Spur results cooked well-done

Cape Town - Spur Corporation, the well-known family restaurant franchiser, has managed to fatten up its trading margins in lean times.

Interim results released on Wednesday - covering the period to end December 2009 - showed Spur's gross trading margin at 37%. This is well ahead of the 32.5% recorded in the corresponding six month period last year and the 30% reflected on the financial statement for the full year to end-June 2009.

Spur CEO Pierre van Tonder said effective cost containment helped Spur fatten up the trading margin despite the downturn in the retail market.

Turnover was up only 6% to R175m, but operating profits came in almost 20% higher at R66m.

Van Tonder admitted it was tough trading - locally and abroad - but said there were some positives during the interim period.

"While lower discretionary consumer expenditure has reduced the frequency of restaurant visits, lower interest rates, stabilising inflation [particularly food prices] and higher real wage increases have positively impacted on consumer sentiment."

Operational cash flow - a traditional strength of the Spur - was strong, coming in at around R70m. Cash-on-hand was R71m, allowing Spur to hike its interim payout 18.5% to 32c/share.

Spur currently operates 359 stores - 322 locally and 37 abroad in countries as far afield as Australia and the UK. The bulk of the restaurants are housed under the Spur brand with Panarotti (pizza and pasta) and John Dory's (seafood) making up less than a quarter of total store numbers.

The bulk of Spur's keep is earned through franchise fee income from the Spur Steak Ranch brand, which topped R65m during the interim period. Fees for Panarottis (R5.6m) and John Dory's (R4.5m) showed encouraging increases, but international franchisee fees dipped 9% to R5.5m as the rand strengthened against foreign currencies.

Turnover from UK-based operations was around R30m and from Australain stores around R16m. On a profit basis, the UK churned a small loss, while Australia managed a small profit.

Asked whether Spur would mobilise its cash pile for acquisitions, Van Tonder said it was unlikely Spur would look to buying additional restaurant brands. "We are expanding our offshore interests, so it's likely some of the cash pile will be used in international operations."

Spur opened 13 new restaurants during the first half of the financial year. On the international front new Spur restaurants were opened in Mandurah (Western Australia), Aberdeen (Scotland) and Maseru (Lesotho).

Spur also opened its first franchised Spur Steak Ranch in Dubai earlier this year.

Looking ahead, Van Tonder believed Spur's value-for-money offerings would ensure Spur remained competitive.

He also believed the Fifa World Cup - coupled with with the extended mid-year school holiday - would bolster trading in the second half.

- Fin24.com