Spur a hit during load-shedding

The Spur Corporation’s results for the second half of 2022 indicated that South African consumers are increasingly eating out during load-shedding.

Spur’s interim results for the last six months of 2022 were released last week, with its profit after tax jumping 183% to R117 million.

Revenue increased by 35.0% to R1.5 billion, driven by a 31.5% increase in franchised restaurant sales and higher sales in the retail company stores, manufacturing, and distribution.

The strong results helped Spur to increase its interim dividend by 67.3% to 82 cents per share.

The group estimated that it experienced load-shedding for 208 days in 2022, which put immense pressure on its supply chain and food storage.

Increased load-shedding resulted in increased operating costs, particularly diesel and generator maintenance costs.

As of the end of 2022, 90% of Spur’s restaurants had generators or were linked to shopping mall generators. At the time of last week’s results, this had increased to 95%.

Load-shedding negatively impacted Spur’s performance, with increased operating costs affecting its profit margins.

Chantal Marx, head of investment research at FNB

However, load-shedding was also a boon for Spur and its brands.

Chantal Marx, head of investment research at FNB, told Moneyweb that people avoided the intense load-shedding at the end of 2022 by eating out and ordering online.

Eating out became a viable option for families without alternative sources of electricity. This is also shown in the footfall reported by South African malls at the end of 2022.

Marx noted that Spur had repositioned its brands to capitalise on families looking to eat out or order takeaways to avoid load-shedding.

Spur also launched its virtual kitchen (VK) stores in 2020 to capitalise on the rapid growth of online food delivery during the lockdown.

It says that these stores now rival the turnover of some of the Group’s more established, smaller brands.

Pizza Pug, for instance, contributed over R10 million to Spur’s turnover in the second half of last year.

Spur has recognised that its customers used to be “pressed for time”, but now they are “pressed for power”.

Keith McLachlan of Integral Asset Management also praised Spur’s innovation in scaling VK stores and positioning itself to benefit from load-shedding.

The VK stores have increased the trading density of Spur’s existing stores by leveraging their infrastructure to operate takeaway-only brands from within its restaurants.

Spur has also handled the energy crisis well by leveraging its scale to negotiate group-wide diesel prices, alleviating the fuel cost on its franchisees.

Spur’s head office has encouraged and assisted its franchisees in procuring alternative sources of electricity which are more sustainable and cost-effective in the long term.

Impressively, Spur has managed this without leveraging its balance sheet.

Spur is “cautiously optimistic” about 2023 and its ability to “navigate the current market challenges through innovation, value, and experience”.


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