Leisure and gaming company Grand Parade Investments (GPI), which gave investors a record record R413.6m special payout for its half-year to end-December, says it is confident about its future prospects after the sale of its Burger King business and a partial recovery of its gambling interests helped it slash its debt levels by 42%.
The empowerment group, which finalised the sale of its struggling Burger King SA and Grand Foods Meat Plant in November, said on Wednesday that it had cut its total debt by R102m to R140m in the six months to end-December, with the group having declared an 88c per share special dividend.
Head-office costs were also cut 15% to R14.7m, with Grand Parade saying its efforts would help reduce dividend leakage as it continued to look to unlock shareholder value through additional asset sales.
Headline earnings from continuing operations rose more than fivefold to R16.3m to end-December, with recoveries in Spur, SunWest, Sun Slots and Worcester Casino, with slot machine operator Sun Slots faring particularly well and recovering to pre-Covid-19 levels.
The pandemic had hit casinos particularly hard in 2020, with operators forced to shut during hard lockdowns, while even eased conditions restricted operating hours and the sale of alcohol. Grand Parade said on Wednesday the headline earnings contribution from gaming and leisure rose 51% to R50.7m to end-December, while food contributed a R7.7m headline loss, 29% down year on year.
In the same period of 2019, the group’s gaming interests had brought in R71m in headline earnings, the primary profit measure in SA that excludes certain one-off items.
GPI, valued at R1.12bn on the JSE, was weighed down by catering equipment business Mac Brothers, which contributed a headline loss of R13.7m, amid a slow recovery for SA's construction and manufacturing sector
The company was founded in 1998 as a BEE partner to casino group Sun International and listed on the JSE in 2008. It bought the Burger King SA franchise in 2013, but had struggled with it, and the R465m sale had almost been derailed after competition authorities said the sale would dilute black ownership in the sector.
The decision prompted a wave of criticism and warnings that black-owned businesses would find it harder to sell their assets, while foreign investment would also be reduced. The Competition Tribunal ultimately gave the go-ahead for the sale.
GPI said on its drastic reduction of debt and costs boded well for future dividends for shareholders, and it remains committed to unlocking further value from asset sales, with the group investigating an exit of its gaming businesses.
GPI shares had fallen 5.2% to R2.55 on Wednesday, and were unchanged on Thursday morning, having risen 14% in the year to date, but having lost a similar amount over the past two years.
Update: March 25 2022
This article has been updated with additional information.
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