SUR 201409110005A
Reviewed Condensed Consolidated Results and Cash Dividend Declaration
Spur Corporation Limited
Incorporated in the Republic of South Africa
(Registration number 1998/000828/06)
Share code: SUR
ISIN: ZAE000022653
REVIEWED CONDENSED CONSOLIDATED RESULTS AND CASH DIVIDEND DECLARATION for the year ended 30 June 2014
- Restaurant sales: up 13.5%
- Revenue: up 9.1%
- Dividend per share: 9.0% up to 121 cents
- Comparable profit: up 9.9%
Prepared under the supervision of the Chief Financial Officer, Ronel van Dijk CA(SA).
TRADING PERFORMANCE
Spur Corporation delivered solid results as trading conditions became increasingly challenging in the
second half of the year. The fundamentals of the group's flagship brands remain strong and continue to
deliver competitive growth.
Revenue increased by 9.1% to R732.6 million. Total restaurant sales across the group increased by 13.5% to
R5.5 billion, with sales from existing restaurants increasing by 9.8% and sales in South Africa growing by
12.8%, driven by robust performers Spur and Panarottis.
Constrained spending is evident among lower and middle income families, with marked spikes in mid-month
and month-end pay day spending patterns becoming the norm.
Spur Steak Ranches showed a very encouraging 11.3% growth in local restaurant sales, supported by continued
investments in upgrades and refurbishments by franchisees to create and maintain an environment that appeals
to families. Existing restaurants increased sales by 9.8%. The brand currently has 1.7 million Spur Family
Card members who now account for 44% of total restaurant sales, up from 38% last year. The Spur Family Card
loyalty programme has been a profound success and a key differentiating factor for the brand.
Panarottis Pizza Pasta delivered excellent results, increasing restaurant sales by 28.2% in South Africa,
with turnover from existing restaurants increasing 15.2%. Higher visibility and marketing of the brand on
radio and television contributed to the strong growth, supported by the breakfast and Sunday lunch
promotions. Customers have responded well to the use of imported Italian ingredients and improved quality
of the product offering.
John Dory's grew local restaurant sales by 21.0%, driven by the opening of five new restaurants. Sales from
existing outlets increased by 12.0%. The brand was promoted on national television for the first time this
year, and has the support of highly committed franchisees. The menu offering continues to take into account
the sustainability of fish stocks while improving the quality perception of the brand.
Captain DoRegos' performance reflects the financial realities of its lower LSM target market. Local
restaurant sales declined by 13.8%, partially impacted by the closure of 15 redundant outlets.
The Hussar Grill has shown encouraging growth since being acquired in January 2014. Increasing customer
support, interest from potential franchisees and the opportunity to expand nationally create exciting growth
prospects for the brand.
Restaurant sales in the international operations were 20.2% higher in Rand terms, favourably impacted by
the depreciation of the Rand during the year. Based on a constant exchange rate, international sales
increased by 6.6%. Africa performed well, growing at 22.3% in Rand terms mainly due to the opening of seven
new franchised outlets comprising additional restaurants in Swaziland, Tanzania, Namibia, Nigeria and Zambia.
Restaurant sales revenue in the UK increased by 18.5% in Rand terms, but was flat on the prior year when
applying a constant exchange rate. It is positive that the region has maintained total turnover, despite
pressure from increased competition and a decline in footfall caused by a protracted economic recovery in
the region. Australia delivered a reasonable performance in a difficult and competitive environment, with
restaurant sales increasing in Rand terms by 12.1% and by 6.7% on a constant exchange rate basis. One new
franchised restaurant was opened in Perth (Australia) during the year.
The group opened 18 Spur, eight Panarottis, five John Dory's and four Captain DeRegos outlets worldwide,
while 63 Spur outlets were refurbished locally with a franchisee investment of approximately R54 million.
The restaurant footprint at 30 June 2014 was as follows:
Franchise brand South Africa International Total
Spur Steak Ranches 270 39 309
Panarottis Pizza Pasta 68 11 79
John Dory’s Fish Grill Sushi 33 – 33
Captain DoRegos 61 2 63
The Hussar Grill 6 – 6
Total 438 52 490
FINANCIAL PERFORMANCE
Local franchise revenue increased by 11.8% for the year. Spur increased franchise revenue by 10.6%,
Panarottis by 25.4% and John Dory's by 21.8%. Franchise revenue from Captain DoRegos decreased by 10.8%.
Operating margins in the Spur and Panarottis divisions improved for the year due to the benefits of economies
of scale, while the margin in John Dory's contracted slightly as a result of the investment in resources to
ensure future expansion of the brand.
Following the closure of the Captain DoRegos distribution centre in November 2013 and the conclusion of a
business restructure early in the new financial year aimed at rationalising the brand's cost structure,
management is confident that the brand is well positioned for future growth.
