Spur's profitability grows wings

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Spur's profitability grows wings
Credit: © Reuters.

Spur (JO: SURJ ) closed 3.15% higher on a day when the markets burned brightly red, demonstrating the power of pink sauce and reasonably priced steaks.

To be honest, I think my endless orders of discounted RocoMamas wings on Bolt Food may have been a major contributor to this result, but Spur didn't mention me in the SENS.

Well, they did mention that 53% of RocoMamas revenue was attributable to takeaways. It's a pleasure, Spur. At group level, takeaways contributed 20% of turnover. I hope they sent a gift to the venture capital investors in Bolt Food to say thank you.

In the six months ended December 2021, Spur obviously posted a big recovery in sales. The base period included numerous lockdown disruptions and limitations on selling alcohol. Group revenue increased by over 40% and profit before tax was 139.6% higher.

Headline earnings per share (HEPS) increased by 119.3% to 70.10 cents and an interim dividend of 49 cents has been declared, a payout ratio of 70%.To give some context to this result, cash generated from operations increased from R29.5 million to R103.8 million. Spur has no debt, so shareholders get all the benefit of this. The group had R259.1 million in cash as at 31 December 2021.

Spur is a franchisor, so it also reports franchised restaurant sales in addition to group revenue. These aren't the same things, as Spur has other sources of revenue e.g. selling the famous pink sauce in retailers. The restaurant sales aren't attributable to Spur shareholders, but form the basis for fees charged to franchisees. Spur group revenue also differs from restaurant sales based on adjustments to the franchise and marketing fee structures to give support to franchisees.

Franchised restaurant sales increased by 28.3% during this period vs. the six months to December 2020. Compared to the first six months of 2021, sales increased by 18%. The Hussar Grill posted the fastest recovery in volumes (45%) which makes sense as this is a sit-down format. These types of restaurants were hardest-hit by lockdown restrictions.On a constant currency basis, international restaurant sales were 4.7% higher.

There's still room for recovery, as group franchised restaurant turnover was 9.5% behind pre-Covid levels. The group plans to open 32 new restaurants in South Africa and seven internationally in the current financial year.

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