7 Sep 2017, South Africa: Chain restaurant owner Spur Corporation reported a 25.9 percent decline in headline earnings from continuing operations to R135.1 million in the year to June 2017. Spur said this was a result of discretionary spending which came under increasing pressure because of deteriorating economic conditions and growing uncertainty that gripped the country.
The franchise owner said the financial difficulties of middle income South African families contributed to sales in Spur Steak Ranches declining by 2.1 percent.
Sales in the last quarter were also impacted by the social media fallout following a racially charged incident between customers in a Spur outlet south of Johannesburg.
Spur chief executive, Pierre van Tonder, said the restaurant’s brand appeal and loyal base of 1.8 million Spur Family Card members had been key to trading through this difficult period.
Van Tonder said the slowdown in consumer spending and confidence had 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,” van Tonder said.
“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.”
As a result of the group’s headline earnings declining, the annual dividend was decreased by 5.7 percent to 132 cents per share.
But the group managed to grow restaurant sales from continuing operations by 4.2 percent to R7.2 billion.
Franchised restaurant sales grew by 4.4 percent in South Africa and by 2.4 percent 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.
Spur Corporation expanded its global restaurant footprint to 591 outlets with the opening of a net 11 new outlets in South Africa and five in international markets.
RocoMamas continued 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 percent as eight new outlets were opened in South Africa.
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 South Africa 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,” van Tonder said.
Spur said the international expansion will focus mainly on Africa where six new restaurants were planned, with a further two restaurants in Saudi Arabia and one in Mauritius.