The Hussar Grill retail division, comprising three company-owned restaurants, contributed revenue of
R15.0 million for the six months since January 2014 while the franchise division contributed R0.7 million
to group revenue for the same period.
While the manufacturing and distribution division reported a decline in revenue of 17.4% for the year,
excluding the impact of the closure of the Captain DoRegos distribution centre, comparable revenue of this
business unit increased by 9.0%. Excluding the Captain DoRegos distribution centre, the business unit
reflected a decline in operating margin from 40.8% in the prior year to 38.9% in the current year. This is
as a result of relatively high food inflation impacting on the cost of manufactured sauces, the full impact
of which has not been passed on to franchisees in an effort by management to protect franchisee
profitability and maintain competitive pricing.
The group's distribution and logistics service provider, Vector Logistics, experienced a 13.5% volume
increase in respect of the group's business. Vector Logistics remains critical to the success of the
franchising system from a sustainability, food safety, quality and consistency point of view.
International revenue, comprising franchise revenue and company-owned restaurant turnover, increased 20.0%
to R251.9 million.
The current year loss from the UK includes impairment and related losses of R3.5 million in respect of the
Mohawk Spur in Wandsworth (England) following a recent trend of unsustainable trading losses. The region is
otherwise holding its own in a competitive environment.
The current year loss in Australia includes an impairment loss of R2.5 million relating to the Panarottis
outlet in Blacktown as well as a profit of R2.2 million realised on the sale of the group's 80% interest
in the Panarottis outlet in Tuggerah (which had previously been impaired). Trading losses for these two
outlets had a negative impact on the division's performance for the year.
The group's non-controlling interest in Braviz Fine Foods, a start-up rib processing plant, is due to
commence trading in December 2014. Management remains excited at the prospects of this first new venture
into vertical integration and is optimistic of the earnings potential of the investment.
Profit before tax increased by 2.7% to R201.9 million. This includes a net charge of R10.2 million (2013:
gain of R10.7 million) related to the group's long-term share-linked retention scheme, R6.0 million (2013:
R2.2 million) relating to restaurant impairment and related losses, R1.3 million one-off costs associated
with the closure of the Captain DoRegos distribution centre, R1.6 million in legal and due diligence costs
associated with the acquisition of The Hussar Grill, and a net foreign exchange gain of R2.6 million
(2013: loss of R6.5 million).
Comparable profit before income tax, excluding exceptional and one-off items (including those listed above),
increased by 9.9%.
Headline earnings remained flat at R135.2 million, with diluted headline earnings per share growing 0.5%
to 157.9 cents.
The board has declared a final cash dividend of 64 cents per share, bringing the total dividend for the
year to 121 cents per share, an increase of 9.0% on last year.
PROSPECTS
The group plans to open eight restaurants internationally while locally ten Spur, ten Panarottis, seven
John Dory's, eight Captain DoRegos and six The Hussar Grill outlets will be opened in the 2015 financial
year. The planned international openings include additional franchised restaurants in Namibia, Tanzania,
Nigeria, Zambia and Australia.
Economic pressures are likely to continue to dampen consumer demand in the restaurant sector in the short
to medium term. Management is confident that the group will continue to deliver on its growth strategy by
targeting organic growth within existing brands and markets, and pursuing opportunities to expand vertical
integration in relation to core products. Critical to sustained organic growth will be ensuring the group's
brands remain relevant to consumers in their respective markets, an uncompromising approach to operating
standards and quality, product innovation and value-for-money. A focus for the year ahead will also be
ensuring efficient and optimal resource utilisation to contain costs in an uncertain consumer environment.
CASH DIVIDEND
Shareholders are advised that the board of directors of the company has, on 9 September 2014, resolved to
declare a final gross cash dividend for the year ended 30 June 2014 of R62.5 million, which equates to
64.0 cents per share for each of the 97 632 833 shares in issue, subject to the applicable tax levied in
terms of the Income Tax Act (Act No. 58 of 1962, as amended) ("dividend withholding tax") of 15%.
The dividend has been declared from income reserves. The net dividend is 54.4 cents per share for share-
holders liable to pay dividend withholding tax. The company's income tax reference number is 9695015033.
No STC credits have been utilised.
