Spur Corporation Ltd (SUR) Earnings Call Transcript & Summary

We have arrived at what is almost the eve of anniversary of a 1-year pandemic that has disrupted our world, our countries, our communities, our families, our people and our business, too. Soon, we'll look back and remember the year 2020 and know that it's a distant memory and more importantly, that we all survived it. Good morning, ladies and gentlemen. Welcome to the results presentation of unaudited interim results for the period ending December 2020. I'd like to welcome those who are physically with us this morning from Century City and for many that are online viewing the results. First of all, upfront, I'd like to welcome a few people, our Board Chairman, Mr. Mike Bosman. Thank you, Mark, for being with us and for this Board for your support and direction over the past period. I'd like to especially welcome our Executive Board Directors, Kevin Robertson, who heads up the Franchising Portfolio for the group. Welcome, Kevin. Really awesome to have you on the team. And welcome to Sacha, Chief Marketing Officer. Welcome, Sach, good to have you here as well. And to all the other executives and our team would like to just extend the special thanks for your support and commitment. We know the team has gone through difficult times over this past period. Some have even lost loved ones. We extend our condolences to those who have and also send message to your families. Thank you for your commitment. Upfront, I'd also like to mention that at least 10% of our quota were contracted with positive results on the virus. We unfortunately did lose one of our colleagues, which is Graeme Kiewitz, our Human Resource executive. May his memory be eternal. Graeme was instrumental in paving the path of transformation for the company, and it's one that we will continue with. So just a moment for Graeme. To our valued franchisees who are listening in today, we really do need to salute you for your bravery in responding to the changes in the market. So positively, responding to what we needed to do to get into the delivery-only period of the COVID pandemic and then being brave enough to open your stores when a lot of consumers were out there, locked away in their homes. Thank you for that. To our franchisees, I have one special message. Our primary aim is to keep your restaurants open. We -- without your restaurants trading, we don't have a business. So it is our aim through consultation and collaboration that we refresh and reinvigorate and prepare for the future to move away from what this pandemic has done to our business. But I'd like to just thank you for your commitment, your trusted partners and valued partners, and we look forward to a great future together. So we're going to move on now to the agenda for this morning. We're basically going to cover trading overview, financial segmentation review and the way forward and Q&A. I'd also like at this point to welcome Cristina, you can see her right here, Cristina Teixeira. Cristina joins us as our Chief Financial Officer, joined the company on the 1st of February. Welcome, Cristina. Really awesome to have you on the team. And we know that with your expertise and discipline, we will take the business forward in a profitable manner. Just to move on, the first thing we'd like to touch on in terms of the trading environment is really the impact that it's had on our consumers before we go into the details. So if we look at what's actually happened on the consumer side, we basically have seen lots of change with our consumers. And our aim at Spur Corporation is to be consumer focused with everything we do. So understanding the dynamic and the change of our consumer segments is paramount to us. We're very aware that consumers, just by the sheer nature of the pandemic, have changed some of their lifestyle habits. They've gravitated towards their homes. They've been selective about what -- where to venture out to. We know that our youth are starting to rewrite the patterns of their lifestyle. They work in from wherever they choose to work, wherever there's WiFi essentially. And they also are more loyal to brands that are making a difference to society or making a difference to the planet. So these young consumers are future consumers, and we're very aware that we need to be completely in tune with their needs. We also know that there's been a dramatic growth in South Africa and globally on the online sales and online purchasing. Just recent statistics from NielsenIQ say that at least 2/3 of consumers plan to continue shopping online post the pandemic. So this isn't something that's going to go away when the pandemic eases. It's going to continue as a lifestyle as people realize the ease and convenience of online shopping. However, many consumers out there are still wanting to get back to their normal lifestyles and those, particularly our customers who still want to come along and celebrate with their families, meet people, have the birthday cheer and have the environment of a usual dine-in experience. Just on that note, I'd like to acknowledge our customers for their loyalty. In recent weeks, I've been in the stores, observing our customer profile, observing what's happening in the marketplace. And I'm absolutely amazed at the loyalty of our customers. We have over 1 million members in our family clubs across the group, active ones. And it was incredible to see people waiting in the queue, 20, long, this last weekend, some sitting in the queue, other standing in the queue to get a table because of the 50% limit to the capacity which obviously has changed in recent days, and we'll discuss that shortly. So to our consumers out there, thank you for your support. Thank you for your loyalty. And we will continue to give you what you need going forward. Just to move on the period at a glance, and Cristina is going to take us through the details of the financials shortly. But you can see our revenue, and that's not turnover, that's revenue to the group traded at minus 40%, and we'll talk about the impact of that. Profit before tax at minus 73%. But when you look at the real extraction, it's a little better than that, and we'll discuss the reasons why. Comparable profit before tax at minus 67%, headline earnings at minus 76%, comparable headline earnings at minus 70%, and a positive cash balance of ZAR 12.7 million. Just to note that it was inevitable that we had to anniversary the July to December of 2020 disastrous year versus July to December 2019, which was a relatively healthy and good year for the group. If we look at our network globally, we have in South Africa, 546 restaurants. If we look at internationally, we're in 15 countries. Our total network is 633 with 87 in the international front. Okay. If we look at our restaurant count by brand and you can see the numbers yourself, I think things to notice there. Obviously, Spur play, the biggest contribution in the group. But you see the growth, the rapid growth of RocoMamas, certainly our rising star in the network, with [ 17 ] stores already in Africa. So if we look at Spur representing 52% of that total count. This is a very important slide, and we'll just chat about the COVID impact and turnover performance. I think we all know the lockdown level legislation. If I can draw your attention to the red highlighted, which is the period that we are addressing this morning and reporting on. We all know the levels. The next line indicates the number of stores that we're trading and are trading during this period for the current month. It's short of a few stores, but those are closed because of revamps and relocations