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South Africa: Spur Trims Fat to Spare Customers' Bacon
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Business Day (Johannesburg)
29 February 2008
Posted to the web 29 February 2008
Nicola Mawson
Johannesburg
FAMILY restaurant group Spur said rising food costs were placing pressure on its margins as it was not able to fully pass on increased costs to customers.
CEO Pierre van Tonder said that, based on the latest inflation figures, the company was experiencing inflation of 20,4%. However, it was not able to pass rising costs on to its customers and had increased menu prices only 4,2% last year.
Van Tonder said franchisee profitability was critical to the company and, as a result, it had tried to reinvent itself and find innovative ways of trimming costs without hampering the group's growth . This included aspects such as restructuring its menu .
Revenue grew 31,5% to R144,9m from R110m, with growth driven by the opening of international company-owned restaurants, especially two Spur outlets in London, last June.
Despite the inflationary pressures weighing on its margins, Spur reported real growth in the six months to December as operating profit moved up 6,9% from R46m to R49,6m. Net profit moved up 7,1% to R36,6m from R34m. Headline earnings increased 5,4% to R36,3m, with headline earnings per share growing 5,4% to 41,18c (39,07c).
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Van Tonder said power outages had affected the company , with about 3% of December sales -- a key trading month -- wiped out by load shedding. The company was now trying to install generators at key trading sites.
Its international operations, which accounted for 27% of sales compared to 8% a year ago, were an opportunity for sustainable growth ahead, the group said. It was looking at expanding into the Middle East and hoped to sign a lease shortly. The company planned three new international outlets in Belfast, Australia and Zambia and was investigating opportunities in the UK and Ireland, Nigeria and Ghana.
Locally, Spur said would open 12 new stores in the second half of the year, possibly in Hillbrow and Braamfontein, although this was off a high base, Van Tonder said. He said Spur aimed to increase its footprint and keep its brands sustainable.
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