In accordance with the provisions of Strate, the electronic settlement and custody system used by the JSE
Limited, the relevant dates for the dividend are as follows:
Event Date
Last day to trade "cum dividend" Friday, 26 September 2014
Shares commence trading "ex dividend" Monday, 29 September 2014
Record date Friday, 3 October 2014
Payment date Monday, 6 October 2014
Those shareholders of the company who are recorded in the company's register as at the record date will be
entitled to the dividend. Share certificates may not be dematerialised or rematerialised between Monday,
29 September 2014 and Friday, 3 October 2014, both days inclusive.
For and on behalf of the Board
A AMBOR (Executive Chairman)
P VAN TONDER (Chief Executive Officer)
Cape Town
9 September 2014
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed
Reviewed restated
year ended year ended %
R 000 30 June 2014 30 June 2013 change
Revenue 732 636 671 552 9.1
Gross profit 521 996 464 191 12.5
Operating profit before finance income 194 999 190 630 2.3
Net finance income 7 251 5 909 22.7
Share of loss of equity-accounted investee
(net of income tax) (379)
Profit before income tax 201 871 196 539 2.7
Income tax expense (64 638) (63 237)
Profit for the year 137 233 133 302 2.9
Other comprehensive income*: 5 621 17 913
Foreign currency translation differences for foreign
operations 8 348 25 071
Reclassification of foreign currency (gain)/loss from other
comprehensive income to profit or loss on abandonment/deregistration
of foreign operations (3 386) 842
Foreign exchange gain/(loss) on net investments in foreign operations 879 (10 666)
Tax on foreign exchange (gain)/loss on net investments in foreign
operations (220) 2 666
Total comprehensive income for the year 142 854 151 215 (5.5)
Profit attributable to:
Owners of the company 136 331 132 624 2.8
Non-controlling interest 902 678
Profit for the year 137 233 133 302 2.9
Total comprehensive income attributable to:
Owners of the company 142 932 151 317 (5.5)
Non-controlling interest (78) (102)
Total comprehensive income for the year 142 854 151 215 (5.5)
* All items included in other comprehensive income are items that are or may be reclassified to profit or
loss.
Earnings per share (cents)
Basic earnings 159.20 154.05 3.3
Diluted earnings 159.20 154.05 3.3
RECONCILIATION OF HEADLINE EARNINGS
Reviewed
Reviewed restated
year ended year ended %
R 000 30 June 2014 30 June 2013 change
Profit attributable to ordinary shareholders 136 331 132 624 2.8
Headline earnings adjustments:
Impairment of property, plant and equipment (refer notes 11 and 4) 2 313 1 750
Impairment of intangible assets (refer note 10) 1 866
Loss/(profit) on disposal of property, plant and equipment (net
of tax) 233 (29)
Profit on sale of subsidiary (refer note 4) (2 154)
Reclassification of foreign currency (gain)/loss from other
comprehensive income to profit or loss on abandonment/deregistration
of foreign operation (refer note 6) (3 386) 842
Headline earnings 135 203 135 187 0.0
None of the above items has any tax or non-controlling interest consequences with the exception of:
Gross impairment of property, plant and equipment comprises R2.496 million (2013: R2.188 million) with
an amount of R0.183 million (2013: R0.438 million) attributable to non-controlling interest.
Gross loss/(profit) on disposal of property, plant and equipment comprises a loss of R0.444 million
(2013: profit of R0.040 million) adjusted for tax of R0.211 million (2013: R0.011 million).
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed
Reviewed at restated at
R 000 30 June 2014 30 June 2013
ASSETS
Non-current assets 512 900 451 447
Property, plant and equipment 77 289 79 775
Intangible assets and goodwill 359 742 323 633
Investments and loans 53 471 11 315
Deferred tax 6 536 9 347
Leasing rights 3 352 5 290
Derivative financial asset 12 510 22 087
Current assets 225 071 244 766
Inventories 12 132 17 156
Tax receivable 10 719 8 134
Trade and other receivables 88 097 88 949
Derivative financial asset 22 157 15 703
Cash and cash equivalents 91 966 114 824
TOTAL ASSETS 737 971 696 213
EQUITY
Total equity 519 620 472 526
Ordinary share capital 1 1
Share premium 6 6
Shares repurchased by subsidiaries (77 235) (77 235)
Foreign currency translation reserve 25 235 18 634
Retained earnings 575 670 536 060
Total equity attributable to equity holders of the parent 523 677 477 466
Non-controlling interest (4 057) (4 940)
LIABILITIES
Non-current liabilities 82 526 90 236
Long-term loans payable 423
Employee benefits 10 909 12 048
Derivative financial liability 319
Operating lease liability 1 776 5 481
Deferred tax 69 522 72 284
Current liabilities 135 825 133 451
Bank overdrafts 539 1 605
Tax payable 4 559 4 132
Trade and other payables 108 299 111 270
Employee benefits 22 017 16 117
Shareholders for dividend 411 327
TOTAL EQUITY AND LIABILITIES 737 971 696 213
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewed
Reviewed restated
year ended year ended
R 000 30 June 2014 30 June 2013
Cash flow from operating activities
Operating profit before working capital changes (refer note a) 198 644 202 914
Working capital changes 3 971 1 320
Cash generated from operations 202 615 204 234
Net interest received 6 313 5 909
Tax paid (66 891) (60 675)
Dividends paid (96 682) (88 444)
Net cash flow from operating activities 45 355 61 024
Net cash flow from investing activities (refer note b) (63 484) (44 804)
Net cash flow from financing activities (3 670) (2 076)
Net movement in cash and cash equivalents (21 799) 14 144
Effect of foreign exchange fluctuations 7 (282)
Net cash and cash equivalents at beginning of year 113 219 99 357
Net cash and cash equivalents at end of year 91 427 113 219
Notes
a) Includes a gross cash outflow of R23.357 million (2013: Rnil) in respect of the settlement of the
share appreciation rights granted in terms of the group's long-term share-linked retention scheme
(refer note 8).
