Fattening operations offshore
Separate listing must be on its long-term menu
SPUR CORPORATION, the restaurant franchising company, has been ultra-conservative in expanding its offshore operations over the past five years. However, it finally seems its international empire is taking shape with offshore business – according to its latest annual report – accounting for a chunky 30% of turnover in the year to end-June 2008.
Little more than two years ago the contribution from Spur’s international operations to group turnover was less than 5%. In the year to end-June Spur generated R81m from international operations, mainly in Britain and Australia.
Writing in the latest Spur annual report, MD Pierre van Tonder notes that while franchising remains its core business model, there had been an investment in wholly owned restaurants to accelerate growth in both Britain and Australia. “We plan to invest in the forthcoming years – focusing on substantial franchisee partners who invest in and operate the franchised outlets personally – while continuing to develop our franchise base.”
Admittedly, Spur’s offshore outlets are small compared to some of the world’s fast food/restaurant brands. But there certainly is enough meat on the bone for Spur to consider a separate listing – perhaps on London’s AIM – for these operations over the longer term.
Spur, a generous dividend payer, may well want to bring on board strategic equity partners to help in its funding burden for its fledgling offshore operations. Obviously, current conditions aren’t conducive to listing a business. But if Spur can add a few more outlets to the mix in Britain and Australia and build a decent trading margin, an IPO and separate listing of its international business could well be a rewarding exercise in a few years’ time.
In terms of hard currency earnings, Spur’s advances in Britain (and Ireland) will be critical. Van Tonder says several new opportunities are being investigated in Britain and Ireland – where the group, after a deal with former master franchisee Trinity Leisure, now holds the franchise rights for all future developments.
Australia also looks interesting. Earlier this year Spur managed to buy out the outside shareholders of two Australian Spurs (Campbelltown and Erina Fair). Presumably, Spur will look to buy out partners in the other three restaurants where it only holds a minority interest. It seems further expansion is on the cards in Australia, with Van Tonder reporting that a regional HQ was recently set up there “to establish a greater corporate presence in that region”.
For the moment it would seem African expansion will continue apace, with Spur planning openings in Lusaka (Zambia) and looking at new opportunities in Ghana, Kenya and Nigeria, plus additional outlets in Tanzania and Zambia.
Clearly, Spur hasn’t been spooked by its experience in China (where it beat a hasty retreat) and is still willing to explore new markets. In that regard Van Tonder says a site for a franchised Spur restaurant has been secured in Dubai – which will hopefully be a beachhead for what could be a lucrative foray into Middle East markets.