Kingco looks beyond JSE's looming wrath
June 26, 2009
By Florence de Vries
King Consolidated Holdings (Kingco), the holding firm of Saddles, Bimbo's, McGinty's and Keg pubs, expected both loss and headline loss a share to be 93c for the 12 months to February compared with the previous year.
This is according to Ivan Nitsche, Kingco's operations director. The group, facing possible suspension by the JSE, attributed its performance in part to lacklustre offerings of its 10 Saddles branches, he said yesterday.
Nitsche put the performance of the group down to a "natural attrition" exacerbated by the current economic downturn. "As a company we have shown remarkable growth in the past year, but we realise that our Saddles branches need to be rejuvenated."
The group faces JSE suspension for missing the deadline to submit financial statements three months after its year-end. It must do so by Tuesday or its listing could be axed.
An independent auditor for Kingco declined to comment on the situation yesterday, saying only that "barring any major catastrophes, the provisional reports should be made available next week".
The company's listing has since been amended to indicate that it had failed to submit its report in time and that its securities are under threat of suspension and termination.
The JSE lifted another suspension of Kingco last September, after it complied with the bourse's requirements following another late submission.
Kingco operates more than 70 franchised restaurants, pubs and fast food outlets nationally.
Turnover last February had risen to R119.5 million, up from R111m, due mainly to franchise expansions. In addition, the franchise division remained profitable in its interim period and had opened an undisclosed number of franchises. The group had expected to fare better in the second period.
Non-executive director Paul Cotterell said he expected an improvement in the second half of the group's financial year because of the anticipated reduction in fuel and a programme by the firm to cut costs in its processing unit.
Nitsche said the group had spent the past year researching the restaurant market in its efforts to rejuvenate Saddles.
"We realise there is a void in the market for a family restaurant, but our franchisees didn't have the means or the interest to fill this gap," he said. Opposition was needed for groups such as Spur, "which could not exist without healthy competition".
Nitsche said the group would open several Saddles branches at major centres in the country and that these new restaurants would be company owned.
Kingco, which had opened 10 new pubs in the form of Keg's and McGinty's, would open 10 pubs in this financial year, Nitsche said. "We are the market leaders on this front, and will take these brands forward."
Retail analyst Chris Gilmour of Absa Asset Management said, however, that the lack of pub culture in South Africa would continue to mar the group's performance. "South African pubs are ersatz compared with the rest of the world and Kingco won't be instrumental in creating such a culture," Gilmour said.
Gilmour contended that the group, with a market cap of R5m, should delist from the JSE for being "too small… Kingco's turnover had grown only marginally in the past four years, and share price is volatile because of its tight shareholding, which inevitably leads to contraction," Gilmour said.
Kingco closed unchanged on the JSE yesterday at 30c.
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