Spur Corporation reported a competitive performance for the six months to December 2018 as increasing demands on disposable income and declining confidence impacted the group’s middle-income customer base.
Total franchised restaurant sales across the local and international operations increased by 4.8% to R3.9 billion. Comparable profit before tax, excluding exceptional and one-off items, increased by 12.4%. The results were negatively impacted by impairment losses totaling R7.8 million.
The group’s headline earnings declined by 11.2% to R83.9 million, with diluted headline earnings per share 10.9% lower at 87.8 cents.
The interim dividend was maintained at 63 cents per share.
Group CEO Pierre van Tonder said trading conditions in the current low growth environment remain particularly challenging. “Discretionary spending came under increasing pressure in the quarter to December 2018 which contributed to a further decline in shopping centre foot traffic,” he said.
Van Tonder said management’s main focus has been on enhancing the profitability of franchisees to ensure the sustainability of the group’s business model. “Initiatives aimed at improving margins across the brands include expanding the range of “home-made” products manufactured in Spur restaurants, rationalising menu offerings, renegotiating rentals and reducing the size of restaurants where necessary,” he said.
Franchised restaurant sales in South Africa grew by 5.7%, supported by the continued recovery in the flagship Spur Steak Ranches brand and a strong performance from The Hussar Grill.
Spur Steak Ranches increased restaurant sales by 6.1%, with the strength of the iconic Spur brand and the loyal customer base of 1.2 million Spur Family Card members being key to driving growth.
The Hussar Grill grew restaurant sales by 13.8% as the brand’s higher-income customers prove more resilient in the weakening economy. Restaurant sales in RocoMamas grew by 6.0% and the brand has grown sales by an annual compound rate of 45.9% since being acquired by the group in 2015. Panarottis and Casa Bella restaurant sales declined by 1.5% and John Dory’s by 0.8%.
International restaurant sales increased by 12.1%, boosted by the opening of 14 restaurants during the past six months. “Trading in Mauritius, the Middle East and Africa has been buoyant, although the performance in certain African countries has been negatively impacted by political instability and volatile exchange rates. The performance in Australia was disappointing and we are re-evaluating our operation in the country.”
Spur Corporation increased its restaurant base to 616 following the net opening of 35 new outlets and the acquisition of the Nikos Coalgrill Greek chain in August 2018, which comprised six restaurants. The group opened its first restaurant in India, being a RocoMamas outlet, and the first outlet for The Hussar Grill opened in Saudi Arabia. Seven Panarottis restaurants were opened in Zambia.
More than 20 new restaurants are planned for the second half of the financial year, including at least 12 in South Africa and a further eight international restaurants. International expansion will focus primarily on Africa with three outlets in Zambia and other new restaurants in Namibia, Kenya, Egypt, Mauritius and
Van Tonder said the current pressure on consumer discretionary spending is expected to persist in the months ahead as the country’s economic prospects remain weak. “In this environment, we will maintain our focus on tight cost management, excellent product quality and supporting the profitability of franchisees,” he added.