and 1 or 2 that haven't reopened yet. The next line just shows the performance. But to graph that out for you, you can see that dramatic drop of no business in April and a clawback as the first curve started easing and then, of course, a bit of a decline again when we went into a stricter lockdown. The bottom arrows depict the franchise fees charged to our franchise network. This was a big contribution for the group and one that we did very readily in order for our restaurants to survive this horrific pandemic and the implications of the restaurant trade in the marketplace. And the good news, we were obviously very thankful to hear our President, Ramaphosa announced that from the 1st of March, which was yesterday that we move into lockdown Level 1. The message out there to our teams, our franchisees and our customers by easing the regulations by no means are we easing the safety precautions. Our disciplines at the restaurant and in our office spaces remain intact to ensure that we do protect our people, our customers and our franchisees. If we look at a little bit more detail in terms of our group total turnover in performance cycles, we look at the 8 months to February last year and then 12 months to June and then 6 months to December. You can see we performed at minus 29.5%. The column that I think we all like to look at as retailers and franchisees is the like-on-like performance and that was minus 31.2%. So given the trading conditions, these results aren't great, but we know they are to be expected in terms of the shortened trading periods and the restrictions on certain categories. If we look at the restaurants in South Africa by brand, you can see Spur trading at minus 31%. Other highlights, some brands, particularly brands that perhaps weren't performing at the optimum, have struggled a little more than the group percentage of 31%. Included in that are some of the specialty brands, Casa Bella, Nikos and Hussar Grill. And we know the impact in those specialty brands was far greater because those are more about dinner time experiences. It's about a longer meal experience. It's about having some wine, it's having some alcohol. So those were directly impacted on a much larger scale. The figure I'd like to draw your attention to, the shortfall in top line turnover was ZAR 1.1 billion. So that is a huge implication on the turnover impact, a negative impact. And if we translate that at average franchise fee, it was a potential loss of ZAR 52 million in franchise fees. This has got nothing to do with franchise concessions. This is what would have been had we've been on par with previous year. If we look at the restaurants internationally, a better performance overall than South Africa at minus 17.1%. As we all know, a large portion of our turnover is done in Africa. Africa has had a slower uptake in terms of the virus stats, uptake is not a good word to say, but the incidence of the virus in Africa. So it wasn't directly impacted. However, we are aware that in a lot of those countries, there are some regulations that are now starting to creep in as their numbers creep up. But we will be going through the segment -- segmental analysis shortly. In terms of number of restaurants, this is a grid that we all love to look at. Not a rapid real growth, but obviously, we did open new restaurants through this difficult time, but also closed some. If we look at the total closures of 22, I think that hardly represents 3% of the total network of 633 stores. A lot of those restaurants that closed over that period were stores that -- or restaurants that were already tracking sort of, as we call, in ICU and couldn't sustain the drop in trading periods. What is encouraging to see from our teams and our support teams and our franchisees is a commitment to have continued revamps and relocations during this time, albeit at a lower rate than normal years. Okay. So if we look at some key measures, and these are quite interesting because it really signifies the impact of the pandemic and the regulations and restrictions. We spoke about [indiscernible] group. Total group dinner sales were minus 39%. A big contribution was the specialty brands, which are shown on this graph, dinner in the 3 specialty brands: Casa Bella, Hussar Grill and Nikos minus 47% and lunch also declined. If we look at the impact of group liquor and this is group liquor turnover, this has got nothing to do with the compound impact when people don't come in because they can't be served liquor, and they don't order the meal anyway. So liquor turnover only for the group was minus 39% over various periods in the 6 months. Group takeaway turnover. This is an awesome performance for a business that is strategic competency is casual dining. We've always done takeaway, but never at a huge volume, because that hasn't been our core business, but really incredible to see how the business responded to the takeaway opportunity, basically doubled our business for the group. For Spur Group, takeaways now represent 27% of total turnover and RocoMamas well poised in the takeaway category because of the nature of burger offering. 53% represents their takeaway sales. Takeaway growth in the third-party aggregators and the 2 main ones. There are some smaller players. We know that Uber Eats not such a wide footprint as Mr. Delivery, but obviously operate in sort of more key segmented and upmarket areas, a growth of 41%, which is really impressive. And Mr. Delivery, an impressive growth of 72%. So whilst there were some service challenges throughout for the network with the third-party delivery guys because they're everywhere at the moment, an impressive growth, and we do have their support, and we look forward to growth in these channels going forward. The virtual kitchen brand, this is a slide that you probably saw at the last presentation, really amazing that the group was nimble enough to respond to the need of closed restaurants and how do we service the consumer. There was an introduction of 14 virtual kitchen brands known in our network as the VK. It's become a little bit of an acronym now. Over the past period, 423 of our restaurants operated as virtual kitchens delivering to the consumer these various brands around certain key category focus areas. A recent strategic session where we analyze the figures, we have refined the mix and 7 of our VK brands are gaining traction. And they will continue in the marketplace as proof of concept until the end of the year until we see what the result is there. The obvious categories that are winning are the burger and the pizza categories are well poised again for delivery. We're really thrilled with the performance of the VK brands. And it looks like our star of the show is Bento -- the Bento's burger brand, which is now producing a 25% reorder rate, and those are the Uber statistics. So really awesome, a brand with great attitude, a beautiful product. If you haven't tried it, please go out and order it, really an awesome burger and a great experience and lots of innovation to come. In fact, I'll mention it upfront. One of the innovations in the pipeline in the next few months is the opening of the Bento's call -- click and collect but not collect and pay. So click and collect, order online and drive through and collect as we've seen with some of the big global players internationally. I now conclude the first section, which is essentially the overview on turnover, and I'm going to hand over to Cristina, who's going to take you through the financial and segmental review. And then we'll provide some more insights across the brands as we go through this section. Thank you.

