Spur Corporation, the family sit-down franchise restaurant chain which lifted headline earnings 15,4% to R58m in the year to June 30, was hoping its value-for-money fare would benefit from the rising interest rate environment by gaining market share, CE Pierre van Tonder said on Thursday.

The interest rate increases in June and August had had no impact on trading so far, but this could change in the future, he said.

"The interest rate increases, together with further anticipated hikes in the year ahead, are likely to result in a slowdown in discretionary consumer spending."

This would create an opportunity for the three franchise brands, Spur Steak Ranches, John Dory's Fish & Grill and Panarottis Pizza Pasta, to increase market share as consumers became more price sensitive. In addition, the expansion of the restaurant footprint would bolster revenue growth.

The group has 320 outlets locally and internationally, including 34 added in the past financial year.

Van Tonder said it was still too early to say how many new outlets would be opened in the new financial year.

"Twenty have already been signed up and I'm always amazed that the country continues to grow.

"There is an appetite for entertainment centres and we will always be at the forefront of these openings."

Restaurant turnover, which reflects franchise fee income from franchisees, increased 17,7%, passing the R2bn mark for the first time. Turnover increased 10,7% if new outlets are excluded.

Group revenue was down 8,9% to R182,7m from R200,6m as a result of lower wholesale and distribution sales after the national distribution of the group's restaurant supplies was outsourced to Vector Logistics. The outsourcing would benefit profit margins, Van Tonder said.

He said the group was negotiating "the last laps" of a black empowerment deal which would involve a shareholding at group level.

At franchise level, Spur Corporation had obtained funding of R30m from the Industrial Development Corporation to provide finance for more black franchisees.

Structures would be put in place to ensure the new black franchisees succeeded, while at the same time the group would ensure that its existing black franchisees, at more than 10 outlets, continued to grow, Van Tonder said.

Headline earnings a share increased 18,9% to 65,12c a share in the year to June 30. A R22m capital distribution, in lieu of dividends, was declared to shareholders, which equates to 25c an ordinary share.

Business Day
Publisher: I-Net Bridge
Source: I-Net Bridge