive. Our general view is that if you have hung on this long, you might as well go on holding, and hope for a recovery off this low base. People won't stop being hungry for hamburgers and pizza.