Spur Corporation grew restaurant sales from continuing operations by 4.2% to R7.2bn in the year to June 2017, as discretionary spending came under increasing pressure and deteriorating economic conditions and growing uncertainty gripped the country.
Franchised restaurant sales grew by 4.4% in SA 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.
The group’s headline earnings from continuing operations declined by 25.9% to R135.1m and by 8.4% on a comparable basis. Diluted headline earnings per share (Heps) from continuing operations were 25.9% lower at 140.8 cents.
The annual dividend decreased by 5.7% to 132 cents per share.
Spur Corporation expanded its global restaurant footprint to 591, with the opening of a net 11 new outlets in SA and 5 in international markets. These include the group’s first restaurants in New Zealand (Spur), Ethiopia (Spur), Oman (RocoMamas) and Saudi Arabia (RocoMamas).
Shopping mall footprint
CEO Pierre van Tonder said the slowdown in consumer spending and confidence has led to a sharp decline in shopping mall foot traffic.
“Over the past year we have seen several of our competitors launching 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,” he said.
The financial difficulties of middle-income South African families contributed to sales in Spur Steak Ranches declining by 2.1%. Sales in the last quarter were also impacted by the social media fallout following a customer incident in a Spur outlet in Johannesburg.
Spur’s brand appeal and loyal base of 1.8 million Spur Family Card members have been key to trading through this difficult period, said Van Tonder.
RocoMamas continues to be one of the fastest growing restaurant brands in the fast casual dining sector in the country and opened its 50th outlet during the year. Sales grew by 78.1% as eight new outlets were opened in SA.
Pizza and Pasta, incorporating Panarottis and Casa Bella, grew sales by 13.3% despite intense competition in the pizza market. John Dory’s increased sales by 14.3% and The Hussar Grill by 35.6%, with sales in Captain DoRegos declining by 17.6%.
Van Tonder said while trading conditions are not expected to improve in the next 12 to 18 months, the group will continue to expand the footprint of its eight home-grown brands.
“We plan to open 34 restaurants across all brands in SA in the year ahead. In the current economic climate we will open smaller format restaurants while also looking for opportunities to open Spur Grill & Go outlets in smaller towns,” he said.
International expansion will focus mainly on Africa where six new restaurants are planned, with a further two restaurants in Saudi Arabia and one in Mauritius.
“Our international strategy is to grow the restaurant footprint in regions where we currently trade to build brand equity and create economies of scale. We will take a cautious approach to entering any new regions,” he said.