Grand Parade Investments reports revenue growth despite divesting from food business

SOUTH AFRICA – Grand Parade Investments, which recently announced the sale of its SA Burger King licence has attributed the exit from its restaurant interests to reducing its debt and improving profits in its half year to end-December.

GPI has reported a revenue growth of 19% to R844.4 million (US$47.8m) with the group’s gross profit increasing by 21% to R405.1 million (US$22.9m).

Burger King had in prior years 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 (US$0.46m), reports Fin24.

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 (US$2.1m),” 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.”

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“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.

The company has been forced to exit its loss-making food ventures after facing increased pressure in recent years. They 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.

Most recently, it disposed of its 95.36 percent interest in Burger King for R670 million (US$37.9m), selling it to Emerging Capital Partners, a private equity fund managing company.

The deal is a category 1 transaction and is subject to regulatory approval and several conditions precedent.

Grand Parade will maintain a minority interest in Burger King in line with its strategy to become a pure investment company.

The move comes as GPI approved sell of its remaining 30% stake in Sun Slots for more than R500 million (US$34.3m) having exited Dunkin Donuts and Baskin-Robbins, as well as disposing of its stake in Spur.

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