Spur starts recovery after devastating impact of COVID-19
November 20, 2020
Cape Town – Spur Corporation has reported a sharp decline in sales and profitability as the COVID-19 lockdown adversely impacted trading in the last four months of the financial year to June 2020.
After restaurant sales increased by 6.0% in South Africa and 4.0% in the international operations in the eight months to February 2020, sales declined dramatically ahead of the lockdown in late March. All restaurants in South Africa were closed from the start of the lockdown on 27 March 2020 until 1 May 2020 when the group did not earn any material income.
Total franchised restaurant sales declined by 21.7% to R6.0 billion for the year. Sales from franchised restaurants in South Africa decreased by 22.3%, with sales from international restaurants decreasing by 16.7% in Rand terms.
Group revenue declined by 19.4% to R761.6 million. Headline earnings decreased by 56.1% to R72.5 million with diluted headline earnings per share 52.1% lower at 82.96 cents.
CEO Pierre van Tonder said the group entered lockdown with adequate cash resources and an ungeared balance sheet, and did not need to access external funding during lockdown despite the business generating limited revenue.
The group has, however, shown a strong recovery in the first four months of the new financial year to October, with a steadily improving monthly sales growth trend ahead of management’s expectations.
South African restaurants traded at 92.8% of last year’s turnover for the month of October, improving from 36.5% for July, 56.7% for August and 73.8% for September. International restaurants traded at 97.5% of the prior year in October.
By the end of October, 612 of the group’s 631 restaurants had reopened.
Spur Corporation introduced its first virtual brands in June 2020 to capitalise on the growing global trend to home consumption, which has been accelerated by COVID-19.
“Our virtual, online, delivery-only brands operate from existing brick and mortar host restaurants. The brands require limited additional investment by franchisees while offering the opportunity to generate incremental turnover,” he said.
The first four virtual brands were trial launched in June while another four have been introduced since year end, enabling the group to increase its appeal to a wider target market audience while also entering some new product categories.
The group plans to open 21 restaurants in South Africa in the year ahead, mainly under the Spur, Panarottis and RocoMamas brands. Eight new international restaurants are planned across Zambia (three), Eswatini (two), Ghana, Zimbabwe and Saudi Arabia.
On the outlook for the new financial year, Van Tonder said the restaurant industry faces a protracted period of recovery following the devastating impact of COVID-19 on consumers and restaurant owners.
“We expect the current weak trading environment to continue in the medium term. Trading could be further impacted by widespread job losses as well as a second wave of COVID-19 infections, similar to what is being experienced in several other countries.
“In this tight consumer environment, the group will continue to capitalise on the strength and appeal of its brands and customer loyalty, and we remain committed to offering value and a safe and entertaining family restaurant experience,” he added.
Issued by Tier 1 Investor Relations on behalf of Spur Corporation
For further information kindly contact
Pierre van Tonder, Spur Corporation 021 555-5100
Graeme Lillie, Tier 1 Investor Relations 082 468 1507