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Spur drives SA expansion despite domestic challenges

‘These are exciting times for us’ – CEO.

Spur Corporation (JSE: SUR), which owns restaurants such as Spur Steak Ranches and Panarottis, will continue to expand in the South African market, despite the negative impact that load shedding is having on its business, says CEO Pierre van Tonder.

In its results for the six months ended December 31, Spur said it plans to open 21 restaurants across its brands in South Africa. Alongside Spur Steak Ranches and Panarottis, Spur Corporation owns John Dory’s, Captain DoRegos, The Hussar Grill and more recently, gourmet burger start-up RocoMamas.

In an interview with Moneyweb, Van Tonder said Spur-owned restaurants were particularly affected by load shedding in November and December last year, eroding turnover in certain areas. “It is a problem, but we have a strategy to get generators approved and installed in all our restaurants,” Van Tonder said.

“South African consumers are fairly resilient. As long as you provide value, whether it’s the Monday night burger or the club… there’s always an opportunity to trade, you’ve just got to wake up earlier in the morning,” Van Tonder quipped.

In its results announcement, the group said its Spur Family Card continues to drive sales and customer loyalty, attracting more than 16 000 new members each month. “The loyalty programme now has 1.8 million active members who account for 41% of Spur’s restaurant sales,” Spur said.

In the six-period, restaurant sales increased 14.1% to R3.2 billion, with comparable profit up 15.3%. A R33 million share-based payment expense relating to the broad-based black economic empowerment transaction Spur did with Grand Parade Investments in October negatively impacted the group’s performance.

Diluted headline earnings per share fell 28.2% to 61.2 cents a share, but increased 15.2% when excluding the share-based payment charge.

Bullish on his brands

Van Tonder said he was excited with Panarottis’ 25% sales growth. He said the chain was “making inroads into the competitive pizza/pasta market”.

With sales falling 18.2%, Van Tonder said Captain DoRegos was still “a work in progress”. Serving predominantly lower income consumers who are the most cash strapped, Spur has been consolidating Captain DoRegos and said in statement that it now had “a stable platform from which to expand”. Van Tonder said 13 new restaurants would be opened by June 30.

Captain DoRegos saw a 30% decline in franchise earnings to R3.3 million.

Franchise revenue in Spur increased by 11.8%, Panarottis 24.5% and John Dory’s 13%.

Spur accounts for 80% of local restaurant sales. “Spur [Steak Ranches] has been the jewel in the crown, so to speak, for many years and I think it still is,” Van Tonder said.

Historically Western Cape-based, Van Tonder noted that Spur was in negotiations to bring The Hussar Grill to Johannesburg, in the Morningside, Fourways and/or Monte Casino areas. He hoped to open four new restaurants in the calendar year.

RocoMamas, a start-up franchise venture specialising in hand-made burgers, is also on a growth path with at least six or seven openings planned for Johannesburg this year. Brian Altriche, a Spur franchisee, launched RocoMamas in 2013. Spur said it plans to expand the RocoMamas brand nationally with “capacity to extend the chain to 30 to 40 outlets in the next few years”.

Disposing of company-owned restaurant investments in Australia, Spur plans to have all of its operations there under franchise by end June, Van Tonder said.

In the United Kingdom, Spur said it was piloting a “smaller format Spur brand”, known as RBW (Ribs Burgers Wings) in Corby and Glasgow. “With all the research and the pain we’ve taken, we feel we have a recipe that could be franchiseable going forward,” Van Tonder said, noting the UK had been a tough area for Spur, which had struggled with labour and food costs.

For the period under review, group revenue increased by 8.7% to R408.7 million, with revenue generated in South Africa 13% higher.

Spur Corporation’s share price closed Thursday 1.37% lower at R36.

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