Grand Parade dividend on hold
• Empowerment group defers payout as new food businesses test local consumer waters
Cape-based empowerment group Grand Parade Investments, which has a record of rewarding shareholders with regular dividends, has deferred a decision on a payout for the 2017 financial year.
Cape-based empowerment group Grand Parade Investments (GPI), which has a record of rewarding shareholders with regular dividends, has deferred a decision on a payout for the 2017 financial year.
GPI holds cash-generative investments in the form of significant minority stakes in the GrandWest casino in Cape Town, alternative gaming business Grandslots and food franchisor Spur Corporation.
But the company is still in capital-hungry development phase with its own fast-food thrust via Burger King, Dunkin’ Donuts and Baskin-Robbins.
On Thursday, GPI chairman Hassen Adams said while the company was committed to remaining dividend-active, any distribution for 2017 would be considered only when future cash flows could be determined with greater certainty.
Adams said special dividends would be paid out of surplus proceeds from the realisation of investments. GPI last declared a dividend in late November 2016, distributing 25c per share or R122m for the 2016 financial year. Adams said GPI recognised that while its food investments were in early or start-up phase, the company would continue to adopt a conservative approach on its gearing for existing operations.
He said that over the past 36 months, GPI had decreased its gearing levels from 35.5% to 16.8% after partial disposals in its gaming and leisure portfolio.
GPI’s targeted debt equity range was set between 20.0% and 35.0%, Adams said.
He believed the current level of gearing would allow the company to raise funding at more preferential rates.
Adams noted the company’s exposure to the South African consumer had created uncertainty that had resulted in a significant increase in the cost of debt available over the last year.
“We have identified the facilities which are relatively cheap in comparison to the prevailing market rates and will look to retain those facilities….”
Vunani Securities analyst Anthony Clark said GPI still had “enormous balance sheet strength” with underlying investments in gaming being “prodigious cash infusers”.
He said that an intrinsic net asset value of 698c per share – which is far higher than the ruling share price – offered added comfort for shareholders, while the food businesses were generating losses.
Since financial year-end, GPI has also embarked on several disposals, notably the sale of properties in Cape Town and Sandton for R64m and the disposal of its 51% stake in Grand Tellumat Manufacturing for R15m. A divisional breakdown showed Burger King contributing a loss of R10m at headline earnings level, but was profitable at an ebitda (earnings before interest, tax, depreciation and amortisation) level.
Adams said the net restaurant movement included the opening of four new restaurants and the closure of five unprofitable restaurants in Johannesburg and KwaZulu-Natal.
Most encouraging was that the average monthly restaurant revenues increased by 9.26%, from R785,000 in 2016, to R865,000 because of a rise of almost 2% in restaurant comparative sales and a proportional increase in revenue derived from new Drive Thru sites.