b) Includes a gross cash inflow of R21.364 million (2013: R1.221 million) arising from the economic
hedging instrument utilised by the group for its long-term share-linked retention scheme (refer
note 8). The current year includes a gross outflow of R36.650 million arising from the acquisition
of Braviz Fine Foods (Pty) Ltd (refer note 5) and a gross outflow of R35.380 million arising from
the acquisition of The Hussar Grill (refer note 3). The prior year includes a gross cash outflow
of R5.092 million relating to the acquisition of Trinity Leasing (refer note 2) and the acquisition
of treasury shares amounting to R16.725 million.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Ordinary share Retained
capital & share earnings and
premium (net of Other non-controlling
R 000 treasury shares) reserves interest Total
Balance at 1 July 2012 restated (refer note 1) (60 503) (59) 486 389 425 827
Total comprehensive income for the year restated 18 693 132 522 151 215
Profit or loss restated (refer note 1) 133 302 133 302
Other comprehensive income 18 693 (780) 17 913
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners (16 725) (87 851) (104 576)
Distributions to equity holders (87 851) (87 851)
Own shares acquired (16 725) (16 725)
Changes in ownership interests in subsidiaries
that do not result in a loss of control 60 60
Acquisition of controlling interest in subsidiary 60 60
Total transactions with owners (16 725) (87 791) (104 516)
Balance at 30 June 2013 restated (77 228) 18 634 531 120 472 526
Total comprehensive income for the year 6 601 136 253 142 854
Profit for the year 137 233 137 233
Other comprehensive income 6 601 (980) 5 621
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners (96 766) (96 766)
Distributions to equity holders (96 766) (96 766)
Changes in ownership interests in subsidiaries that
result in a loss of control 1 006 1 006
Disposal of controlling interest in subsidiary
(refer note 4) 1 006 1 006
Total transactions with owners (95 760) (95 760)
Balance at 30 June 2014 (77 228) 25 235 571 613 519 620
CONDENSED CONSOLIDATED OPERATING SEGMENT REPORT
Reviewed
Reviewed restated
year ended year ended %
R 000 30 June 2014 30 June 2013 change
External revenues
Manufacturing and distribution (refer note a) 176 576 213 712 (17.4)
Franchise Spur 198 498 179 464 10.6
Franchise Panarottis 20 932 16 692 25.4
Franchise John Dory's 14 271 11 712 21.8
Franchise Captain DoRegos 8 185 9 174 (10.8)
Franchise The Hussar Grill (refer note b) 700
Retail The Hussar Grill (refer note b) 14 988
Other South Africa 44 958 30 399 47.9
Total South African segments 479 108 461 153 3.9
Unallocated 1 595 515 209.7
Total South Africa 480 703 461 668 4.1
United Kingdom 157 565 118 353 33.1
Australia 79 366 79 157 0.3
Other International 15 002 12 374 21.2
Total International 251 933 209 884 20.0
TOTAL EXTERNAL REVENUE 732 636 671 552 9.1
Profit/(loss) before income tax
Manufacturing and distribution (refer note a) 58 520 59 525 (1.7)
Franchise Spur 176 552 158 818 11.2
Franchise Panarottis 13 117 9 874 32.8
Franchise John Dory's 7 736 6 629 16.7
Franchise Captain DoRegos 2 158 3 838 (43.8)
Franchise The Hussar Grill (refer note b) 471
Retail The Hussar Grill (refer note b) 2 354
Other South Africa (160) 92 (273.9)
Total South African segments 260 748 238 776 9.2
Unallocated South Africa (refer note c) (60 020) (34 889) (72.0)
Total South Africa 200 728 203 887 (1.5)
United Kingdom (refer note d) (2 232) (1 006) (121.9)
Australia (refer note e) (157) (1 513) 89.6
Other International 8 829 7 487 17.9
Total International segments 6 440 4 968 29.6
Unallocated International (refer note f) (4 918) (12 316) 60.1
Total International 1 522 (7 348) 120.7
PROFIT BEFORE INCOME TAX AND SHARE OF LOSS OF EQUITY-ACCOUNTED
INVESTEE 202 250 196 539 2.9
Share of loss of equity-accounted investee (net of income tax) (379)
PROFIT BEFORE INCOME TAX 201 871 196 539 2.7
Notes
a) Includes revenue of R22.724 million (2013: R72.625 million) and loss before tax of R1.361 million
(2013: profit of R1.949 million) relating to the Captain DoRegos warehouse and distribution centre
(refer note 7). Included in the current year are costs associated with the closure of the distribution
centre amounting to R1.326 million in respect of retrenchment costs, losses on sales of property, plant
and equipment and the impact of the increased cost of working during the process of closing down the
facility.
