FOR YEARS AFTER the company listed in 1986, Spur founder Allan Ambor used to complain that partially informed investors would include his group among the fastfood companies, whereas it was, in his preferred phrase, a family sit-down restaurant. The fact that his branding was so successful that it was copied by some hamburger chains may have encouraged the confusion.
Whatever the reason, despite turning in consistently good results, Spur’s record was never properly recognised by the market. The company consistently grew profits, yet year after year offered a return that allowed me to keep including it – rewardingly – in my high-yield portfolio.
Spur has in recent years diversified from the original steakhouse chain both product-wise and geographically. Though 75% of the 334 outlets are still Spur Steak Ranches, there are also 64 Panarottis Pizza Pasta and 20 John Dory’s Fish & Grill eateries, while there are 26 Spurs and nine Panarottis outside SA.
Most of the foreign operations are elsewhere in Africa, but there are some in Australia and the UK and even a lone Spur in China. However, external interests are still comparatively small, contributing only R6,7m of group revenue of R183m in the financial year to June 2006, and are probably as yet barely profitable.
In the six months to 31 December, revenue rose 13,6% to R110m, or by 17,1% for restaurants operating in both periods. Spur says this shows that it grew its share of an increasingly competitive market, and it believes its position as a family restaurant for the expanding middle market will ensure this trend continues.
Profits are predominantly earned from franchise fees, and diluted HEPS of 38,4c were 17,2% up. The interim distribution is increased from 22c to 26c and as usual will be by way of capital distribution rather than a dividend – at this stage still a tax-efficient option.
For the past 12 months, HEPS are 70,8c and distribution 51c. Spur is a strongly cash-generative business and at each of the past three reporting dates net cash has been about R40m, allowing a generous distribution policy.
At the current 1 130c, the historic p:e ratio is 16 and yield 4,5%. While the earnings rating is now close to the market average, the yield is still well above average and the share should remain an excellent long-term holding.