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Gaming cushions GPI's gamble on food

Sep 01 2015 14:13
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Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Cape Town - JSE-listed investment and empowerment group Grand Parade Investments (GPI) [JSE:GPL] showed revenue growth of 272% from R134m to R502m for its financial year to end-June 2015.

Headline earnings per share were 10.53 cents compared to 3.17c for the previous period. The group's headline earnings for the year rose by R34.6m to R49.4m, with the gaming division contributing the bulk.   
GPI said on Tuesday its strategy over the past 12 months was to focus on being a diversified empowerment investment holding company. Consequently, it made various disposals and acquisitions.
It disposed of 25.1% of GPI Slots, 24.9% of Dolcoast Investments and 5.7% of National Manco in its gaming portfolio. Acquisitions over the period were the remaining 77.8% of Mac Brothers Catering Equipment and the acquisition of a 10% stake in Spur as its empowerment partner. GPI also acquired 51% of Grand Tellumat Manufacturing.
A further R231.8m was invested in the expansion of Burger King SA, taking its total investment to R411.8m at year-end. Burger King opened 26 stores, bringing the total to 44 on a national level by the end of the reporting period.
GPI focuses on two investment pillars: gaming (SunWest, Golden Valley Casino, GPI Slots, Grand Sport) and food (Burger King, Spur Corporation, Excellent Meat, Mac Brothers). It also looks at other investment opportunities which would complement these assets or the supply chain.
“The South African economy has been under significant pressure and looks to remain so for the foreseeable future. However, our core investments in the gaming and food sectors showed its resilience and delivered solid results,” said CEO Alan Keet.

READ: GPI buys stake in Australian gaming firm

GPI said SunWest - the GrandWest Casino and The Table Bay Hotel in Cape Town - performed exceptionally well and remains the largest contributor to the group’s headline earnings, contributing R116.7m for the year. GPI Slots contributed R9.7m to group earnings.
On the other hand, online sports betting venture Grand Sports - trading as - contributed a loss of R8.1m. Keet said, however, that the business is poised for growth with several initiatives planned for the coming year.

Burger King SA contributed a loss of R55.1m, 38% higher than the previous year. Keet said the losses are in line with expectations as they are part of the initial start-up and expansion phase for Burger King SA.

Keet was pleased that Burger King SA operating costs were brought in line with targets, and that the focus will remain on expansion to reach critical mass.  
The Excellent Meat Burger Plant, which was established to cater for all of Burger King’s burger patty requirements, made a loss of R800 000 but is expected to grow in line with store roll-out. Opportunities are being explored to sell products to other franchisees internationally.  
Mac Brothers contributed a loss of R2m at group level as it was negatively affected by persistent load shedding.

"It will diversify its client base in the future, which will see it being profitable from operations outside of the GPI group," said Keet.

The group’s investment in Spur contributed a loss of R5.9m to headline earnings, but Spur's share price growth added R45m to income. GPI plans to unlock synergies between Burger King and Spur in the coming year.

READ: Grand Parade wants to stop speculation

Diversified investments

Grand Tellumat Manufacturing reported a loss of R7.4m, mainly due to the first few months of losses incurred shortly after GPI entered into the joint venture.

"The order book for 2016 looks solid and the positive results seen in the second half of last year, look to be achievable," said Keet.

The year ahead

GPI will focus on its core investments in gaming and food. It also plans to conclude the sale of the second tranche of GPI Slots and unlock the potential of its sports betting and gaming machine manufacturing investments.
“Growth and investment is integral to GPI’s vision to become a major and respected force in the gaming and food sector in SA. Our focus is to unlock potential through new ventures and to cultivate our existing opportunities,” said Keet.
GPI said it would make an announcement about 2015 dividends only after the conclusion of corporate actions which could have an impact on cash flow.

ALSO READ: Burger King SA sources bulk of produce locally



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