Leading casual dining franchise group Spur Corporation has been advised to curb its appetite for expanding its operations beyond the borders of South Africa.
The warning comes as the restaurant group, which owns established and complementary eatery brands including John Dory’s, RocoMamas, Spur, Tashas, Panarottis, Doppio Zero and Pizza e Vino, released a healthy set of interim results for the six months ended December 31.
The franchised sales of the group, which has 753 outlets trading across South Africa and 13 countries in the rest of Africa, saw revenue increasing by 8% to R6.4-billion, resulting in profit before income tax increasing by 13% to R244.7-million. Diluted headline earnings per share rose by 14.5% to 197.15 cents, with the company declaring an interim dividend per share increase of 13.2% to 120 cents.
Spearheading the volume growth in South Africa, was Spur brand which increased restaurant sales by 7.2%. The group said Panarottis increased restaurant sales by a 17.4% and RocoMamas, which specialises in smash burgers, saw its sales increase by 4.9%. However, John Dory’s sales were 11.7% lower, prompting the management to realign the brand structure to improve performance.
“John Dory’s operations are being closely reviewed, with a focused executive team developing a turnaround s, trategy. Brand equity remains a key issue, as the highly competitive seafood category is not always the first choice for consumers in a strained economy, non-executive chairman Mike Bosman and group CEO Val Nichas announced in the results presentation.
They said the group had also concluded the sale of the Nikos brand back to Peter and Nikki Triandafillou, who founded the Greek-style eatery in Durban in 2017. The sale comes to effect today
Spur Group recorded double-digit growth at a time when the country’s meat traders have been facing foot and mouth disease that has disrupted supply chains and hit beef prices.
In South Africa it opened 29 new eateries in the period under review, which include seven Spur restaurants, seven Panarottis, two John Dory’s, five RocoMamas, four Doppio Zeros, two Hussar Grills, one Casa Bella and one Nikos, bringing the local restaurant footprint to 640.
The company stated that eight restaurants were closed in South Africa in the period, while the group opened nine new restaurants in the rest of Africa to bring the international store network to 113, including in Lesotho and Kenya.
Profit before income tax from its rest of Africa operations increased by 38% to R17.1-million from R12.4-million.
However, Sasfin senior equity analyst Alec Abraham told Sunday World that it was difficult to make money on the continent, especially when it comes to currency conversions, costs in hard currency, and repatriating cash.
He cited troubles encountered by fashion retailers Truworths, Woolworths and Mr Price, and supermarket giant Shoprite Group.
“Very often you will be selling in a local currency but what if your costs like rentals are in US dollars. Africa is a great revenue opportunity but in terms of making proper money on a consistent basis is very, very difficult,” he said.
Abraham predicted a strong second half performance by the Spur Group, predicting that when the restauranteur releases full year results later this year, he expects a 15.5% headline earnings per share increase.
An expected rise in consumer demand for Spur products would be driven by Finance Minister Enoch Godongwana’s decision to make an adjustment for bracket creep – a move that benefits individual taxpayers – and lower fuel price increases, among other things.
He praised the group’s management for repositioning the business strategically by improving its manufacturing side.
Abrahams said John Dory’s lacklustre performance was due to seafood being price-sensitive, resulting in consumers generally preferring beef, chicken, burgers and pizzas
He also explained that RoccoMamas’s sales were a bit lower as burger chain had to effect a large price increase of its products due to the foot and mouth disease price disruptions.
