It’s little wonder that Spur has returned almost 31% to shareholders this year, dividends included. The stock jumped 11% at one point on Monday after the company released stellar results for the year ended June.
Load-shedding has savaged margins for most consumer-focused companies, but Spur’s experience was largely the opposite.
And while research undertaken by the group revealed that 41% of customers chose to stay home and make a meal plan ahead of their scheduled load-shedding time, buying takeaways and going out to eat were right up there. A quarter of consumers visited a sit-down restaurant if it was close to where they live.
CEO Val Nichas says Spur is chosen as the destination to visit during load-shedding: the grills are always on, the service is good, the children are entertained and the chain offers regular promotions.
The group’s customer count grew by 13% year on year. Takeaway sales now represent 15% of restaurant sales, with collect orders at 52% of the total.
The Spur brand — one of the few in the country that can claim iconic status — remains the core of the group and has largely been responsible for boosting growth in volumes
The Spur brand — one of the few in the country that can claim iconic status — remains the core of the group, and has largely been responsible for growth in volumes. Spur accounts for 69% of South African sales, followed by RocoMamas and Panarottis, which each represent 10%. International restaurants account for 10% of group sales.
Nichas says: “Marketing has been world class, with outdoor activities and sponsorships,” and she attributes the company’s 76% leap in headline earnings to “running the business tighter in terms of overheads, fixing operations and expenses, and managing the expansion plan”.
The group is one of a handful of companies whose revenue is growing fast: the Spur brand’s restaurant sales were up 24.9%. Panarottis grew sales by 18.6%, RocoMamas by 9.6% and John Dory’s by 8.7%. The speciality brands of The Hussar Grill, Nikos and Casa Bella were the fastest growing in the group and increased sales by 42.2%, benefiting from an increase in local and international tourism. This was off a base period that included December 2021, which was clouded by the pandemic.
Franchised restaurant turnover hit R9.5bn, and for the first time the group topped the R1bn mark in breakfast sales this year. Spur upped the dividend 41%, and ended the year debt free, with unrestricted cash on hand of R375m.
“You can see that the group has recovered very well after Covid — despite load-shedding, which in some cases assisted the franchisee and the franchiser,” says Cobus Cilliers, senior equity analyst at All Weather Capital.
He’s especially encouraged that management plans to revisit its capital allocation policy later this year. “They’re sitting with a lot of cash on the balance sheet. Spur by nature is very cash generative; and management have prudently [handled] capital allocation, which is fair, given risks during Covid”.
They’re sitting with a lot of cash on the balance sheet. Spur by nature is very cash generative; and management have prudently managed capital allocation, which is fair given risks during Covid
— Cobus Cilliers
Cilliers expects management to use its cash for investments as well as for special dividends and/or share buybacks.
Nichas tells the FM the group is looking at all options for capital allocation, of which one is acquisitions. “We haven’t looked externally at all, but are considering all sorts of options.”
And while she expects trading conditions to remain challenging, she’s positive about the company’s outlook.
The group plans to open 41 new restaurants in South Africa and 12 internationally in the next year. This includes the aggressive expansion of its Panarottis brand, for which 15 new stores are planned.
Spur is also sponsoring Springbok rugby and netball and is developing talent within. Black franchisees now represent 29% of all local franchise partners.
So what has contributed to the group’s successful recipe? Probably the rude health of its brand and increased marketing attention. Says Nichas: “If your brand is looked after, [owners] definitely do win … and you have a lot of people who are earning more now and want to experience this.”
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