The mothership is offloading

More Spur customers have avoided the steakhouse chain this year than last, but whether this is because Spur is a mature business in a dog eat dog economic environment, or because of the consumer boycott following the racial incident in Johannesburg, is anyone’s guess.

“The social media fallout following a customer incident in a Spur outlet in Johannesburg affected restaurant turnovers in the last quarter of the financial year,” said CEO Pierre van Tonder at the presentation of the results for the year to June. “However, in the current poor trading environment the extent of the impact cannot be determined.”

If it were not for brand extensions at Spur, the situation would be worse. Like for like turnover declined by 9.9% at existing stores, but the addition of six Spur Grill & Go restaurants helped to cushion the fall in revenue growth.

Across the group, franchised restaurant sales grew by 4.4% in South Africa and by 2.4% in rand terms in international restaurants, excluding the impact of the closure of the group’s operations in the UK and Ireland in the previous financial year.

Headline earnings from continuing operations declined by 25.9% to R135.1 million and by 8.4% on a comparable basis. Diluted Heps from continuing operations was 25.9% lower at 140.8 cents.

“Over the past year we have seen several of our competitors launch aggressive discounting campaigns to attract cash-strapped customers. In this environment our franchisees have continued to face margin pressure and we have taken decisive action to support franchisee profitability to ensure the sustainability of our restaurant brands,” Van Tonder said.

What was notable about the results was the positive growth in all of the other group brands, with the exception of the embattled Captain DoRego’s, thanks largely to new store rollouts.

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RocoMamas continues to be one of the fastest growing restaurant brands in the fast casual dining sector, adding eight new outlets in the year, bringing the total to 50.Source: Compiled from Spur corporate information

Spur Corp increased its shareholding in the RocoMamas franchise business to 70% following the acquisition of a further 19% stake for R14 million in April 2017.

At Hussar Grill, whose consumers are least affected by the economic climate, sales were boosted by the opening of two new stores in the first half of the year, bringing the total to 14.

While economic conditions are not expected to improve for another 12 to 18 months, Spur Corp plans to open a net 20 restaurants in South Africa across all of its brands. In some cases these will be smaller format stores, requiring a lower investment from franchisees. The group will also look for opportunities to open its Spur Grill & Go outlets in smaller towns.

And although the group has pulled its Spur brand out of the UK, it continues to open new restaurants elsewhere (including a Spur in New Zealand and Ethiopia, and a RocoMamas in Oman and Saudi Arabia) and will open at least nine international restaurants in this financial year, bringing the total to 72. The focus will mainly be on Africa where new outlets will be opened in Nigeria, Namibia, Kenya, Zimbabwe and Swaziland. A further two outlets will be opening in Saudi Arabia and one in Mauritius.

The company announced a dividend of 132 cents, down 5.7% from last year. On this news the share rose timidly to R28.50, but it’s still 9.32% down from the beginning of the year.

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