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SPUR Corporation First Half Profit Up 20%

Spur Corporation today reported an increase of 8.4% in group revenue to R525 million as middle income consumers came under increasing financial strain in the six months to December 2019.

The group’s profit before tax grew by 19.5% to R161.8 million, boosted by the recovery of an impairment provision of R10.8 million related to its black economic empowerment transaction with Grand Parade Investments which ended in October 2019.

Headline earnings grew by 29.0% to R113.5 million, with diluted headline earnings per share 35.6% higher at 124.9 cents. The directors have increased the interim dividend by 23.8% to 78 cents per share.

Group CEO Pierre van Tonder said total franchised restaurant sales across the local and international operations increased by 4.5% to R4.1 billion.

“Economic headwinds continued to dampen consumer spending in South Africa, with local franchised restaurant sales growth of 4.7% reflecting the pressure on the group’s main middle income customer base.”

He added that electricity load shedding has been highly disruptive to trading patterns and restaurant foot traffic. “In response to these sustained power outages, our franchisees across the group are investing in installing generators in their restaurants, with approximately 80% of outlets now able to trade during load shedding.”

The flagship Spur Steak Ranches brand increased restaurant sales by 4.5% for the six months and gained market share. Van Tonder said Spur’s new contemporary restaurant design and décor is proving appealing to customers while a new menu has been introduced catering for all taste profiles, including vegan-friendly meal options.

RocoMamas grew restaurant sales by 6.4% in the increasingly competitive and fast-growing gourmet burger market. John Dory’s increased restaurant sales by 6.6% and Panarottis and Casa Bella grew sales by 1.5%, impacted by aggressive discounting in the takeaway pizza market. The Hussar Grill continued to demonstrate the resilience of higher income customers as the steakhouse brand grew sales by 9.2%.

International restaurant sales increased by 4.1%. Restaurant turnover for the Africa and Middle East operations, which accounts for 82.3% of total international turnover, increased by 9.6%. Continued poor trading conditions and the closure of a net two restaurants contributed to sales in Australia and New Zealand declining by 20.3%.

Spur Corporation expanded its restaurant base to 642 following the net opening of 22 new outlets in the first half of the year. This included six restaurants in Mauritius and three in Zambia, growing the group’s presence in these countries to 18 and 16 outlets respectively.

Over the next six months the group plans to open 17 restaurants outside of South Africa, “with our international expansion focusing primarily on Africa and the Middle East”. Six new restaurants are planned for Zambia, three in Saudi Arabia (Riyadh), two each in Nigeria, Kenya and Eswatini and one each in Zimbabwe and Ghana.

In South Africa 11 new outlets are planned and Van Tonder commented that management continues to seek opportunities to acquire brands with good growth prospects.

On the outlook for the remainder of the financial year, Van Tonder said the group will maintain its focus on food quality, value and competitive pricing, driving customer loyalty and growing market share in the current environment of low economic growth, weak consumer confidence and pressure on disposable income.

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