b) The Hussar Grill franchise division and three company-owned retail restaurants were acquired with effect
from 1 January 2014. Refer note 3 for more details.
c) Includes net interest income of R7.118 million (2013: R5.854 million). Includes a charge in respect of
the cash-settled share-based payments of R28.117 million (2013: R23.645 million) and a fair value gain
in respect of a related economic hedge of R17.922 million (2013: R34.357 million) (refer also note 8).
The current year includes transaction costs for the acquisition of The Hussar Grill of R1.620 million
(refer also note 3) and costs of R0.495 million relating to the international group restructure under-
taken during the year (refer note 6). The prior year includes legal costs and professional fees of
R1.424 million relating to the dispute with the former non-controlling shareholder of John Dory's
Franchise (Pty) Ltd and the related Financial Services Board investigation (which investigation resulted
in the company being vindicated of any wrong doing).
d) The current year includes an impairment of franchise rights (intangible asset) amounting to R1.866
million and the accelerated amortisation of leasing rights amounting to R1.612 million relating to Mohawk
Spur Limited (refer note 10). The prior year includes start-up and trading losses in respect of Two Rivers
Spur (Staines, England), Rapid River Spur (Dublin, Ireland) and Trinity Leasing in the amount of
R2.773 million in aggregate.
e) The current year includes an impairment loss of R2.496 million relating to the impairment of assets of
the Panarottis in Blacktown, Australia (refer note 11) as well as a profit of R2.154 million on the
disposal of the Panarottis in Tuggerah, Australia (refer note 4). The prior year includes an impairment
loss in respect of the property, plant and equipment of the Panarottis in Tuggerah amounting to
R2.188 million.
f) Includes a foreign exchange loss of R0.687 million (2013: R5.676 million) and a gain of R3.386 million
(2013: loss of R0.842 million) relating to the reclassification of foreign exchange differences from
other comprehensive income to profit on abandonment/deregistration of foreign operations (refer note 6).
The current year includes costs of R1.674 million relating to the group restructure undertaken during
the year (refer note 6). The prior year includes losses amounting to R1.052 million in winding up certain
of the group's Australian equity-accounted associates which ceased trading in previous years.
SUPPLEMENTARY INFORMATION
Reviewed
Reviewed restated
year ended year ended %
30 June 2014 30 June 2013 change
Shares in issue (000's)* 85 633 85 633
Weighted average number of shares in issue (000's) 85 633 86 090
Diluted weighted average number of shares in issue (000's) 85 633 86 090
Headline earnings per share (cents) 157.89 157.03 0.5
Diluted headline earnings per share (cents) 157.89 157.03 0.5
Net asset value per share (cents) 606.80 551.80 10.0
Dividend per share (cents) 121.00 111.00 9.0
* Shares in issue less shares repurchased by a wholly-owned subsidiary company and share incentive special
purpose entity.
NOTES
1. Review report The consolidated statement of financial position at 30 June 2014 and the consolidated
statement of comprehensive income, statement of changes in equity, segmental analysis and statement of
cash flows for the year then ended, have been reviewed by KPMG Inc. Their unmodified review report
signed by registered auditor, BR Heuvel CA(SA), is available for inspection at the company's registered
office. The auditor's report does not necessarily report on all of the information contained in this
announcement/financial results. Shareholders are therefore advised that in order to obtain a full
understanding of the nature of the auditor's engagement they should obtain a copy of the auditor's
report together with the accompanying financial information from the issuer's registered office.
Basis of Preparation The condensed consolidated financial statements for the year ended 30 June 2014
have been prepared in accordance with the JSE Limited Listings Requirements for provisional reports
and the requirements of the Companies Act of South Africa (No. 71 of 2008). The Listings Requirements
require provisional reports to be prepared in accordance with the framework concepts and the measure-
ment and recognition requirements of International Financial Reporting Standards ("IFRS") and the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements
as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information
required by IAS 34 Interim Financial Reporting. The accounting policies and methods of computation
applied in the preparation of these financial statements are in accordance with IFRS and are consistent
with those applied in the preparation of the group's annual financial statements for the year ended
30 June 2013, except for the application of IFRS 10 Consolidated Financial Statements, which resulted
in certain companies now being consolidated into the group's results which previously did not meet the
definition of a subsidiary under the previous consolidation standard. The applicable comparative amounts
have also been restated. The impact on opening retained earnings for the current period is an increase of
R0.812 million (2013: R0.472 million). The impact on profit for the period is an increase of R1.098 million
(2013: R1.482 million). The impact on profit attributable to ordinary shareholders is an increase of
R0.362 million (2013: R0.340 million).
