Grand Parade casinos perk up
• Group posts R61.7m headline loss as Covid-19 hits restaurants and casinos
Leisure and gaming company Grand Parade is optimistic it can turn around its weaker fortunes through the sale of its assets in the medium term and believes its casino businesses are showing signs of recovery.
Leisure and gaming company Grand Parade is optimistic it can turn around its weaker fortunes through the sale of its assets in the medium term, and believes its casino businesses are already showing signs of recovery.
The company swung into a headline loss in its year to endJune after the Covid-19 lockdown shuttered casinos and hit the restaurant industry.
Its headline earnings plummeted 262% to a loss of R61.7m from a profit of R38m.
The pandemic also derailed efforts to sell its 30% stake in gaming business SunSlots to Sun International as it did not get regulatory approval in time.
CEO Mohsin Tajbhal told Business Day he thought the casino and gaming businesses Sun West and Sun Slots and Worcester were “quite resilient” having bounced back to about 70% levels of trade in August even before the 10pm curfew was lifted to a midnight curfew this month. He believed it could sell Sun Slots in future.
“We will monitor and wait for recovery ... to complete asset sales. The deal didn’t go through but it is still a decent asset in a fast-growing sector,” he said.
“We may even get a better offer than we had previously had. I am confident.
“We will wait for recovery and investigate a possible exit,” said Tajbhal.
The group’s “strategy is not a fire sell. We are looking to maximise value.”
Grand Parade had an intrinsic net asset value of R1.92bn at the end of June, but said that on its calculations it had an intrinsic net asset value (INAV) per share of R4.49. INAV measures the company ’ s value based on the future earnings it expects to generate for its investors.
The group plans to deal with what it believes is a 55% discount to its INAV by a controlled sale of assets. It could consider selling its last stake in Spur once the restaurant group share price recovers, it said. In the past year it entered into an agreement to sell its 33 Heerengracht property in Cape Town for R90m to Aragon Property, which has completed its due diligence.
It is selling its N1 City building for R26m and expects full transfer of the property to be completed at the end of September.
It also accepted an offer to sell No 3 Epping Circle for R6m. The transaction is subject to the completion of a due diligence and funding approval.
Grand Parade’s stake in Burger King and Grand Foods Meat Plant, which it is in the process of selling, accounted for R488m of INAV.
In July the company announced new sales terms for the sales, based on an enterprise value for Burger King of R570m, from R670m when an agreement was announced in February.
It will use the proceeds of sale to pay down debt, which it has reduced already in the past financial year, from R560m to R258m. Tajbhal said that the market was sceptical that its sale of Burger King to investment group Emerging Capital Partners would be finalised. It was renegotiated during the lockdown, but was adamant that it would be finalised within three months.
Tajbhal was happy with the terms of the renegotiation, which he said were fair.
“The deal is on the table. We will close the deal. I am very confident. A signed detailed commercial offer had been agreed.”
The group said in a statement that revenue for the chain remained flat at R1.010bn compared with R1.015bn in the prior year despite it being closed during the month of April and only drive-through sales during May.
“If it wasn’t going to go through, ECP would have walked away from the table with the impact Covid 19 has had. The business is doing well. The buyers are reluctant to walk away.”