Spur Corporation increased headline earnings by 10.2% to R165 million in the year to June 2019 as trading conditions continue to be challenging in South Africa while the international business was impacted by weak economic conditions and high operating costs in Australia.
Total franchised restaurant sales across the local and international operations increased by 7.2% to R7.6 billion.
Group revenue increased by 5.9% to R945 million and profit before income tax grew by 13.9%. The total dividend was increased by 10.6% to 136 cents.
Spur Corporation expanded its restaurant base to 620 following the net opening of 39 new outlets during the year and the acquisition of the Nikos Coalgrill Greek chain in August 2018 which comprised six restaurants.
The group opened its first restaurants in India and Cyprus, both RocoMamas outlets, while The Hussar Grill opened its first restaurant in Saudi Arabia.
Group CEO Pierre van Tonder said franchised restaurant sales in South Africa grew by 6.2% as the group’s middle-income customer base came under increasing pressure in the slowing economic climate.
“In this constrained spending environment we continue to focus on enhancing the margins of our franchisees to ensure a more sustainable franchise business,” he said.
Spur Steak Ranches increased restaurant sales by 5.4%, supported by the loyal customer base of over 1.2 million active Spur Family Card members. The Hussar Grill’s higher income customers continue to be resilient and the brand grew restaurant sales by 13.4%.
RocoMamas, one of the fastest growing brands in the country’s casual dining sector, grew restaurant sales 7.5%. John Dory’s increased restaurant sales by 4.6% and Panarottis and Casa Bella grew restaurant sales by 0.9% as the Panarottis chain continued to be impacted by aggressive discounting in the pizza takeaway market.
Van Tonder said the group has embraced the call-and-collect and delivery models, experiencing strong growth across all brands from third party delivery services such as Mr D Food and Uber Eats.
International restaurant sales increased by 12.3%, benefiting from the opening of a record 20 restaurants during the year. “Trading in Africa, Mauritius and the Middle East remains strong, while trading in certain African countries including Namibia, Kenya and Lesotho was slower.”
“Trading conditions in Australia and New Zealand continue to be challenging, with sales declining by 15.9% following the closure of three restaurants. As a result of the high franchisee operating costs and financial losses we are re-evaluating our operations in these countries,” he said.
More than 20 new restaurants are planned for the new financial year, including at least 11 in South Africa and ten international restaurants. International expansion will focus primarily on Africa and the Middle East, with three RocoMamas outlets in Saudi Arabia and new restaurants in Kenya, Nigeria, Mauritius, Zambia and Zimbabwe.
Van Tonder said the group expects trading conditions to remain difficult in the short to medium term against the background of low economic growth, the weak labour market, fragile consumer confidence and continued pressure on household budgets. In this environment, we will maintain our focus on tight cost management, excellent product quality and supporting the profitability of franchisees,” he added.