2. On 7 November 2013, a wholly-owned subsidiary of the group acquired the remaining 10% interest in
Trinity Leasing Limited ("Trinity") for no consideration, resulting in the group now owning all the
shares in Trinity. Trinity owns the lease of the premises from which the group operates the Two Rivers
Spur in Staines, England. The group had acquired the initial 90% interest in Trinity with effect from
1 October 2012. The carrying amount of the net assets of Trinity in the consolidated financial state-
ments of the group at the date of acquisition of the additional 10% interest was R0.448 million. The
acquisition of the additional 10% interest has consequently resulted in a reduction in non-controlling
interests of R0.045 million and a corresponding increase in retained earnings.
3. With effect from 1 January 2014, a wholly-owned subsidiary of the group acquired the franchise business
of The Hussar Grill as well as three restaurants trading as The Hussar Grill in Rondebosch, Green Point
and Camps Bay (all in the Western Cape). The acquisition is intended to give the group exposure to an
upmarket specialist steakhouse chain. The aggregate purchase consideration of R35.380 million was
settled in cash on the effective date. The net fair value of the identifiable assets and liabilities
was R8.462 million and comprised: trademarks and intellectual property of R9.904 million, inventory of
R0.475 million, employee obligations of R0.095 million and a deferred tax liability arising from the
initial recognition of these assets and liabilities of R1.822 million. The resulting goodwill of
R26.918 million is attributable to the reputation of the brand and the standing of the restaurants in
the respective areas in which they trade and will not be deductible for tax purposes. Subsequent to
acquisition, the combined business contributed R15.688 million to revenue, R2.825 million to profit
before tax and R2.034 million to profit. Transaction costs in the amount of R1.620 million relating to
financial and legal due diligence, legal and consulting services are included in profit before tax for
the year.
4. With effect from 1 January 2014, a wholly-owned subsidiary of the group which was the 80% partner of
the Panarottis Tuggerah partnership agreed with the remaining 20% partner to dissolve the partnership
in question. The partnership previously operated the Panarottis restaurant in Tuggerah, Australia. As
part of the agreement, the group disposed of the partnership's net liabilities of R5.029 million (of
which the group's share amounted to R4.023 million) to the remaining 20% partner in exchange for:
forgiving previously intra group loans to the partnership in the amount of R3.428 million; retaining
the cash and certain debtors balances of the partnership of R0.406 million and R0.395 million
respectively; assuming certain of the partnership's liabilities in the amount of R0.986 million; and a
cash payment R1.744 million which is to be paid in instalments until October 2017. This resulted in a
profit on disposal of the partnership interest in the amount of R2.154 million. For the period in
question, the partnership contributed revenue of R6.050 million (2013: R11.095 million) and earned a
profit of R0.064 million (2013: loss of R2.990 million which included an impairment loss on property,
plant and equipment of R2.188 million).
5. With effect from 18 March 2014, a wholly-owned subsidiary of the group acquired a 30% interest in Braviz
Fine Foods (Pty) Ltd, a start-up entity in the process of establishing a rib processing plant in
Johannesburg. As the group is able to exercise significant influence over the entity, but not control,
it equity accounts the investment. The initial purchase consideration amounted to R0.4 million
(comprising ordinary shares of R300 and initial transaction costs of R0.4 million). The group
simultaneously advanced a loan in the amount of R36.250 million to the entity. The loan bears interest
at the prevailing prime overdraft rate of interest and has no formal repayment terms (although any
repayment of shareholder loans is to be made on a pro rata basis between the respective shareholders)
and is consequently considered part of the net investment in the equity-accounted investee. Immediately
prior to the effective date, the fair value of the acquiree's net liabilities amounted to R0.684 million.
Goodwill of R0.606 million is therefore implicit in the carrying value of the investment. The group's
share of equity-accounted losses after tax for the period from acquisition to the reporting date
amounted to R0.379 million and arose primarily from finance costs incurred by the entity on shareholder
funding for the period.
