Pierre van Tonder: Group MD, Spur Corporation

MONEYWEB, Erika van der Merwe, 14 September 2006

For the year to June restaurant turnover up nearly 18%.

MONEYWEB: We welcome on the line Pierre van Tonder, group managing director of Spur Corporation. Pierre, after Old Mutual the details of your results are somewhat less overwhelming, but nevertheless interesting.

PIERRE VAN TONDER: Yes, somewhat, I think – to put it into perspective. Yes, to make sure we’re all normal.

MONEYWEB: Pierre, for the year to June restaurant turnover was up nearly 18%, and we must ask the perennial question about the state of the South African consumer. We know Arthur and his family love going to the Spur. He’s got a young family. So we know you cater for people like that. But then also there’s the role of a structural shift in spending patterns.

PIERRE VAN TONDER: Yes, I think we’ve all been pretty fortunate in the South African economy to benefit in terms of the buoyancy of the market over the last two years or so. Even with the interest rates maybe climbing, we see it as a definite opportunity for us to further push our envelope with regard to our value proposition. When I say value proposition, I think people will obviously tighten their belts ever so slightly in terms of the interest rates and where they go to. But they will still go out to eat, and it’s definitely an opportunity as we see it from a management perspective to further kind of put the Spur proposition forward with regard to the value proposition.

MONEYWEB: How defensive is this eating-out industry in South Africa? I’m thinking of recently Bidvest with their food services division in Europe that’s doing very well. It argues to be a defensive industry. Can one say the same in South Africa?

PIERRE VAN TONDER: I’m trying to really understand your question.

MONEYWEB: Tying in with what you said about belt-tightening, if interest-rates do go up how big will the impact be on you?

PIERRE VAN TONDER: I think we’ve been there kind of before when the interest rates have gone a little bit out of kilter in terms of the man in the street. And we’ve taken that as an opportunity to really kind of push the brand envelope in terms of getting people into our restaurants. And again, we would see that as an opportunity if it does get a little bit out of kilter. I don’t think it’s going to go 1.5% or 2%. But if it does go there, it’s a case of how you kind of sharpen the tools in your shed to compete.

MONEYWEB: Now, another key theme for you over the last year or so has been your store and franchise expansion. This is now across Spur, Panarottis and John Dory brands. You’ve opened 34 new restaurants, so you’re now at 321 restaurants, of which 90% is in South Africa. Sounds like a fairly aggressive expansion.

PIERRE VAN TONDER: Yes, it has been a very good time for us in terms of expansion. You know, new stores always put the icing on top of the cake, so to speak. But we always judge ourselves by what our existing business grows, and on a like-for-like we’re about 10.7% on year-on-year growth. And that’s kind of always our measurement tool to see in terms of increase of market share – and actually is your business growing organically? So whilst the new business is great and exciting, we always benchmark ourselves as management on existing business.

MONEYWEB: In other words, are you saying to make sure you’re not expanding too rapidly?

PIERRE VAN TONDER: Correct. Yes.

MONEYWEB: Now how established do you see the Panarottis and the John Dory brands? We know Spur is pretty established.

PIERRE VAN TONDER: Panarottis has been around now for nine years. We’re up to 65 stores. This year we introduced a whole new décor theme to it as well. And we’re very excited about the turnovers that we are achieving in Panarottis, especially in the big what I would call entertainment shopping centres in South Africa. We’re also encouraged to see how Panarottis is performing with us in Australia as well. So from the brand perspective we really see that Panarottis is a good feature within our stable. John Dorys – we’ve been in John Dory now for just over a year, because we purchased it from our partner in Durban. We’re up to 17 stores. We’ve already opened three in this new financial year and it’s showing very, very good signs as another one of our brands within our stable that we can grow well.

MONEYWEB: Our thanks to Pierre van Tonder, group managing director of Spur Corporation. Arthur, do you agree with Nazeem’s comment a little earlier that Spur’s a great company, great operation, but perhaps on the expensive side?

ARTHUR BUCHNER: The stock might be a little bit on the expensive side, but what you have to understand is that when you get belt-tightening, their product is fantastic, their product is value for money. So you can go out to the larney restaurants and pay R80 for a steak, or you can go and get a steak for R50. So when the belt-tightening happens it happens at the top end of the market. People start to go to the family-orientated restaurants, and I think that they can withstand quite an increase in interest rates. Maybe 2% or 3%, and it wouldn’t affect them too much. I’ve been to a couple of the John Dorys, and if you compare them to the other fish restaurants around they’re also better value for money. You don’t feel like you’ve had your eyes ripped out when you walk out at the end of the day and have to sign your chit. And I like the concept of the two stores next to each other, sharing similar kitchens, where you can actually go there and decide – today I’m feeling like fish, tomorrow I’m feeling like chicken wings. I really like the store. I like the brand. I think they’ve got, long term, good holding-on and growth prospects. Little bit overvalued in relation to where they have been. They have had quite a nice move. But I wouldn’t be a seller of the stock.

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