SUR SUR SUR - Spur Corporation Limited - Unaudited condensed consolidated interim results for the six months ended 31 December 2007 Spur Corporation Limited (Registration number 1998/000828/06) Share code: SUR ISIN: ZAE000022653 UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2007 KEY PERFORMANCE Indicators Profit after tax +7.1% Distribution per share +7.7% ABRIDGED INCOME STATEMENT Unaudited Unaudited six months ended six months ended R`000 31/12/07 31/12/06 Revenue 144 850 110 125 Operating profit 49 581 46 381 Net interest received 2 212 2 188 (Loss)/ income from associate companies (64) 297 Profit before taxation 51 729 48 866 Taxation (note 1) (15 097) (14 658) Recognition of taxes relating to foreign subsidiaries - - Profit for the period 36 632 34 208 Attributable to: Equity holders of parent 36 304 34 206 Minority interests 328 2 Earnings per share (cents) 41.18 38.80 Diluted earnings per share (cents) 39.56 38.17 Distribution per share (cents) 28.00 26.00 Audited year ended R`000 % Change 30/06/07 Revenue 31.5 215 411 Operating profit 6.9 89 585 Net interest received 3 754 (Loss)/ income from associate companies (344) Profit before taxation 5.9 92 995 Taxation (note 1) (27 797) Recognition of taxes relating to foreign subsidiaries 16 554 Profit for the period 7.1 81 752 Attributable to: Equity holders of parent 6.1 81 807 Minority interests (55) Earnings per share (cents) 6.1 92.80 Diluted earnings per share (cents) 3.6 89.39 Distribution per share (cents) 7.7 55.00 RECONCILIATION OF HEADLINE EARNINGS Unaudited Unaudited six months ended six months ended R`000 31/12/07 31/12/06 Earnings attributable to ordinary shareholders 36 304 34 206 Headline earnings adjustments: Profit on sale of intangible asset - - Loss on sale of property, plant and equipment - 132 Loss on sale of associate company - 104 Headline earnings 36 304 34 442 Audited year ended R`000 % Change 30/06/07 Earnings attributable to ordinary shareholders 6.1 81 807 Headline earnings adjustments: Profit on sale of intangible asset (1 397) Loss on sale of property, plant and equipment 171 Loss on sale of associate company 104 Headline earnings 5.4 80 685 ABRIDGED BALANCE SHEET Unaudited at Unaudited at Audited at R`000 31/12/07 31/12/06 30/06/07 ASSETS NON-CURRENT ASSETS 411 886 358 601 405 298 Property, plant and equipment 88 234 53 576 82 982 Intangible assets 272 596 272 043 272 596 Investments and loans 27 129 22 677 25 072 Deferred taxation 23 927 10 305 24 648 CURRENT ASSETS 124 232 102 239 99 462 Inventory 5 500 2 515 4 943 Trade and other receivables 54 830 58 673 47 100 Taxation 1 910 - 2 285 Cash and cash equivalents 61 992 41 051 45 134 TOTAL ASSETS 536 118 460 840 504 760 EQUITY AND LIABILITIES CAPITAL AND RESERVES 418 006 376 281 403 636 Ordinary share capital 1 1 1 Share premium (net of treasury shares) 11 713 60 200 37 279 Foreign currency translation reserve 6 554 5 954 7 128 Share-based payments reserve 18 569 17 065 17 817 Accumulated profit 376 986 293 081 340 682 Total equity attributable to equity holders of the parent 413 823 376 301 402 907 Minority shareholders` interests/(deficit) 4 183 (20) 729 NON-CURRENT LIABILITIES 64 717 40 679 43 288 Interest-bearing loan 17 077 - - Operating lease liability 1 502 - - Deferred taxation 46 138 40 679 43 288 CURRENT LIABILITIES 53 395 43 880 57 836 Trade and other payables 45 596 35 746 46 691 Shareholders for distribution 347 405 302 Taxation 5 394 6 364 9 927 Bank overdraft 2 058 1 365 916 TOTAL EQUITY AND LIABILITIES 536 118 460 840 504 760 ABRIDGED CASH FLOW STATEMENT Unaudited six Unaudited six Audited months ended months ended year ended R`000 31/12/07 31/12/06 30/06/07 Cash generated from operations 55 495 51 210 96 924 Net interest received 2 212 2 188 3 754 Taxation paid (15 210) (8 560) (15 812) Distributions paid (25 521) (22 006) (45 030) Working capital changes (7 430) (8 611) 10 003 Cash flow from operating activities 9 546 14 221 49 839 Cash flow from investing activities (11 584) (15 364) (47 254) Cash flow from financing activities 18 414 - - Net movement in cash and cash equivalents 16 376 (1 143) 2 585 Adjustment for foreign exchange fluctuations (660) (59) 745 Net cash and cash equivalents at beginning of period 44 218 40 888 40 888 Net cash and cash equivalents at end of period 59 934 39 686 44 218 ABRIDGED STATEMENT OF CHANGES IN EQUITY Ordinary share Accumulated capital & premium profit & minority R`000 (net of treasury shares) shareholder interests Balance at 1 July 2006 82 240 258 637 Profit for the year 81 807 Distributions (44 960) Share-based payments reserve