Spur to continue with its successful recipe as it expands in Africa
Restaurant turnover for operations in the rest of Africa and the Middle East increases almost 10%
Spur is looking to the rest of Africa to expand its footprint, which will include opening more of its popular RocoMamas outlets thanks to increasing profits from the continent.
CEO Pierre van Tonder said the success in Africa, where many retailers like Shoprite struggle with hyperinflation and constrained consumers, was using local business people to run the franchised restaurants. Spur reported a 27.5% increase in profit in its Africa and Middle East outlets.
Van Tonder said: “Local guys understand nuances of the local market well.”
In the past year, Spur opened six restaurants in Mauritius leading to 18 in total in the island state and three in Zambia, which will bring the total there to 16.
Restaurant turnover for the Africa and Middle East operations, which accounts for 82.3% of total international turnover, increased by 9.6% in the six months to the end of December. By contrast income growth in SA, where it has 559 restaurants, was up 4.7% in the second half of last year.
In the next six months the group plans to open 17 restaurants outside SA, “with our international expansion focusing primarily on Africa and the Middle East”.
Six new restaurants are planned for Zambia, three in Saudi Arabia (Riyadh), two each in Nigeria, Kenya and Eswatini and one each in Zimbabwe and Ghana.
But poor sales in Australia and New Zealand meant turnover there declined by 20.3% in the last six months of 2019, lowering overall international restaurant income growth to 4.1%.
Spur has changed its franchise model slightly in New Zealand, ensuring franchises pay franchise consulting fees for advice upfront to stem financial losses there, said Van Tonder.
“We have no intention to close those [New Zealand and Australian] branches,” he said. It did shut two unprofitable restaurants Down Under last year.
Back in SA, Spur has battled with constrained consumers and fewer customers as load-shedding kept people from shopping malls. Van Tonder has previously spoken out about problems businesses face because of load-shedding and the poor economy.
“Economic headwinds continued to dampen consumer spending in SA, with local franchised restaurant sales growth of 4.7% reflecting the pressure on the group’s main middle income customer base.”
He added: “Our franchisees across the group are investing in installing generators in their restaurants, with approximately 80% of outlets now able to trade during load-shedding.”
In small towns, water supply is erratic and often of an unhealthy quality. Not only do consumers need clean water, but expensive Coke and coffee machines require high-quality water to run, he said. This meant that restaurants have to install water purifiers and infrastructure to clean locally supplied water.
Back in big cities, the Spur group saw sales up 9.2% in its high-end brands, such as steakhouse Hussar Grill, but it will expand in this market with a “cautious approach” as upmarket restaurants need to be in very particular locations aimed at niche clientele.
The group’s profit before tax grew by 19.5% to R161.8m, boosted by the recovery of an impairment provision of R10.8m related to its BEE transaction with Grand Parade Investments.
Diluted headline earnings per share were 35.6% higher at 124.9c. The interim dividend increased by 23.8% to 78c per share.
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