Thank you, Val. Good morning, ladies and gentlemen. We'll start with the income statement. As Val mentioned, the sales from our South African restaurants decreased by 31% and our international restaurants by 17.3%, resulting in an overall decrease in turnover of 29.5%. But the revenue drop that you see, the spread on your screen, represents 40%. And the reason for the delta, the additional 10%, is as Val explained, the concessions -- the discounts provided on the standard fees that we awarded to our franchisees partners in order to assist them through this very difficult financial time of COVID. If we look at our gross profit level, where our decrease is 43%, and that is the result of a GP percentage drop from 76% through to 72%. The reason for that is, in addition to the concessions discounts provided, we also had the impact of our manufacturing and distribution business, although volumes increased within our retail business through the distribution of our own sources into the market. The retail business does come and trade at a lower margin than that of our normal central kitchen business and our distribution channel. So we were able to achieve volumes through sale of sources to the consumer, but that did come at a lower margin and hence, impacted the GP percentage. Other expenses, you'll see that they are down 26% as opposed to the 43%, that is as a result of a fixed component of overheads in addition to the variables, and we'll unpack that as we go through each segmental division. From a net finance income, you'll see a drop from ZAR 10 million down to ZAR 1 million as a result of lower cash on hand during the period. Specifically, there was a large cash outlay in the previous period in order to be able to buy back our shares. And that combined with lower interest rates meant that we had net finance income of ZAR 1 million. You'll see an effective tax rate of 31.6%. When compared to our South African tax rate of 28%, the marketing funds adjustment that you would process to get to the underlying trading result is about 5%. But we did have about 6% worth of nondeductible expenses that we add back to the effective tax rate, bringing it back up to just above the 28% statutory. That then results in a 74% decrease in profit for the year. And you'll see the earnings per share at 74.6% based on a weighted average number of shares of 83.9%, which is net of our group's treasury shares. If we unpack that income statement then into a segmental overview, the first slide that you see is a segmental for South Africa. Indicators to note is that South Africa represents 95% of the group's revenue. The importance, although more significant material contributors, obviously, the Spur brand, which delivers 22% of our revenue. And then as well the manufacturing and distribution business, which we'll cover a little bit later again at 31%, marketing at 21%. What you will see then, if we look at the Spur brand, with the change in revenue of 43.6%, you'll see that the profit is also they're about in line of 48%, so margins holding. If you look at the smaller brands, Panarottis, John Dory’s and Hussar Grill, you'll see that the drop of profit is a little bit more marked than that of the revenue, and we'll unpack that. And as Val said, the RocoMamas stores is quite rock star, where we have a margin enhancement actually period-on-period at 70 -- sorry, a slight management of the margin at 72% as opposed to profit of 74%, but certainly a great trading product. If we unpack the franchise businesses, and so we've provided a slide per business or slides consistent in terms of format largely. And there, you can see our store turnover versus our revenue and you can see the greater dip in the first -- or the second half of the financial year and then recovering a bit in the first half of this 2021 financial year. And you can see the impact on profit. And we've detail to you as well the concessions on the discounts or at least the delta between the standard grade as well as the revised rate for the period. As I said, this franchise contributes 22% of group revenue, 68% of the franchise revenue. So the most material contributor to revenue and therefore, profitability. As mentioned, revenue went down by 43% and profit went down by 48%. The Spur grouping of all team members have done very well in terms of being able to manage their cost base. They had a 50% saving year-on-year on nonemployee costs and managed to reduce their employee cost by 12%. So that's aided in the impact on profit in order to more closely link to the drop in revenue.

