Empowerment group Grand Parade Investments (GPI) says it will reduce its holdings in its fast-food Burger King chain once it has managed to make it profitable, allowing the parent to return to its roots as an investment holding company.
GPI was formally known for holding minority stakes in several gambling concessions in the Western Cape before it started running Burger King in 2013. Acting CEO Mohsin Tajbhai said the company expects the burger chain to make a profit before the end of the 2020 financial year.
The strategic shift that saw GPI go from being a holding company to running fast-food outlets has not been a success, with the food division yet to turn a profit. Several minority shareholders also criticised its management’s lack of experience in running the businesses.
Tajbhai, the fourth CEO in three years, acknowledged the group had made mistakes when it came to rolling out the outlets. It had learned its lesson and the chain was in a turnaround phase after management closed or relocated unprofitable stores.
The group recently shut down its store in Rosebank and was looking for a new location in the area which was better suited to its needs, Tajbhai said. It also strengthened the oversight of its food division by appointing former SABMiller executive Mark Bowman and former Spur financial director Ronel van Dijk to its board at its AGM in December.
The food division suffered a net loss of R13m in the six months to the end of December, a marginal improvement on the R13.4m loss in the corresponding period the previous year, the company said on Monday. Its gaming operation grew net profit to R73m from R56m.
The group incurred an overall net loss of R101.8m compared to the R186,000 it made in the corresponding period a year earlier. This year's losses were in part due to it writing off R50m on its investment in Dunkin’ Donuts and Baskin-Robbins. A R65m reduction in the valuing of some of its assets also contributed to the net loss.
AlphaWealth fund manager Keith McLachlan said he did not think it was a good idea for GPI to go into fast-food retail in the first place, and it should have just stuck to holding onto its gaming shares.
GPI’s share price closed down 4% to R2.40, its biggest drop in just over a month.
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