6. In June 2004, a wholly-owned foreign subsidiary of the group, Vantini Spur Limited ("Vantini"), the
owner of the group's international trademarks and intellectual property, granted a ten year usufruct
of the trademarks and intellectual property to another foreign wholly-owned subsidiary of the group,
Steak Ranches International BV ("SRIBV"). SRIBV is the primary franchisor of the group's brands outside
of South Africa. During the period of 31 March 2014 to 30 June 2014, in anticipation of the expiration
of the usufructury rights referred to above, the group restructured certain of its international
subsidiaries in order to ensure the continued validity of franchise agreements concluded between SRIBV
and its franchisees. The restructure resulted in certain foreign subsidiaries commencing deregistration
procedures or becoming dormant which resulted in foreign exchange gains on translation of these foreign
operations previously recognised in equity (FCTR) through other comprehensive income being recycled
through other comprehensive income back to profit in the amount of R3.386 million. Legal, consulting and
other advisory costs relating to the restructure amounted to R2.169 million for the year and are included
in profit before income tax for the year.
7. In November 2013, the group closed its Captain DoRegos warehouse and distribution centre in Bloemfontein.
The distribution operations were absorbed into the group's existing outsourced logistics network.
One-off costs associated with the closure of the warehouse amounted to R1.326 million and are included
in profit before income tax for the year.
8. In December 2013, the first tranche of the share appreciation rights granted in terms of the group's
long-term share-linked retention scheme was settled in cash. This resulted in a gross cash outflow of
R23.357 million. Simultaneously, the economic hedging instrument utilised by the group matured which
resulted in a gross cash inflow of R19.920 million. During the year, the share-based payment expense
in respect of the scheme included in profit before tax amounted to R28.117 million (2013: 23.645 million),
while the gain on the related economic hedging financial instrument recognised in profit before tax
amounted to a credit of R17.922 million (2013: R34.357 million). Further details of the share
appreciation rights and related hedges are detailed in notes 21 and 15 respectively on pages 127 and
124 respectively of the annual integrated report for the year ended 30 June 2013.
9. Subsequent to the reporting date and with effect from 1 August 2014, the group acquired the remaining
50% interest in Panpen Pty Ltd ("Panpen"), a company in which the group had an existing 50% interest
and which operates the Panarottis outlet in Penrith, Australia. Despite not owning a majority interest
in Panpen prior to this transaction, the group effectively controlled Panpen and the entity was
consequently consolidated. The purchase consideration is an amount of AU$200 000 which was settled in cash
on the effective date. As part of the transaction, Panpen was required to settle the outstanding
shareholder's loan with the non-controlling shareholder in the amount of AU$158 342 (or R1.584 million
as at 30 June 2014) which amount was settled in cash on the effective date. The net liabilities of Panpen
at 30 June 2014 included in the consolidated financial statements of the group amount to R0.408 million
and the group has already recognised goodwill attributable to its existing investment in Panpen in the
amount of R3.215 million at 30 June 2014.
10. As a result of historic trading losses, the group had impaired the property, plant and equipment of
the Mohawk Spur in Wandsworth, England in prior years. As a consequence of continuing trading losses,
the carrying value of the cash-generating unit was re-assessed for impairment at the reporting date.
In this regard, the group concluded that the franchise rights intangible asset of R1.866 million
attributable to the cash-generating unit was impaired at the reporting date and the full carrying
value of the intangible asset has been charged to profit or loss. Furthermore, in considering the
ability of the entity in question to continue trading, the group has accelerated the amortisation of
the lease previously acquired by the group relating to the entity, resulting in a further charge of
R1.612 million to profit before income tax.
11. As a consequence of sustained historic trading losses, the property, plant and equipment of the
Panarottis outlet in Blacktown, Australia, amounting to R2.496 million at the reporting date were
impaired.
12. Subsequent to the reporting date, on 31 July 2014, shareholders were advised by way of an announcement
published on SENS that the company had entered into various agreements to issue 10 848 093 new ordinary
shares indirectly to Grand Parade Investments Limited ("GPI", registration number 1997/003548/06), a
strategic black empowerment partner. The company is separately intending to donate 500 000 of the
company's shares (100 000 share per annum over five years), currently held as treasury shares, to the
Spur Foundation, a benevolent foundation that is consolidated for the purposes of IFRS. Both
transactions are subject to shareholder and regulatory approval and the intended transaction date will
be no later than 31 October 2014. The issue of shares to GPI will result in that company indirectly
holding 10% of the company's total shares in issue after the transaction. The shares will be issued
at a price of R27.16 per share, representing a 10% discount to the volume weighted average trading
price of Spur shares on the JSE for the 90 trading days prior to 30 July 2014. GPI will be restricted
from trading the shares in question without the express permission of Spur for a period of five years
from the effective date of the transaction and is furthermore required to maintain its Broad-based
Black Economic Empowerment credentials for the same period. Spur will partially fund the transaction
through a subscription of cumulative compulsorily redeemable five year preference shares in a special
purpose entity with a combined subscription value of R72.33 million (representing 24.5% of the total
funding requirement for the transaction). The preference shares will accrue dividends at a rate of 90%
of the prevailing prime overdraft rate of interest and will be subordinated in favour of the external
funding provider. GPI will fund 24.5% of the total funding requirement and an external funding provider
will fund the balance of 51% of the total funding requirement. The preference shares will be secured
by a cession of the reversionary interest in the Spur shares held indirectly by GPI which also serve
as security for the external funding. The transaction will result in a net cash inflow of
R222.33 million to Spur. If the transaction is approved by shareholders and regulators and the
remaining conditions precedent are fulfilled, it is estimated that a share-based payment expense of
R48.686 million will be recognised in profit in the 2015 financial year. Of the total estimated
transaction costs of R1.604 million, it is estimated that: R0.285 million relate directly to the
subscription of the preference shares referred to above and will be included in the carrying value of
the preference shares; R1.034 million relate directly to the issue of the company's ordinary shares and
will be charged directly against equity (retained earnings) and the balance of R0.285 million will be
charged to profit. The pro forma financial impact of the transactions was disclosed to shareholders in
an announcement published on SENS on 4 September 2014 and the circular incorporating full details of
the transactions was mailed to all shareholders on 4 September 2014.