So if you look at just some detail around Spur. At Spur, we do regard as our mother brand, it's basically our foundation of the business. It's the South African household brand that everyone's known through some part of their lifestyle, including our newcomers that are engaged in our restaurants and entertained in our play worlds. So if we look at some of the key focus areas. Despite COVID and despite the limited trading hours, we still saw families continuing to want to celebrate and entering our stores. We saw, as I mentioned earlier, that loyalty in terms of the wait lines. We have had a direct impact, a negative impact on the restrictions in terms of curfew, reduced dinner trading, alcohol sales and limited capacity. In particular, we are thrilled that we've now moved to 100 people per restaurant. Obviously, we have many restaurants that are 250 and greater. So we're not there yet, but certainly an improvement on the previous restrictions. During this difficult period, we had strong value-add campaigns and Call & Collect advertising was invested online to encourage consumers to engage with us and bring their normal dine in meal to their homes. Just some key areas or key indicators. When the beaches closed in December, we were trading relatively well for December, and as we all know our peak trading season for the year, we experienced up to a 40% decline in some of the coastal areas. On the positive side, when we reopened the kids play areas in October, we saw an amazing increase and almost on par with last year, only tracking at minus 6%. Breakfast turnover remains strong with the Spur network at an amount of 33% of total turnover. And then not to forget our Spur Grill & Go, we have 6 outlets. The nature of Grill & Go is takeaway. It's in transient sites and the takeaway portion was 48%. So overall, the Spur brand under the conditions had a fair delivery of turnover. Just to show you some of our new stores that opened during this period. On the top left, I think it's your left, Coyote Creek, which is at Castle Gate just outside of Pretoria; and then the White River Crossing was a relocation, a beautiful store; Big Bear, as you can see there. And those are just some examples of how the Spur brand continues to open and attract consumers out there with its usual and improved offering.

Moving on to Panarottis and Casa Bella, our pizza and pasta offering. There, you'll see a drop in revenue of 46% relative to a drop in profit of 66%. I think the first thing to note is that Casa Bella did close 2 stores during the year. So on a like-for-like basis, the Casa Bella drop in revenue would have been 41% and the Panarottis drop in revenue is 30%. This team also focused on cost management. They managed to decrease their nonemployee cost by 50%. And they were slightly less than the Spur team in terms of employment costs, managed their costs down by 10%. And hence, that is the management of the margin in order to manage it to 66% down only.

Okay. If we look at Panarottis and Casa Bella, obviously, our pizza and pasta offering for the consumer, we're really pleased to know that Panarottis still dominates as the largest group of casual dining restaurants in the pasta and pizza category. And it's this position that we're going to consider as we move the brand forward into a leadership role to continue to dominate in such a lucrative market where every family just loves pizza and pasta and often wants to experience it outside of delivery box. So we're really proud that we have the network. We have the franchisees, and we have the attitude and the intention to move this brand into a more dominant position. This year, what we wanted to highlight is the rapid growth of the Pizza Express model, a smaller concept, obviously, lower turnovers but more lower setup costs and more focus around the over-the-counter delivery experience. And you can also see the rapid growth on the international market with 15 new Pizza Expresses opened over the last year, in fact. Pizza Express is performing better in Africa than it is locally, but our plan is to refine the model because there's still a market out there for people who love Panarottis and can now take it home with them. Casa Bella, our specialty brand in the pizza and pasta category. We did close 2 restaurants, Woodlands and The Pearls, actually, I think it was your Pearl and one was a relocation. A significant impact, as we've said before, on the specialty restaurants. What further compounded the negative performance of Casa Bella are the sites that are in casinos. We know the casinos were closed for a period of time. They've reopened, but they also have a capacity issue. So there's absolutely no footfall in those sites. So Grand West and Montecasino. And then, of course, our Sun City resort site, huge impact. A colleague of mine was there recently and just said it's like a graveyard. There's nothing happening out there. And until all those resort-type locations start picking up, we're unfortunately going to feel the impact of the business. So Casa Bella did unfortunately produce a negative result of 61%, but a great offering something that has a place in the marketplace and will certainly be one that we will grow in our portfolio.

Moving on to John Dory’s, our fish and sushi offering, as you can see as well, 50% down in revenue with quite a material, 88% down in profit. The business really only delivered about ZAR 5 million worth of revenue and with a cost base of near ZAR 4.8 million, difficult to manage that cost structure in a very short time frame. That said, the team focused on nonemployment costs and reduced that by 55% and employment costs decreased by 8%.

If we look at a bit of detail on John Dory’s, it did deliver a disappointing turnover. But understandably in terms of where some of those sites are located. We are encouraged, however, to be trading in the seafood category, and we will continue to trade in this category. John Dory’s is an important growth plan for the future. This site that you see in the photo is of N1 City in Cape Town, a beautiful restaurant. We already have 60% of our restaurants at John Dory's that have been revamped. So a special acknowledgment goes to our teams and our franchisees for their commitment. The sushi experience at John Dory's will be amplified. Currently, Sushi represents 24% of our total turnover, and we're going to continue that sushi experience through the sushi conveyor belt, through the sushi chefs in action, producing a quality product that's on par with any competitor in the marketplace and internationally. John Dory's also had the virtual Kitchen brand of real sushi. So have also been exploring the opportunity to get sushi to the homes through the delivery mechanisms.

Moving on to the Hussar Grill, one of our specialty restaurants. You'll see a drop of 66% on profit against a revenue of 41%. The Hussar Grill traditionally hasn't been placed for takeaway and delivery offering, which obviously was focused on during the period, but then exposed it to a little bit more than maybe some of the other businesses like RocoMamas in terms of its ability to change [indiscernible] or multiply the effect. It obviously was also impacted by the size of the stores and the limits on capacity to trade. Very importantly impacted by the ban on ability to trade on alcohol and also impacted by international and local visitors and tourists to the area. So Hussar Grill was impacted. The team focused on employee costs, managed to manage that by 5% down and on nonemployee costs and decreased that by 65% in the period.

