Spur Corporation Lifts Earnings 31% in Strong Post Lockdown Trading Recovery

Spur Corporation increased headline earnings by 31% to R121 million in the year to June 2022 as the group reported a strong post COVID-19 lockdown trading recovery and capitalised on increasing restaurant foot traffic.

Group revenue grew by 32.5% to R2.4 billion, with improved franchised restaurant turnover, higher sales in the company-owned restaurants and increased sales from the manufacturing and distribution division. This contributed to profit before income tax growing by 41.9% to R210 million.

A final dividend of 78 cents per share was declared, bringing the total dividend to 127 cents. The group remained in an ungeared position at the June 2022 year end, with unrestricted cash on hand of R291 million.

Group CEO Val Nichas said franchised restaurant sales increased by 28.2% “and are pleasingly ahead of the pre-pandemic sales reported for the 2019 financial year.”

Franchised restaurant sales in South Africa grew by 30.5% and by 10.3% internationally. The rest of Africa accounts for 67% of the international portfolio and solid trading performances were reported in Zambia, Namibia, Zimbabwe and Kenya.

In South Africa, growth was driven mainly by the Spur brand, which increased restaurant sales by 30.1%. Spur represents 68% of the group’s South African sales and remains independently rated as the country’s leading casual dining chain. Panarottis, John Dory’s and RocoMamas all performed well while the speciality brands lifted sales by 52% with a strong recovery in restaurant sales in The Hussar Grill.

Takeaways grew by 30%, with the highest percentage of takeaways being in RocoMamas (57%) and Panarottis (39%) as pizza and burgers are the most popular products for takeaway and delivery.

The group’s restaurant base expanded to 631, with 547 outlets in South Africa and 84 across the rest of Africa, Mauritius and the Middle East. Locally 23 restaurants were opened, including nine RocoMamas, five Spur, four Panarottis and five in the speciality brand portfolio. The current challenging trading conditions led to the closure of 15 local outlets. Black franchise partners now represent 28% (2021: 22%) of the group’s network.

The group’s international growth strategy gained momentum and eight restaurants opened internationally, with four Panarottis and two RocoMamas in Zambia as well as a RocoMamas in both Namibia and India.

Nichas said the group plans to open 32 new restaurants in South Africa and nine internationally in the 2023 financial year.

The newest brand in the stable, Modrockers, is an innovative plant-based quick service restaurant. Located in Rosebank, Johannesburg, Modrockers is aimed at the youthful flexitarian market. The group will continue to grow the plant based, environmentally conscious meal options at Modrockers as well as all the major brands.

The online, delivery-only virtual kitchen brands were expanded with the launch of Just Wingz, specialising in a range of chicken wings and capitalising on the growth trend of chicken. The virtual kitchen brands were launched during the hard lockdown in 2020 and over 50% of the group’s restaurants are now participating in the virtual kitchen offering.

The first RocoMamas Drive Thru opened in Gauteng in June 2022 and a second is planned to open at the end of August. This follows the highly positive customer response to the first Spur Drive Thru which opened in Pretoria in 2021. “We will continue to expand this convenient and lucrative channel to meet the needs of our customers for convenience.”

On the outlook for trading in the new financial year, Nichas said the country is facing severe headwinds while consumer disposable income is being eroded by higher fuel, electricity and food costs, and rising interest rates. “However, should market conditions remain stable, we are optimistic on our growth prospects for the new year.”

Nichas said it is encouraging that South Africa’s limited services restaurant sector, which includes fast food, chain and independent restaurants, is projected to show an annual compound growth of 8.6% from 2022 to 2026, according to Euromonitor, “which offers a positive outlook and an opportunity to leverage this expected growth”.

“The widespread changes in the trading environment and shifting consumer trends creates opportunities for innovation, including new meal solutions, expansion of restaurant formats and alternative trading channels. We are taking advantage of the global trend towards convenience with the growth in e-commerce and on-demand delivery as well as expanding our ranges of plant-based and vegan menu options for health conscious and environmentally aware consumers,” she said.

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