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INTEGRATED REPORT 2018

International expansion

Extending Spur Corporation’s brands into new territories allows the group to grow revenues in areas with strong growth potential, while diversifying geopolitical risk.

Entering and developing new markets requires a long-term view to establish supply chains and logistics, and achieve economies of scale.

Strategic response

Spur Corporation has restaurants operating outside South Africa in Africa, Mauritius, the Middle East and Australasia.

Trading conditions in Australasia continue to be challenging, particularly due to high occupancy and labour costs. Spur Corporation is engaging with its franchisees in the region in an effort to reduce the size of existing outlets, rationalise the product offering and implement technology to improve efficient use of labour. The new RocoMamas in Australia incorporates these elements and will serve as a test case for determining whether a viable franchise model in the region is practicable.

The group’s brands are well suited to the developing and higher-growth markets of Africa, Mauritius and the Middle East, and have been well received. Trading in Africa has certain challenges, including securing suitable sites at a reasonable rental price, placing skilled employees, ensuring consistent supply of quality ingredients and managing currency fluctuations and foreign exchange repatriation. However, the long-term characteristics of selected African markets show excellent potential where these challenges can be addressed successfully.

In 2019, the group will continue to expand into existing markets, while further expanding into India, Pakistan and Cyprus.

The group’s international footprint is shown in the diagram here.

% OF INTERNATIONAL REVENUE AND PROFIT
2018 target Achieved in 2018 2019 target Comment
       
International revenue 5.0% of total group revenue 4.9% 4.6% Revenue in the international business did not achieve target due to the poor trading conditions in Australasia as well as trading fewer restaurants than projected in Africa.
International profits 2.5% of total group profit (1.9%) 1.2% The loss for the year includes impairment losses and write- offs in Australia of R7.2 million. In addition, revenue was short of target.
68 international outlets 62 70 Fewer restaurants were opened than anticipated in Africa due to economic and political instability on the continent. In addition, three restaurants were closed in Tanzania following political issues in that country and two Panarottis outlets in Australia were closed that were not anticipated.