New focus pays off for Grand Parade


New focus pays off for Grand Parade

Published Date: 2020-03-23 | Source: Stephen Gunnion | Author: Stephen Gunnion

New focus pays off for Grand Parade

The investment group has liquidated loss-making franchises and is disposing of businesses so it can improve shareholder returns.

Grand Parade Investments has reported improved profitability as it scales back its business, reduces debt and prepares to return cash to shareholders. The investment group liquidated its loss-making Dunkin' Donuts and Baskin-Robbins franchises just over a year ago. It has also reached a deal to sell its Burger King SA business, with investors in line for a special dividend.

GPI said its remaining businesses, mostly casinos, delivered a strong performance in the six months to end-December despite the recessionary environment. Burger King grew revenue by 27.5% from a year earlier as it slowed down the opening of new restaurants to focus in improving the profitability of its worst performing outlets. However, catering equipment supplier Mac Brothers was hit by the slowdown in the construction and manufacturing sectors, reporting a 24% decline in revenue. As a result of its poor performance, GPI has impaired the business's goodwill by R38.6 million.

Negative GDP growth over the last two quarters of 2019, coupled with systemic factors, resulted in a 4% decline in SunWest's contribution to group headline earnings. Overall its gaming assets contributed R71.3 million to headline earnings, down 4% from the previous year.

Revenue from continuing operations increased by 19% to R844 million and operating profit on the same basis surged 315% to R81.4 million. It swung to a net profit of R6.4 million from a R36.4 million loss previously. That resulted in headline earnings of R44.1 million and headline earnings per share (HEPS) of 10.35c, up 176% from a year earlier. HEPS from continuing operations rose 37% to 11.69c per share.

The group said it planned to reduce the discount its shares trade at relative to the value of its underlying assets. It has already narrowed the discount from 40% to 20-30% and said this would reduce further through the controlled sale of its assets. The sale of Burger King and its Grand Foods Meat plant for R697 million to private equity group Emerging Capital Partners was the first step in its value unlock strategy.

Its shares closed 0.3% down at R2.99 in thin trade on Friday.

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