Okay. Having a brand of this nature in our staple allows us to perfect our offering in the other brands, learning more about the specialty of maturing meat of high-grade needs, which we do have in Spur as well. So an important player in our portfolio. We have 20 restaurants at the moment, 4 of which are company-owned, and Cristina will talk a little later about our retail company-owned stores. We also have 2 Hussar Grills in Zambia and Saudi Arabia. The decline we spoke about and of course, when you look at 65% of the restaurant locations based in the Western Cape, you can understand the direct impact of the loss of tourism and the dinner experience. However, innovation hasn't stopped. We've got 2 awesome and innovative brand extensions in the pipeline, one which is imminent in March. We have a Hussar Grill in Stellenbosch. And we're launching an extension to that store, which is a TAPAS BAR offering. So really awesome. So let's hope that the alcohol ban is not introduced again. But really a wonderful concept and so well aligned to the experience so you can come in and have a little TAPAS, have a little cocktail and then move into the dining area. And the next innovation also complements the dinner experience that we will reveal that to you in the next 6 months.

Our RocoMamas brand, very well poised for the takeout market as well as delivery markets, enhance the credibility of RocoMamas. As you see, revenue down by 23% and profit before tax kept intact at 25%. This brand benefited as well from an increase in terms of restaurant additions. We opened up 5 restaurants during the period, closed 1, so a net addition of 4, which helped their top line. And the team also focused very well on costs with other cost decrease about 65% period-on-period and is saving on employee cost, too.

RocoMamas, as we mentioned before, certainly the rising star in our network. A brand that's extremely focused, extremely well positioned with a key differentiator in terms of its Smashburger, it's order your own or build your own burger, a very focused team, very clear about where the business is going and a rapid growth, which is exciting. Both consumers are attracted to the brand. Last Saturday, I was in restaurants and was amazed to see the different age groups that are embracing RocoMamas and coming to the store to dine with their families. This brand transcends age, race, it's just amazing. And also attracts lots of franchisee investment interest. And I think that just endorses the strong brand equity that RocoMamas has as such a young brand. New restaurants in South Africa were 5, international 3. We did close 1. I think the good thing to do at this very early stage in its life cycle is to exit sites that perhaps don't give us the trading density immediately and the ability to refine and relocate some of those sites as needed. At the moment, we have 89 RocoMamas, 16 of those are international. Incredible how this brand has taken off in the international market in our portfolio. And then also 6 RocoGO, which are more the takeaway over the counter, you'll see one of those in, for example, Montecasino in Johannesburg and 1 RocoGO internationally. We also have one company-owned restaurant in RocoMamas in Greenpoint. And we've spoken about the takeaway turnover. Okay. Very important as a forward-thinking brand, you can see they're already looking at their supply chain in terms of bringing in products that are farmed in a more eco-friendly way, no antibiotics, free to roam, Gouda cheese. The beef, 100% beef, pasture reared, grass fed. The beef actually comes into the stores, it's handmade, prepared with a lot of care for our consumers. And that makes this brand unique in its offering and its attitude, as you can see. I'm not quite sure how you eat that burger, but I'm sure if you're 18, you can. Very exciting, some product extensions. This is just an architect's impression of our first RocoMamas drive-thru, which we proud to announce, is going to be opened by an existing franchisee in Queenswood, Pretoria. So we're really excited about that venture, and we do foresee a greater growth in the hamburger, the category through our RocoMamas brand. Obviously, Spur Corporation, we have a big market share around burgers because we do burgers everywhere. Spur have a huge amount of volume around burgers and RocoMamas represents that more adventurous gourmet burger with a slight different angle in terms of how it's prepared.

Next, we have Nikos, another specialty offering. 48% decrease in revenue and an enhancement on profit. The Nikos business was impacted by 2 closures and on a like-for-like basis, the revenue would have been down by 17%. The team restructured quite materially that had a 90% saving on costs and just because -- with respect to employment costs that were down at 60% in order to restructure, and we stabilize the cost structure that supports new costs. So 17% down on revenue.

Okay. Our Nikos partnership continues with our trusted partners. A Greek family have been in the restaurant business for many years. And for us, we call in this brand one of our young guns with a lot of potential, a nice, fresh offering to the marketplace and a big commitment. We did close some stores, as Cristina mentioned, the one significant site was in Rosebank. And for all the Johannesburgers listening in today, you'll know that because of all the corporate offices in that trading area closing or not working to capacity, the footfall declined entirely and with higher rentals in the Rosebank area, we're unable to sustain that site. But the good news is we continue to innovate with Nikos. This is our new site that will be opened, I think, in May at Montecasino. Hopefully, by then, the regulations change for casinos. But this is going to be an awesome site. You can see on the right there, a big focus around Athens Street Food offering, which is really awesome. A lot of people and our Board Chairman sort of joked with me saying, are we changing Nikos to Nikos and we said, no, absolutely not. Everyone in Greece is named Nikos. So really awesome, we're certainly encouraged about this brand. It's run by a group of dynamic people, and we see it growing as part of our specialty offering for the group.

