Burger King South Africa financials revealed ahead of disposal

Burger King South Africa saw its revenue for the year ended June 2021 grow to R1.349 billion compared to R1.010 billion in the prior year, its licence owner, Grand Parade Investments (GPI), said on Thursday (30 September).

The chain of hamburger fast-food restaurant’s headline contribution improved by R11.8 million during the year from a loss of R25.5 million in the prior period to a loss of R13.7 million in the current period, Grand Parade Investments said ahead of its disposal to a private equity fund.

The Competition Tribunal gave the green light to Burger King South Africa’s (BKSA) acquisition earlier this month to pan-African private equity firm Emerging Capital Partners (ECP) – pending all final approvals.

The deal was initially denied approval in June with the Competition Commission citing a lack of BEE credentials.

Grand Parade announced its intention to sell the Burger King SA and meat plant companies in 2020, as part of its strategy to focus on operations that would unlock value for shareholders.

The initial price for the franchise was R670 million, but following the Covid-19 pandemic impact on the food services industry, Burger King SA was revalued at R570 million, while the meat plant carried a revaluation of R23 million, down from R27 million, before.

GPI said in a financial statement on Thursday that average monthly restaurant revenues (ARS) for BKSA increased by 31% from R0.896 million last year to R1.171 million this year, largely as a result of the strong growth in drive-thru ARS (2020: R1.109 million 2021: R1.438 million).

It noted that the current financial period observed substantial changes in consumer traffic trends. Comparative traffic for 2021 was -4.5%, versus -11.0% in 2020.

The group said that the changes in service mode mix towards home delivery (2021: 15.0% from 2020: 8.1%) and drive-thru sales (2021: 46.2% from 2020: 36.7%) resulted in a net comparative sales gain of 11% (2020: 0.8%; 2021: 11%) for all drive-thru locations.

Overall comparative sales growth in 2021 was 5.9%, excluding April and May 2020, when stores were closed due to a hard lockdown.

Grand Parade said that restrictions on takeaway & dine in-service modes resulted in mall & in-line traffic reducing even further (2020: -12.3%; 2021: -16.6%) resulting in the mix of cash positive locations deteriorating substantially versus pre-Covid performance – cash positive restaurants: YTD June 2021: 64% vs YTD Mar 2020: 72%).

The sales growth landscape has changed fundamentally for quick-service restaurants in South Africa, said Grand Parade Investments, with restaurants in general under pressure. “With our focus since 2015 on suburban drive-thru location growth, we need to look at mechanisms to capitalise in the home delivery growth of 141% we saw in 2021,” it said.

The group has seen its drive-thru portfolio mix climb to 60%, from 55% in 2020, and 21% in 2015.

The total number of Burger King restaurants at the end of June 2021 was 102, of which 95 are corporate-owned.

“The net restaurant movement for the year totalled five, which included the opening of seven new restaurants and the closure of two unprofitable restaurants,” it said.

Burger King realised a company EBITDA of R51.70 million during FY2021 compared to R34.62 million in the prior year, the group said.

Read: Competition Tribunal approves Burger King takeover – with a catch

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Burger King South Africa financials revealed ahead of disposal