Press release

Spur Corporation increases headline earnings by 37%

September 15, 2005

Cape Town – Listed family restaurant group, Spur Corporation, continued its strong growth of recent years, increasing headline earnings by 37% to R51,1 million (R37,2 million) in the year to end June 2005, as buoyant market conditions and foreign exchange gains beefed up performance.

Headline earnings per share rose 42% to 56,3 cents (39,7 cents), while diluted headline earnings per share grew by 41% to 56,1 cents (39,7 cents).

Operating profit increased by 37% to R68,5 million (R50,2 million), lifted by unrealised foreign exchange gains of R2,5 million (loss of R3,9 million). The improved operating profit margin reflects disciplined expense management and internal controls.

Shareholders will receive a distribution of 40 cents per share for the year, up 33% on the previous year.

Group managing director, Pierre van Tonder, said the increased spending power of the country’s growing middle class has been a positive development for the economy.

“Spur Corporation prides itself on being a South African restaurant chain, with our value-based offerings across Spur, Panarottis and John Dory’s finding increasing support from this rapidly growing sector of the consumer market. We have been able to capitalise on this trend, particularly in the Gauteng region, and have grown our market share.”

Turnover increased by 11% to R200,6 million (R181 million). This was impacted by the decrease in wholesale and distribution sales following the decision to outsource the national distribution of the group’s central kitchen products during the year. The outsourcing of the distribution function is aimed at ensuring consistency and quality of delivery to outlets nationally.

Van Tonder said the group’s core franchise royalty income grew by 19%. “We benchmark our performance on the growth in turnover of our existing stores (excluding new stores opened during the year) and it is encouraging that same store growth was 13%, well ahead of menu price inflation for the period.”

During the year under review, the group opened 20 new stores in South Africa and three internationally, bringing the total number of stores to 287.

Spur Steak Ranches opened 13 new stores and at year end had 224 outlets. Four stores were relocated and are all showing turnover increases of more than 40% in their new sites. The store upgrade programme continued with a further 19 stores being refurbished, bringing to 167 the number of stores revamped since the programme began in 1999.

Panarottis Pizza Pasta continued its rapid store growth, opening 10 new stores during the period. Turnover grew by 15%. “The family-focused value offering of Panarottis remains strong and we are launching a new marketing campaign to bolster the brand positioning,” Van Tonder said.

Spur Corporation bought a 60% stake in John Dory’s Fish & Grill franchise with effect from November 2004, with the founders of the business retaining a 40% interest. John Dory’s has seven stores, mainly in KwaZulu Natal, and the group plans to expand the store base nationally. Ten stores are expected to be opened in the upcoming year, with the first store having been opened in the Western Cape in July.

Following the opening of new Spur stores in Wandsworth, United Kingdom, and Maputo, Mozambique, and a new Panarottis outlet in Parramatta, Australia, the group now has 32 stores outside of South Africa.

Van Tonder said Spur has a prudent international strategy and is targeting unchartered territories in the new year, including China. A master franchisee has been appointed in China and the first Spur Steak Ranch will be opening in Shanghai later this month, with stores planned for Fuzhou (November) and Nanking (January 2006).

A further three stores are planned for Australia where the group already has three Spur and three Panarottis outlets. African expansion will focus on new stores in Windhoek and Gaborone, where the strategy is to position new stores adjacent to hotels and entertainment centres.

On the outlook for the group, Van Tonder said “favourable trading conditions are likely to continue as inflation and interest rates are expected to remain steady in the year ahead. We are therefore confident of delivering continued solid growth to our shareholders.”

He said the group would continue its roll-out of stores across the three franchise brands in South Africa and ensure sustained expansion of the international operations.

“Black economic empowerment (BEE) is a priority for the Spur Corporation,” said Van Tonder, “and we are actively pursuing our BEE plans at a shareholding and franchisee level.”

Issued by Tier 1 Investor Relations on behalf of Spur Corporation

For further information kindly contact

Pierre van Tonder
Managing Director
Spur Corporation
Tel (021) 466-8200

Ronel van Dijk
Chief Financial Officer
Spur Corporation
Tel (021) 466-8200

Graeme Lillie
Tier 1 Investor Relations
Tel (021) 702-3102 / 082 468 1507