Johannesburg - Grand Parade Investments (GPI) has plugged R231.8 million into expanding the Burger King franchise in SA, yet the American product is still running at a loss.
Overall, the company reported revenue up substantially higher, at R502 million from R135 million in the year to June, and said net profit also leapt, growing from R63 million to R661.7 million.
The results, its says, highlight the “strength and quality” of its investment portfolio, despite pressures in the local economy. GPI has stakes in SunWest International, GPI Slots, Spur and Burger King.
Presenting its results for the year to June today, the company noted its total investment in Burger King SA, which was formed between GPI and Burger King Worldwide, with the first store opening in Cape Town in the second half of 2013, is now at R411.8 million.
GPI notes its store footprint is now at 44, as it opened 26 outlets during the year. The listed investment company adds its focus will remain on expanding Burger King to make sure that it reaches its critical mass during the upcoming year, “which will allow the investment to sustain its expansion without the support of GPI”.
The group is also set to identify and unlock synergies between its investments in Burger King and Spur, “as the potential to create value between these two investments is significant”.
Currently, Burger King SA is running at a loss and contributed a R55.1 million loss to GPI’s group headline earnings - a 38.2 percent increase year-on-year.
“The past two years have been the initial start-up and expansion phase for Burger King and the losses that have been contributed are in line with management expectations.”
GPI says the burger chain achieved “significant” milestones during the year as it has now localised 92% of its food inputs, which has significantly de-risked the business from currency fluctuations, stock losses and increased the food margin.
The rand, hovering near 14-year lows, has been increasingly volatile over the past while.
On an operational level, profit came in at R3.7 million between April and June, notes GPI.
Burger King’s burger patty production unit, Excellent Meat Burger Plant , contributed a R800 000 loss to headline earnings. Meanwhile Mac Brothers, which earns 32% of its sales from providing equipment to Burger King, contributed a R2 million loss.
GPI added its investment in Spur contributed a R5.9 million loss because of interest expenses. It says dividends and interest will balance out going forward.
IOL