In terms of our retail stores, as Val mentioned, we own 5 of them, 4 Hussar Grills and 1 RocoMamas. So that's our company-owned stores that we call retail stores. You'll see the decrease in revenue and profit indicated. The retail stores obviously suffered from or experienced the same positioning as I described earlier with respect to Hussar Grill, mainly ban in alcohol impacts volume of trade and the local international tourists that were in presence in the time of a COVID lockdown. In addition, what you'll see is the -- in the prior year, was an impairment process in the second half of the financial year to account for write-downs in terms of property, plant and equipment required. So that's why you see the drop in the second half of last year. And the improvement this year with an element of lease depreciation being charged through the income statement because the numbers have been impaired. So that's why the hockey stick impact that shows a weaker second half last year and then an improvement in the current year. But as I say, Hussar Grill is experiencing -- our own company stores experiencing the same as the franchisee stores. If we move on to international. The grid shows 4.7% of our revenue comes from international. We've broken that down between Australasia and in the rest of Africa and the like. What you'll see is that from an Australasia perspective, Australia and New Zealand, you'll see for the current year, we report a loss of ZAR 569,000 versus ZAR 2.3 million over last year. If we -- the period of the last year did include in payments, circa ZAR 1 million, that was processed. And the period in the current year records recoveries or reversals of ECL adjustments. So on a like-for-like basis, in essence, the losses that are reported for both the first half of last year and the first half of this year is circa ZAR 1.5 million and represent employment costs. During the course of this financial year, at the reporting period and review, we have retrenched to the one individual that was looking after Australasia, and that represented those employment costs. If you look at the Rest of Africa and Middle East, representing a good portion of profitability, ZAR 7.6 million in the current year. From a margin perspective, actually enhanced margin period-on-period and the profitability really coming from Africa and Mauritius specifically, as you can see. If we move to the manufacturing and distribution segment, I'm going to put up first slides. I touched on this earlier on in the presentation. There, you can see the split between manufacturing. So we've been manufacturing our central kitchen and distribute sources through to our franchise stores. Our retail, where we sell sauces through to the retail market and distribution where we assist with the distribution of product through to our franchisees partners. So the first and the third manufacturing and distribution to be expected down on the prior year due to the volume decrease as our stores weren't trading or reduced trading as a result of COVID. The retail line, you'll see has moved up from ZAR 34 million through to ZAR 40 million. But if you look on the right-hand side, you'll see that the margin that a it trades at is circa 6% as opposed to the other 2 portions of our business, which has either 100% margin or a 14% margin if it's in manufacturing.

So the retail growth is to be expected. If we consider the growth in retail with essential items and the fact that consumers were gravitating to these supermarkets so these numbers are sort of in line with the trend we've seen in the major supermarket groups. Our product range comprises 25 SKUs across 2 variants, really great market share in the supermarkets. If we look at some of the areas and the categories you can read those on your own, we have a variety of sauces. We have cook with sauces and various other options, spices, et cetera. And you can see Shoprite Checkers has been our most dominant stockers, followed by all the major retailers and then a huge segment of independence and smaller chains that carry the Spur offering, obviously, a wonderful category to take home and drive with, another growth category for us going forward. You can see the Durky Sauce, which a lot of people know, is a signature taste in the Spur portfolio, the Durky Sauce sells second to the barbecue sauce. So it's a very popular and customized taste profile. And on the slide here today, you can see the new packaging for the Spur retail packs.