Foreign currency translation reserve Minority shareholders` share of losses (55) Acquisition of minority shareholder`s interests in subsidiary 43 Issue of shares in subsidiaries to minority shareholders 979 Balance at 1 July 2007 37 280 341 411 Profit for the period 36 304 Distributions (25 566) Share-based payments reserve Foreign currency translation reserve Minority shareholders` share of profits 328 Foreign currency translation reserve effect on minorities (31) Issue of shares in subsidiary to minority shareholder 3 157 Balance at 31 December 2007 11 714 381 169 Other R`000 reserves Total Balance at 1 July 2006 21 763 362 640 Profit for the year 81 807 Distributions (44 960) Share-based payments reserve 1 504 1 504 Foreign currency translation reserve 1 678 1 678 Minority shareholders` share of losses (55) Acquisition of minority shareholder`s interests in subsidiary 43 Issue of shares in subsidiaries to minority shareholders 979 Balance at 1 July 2007 24 945 403 636 Profit for the period 36 304 Distributions (25 566) Share-based payments reserve 752 752 Foreign currency translation reserve (574) (574) Minority shareholders` share of profits 328 Foreign currency translation reserve effect on minorities (31) Issue of shares in subsidiary to minority shareholder 3 157 Balance at 31 December 2007 25 123 418 006 ABRIDGED SEGMENT REPORT Unaudited six Unaudited Audited months ended six months ended year ended R`000 31/12/07 31/12/06 30/06/07 REVENUE Wholesale and distribution 42 558 42 710 76 192 Franchise - Spur (SA only) 53 706 50 407 99 911 Franchise - Other 13 826 12 197 23 773 Retail stores 33 058 3 553 13 846 Corporate services 1 702 1 258 1 689 Group revenue 144 850 110 125 215 411 OPERATING PROFIT Wholesale and distribution 13 801 17 661 30 987 Franchise - Spur (SA only) 46 047 42 685 84 295 Franchise - Other 6 431 5 264 14 264 Retail stores 855 (903) (3 285) Corporate services (17 553) (18 326) (36 676) Group operating profit 49 581 46 381 89 585 SUPPLEMENTARY INFORMATION Unaudited Unaudited six months six months ended ended 31/12/07 31/12/06 Shares in issue (000`s) (note 2) 88 156 88 156 Weighted average number of shares in issue (000`s) 88 156 88 156 Headline earnings per share (cents) 41.18 39.07 Diluted headline earnings per share (cents) 39.56 38.44 Net asset value per share (cents) 474.17 426.84 Audited year ended % Change 30/06/07 Shares in issue (000`s) (note 2) 88 156 Weighted average number of shares in issue (000`s) 88 156 Headline earnings per share (cents) 5.4 91.53 Diluted headline earnings per share (cents) 2.9 88.17 Net asset value per share (cents) 11.1 457.87 NOTES 1. On 20 February 2008, subsequent to the balance sheet date, the Finance Minister announced a reduction in the South African corporate tax rate from 29% to 28%. This reduction will be accounted for in the full year results to 30 June 2008 but no related impact has been taken into account in these results in accordance with AC502 - Substantively Enacted Tax Rates and Tax Laws. 2. Shares in issue less shares repurchased by a wholly owned subsidiary company and share incentive trust. BASIS OF ACCOUNTING These unaudited financial results for the six months ended 31 December 2007 have been prepared in accordance with IAS 34 - Interim Financial Reporting. The accounting policies and methods of computation applied in the preparation of these results are consistent with those applied in the preparation of the group`s annual financial statements for the year ended 30 June 2007. FINANCIAL AND OPERATIONAL REVIEW The period under review was characterised by a slow-down in consumer spending due to multiple interest rate increases, higher fuel prices, high food inflation and the introduction of new credit legislation in June 2007. This impacted on revenue growth in our South African operations with restaurant turnover increasing by 7%. Turnover of existing restaurants, which excludes new outlets opened during the reporting period, grew by 6%. Overall group revenue grew by 31.5% to R144.9 million, mainly as a result of the opening of international company-owned outlets, particularly the two Spur restaurants in London, which commenced trading in June 2007. The group`s international operations contributed 27% of revenue (2007: 8%). The trading environment during the period was adversely affected by on-going high food price inflation. Input costs of raw materials, such as oil and tomato products, resulted in pressure on margins in the group`s sauce manufacturing division. Management took the strategic decision not to pass these cost increases on to