The group posted a resilient performance in a constrained spending environment. Total franchised restaurant sales across the local and international operations increased by 7.2%* to R7.6 billion, and the total number of restaurants increased from 575 in the prior year to 620. Customers responded to our continued focus on excellent product quality and value offering.
Spur Corporation views good governance as a critical component to success. The board’s responsibility is to act in the interest of all stakeholders and govern effectively and efficiently. Our short-term priorities are threefold:
The Group appointed me as a director on 15 November 2018. My election as non-executive chairman of the board followed the retirement of a highly-respected veteran of the South African restaurant industry, Mr Allen Ambor, on 28 February 2019, after more than 51 years’ of service at the group. He founded Spur Steak Ranches in 1967 and was instrumental, with his management team, in growing the group into what it is today.
* Excluding Captain DoRegos, sold with effect from 1 March 2018.
|“It is important for us to do the right thing. It is not always easy and may sometimes require a level of courage.”
The board has adopted a zero- tolerance approach to unethical behaviour and sets the ethical tone for the group. Governing ethics at a group such as Spur Corporation, with its network of franchisees, can be challenging. However, we are comfortable that our comprehensive controls, internal and independent audits across the supply chain, and training initiatives at franchise level, support an ethical culture.
The directors are satisfied that
we have fulfilled our responsibilities
in accordance with the board charter. Although we are confident that
At the AGM in December 2018, Messrs Dean Hyde, Keith Getz and Keith Madders retired from the board by rotation. They had brought to the board a wealth of industry experience and institutional knowledge over very many years. The board and management thank them for their lengthy service and we wish them well with all of their future endeavours.
A refreshed board nevertheless offers new opportunities and insights. We are very committed to having real diversity at board level to leverage different backgrounds and perspectives. With the appointment of Professor Shirley Zinn and Ms Cora Fernandez in June 2019, the board’s balance and independence are reinforced. The board’s composition comprehensively reflects an appropriate mix of knowledge, skills, experience, diversity and independence.
Professor Zinn has held top human resources positions in the corporate and public sectors. She has experience across multiple industries and business sectors, and she continues to provide consulting and advisory services relating to transformation, leadership, and education. Ms Fernandez is a Chartered Accountant with significant top executive and board experience. She hails from an extensive investment management and private equity background.
We are excited and grateful that they have agreed to join our board. We consider their depth of experience, particularly for the audit, risk and nominations and remuneration committees, to be highly beneficial.
Shareholders voted against our Remuneration Policy and implementation report at the last AGM. We invited shareholders to attend an engagement session in
January 2019. We will be proposing some changes to our short and long-term incentive schemes for the future years, to ensure enhanced alignment between the interests of management and shareholders. Our newly reconstituted nominations and remuneration committee will continue to review and refine these schemes, in response to the concerns noted by shareholders.
We negotiated an amicable separation from our B-BBEE relationship with Grand Parade Investments (“GPI”) to allow Spur Corporation to reacquire the 10% of the total shares in the company issued to GPI in 2014. We believe this to be in the best interests of shareholders, as it will enhance earnings and increase dividends per share, while marginally improving return on equity. The group has significant cash reserves, and we believe that the reacquisition of our shares is an effective allocation of this capital. The transaction was approved by shareholders at the general meeting held on 25 September 2019 and implemented on 15 October 2019. The value of the transaction is R260.4 million, equating to R24 per share, and the net cash outflow to the group is R147.2 million on implementation date.
To generate sustainable returns for providers of financial capital over the long term and support the creation of value for the group’s key stakeholders, Spur Corporation needs to grow. To achieve this, we have developed the Vision 2023 strategy collaboratively at group and brand level. The strategy is entering the execution phase.
The board worked with the chief executive officer (“CEO”) and senior executives to ensure these strategies are appropriate and facilitate growth. We assessed the business holistically and we will adopt a very strict approach to the allocation of capital. We will be exploring opportunities where change and innovation can make a material difference to the group’s performance. We will also continue to look at how the group can use its existing assets to improve and innovate our offering to the benefit of our franchisees.
As a result, we are considering expanding the group’s manufacturing, procurement, training and marketing divisions, while innovating the core of the business in terms of our digital transformation strategy, restaurant design, delivery and menu engineering. We will consider acquisitions with caution.
We are optimistic about the future of South Africa and earnestly consider our obligations to help where we can, and to invest in our country. Our CSI initiatives, managed by The Spur Foundation, continue to uplift and improve the lives of many South African families, especially children. The Foundation supports several food and education programmes for children through the provision of necessities and amenities.
Many of our franchisees are active in their local communities through initiatives to support the people around them and the environments in which they trade. In 2018 The Spur Foundation started a Franchisee Beneficiary Fund that encourages franchisees to nominate a charity in which they are actively involved to garner additional support.
The importance of transformation in any South African company cannot be overstated. Internally, our transformation initiatives support the development of historically disadvantaged individuals at franchises and corporate offices. We also provide in-house development opportunities and mentoring programmes to employees.
Outlook and appreciation
We expect trading conditions to remain very constrained in the short to medium term against the backdrop of low economic growth, the weak labour market, fragile consumer confidence, possible ongoing social unrest and continued pressure on household budgets from rising costs.
One of the group’s core strengths is positioning our brands’ offerings across the scale of consumer preferences, taste profiles and price points. There is a great deal of trust in Spur Corporation’s brands. Customers know if they spend their hard-earned money at a Spur Corporation restaurant, they will receive excellent value for money and a fun, friendly, family-focused experience, whether they are in Upington, or Port Elizabeth or in any one of our restaurants elsewhere in South Africa or around the world.
I would like to thank my colleagues on the board of directors and the members of the group management team for their excellent work during the past year. In tough socio-economic conditions, Spur Corporation is fortunate to have highly experienced and dedicated board members and executives who have been through good and bad times. I would also like to extend a very big thank you to our franchisees and their employees, who are the face of the group, for their trust in us. The board and management also thank our shareholders for their continued support.