Durban - Heavy investments into the roll-out of Burger King operations led to a decrease in adjusted headline earnings a share of 26 percent in the year to June, but Grand Parade Investments (GPI) promises the fast food chain will break even by next year.
The group’s chief executive, Alan Keet, said yesterday that if it were not for the investment in rolling out the fast food restaurants of the US franchise, the company would have increased its headline earnings by at least 10 percent.
For the year to June GPI, which also has interests in casinos and limited payout slot machines, as well as manufacturing, increased revenue by 50 percent to R753 million, while the group’s earnings before interest, tax, depreciation and amortisation was up 15.7 percent to R211m.
The group said that adjusted headline earnings a share of 22.5c was down from last year’s 30.46c due to the investment in the Burger King business, which accounted for a decrease of 11.4c.
“Burger King has had to deal with costs related to establishing its business, and the initial losses reflect that,” Keet said.
“The supply chain has now been secured and established, and the food margins are at appropriate levels.
“The losses should be seen more as an investment into the future and they have now been stemmed, with Burger King budgeted to break even in 2015.”
The group would have 20 Burger King outlets before the end of the year.
“We have seen tremendous growth in our stores and we are stealing market share from our competitors.”
Keet added that GPI was targeting to have about 100 stores by June next year.
“This is the self-imposed target and if we see that if it does not come to fruition then we can always pull back. We are very comfortable with our target of breaking even in 2015,” he said.
He said that GPI was proud of the work done to get Burger King off the ground and had spent about R180m by the June year-end towards the opening and setting up of its outlets, adding that besides Burger King, GPI was working on various transactions involving some of its limited payout machines, as well as its casino interests.
The group will receive R1.55 billion in cash from Sun International to exit its entire 25.1 percent shareholding in SunWest, which operates Grand West Casino and Table Bay Hotel, as well as its 25.1 percent interest in the Worcester casino.
GPI also disposed of its 5.6 percent indirect shareholding in Sibaya Casino in KwaZulu-Natal for R130m.
Keet said after these transactions, GPI would still hold 30 percent of the slot machines business, as well as 60 percent of a catering equipment manufacturing business. Earlier this month, GPI announced its interest in a manufacturing joint venture with leading electronics maker Tellumat.
“Tellumat is an interesting deal, we have partnered with Tellumat in order to gain access into a new technology-savvy market.”
GPI shares lost 1.72 percent to close at R6.27 on the JSE yesterday.