Stronger second half result as Spur chain recovers
September 6, 2018
Cape Town – Spur Corporation posted a stronger second half performance in challenging economic conditions in its major trading markets as total franchised restaurant sales across the local and international operations increased by 1.3% to R7.1 billion in the year to June 2018.
The results exclude the Captain DoRegos chain which was sold with effect from 1 March 2018.
The group’s headline earnings increased by 14.8% to R153.7 million and on a comparable basis decreased by 9.7%. Diluted headline earnings per share from continuing operations increased by 14.0% to 160.5 cents.
The total dividend of 123 cents per share was 6.8% lower than last year.
Group CEO Pierre van Tonder said political concerns and policy uncertainty have resulted in weak economic growth in South Africa, a volatile exchange rate, rising unemployment, increased pressure on consumer disposable income and low levels of consumer confidence.
Franchised restaurant sales in South Africa grew by 1.5% after recovering in the second half. After declining by 6.0% and 0.1% in the first and second quarters of the financial year, local restaurant sales increased by 1.4% in the third quarter and grew by a strong 12.2% in the fourth quarter.
“The stronger restaurant sales in the second half were due to our increased focus on product quality, service and innovation, rather than any improvement in consumer spending.
“Discretionary spend is under growing pressure which is resulting in a continuing decline in restaurant and shopping centre foot traffic. However, the improving sales in the last six months is positive for the sales outlook as we move into the new financial year,” he said.
The flagship Spur Steak Ranches brand, which accounts for almost two thirds of group restaurant sales, continued its recovery in the second half of the financial year following the damaging social media incident in March 2017. Restaurant sales declined by 9.1% in the first half and 3.2% in the third quarter, but increased by 14.8% in the fourth quarter, resulting in a 2.8% decrease for the full year.
RocoMamas continues to be one of the fastest growing restaurant brands in the local fast casual dining sector. Restaurant sales increased by 31.5% as 15 restaurants were opened in South Africa, expanding the brand’s national presence to 65.
The Hussar Grill grew restaurant sales by 24.4%, John Dory’s by 0.6% and Pizza and Pasta (Panarottis and Casa Bella) by 4.2%. Van Tonder said the domestic pizza market is highly competitive with several major chains following aggressive discounting strategies.
International restaurant sales increased by 2.7% on a constant exchange rate basis.
As part of its measured expansion programme, the group opened 44 new outlets across all brands in South Africa, despite the challenging trading conditions. In addition to the 43 Captain DoRegos outlets which were sold, 18 restaurants were closed, bringing the local restaurant base to 513.
The first RocoMamas was opened in Australia in June 2018, one of 11 new international outlets. Other restaurants were opened in Nigeria, Mauritius, Kenya, Namibia, Swaziland and Zimbabwe. Nine international restaurants were closed.
Franchisees invested R220 million in new and revamped restaurants during the year.
Over 40 new restaurants are planned for the 2019 financial year. This includes at least 29 outlets in South Africa and at least 14 international restaurants.
The group’s first restaurant will be opened in India (RocoMamas) with a further two outlets planned for Saudi Arabia (RocoMamas and The Hussar Grill). The group also plans to expand into Cyprus (RocoMamas) and Pakistan (Spur).
On the outlook for the months ahead, Van Tonder said the group’s middle income customer base is under increasing financial pressure, with little relief expected in the short to medium-term. “Our focus in this environment will be on retaining and growing our customer base through our product quality, value, customer experience and innovation.”
“We also plan to increase market share by capitalising on the growing opportunity through delivery services which are becoming increasingly popular across all brands, including Uber Eats, Mr Delivery as well as “call and collect”, he added.
Issued by Tier 1 Investor Relations on behalf of Spur Corporation
For further information kindly contact
Pierre van Tonder, Spur Corporation 021 555-5100
Graeme Lillie, Tier 1 Investor Relations 082 468 1507