Continuing to the smaller segments within the organization. First, we have a segment called Other, which as you see from the bottom is a composition of décor, training, training at least and mainly export and call center. The revenue number at ZAR 12.7 million is mainly -- the majority of it is from our exports business, down on the prior period as a result of decreased trading from our franchisees. Most of those divisions were able to break even at least. The operating loss of ZAR 3 million really represents our training department. And it relates to employee costs. It's an underrecovery of employee costs with a reduced ability to train during the period. We'll see there's some retrenchment costs in the period as we retrench staff. And so our comparable operating loss ZAR 2.5 million, which, as I say, represents training and employment costs. The other portion of our segments, shared services. There's a number of line items there, revenues and ancillary sales through to our franchisees, recovery of certain costs from our franchisees. You'll see a reduction in the administrative fee, the fee that we earn in order to be able to administer the marketing funds. As a result of the fact that, that fee is based on a percentage and with the reduced marketing revenue, the amount that was received by the company to administer the funds would obviously have been reduced. You'll see that there was an income in the prior year, it's the GPI finance income. That's a preference dividend that was received in the prior year, obviously not repeated. So that impacts the current year. I've spoken about the reduction in the net interest income. And so therefore, we look at the shared overheads. And you'll see that shared overheads are actually ZAR 70 million. Let's call that the corporate costs, employees and others of ZAR 70 million relative to the prior period of ZAR 52 million. If we unpack that a bit, you'll see the breakdown. So in the period, as I said, ZAR 72 million. We adjust this to show you comparable shared overhead. So we're stripping from the ZAR 70 million of the current year, ZAR 52 million of the prior year, the, let's call it, once-off nonrecurring line items. In addition to the preference dividend we mentioned earlier, you'll see an impairment of GPI funding, which is a gain last year. What that means is when the GPI transaction is concluded, there was a reversal in the prior year of ZAR 10.8 million being a reversal of impairment. So that enhanced costs, reduce costs. And so we stripped that out in order to show you the underlying real costs. In the current year, you see an employee benefits obligation, ZAR 8.5 million, as disclosed in our annual report. We provided you with all the detail regarding our previous CEO, Mr. Van Tonder's mutually agreed separation and how we structured that's arrangement. And so the ZAR 8.5 million is net present value of ZAR 9.3 million that will be paid to Mr. Van Tonder up to December 2022. So we add that back for clarity of what the underlying costs are. If we look at the next material line items, retrenchment costs, you see ZAR 2.5 million. You saw ZAR 500,000 on the slide before. So the corporate office, the shared services incurred ZAR 2.5 million. The other department incurred ZAR 500, which then meant ZAR 3 million worth of retrenchment for the period. And that being said, that our costs for the period of ZAR 59 million as compared to ZAR 63 million, shows you quite a high fixed cost. And in the appendix to the presentation that you now have, you'll see the breakdown of those costs on a department-by-department basis as it's traditionally presented to you. One slide on the marketing fund. Obviously, the marketing funds are consolidated into our results, but are independently managed and not within the control of the company per se. The revenue at ZAR 66 million for the period is largely represented by the marketing revenue for Spur and obviously, John Dory’s and Panarottis. We underspend in the period of 7.6 as well at Spur, underspend in the period to curtail costs due to overspend in prior periods. So for the period, 7.6 cumulatively loss today with retained loss position is a cumulative overspend of 5.2. On the right, you'll see that the group has funded the marketing funds to the value of ZAR 34.5 million as at 30, December 2020. The figure at 30 June 2020 was ZAR 23.4 million. So ZAR 11 million net funding that's moved from cash out of Spur Corp through to the marketing funds to assist with the marketing activities. The comparable profit analysis, which I know as stakeholders, you're familiar to receive and see. We start with our profit before tax of ZAR 43 million and ZAR 161 million of the prior year. We exclude marketing funds for the reasons that we described, matters or at least funds which are not within the company's control. And then some of these line items, you see we add back the ECLs, the credit loss provisions that we put through. We've added back the net present value of our employee benefit obligation that I described earlier. There were some additional net fees which shareholders approved at our AGM, which we've added back. The retrenchment costs that I mentioned, ZAR 3.3 million, we've added back, and that thing says the comparable profit before tax is ZAR 49 million relative to ZAR 150 million over the prior year and hence 67.0% decrease period-on-period. If we move on to the balance sheet. Firstly, the balance sheet is largely unchanged from what you would have seen for June 2020, equity at ZAR 565 million. If we look at the noncurrent assets, the most material part of our property, plant and equipment, as you're aware, it's this office here, at Century City. If we look at the right-of-use assets, it's really -- I would need rental. And the rentals that we have with our retail company-owned stores that are on our balance sheet as is required. The intangibles and assets of ZAR 366 million is mainly the Spur trademark. And so therefore, we have long-term assets of ZAR 514 million. If we look at taxation, ZAR 26 million, ZAR 22 million of it links to the well-disclosed asset recovery that we expect from the South African Revenue Services, of which the contingent liability has been disclosed to you before. Trade and other receivables have increased ZAR 64 million up ZAR to 104 million. I think to be expected when we understand that the ZAR 64 million trade and other receivables at June 2020 was on a very, very low trading level. Stores were only starting to be able to open up and still heading into a sit-down environment. And so the trade and other receivables for December are more a normalized level of debtors. Cash has increased by ZAR 12 million to ZAR 186 million. If we look at other noncurrent liabilities, mainly deferred tax about ZAR 5 million that links to the long-term portion of our employee benefit obligations. Other important matters to indicate or to look at is the fact that we have our shareholders dividend net ZAR 66 million, that is reflected on our balance sheet. Unpacking the cash flow. Operating profit of ZAR 59 million. If we look at the net profit before tax of ZAR 41 million for the year, add back ZAR 5 million for intangible right-offs, ZAR 5 million for depreciation and add back our employee benefits adjustment of ZAR 8.5 million, so the more material noncash items, we have operating profit of ZAR 59 million. Our working capital changes are negative at 29. You see the breakdown rest of the category. As to be expected, trade and other receivables, as we said, a very active trading month of December relative to June 2020, will explain the increase in trade receivables and therefore, the indicated outflow. The rest of our cash flow statement. We show you that after generating cash of ZAR 30 million, we've paid ZAR 14 million away to receivable revenue. No dividends paid in the period. The investing activity is lean. We had some ZAR 2 million worth of acquisitions of intangibles and PPE and some loans repaid, so net one. And the financing activities of ZAR 3 million is purely the repayment of lease liabilities. That then generated close to ZAR 13 million increase in cash, leaving us with a closing cash balance of ZAR 187 million, of which ZAR 9 million is restricted cash. And pleasingly, a net ungeared balance sheet, which I think we are very pleased to have showing a conservatively managed balance sheet that we have taken over, which is very pleasing.

