Recession fails to rain on Grand Parade – Business Day

Black-empowered investment group Grand Parade Investments (GPI) yesterday posted a 14% rise in headline earnings to R96,7m for the year to June

This growth was achieved after a string of acquisitions last year and despite weaker trading conditions at Western Cape’s GrandWest Casino, which it co-owns through a 29,24% stake in SunWest.

Sun International , which owns the lion’s share of GrandWest, said last week revenue at the resort fell 6,4% to R1,642bn year on year, while operating profit fell 9,4% to R535m.

CEO Adrian Funkey said: “GPI’s share of associate income increased substantially this year. In the case of SunWest, this growth is attributed to its increased stake for the full year while profit from RAH ( Real Africa Holdings ) has been accounted for the full current reporting period, compared to one month in the previous year.”

GPI increased its stake in SunWest last year from 26,41% to 29,24%. This helped drive its share of earnings from SunWest to R85,29m, up 6% year on year. The acquisition of a 30,6% in RAH last year also gave the group a boost, contributing R28,1m to headline earnings, up from R5,4m last year.

Earnings were achieved on revenue of R27,45m and R118,1m from the share of profit from associates, including its investments in SunWest, RAH, Akhone GPI and Thuo Gaming Western Cape.

Revenue was made up of GPI’s share of management fee revenue from Western Cape Manco, dividends from National Manco and preference share holdings and interest on positive cash balances. Costs were cut 7% to R14m.

Headline earnings a share fell 9,7% to 20,92c per share, due largely to a massive increase in weighted average shares at year- end. The increase was related to the acquisition of RAH, paid for predominately in shares.

Funkey said: “We are confident that our increased exposure to carefully chosen urban casinos and the limited payout machine industry positions GPI well for growth when the economy turns, which it must inevitably do.

“We have an exceptional balance sheet with low levels of debt, which is a good position to be in, particularly in this pressing economic environment.”

The group has borrowings of R287m with noncurrent assets of R1,8bn. The group had R55m in cash at the end of June.

Such is management’s confidence in the group that it acquired 27-million shares at an average of R2,18 a share during the year. “The share is trading at a discount to it net asset value of 370c and we felt at the trading price GPI would be our best investment,” said Funkey.

Asked why the market, which was trading the share at 245c yesterday, did not value the share closer to its net asset value, Funkey said: “There are concerns about the future of GrandWest exclusivity rights in the Cape Town metropole. GPI is also new to the JSE, and investors are still sizing us up before investing.”

He was not willing to be drawn on the issue of exclusivity, saying only that GrandWest would deliver value for years to come.