13. As reported in note 41.1 on page 148 of the annual integrated report for the year ended 30 June 2013,
the South African Revenue Services ("SARS") had previously issued assessments to wholly-owned
subsidiary Spur Group (Pty) Ltd for additional income from controlled foreign companies of the group for
the 2009, 2010 and 2011 years of assessment. These assessments had previously been objected to by the
company. During the year, the objections were partially disallowed by SARS, resulting in reduced
assessments being issued amounting in aggregate to R1.993 million (comprising R1.561 million in tax
and R0.432 million in interest). The assessments have been settled. The board of the company in
question has appealed SARS' decision to partially disallow the objection and SARS has agreed to refer
the matter to alternate dispute resolution proceedings. No date has yet been set for these proceedings.
The board continues to be of the view that it is able to defend its position. Consequently, a liability
has not been raised in respect of the assessments issued, or the possible liability arising from the
same disputed issue for the 2012 to 2014 years of assessment. There have been no further changes to
the status of other contingent liabilities referred to in note 41 on page 148 of the annual integrated
report for the year ended 30 June 2013.
14. Fair value of financial instruments:
The hedge forward derivative financial assets/(liabilities) utilised by the group to economically
hedge the impact of the share appreciation rights granted in terms of its long-term share-linked
retention scheme are fair valued at each reporting date (refer note 8). The fair values of the
contracts are determined by an independent external professional financial instruments specialist
using a Black-Scholes (risk neutral pricing) option pricing model in a manner that is consistent
with prior reporting periods. The financial instruments in question are designated as level 2
financial instruments in terms of the fair value hierarchy specified in IFRS13 Fair Value
Measurement, as the inputs into the valuation model are derived from observable inputs for the
assets/liabilities in question, but are not quoted prices in active markets for identical
assets/liabilities.
The loan advanced to the equity-accounted investee of R36.250 million as detailed in note 5 was
initially recognised at fair value at 18 March 2014 and is subsequently recognised at amortised
cost. In determining the fair value of the loan in question at initial recognition, the directors
considered the interest rates implicit in similar loans granted on similar terms and conditions
between unrelated market participants. The directors determined that the interest rate applicable
to the loan in question is commensurate with similar external loans between unrelated market
participants and the nominal value of the loan therefore approximated its fair value at initial
recognition. The financial asset is designated as a level 2 financial instrument in terms of the
fair value hierarchy as the inputs into the valuation model are derived from observable inputs for
the asset in question, but are not quoted prices in active markets for identical assets.
Directors
Executive Chairman: A Ambor
Chief Executive Officer: P van Tonder
Chief Financial Officer: R van Dijk
Chief Operating Officer: M Farrelly
Non-executive: K Getz, D Hyde, M Kuzwayo, K Madders MBE (British), D Molefe, M Morojele
Company Secretary: R van Dijk
Spur Corporation Limited (Registration number 1998/000828/06)
Share code: SUR ISIN: ZAE000022653
Registered Office: 14 Edison Way, Century Gate Business Park, Century City, 7441
Transfer Secretaries: Computershare Investor Services (Pty) Ltd, 70 Marshall Street, Johannesburg, 2001
Sponsor: Sasfin Capital (A division of Sasfin Bank Ltd)
Our Brand Family
Spur Steak Ranches
Panarottis Pizza Pasta
John Dorys Fish Grill Sushi
Captain DoRegos Chicken Fish Burgers
The Hussar Grill
www.spurcorporation.co.za
11 September 2014
Date: 11/09/2014 08:00:00 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. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS. |
