Spur plans to dish up more restaurants on the back of increased sales

Belts may be tightened across SA, but it's not only due to a tough economic climate – fast foods are going down well too. Spur's group revenue increased by 5.3% to R370.2m in the six months ended December 31, 2018, the corporation said on Thursday.

The corporation – which includes Spur steak ranches, Panarottis, John Dory's and The Hussar Grill – issued unaudited financial statements and a cash dividend declaration.

And despite anticipating ongoing pressures on discretionary spending due to rising utility and living costs, load shedding and uncertainty ahead of elections, the group says it plans to open at least 12 new restaurants across the country in the second half of the year, including Spur Steak Ranches, Panarottis, RocoMamas and Nikos Coal Grill brands.

Spur still recovering

Franchised restaurant sales in SA – excluding Captain DoRegos, which was sold – grew by 5.7%, with sales increasing by 11.3% in the first quarter to September 2018, the corporation said.

This, it added, was supported by "continued recovery in Spur Steak ranches" as well as a strong performance in the Hussar Grill.

The previous comparative period saw Spur battling to lift half-year sales as it faced a triple challenge of a tough economic climate, increased competition and a boycott following a controversial racist incident at a Spur steak ranch that went viral on social media.

The restaurant's recovery was helped along by a loyal customer base of 1.2 million Spur Family Card members, the corporation said.

Dividends maintained

According to Thursday's statement, total franchised restaurant sales across local and international operations increased by 4.8% to R3.9bn, and by 6.5% excluding the results of Captain DoRegos.

International restaurant sales increased by 12.1% on a constant exchange rate basis and by 12.7% in rand terms, driven largely by the opening of 14 restaurants during the period.

However, headline earnings declined by 11.2% to R83.9m, with diluted headline earnings per share 10.9% lower at 87.8 cents.

Nonetheless, dividends per share were maintained at 63 cents per share.

Restaurant sales in pizza and pasta – affecting Panarottis and Casa Bella – declined by 1.5%, which the corporation put down to "aggressive discounting" by competitors in the takeaway pizza market.

Millennials hit hard

The second quarter to December 2018, overall, saw weaker performance.

"Sales growth in the second quarter to December 2018 slowed to 1.2% as discretionary spending came under growing pressure, which contributed to a further decline in shopping centre foot traffic," the statement said.

According to Spur, management's focus has been on driving franchisee profitability, with further initiatives being undertaken following successful promotional and discounting strategies for Spur in the previous financial year.

These include expanding the range of "home-made" products manufactured in Spur restaurants, manufacturing menu offerings in certain brands, renegotiation rentals and reducing the size of some restaurants.

RocoMamas – which has grown restaurant sales by an annual compound rate of 45.9% since being acquired by the group in 2015 – also saw growth slowing down to 6.0%, which Spur explained as the urban millennial market not being immune to the economic downturn.

Higher-income customers proved more resilient, the corporation said, with the Hussar Grill growing restaurant sales by 13.8%.

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