Lockdown puts Burger King SA owner back into loss-making position

Burger King storefront.
Burger King storefront.

The owner of Burger King South Africa expects to plunge to a loss when it finishes tallying its financial statements for the year ended on 30 June as sale of assets, laying off staff and other cost-cutting initiatives have not been enough to lessen the blow of the Covid-19 which saw restaurants operations came to a complete standstill during the early days of the lockdown.

The listed food and empowerment group, Grand Parade Investments (GPI) which suffered another blow because of Covid-19 when its anticipated sale price of Burger King was revised downward, warned shareholders on Monday that it expects a headline loss per share of between 13.18 and 14.96 cents per share.

This translates to a tank of between 248% and 268% in the company when compared to the headline earnings when compared to the 8.91 cents per share earnings it reported in June 2019.

It further expects a basic loss per share of between 27.52 and 29.22 cents per share, compared to the basic loss per share of 8.48 cents in 2019.

"All GPI’s operational businesses were shut down for the month of April. Burger King resumed limited trading in May through home delivery only, with all service modes resuming in June. The gaming businesses, SunWest and Sun Slots, remained closed from the end of March to the end of June, and only resumed operations in July under restrictive operational controls," wrote the company in a trading update.

GPI was starting to show light at the end of the tunnel when Covid-19 struck, having closed its loss-making Dunkin Donut and Baskin-Robbins businesses in 2019. The company, which also owns a 17.5% stake in Spur Steak Ranches, said its management tried to reduce costs and preserve cash by reducing salaries across the group, implementing temporary staff layoffs, negotiating rental holidays with landlords; and through accelerated sales of non-core assets, among other things.

"Despite the actions taken to reduce costs, the lockdown had a material impact on the operating performance of the GPI group," wrote the company.

The company said the previously announced sales of Burger King SA and Grand Foods Meat Plant are still ongoing and so is the sale of its 33 Heerengracht property for R90 million. GPI said the value to be realised from these disposals is greater than its current outstanding debt.

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