Grand Parade Investments profit jumps with surprise boost from Burger King

Grand Parade Investments, which recently sold its interest in Burger King in South Africa, reported a revenue growth of 19% to R844.4 million on Friday.

The group’s gross profit increased by 21% to R405.1 million. No dividend was declared for the interim period.

Grand Parade, which also owns Grand West casino, has been forced to exit its loss-making food ventures after facing increased  pressure in recent years. Its share price lost 60% of its value in the past five years, Fin24 reported late in 2019. Grand Parade had made headline losses for two consecutive years in 2017 and 2018 before reporting more promising results for the year to end-June in 2019. 

Its attempts to launch the US fast-food chains Dunkin Donuts and Baskin Robbins failed, after which it also sold its 10% stake in Spur. Most recently, it disposed of the above-mentioned interest in Burger King for R670 million, selling it to Emerging Capital Partners, a private equity fund managing company. 

Burger King had, in prior years, been counting mounting losses. However, the food and gaming company’s results for the six months ended 31 December 2019 showed improved results for Burger King, with revenue growth of 27.5% compared to the previous period. Overall, Grand Parade's food business contributed R8.29 million.

In a statement, Grand Parade said it had cut back on Burger King's restaurant growth in the last six months, focusing instead on improved profitability in its poorly performing food outlets. In line with this, it increased its overall count of restaurants by just one, opening two new restaurants and selling one over the period. 

Despite the overall jump in profit, Mac Brothers, a supplier of catering equipment, saw a 21% revenue decline caused by a contraction in the construction and manufacturing sectors, which went down 5.9% and 1.8% in the last quarter of 2019.

"The poor performance of the business over the period has led management to impair the asset by R38.6 million," Grand Parade said.

With gaming assets having the largest contribution to the group’s earnings, casino operator Sunwest International reported a 4% decline in headline earnings as macro-economic factors weighed heavy on the casino business and its assets.

Looking ahead to the coronavirus in the country, GPI said the group is exercising caution in its restaurants to endure the safety of customers.

"Although we have seen an impact on Burger King over the last few days, its still too early to quantify the true impact this will have. We have, however, adopted our operations to deal with the effects of Covid-19.

"Our restaurants have adopted the highest precautionary measures to ensure that our establishments are safe. We are also in the process of implementing… delivery which will allow customers to click and collect without entering the store and with limited contact," said GPI CEO Mohsin Tajbhai at the results presentation.

The company’s share price closed at R2.99, slightly down from R3.00 in the morning. It had dipped to R2.71 at at midday.

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