Our opinion on the current state of SPURCORP(SUR)Spur (SUR) is a well-known franchisor with 701 fast-food restaurants. In South Africa, it has 559 restaurants, with 80% of them able to trade during load-shedding, and it also has branches overseas. About two-thirds of its sales in South Africa come from Spur Steak Ranches, with the remaining balance coming from a variety of franchise brands that the company has acquired over the years. These include John Dory, Panarottis, and more recently, RocoMamas and Hussar Grill. It appears that while the traditional Spur brand has seen a plateau in interest, newer acquisitions like RocoMamas and Hussar Grill are attracting South African consumers who are looking for fresh dining experiences.
This share is closely tied to consumer spending, which has been under pressure in recent years. The company is experimenting with meal kits that can be delivered and eaten at home, which could be a potential growth area. Notably, the outgoing CEO, Pierre van Tonder, left the company with no debt, which is a key reason it has not needed to undertake a rights issue.
On 27th July 2023, the company announced that it had acquired 60% of Doppio Zero, Pizza e Vino, and Modern Tailors for an undisclosed amount. In its results for the year ending 30th June 2024, Spur reported revenue up 14,1% and headline earnings per share (HEPS) up 11,4%. The company attributed the revenue growth to improved franchised restaurant turnovers and increased sales from the manufacturing and distribution division, which grew by 9,9% (8,7% excluding Doppio Collection). Sales growth in the retail company stores was a robust 119,5%, positively impacted by the contribution from the Doppio Collection restaurants.
The share looks reasonably valued and has broken strongly through its long-term downward trendline following the latest results. After reaching a low of 1240c on 7th September 2020, following the COVID-19 crisis in March 2020, the share has now recovered to 3450c. It was added to the Winning Shares List (WSL) on 8th August 2023 at 2488c, so it is up over 40% in just over a year.