franchisees in order to ensure both good value for our customers and the sustainability of franchisee profitability. We are confident that this strategy will have a positive effect on the group`s revenue and profitability in the medium to long term and our ability to deliver value for money. These factors contributed to the growth in operating profit being below revenue growth, increasing 6.9% to R49.6 million (2007: R46.4 million). Headline earnings increased by 5.4% to R36.3 million (2007: R34.4 million) with the distribution per share up 7.7% to 28.0 cents (2007: 26.0 cents). RESTAURANT GROWTH The group has continued with the prudent expansion of its restaurant footprint locally and internationally, opening eight new restaurants across the three franchise brands during the period. Five new restaurants were opened locally, including a Spur outlet in Maponya Mall, the new mega shopping centre in Soweto, in October 2007. Following the opening of outlets in Newry (Northern Ireland) and Kampala (Uganda) the group has 37 restaurants outside South Africa. A summary of the group`s restaurant base at 31 December 2007 is as follows: Franchise brand South Africa International Total Spur Steak Ranches 232 28 260 Panarottis Pizza Pasta 52 9 61 John Dory`s Fish & Grill 20 - 20 Total 304 37 341 STRATEGY & PROSPECTS The group`s experienced management team views the current tough trading environment as a challenge and an opportunity and is confident that appropriate measures are in place to ensure continued growth. These strategies include: an enhanced focus on increasing efficiencies in the procurement process; further leveraging the group`s buying power to ensure customer benefit through franchisee success; minimising cost increases to customers and franchisees through product innovation, menu engineering and broader local and international product sourcing; continuing with aggressive marketing campaigns to further build customer loyalty and drive restaurant foot traffic; further enhancement of the family experience in store; and the ongoing process of installing generators in order to negate the impact of irregular power supplies and electricity load shedding. The group plans to open 12 restaurants in South Africa in the second half of the year and three internationally in Belfast (Northern Ireland), Erina Fair (Australia) and Lusaka (Zambia). The group is also investigating further opportunities to open outlets in the United Kingdom and Ireland, as well as Africa in Lagos (Nigeria) and Accra (Ghana), while continuing to explore potential in the Middle East. The brand loyalty built up over many years together with our positioning as an affordable, accessible and enjoyable family sit-down restaurant experience will ensure continued revenue and profit growth. CAPITAL REDUCTION In accordance with a general authority given to the directors at the annual general meeting held on 5 December 2007, shareholders are advised that the board of directors of the company has approved a capital reduction of R24.7 million payable to the company`s shareholders, in lieu of dividends, to be written off against the share premium account, which amount equates to a distribution of 28.0 cents per ordinary share ("the distribution"). The distribution will be paid on Tuesday, 25 March 2008, to those shareholders of the company who are recorded in the company`s register on Thursday, 20 March 2008 ("the record date"). The last day to trade (cum the distribution) in the company`s shares for purposes of entitlement to the distribution will be Thursday, 13 March 2008. The shares will commence trading ex the distribution on Friday, 14 March 2008. Share certificates may not be dematerialised or rematerialised between Friday, 14 March 2008 and Thursday, 20 March 2008 both days inclusive. For and on behalf of the Board A Ambor (Executive Chairman) Cape Town P van Tonder (Managing Director) 27 February 2008 Directors: A Ambor (Executive Chairman), P van Tonder (Managing Director), M Farrelly, K Getz*, D Hyde*, P Joffe, K Madders MBE* (British), J Rabb*, K Robertson, R van Dijk. Company secretary: R van Dijk (* non-executive) Spur Corporation Limited (Registration number 1998/000828/06) Share code: SUR ISIN: ZAE000022653 Registered Office 1 Waterford Mews, Century Blvd, Century City, 7441 Transfer Secretaries Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg, 2001 Sponsor: Sasfin Capital (A division of Sasfin Bank Ltd) www.spur.co.za Date: 28/02/2008 12:00:02 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. 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