Great. Thank you, Cristina. This section now concludes the financial results. And before we open up for questions, we thought it would be opportune since we have you with us this morning is to talk about the way forward for Spur Corporation. This certainly is in our business plan going forward. That's still under development. But just to give you a view of where we're heading. So if we put this past period behind us and also look at the insights in business and in the marketplace, where we almost move into a new world that is focused around having more purpose, having more reason for being and also seeing our youth-seeking brands that have more purpose in the marketplace. We've taken a new approach at Spur Corporation. An approach that says. There has to be a reason why we exist. We obviously know we're all in the business to create jobs and opportunities. But we are moving on to a new positioning, which is to lead the marketplace through brands that lead the experience. The reason why we can take on that unique proposition. If we look at the Spur restaurants, they were the pioneers at creating the casual dining experience through their birthday cheer mantra, the birthday cheer celebration, the awesome play areas that people gravitate to the sounds of the rib sizzling, the smell, the kids running through the dining area, just an awesome and unique experience, and our plan is to amplify that. If we look at RocoMamas, also leading with the burger experience in terms of the attitude, the vibe in the store, the smashing of the burger, the self-ordering, build-your-own burger concept. Spur is well poised to lead the way in the marketplace through experiential brands. What is important is we have seen that this is just a basic logic to this. We know that consumers want to have meal opportunities. We know that they want to connect. We know that they need a dine-in experience. if we fulfill that need by opening more restaurants, we create more opportunity for franchise investment. That, in turn, creates job opportunities for the people of South Africa who need to run those brands and the impact is just massive. So our aim going forward is to look at everything that's for the greater good, our own people, our franchisees and our consumers. And we're going to achieve that by looking at our employee experience, our commitment to our people, people or how you build brands, how you create the difference in the marketplace, creating those unique customer experiences that I spoke about. The importance of our partnering with our franchisees and of course, to give the return to our investment community. There are, however, 2 major drivers that we are adopting as a business, and our business going forward will be driven by these 2 very important initiatives. The one is around transformation and we're really serious about transformation in the organization. This isn't something that we pay in lip service to. I'd like to at this point, also announce that we promoted someone in our team who has been appointed as Transformation Manager, reports and into the CEO office. Moshe Apleni, who's been with the group for a few years, but now takes on this new role. This is a demonstration of the focus that we're going to be giving this portfolio, and I'm thrilled to be working with someone of Moshe's caliber. He is also the Chairman of the Spur Foundation. So transformation for Spur will be led with my commitment. It will be deliberate transformation because we are committed and we care about affecting change in the marketplace. Our aim is to embrace diversity to collaborate with the cross-section of our people, all our people, to give the opportunity to previously disadvantaged individuals. We need to see this as an opportunity, something that will build not only Spur Corporation, but build a better and greater South Africa and have a network that resembles the profile of our South African population. We are really committed to this. At the moment, we have probably about 21% black franchisees who own restaurants. Our aim is to expand that, working together with our partners that have the experience in the marketplace and creating opportunity going forward. The second one is innovation. We all know how great brands are built. It's about refreshing, re-innovating, reinvigorating those brands in line with what is relevant to the consumer and the future consumers' needs. And we've seen those changing patterns. We're working very closely to understanding the changing dynamic of the marketplace and responding by using our brands to fulfill some of those needs through innovation, be it to the new formats that I mentioned, be it the new product ranges, be it the new brands that we build like the VK brands. So we're certainly excited. It's a very focused direction. It's one that will create opportunity for people to invest in the business but deliver a great experience to consumers who just want to enjoy dining like normal families and normal people out there. I'd like to just flash up our future consumers. They're in our stores already. This is them, they love Spur, they're growing up with Spur, and our aim is to keep them with us. They might gravitate to the younger brands as they move along their life cycle of meal experiences but these are people, and we are committed to growing a business that satisfies their needs. So at that point, I just want to thank everyone for being here. This does bring us to the conclusion of the audited results presentation, the unaudited interim results presentation. We're now going to open it up to question and answers. Cristina and I will be here to respond to any of your requests. And I'm going to be asking someone just to feed us the questions that are coming through. Thank you for your time.

Okay. Questions from the website. First question is from [ Zaid Farooq ] from Aon Investment Management. And this question is in 2 parts. The first part, do you expect COVID to have structural changes longer term? And as a result, do you expect lower margins going forward due to more online or VK sales through delivery partners?

Thank you for that question. If I can respond on 2 parts. In terms of the COVID future, if we can call it that, it's very real that what we are seeing are very erratic trading patterns, trading patterns that are completely aligned to the restrictions. Close up the hours, turnover drops, stop dine-in or do the alcohol ban, an immediate correlation between restrictions and trading. We don't know what the future holds. We are prepared for any incident. We know that they talk about the third wave. We have our contingencies in place should the country move into the third wave, which is possible. So yes, we see an erratic trading period going forward. We cannot really say what the future holds. In response to the second part of the question, yes, the channel of delivery takeaway is paramount. We will do all we can to grow it through all means. Strategically, we are looking at it in terms of our current offering and other possible offerings. In terms of margin, like any good franchise business, you've got to manage your margins. So if your cost of doing business increase, you've got to structure whether you're buying in better through your supply chain, whether you're restructuring your office to the consumer, we would have to respond to that need to ensure that we remain profitable in the channels in which we choose to operate in.

Well, and then the second part to Zaid's question, could you walk us through your drive-through strategy? Would this extend to other brands as well?

Our drive-through strategy, I'm not in a position to discuss it publicly. We do know that drive-through is an important category because of the convenience of just driving through and putting your family in the car and coming through to get the experience. We do have 2 projects in the pipeline now. I did show you the one on RocoMamas and RocoMamas is well poised. We do have another [indiscernible] drive-through concept that will be revealed in the marketplace in the next couple of months. We're super excited about it. So watch the press for the next period while we work on that. So yes, I would say that alternative trading formats are definitely on our agenda. They might not all be drive-throughs, but there will definitely be more convenience offerings.

Thanks. Well, there are no further questions on the website.

No further questions. Okay, wonderful. So my final message to our network, our valued franchisees, our team who have really been awesome. We have a group of really talented, committed individuals and to our customers. We continue the journey with you. Thank you for your support, and we look forward to the next period. Keep safe. Thank you.