Too tasty for bland trade
The market responded well to the decision of Grand Parade Investments (GPI) to exit its unpalatable investments in coffee and confectionery brand Dunkin’ and ice cream business Baskinrobbins. Both these investments were hopelessly under scale and unprofitable, and unlikely ever to sweeten returns.
One assumes GPI’S activist shareholders, who recently managed to usher fast-moving consumer goods experts into the boardroom, were unrelenting in their demands that these brands be culled as quickly as possible.
Just how bad the brands were as investments is illustrated by GPI opting for a voluntary liquidation of both. Presumably a serious effort was made to find buyers for these businesses, but bland trading in the local fast-food sector would have dampened enthusiasm from potential buyers.
The eventual capitulation at Dunkin’ and Baskin-robbins confirms that GPI’S record of capital allocation has been fairly dismal of late.
The decision to lighten up on the profitable gaming assets in order to make meaningful investments in the food sector — most notably the local Burger King franchise — is yet to produce the promised relish in terms of returns. Taking Dunkin’ and Baskinrobbins off GPI’S operational menu is commendable, but the trickier task is what to do with the influential stake in Spur Corp. Spur’s shares are under some pressure following a stark trading update recently after a sudden loss of flavour at fast-growing gourmet burger outlet Rocomamas markedly soured sentiment.
This might be the perfect time for Spur and GPI to put their heads together with regard to Burger King. Injecting Burger King into Spur at a reasonable price in exchange for shares would allow GPI to snag a significant minority stake in a larger and more diversified food business. Such a deal would also mean that GPI would revert to being an investment company. Its reputation as an operational counter has hardly been advanced by Burger King’s prolonged efforts to secure profitability.
Always flush
Universal Partners (UP) is not exactly front of mind when it comes to the
JSE’S array of investment counters.
The company has a rather eccentric portfolio. Arguably the investment likely to make the biggest splash is Propelair, a provider of water-efficient toilets in the UK and SA.
UP says Propelair is finding favour with large corporates wanting to improve their environmental credentials. The company says one large client, which has had more than 30-million flushes since installation on its estate, has saved more than 250 megalitres of water using the Propelair toilet. UP says a number of trials are also under way, which should lead to a substantial increase in sales.
The company, which holds a 15.6% stake in Propelair, last month put another R7.3m in the toilet business by way of a rights issue to fund growth.
Less assured
How fortunate for life assurer Clientèle that it issued a trading statement on the day market leader Discovery gave a downbeat business update to shareholders.
The market got in a bit of a tizz about Discovery’s performance, so I’m not sure how many punters noticed that Clientèle, which has a solid record, advised that headline earnings and headline earnings for the six months ended December will drop between 55.7c and 58.9c a share. This is a hefty 25%-29% down on last year, and is a performance that might have rattled the company’s share price were it not for the relative illiquidity of the stock.
Clientèle serves a different market from the mostly upmarket Discovery and offers very different products from it. If Clientèle’s basic and low-cost product range is not finding traction, new business in the assurance market is looking worryingly threadbare.
If Clientèle’s low-cost product range is not finding traction, new assurance business is looking worryingly threadbare