Spur gets boost after social media fallout
The company says it is re-evaluating its operations in Australia and New Zealand
Spur Corporation’s well-known steakhouse brand has recovered from the fallout of a 2017 racist incident that saw a boycott of its restaurants, helping the company buck the trend in the fast-food sector.
“The resurgence of the Spur brand and the work that we have done to regain consumer confidence ... has really stood us in good stead,” Spur Holdings CEO Pierre van Tonder said on Wednesday, after the release of the company’s annual results for the year ended June.
The owner of Spur, as well as brands such as RocoMamas, Panarottis and The Hussar Grill, reported a headline earnings rise of 10.2% to R165m, and upped its full-year dividend by 10.6% to 136c. This is against continued challenging trading conditions in SA, as well as weak economic conditions and high operating costs in Australia.
The Spur brand took a knock in 2018 — seeing a 3.2% decline in its franchisee revenue — after a racially charged incident between two customers was spread on social media.
Franchise revenue in Spur for 2019 recovered, increasing by 9.7%.
“Initially, when we had the social media incident it was all hands on deck, we had to assist franchisees with concessions, we had to lend money to our marketing department. But we’ve turned these corners now,” said Van Tonder.
Franchisee revenue from its other units also rose, with its pizza and pasta business up 5.6%, John Dory’s grew 8%, The Hussar Grill increased by 10.8%, while RocoMamas recorded growth of 8.3%.
The company’s results were exactly “the shot in the fast-food arm that the sector needed”, said analyst Anthony Clark of Smalltalkdaily Research, after the disappointing numbers from peer operations such as Famous Brands.
Spur has posted a 5.9% rise in group revenue despite continued pressure on South Africa's middle class. The owner of chains such as RocoMamas and The Hussar Grill says that its expansion strategy is part of the reason why it managed to deliver growth. Business Day TV spoke to CEO Pierre van Tonder for more insight.
“Overall the key trading brands had a pleasing period with solid growth in what is a highly challenging and competitive consumer environment,” said Clark.
However, challenging trading conditions in Australia and New Zealand saw Spur take a R12m impairment. With sales declining 15.9% after the closure of three restaurants, and considering high franchisee operating costs and its financial losses, the company said it was re-evaluating its operations in those countries.
The company is also in the process of a separation from empowerment partner Grand Parade Investments (GPI). It announced in June that it would buy back the 10% stake held by GPI for R260.4m, with the transaction subject to shareholder approval at the end of September.
Van Tonder said that the company wants to finalise the transaction with GPI and then “regroup” before beginning the search for a new BEE partner.
But there is “no question ... if you are a South African company, the BEE side and the credentials side of the business is critically important”, he said.
After discussions with the board, the company had set itself “very specific time frames within the next 12 months” to identify the right empowerment partner, Van Tonder said.