Spur Corporation earnings up 119% in strong post-lockdown trading

Spur Burger in hands
Spur Corporation increased headline earnings by 119.4% to R59 million in the six months to December 2021 as trading conditions improved with the easing of COVID-19 lockdown restrictions and the strong increase in restaurant foot traffic in the last few months of 2021.
Group revenue grew by 40.3% to R441 million due to improved franchised restaurant turnovers, higher sales in the five company-owned restaurants and increased sales from the manufacturing and distribution division.
Comparable profit before income tax, excluding once-off and unusual items, increased by 96.3%.
An interim dividend of 49 cents per share was declared and the group remained in an ungeared position at the end of December 2021, with unrestricted cash on hand of R259 million.
CEO Val Nichas said following the reduction in lockdown levels and easing of trading restrictions, customer counts in restaurants improved from August to December 2021, with strong trading in the fourth quarter of calendar 2021.
While there is still uncertainty on the continued effects of the COVID-19 pandemic, the group demonstrated a pleasing recovery in trading performance. However, group franchised restaurant turnover for the half year remains 9.5% behind pre COVID-19 levels,” she said.
Franchised restaurant sales grew by 28.3% over the prior period when significant restrictions on sit-down trade were in place. Trading was impacted by varying levels of COVID-19 restrictions while conditions were compounded by the widespread civil unrest in KwaZulu-Natal in July 2021.
Growth was driven mainly by the Spur brand, which increased local restaurant sales by 32.6%. Panarottis, John Dory’s and RocoMamas all increased restaurant sales by a third and The Hussar Grill by 45.0% in South Africa.
Takeaways accounted for 20% of the group’s South African turnover in the past six months, with the highest percentage of takeaways being in RocoMamas (53%) and Panarottis (40%).
The group’s restaurant base expanded to 627, with 545 outlets in South Africa and 82 across the rest of Africa, Mauritius and the Middle East. Sixteen restaurants were opened in South Africa, including seven RocoMamas, three Spur and two Panarottis outlets, while ten were closed.
The international growth strategy is focused on areas in Africa where the brands appeal to local consumers, such as Zambia, Namibia and Kenya. Internationally, four restaurants in Zambia, Namibia and India were opened and seven were closed.
The most recent addition to the brand portfolio is Modrockers, an innovative plant-based quick service restaurant. Located in Rosebank, Johannesburg, the restaurant is in the fourth month of its pilot phase and the group aims to capitalise on the growth and awareness of plant-based eating.
The online, delivery-only virtual kitchen brands launched during the hard lockdown in 2020 have continued to gain traction, with over 170 of the group’s restaurants participating in the virtual kitchen offering.
Following the highly positive customer response to the first Spur Drive Thru which opened in Pretoria in June 2021, further potential sites have been identified, including two RocoMamas Drive Thru’s that are currently being built.
Discussing the trading outlook, Nichas said COVID-19 has had a profound impact on the domestic restaurant industry, with an estimated 1 000 restaurants having closed since the onset of the pandemic.
“The restaurant franchising sector also faces increased operating costs which has resulted in a need to adjust staffing levels, reduce menu sizes, introduce value offerings and simplify operations to offset the increases in petrol, power and key food input costs. The recent increase in the minimum wage will continue to place pressure on restaurant business models, especially in some high volume sites like airports and resorts where turnovers have not fully recovered.”
However, Nichas said the restaurant sector in South Africa is predicted to show an annual compound growth of 4.5% from 2021 to 2025, according to Euromonitor, which offers a positive outlook and an opportunity to leverage this projected growth.
“The widespread changes in the trading environment and shifting consumer trends allow for innovation, including new meal solutions, expansion of restaurant formats and alternative trading channels. New trends include convenience in prepared or near-finished meals. Online and food delivery is expected to continue to grow. Health options will gain momentum as vegan, vegetarian and plant-based offerings increase. There remains a constant need for providing value and reward,” she added.
Nichas said the group remains on track to open 32 new restaurants in South Africa and seven internationally for the current financial year to June 2022.

Issued by Tier 1 Investor Relations on behalf of Spur Corporation
For further information kindly contact
Val Nichas, Spur Corporation 021 555-5100
Graeme Lillie, Tier 1 Investor Relations 082 468 1507

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