Covid-19 Second Wave Compounds Tough Six Months For Spur

Val Nichas
Spur Corporation encountered harsh COVID-19 lockdown trading restrictions throughout the six months to December 2020 while the outbreak of the second wave of the pandemic contributed to further pressure on sales and profitability.
Total franchised restaurant sales declined by 29.5% to R2.9 billion for the half year. Sales from franchised restaurants in South Africa decreased by 31.0%, with sales from international restaurants decreasing by 17.3% in Rand terms.
Group revenue declined by 40.2% to R314.2 million. Headline earnings decreased by 76.4% to R26.8 million with diluted headline earnings per share 74.5% lower at 31.88 cents. Owing to the slowdown in trading and the lower free cash generation, no interim dividend has been declared.
While the business traded under restrictions throughout the six month period and generated lower revenue, the group did not need to access external funding and remains in an ungeared position.
Newly appointed CEO Val Nichas said trading throughout the pandemic has been particularly challenging as the national curfew limited trading hours and customers chose to avoid social contact by staying at home, while the lockdown resulted in financial hardship for many South Africans.
The second wave of COVID-19 infections and resultant restrictions led to restaurant turnover for December 2020 declining by 25.8% in South Africa. “The closure of beaches immediately impacted restaurants in coastal regions in this traditionally high trading month, with sales declining by up to 40% in these areas,” she said.
The impact of the curfew in South Africa on evening restaurant trading hours is reflected in dinner sales declining by 39%. Group alcohol sales were 39% lower as a result of the ban on the sale of alcohol for part of the period.
Nichas said online ordering systems and the ongoing partnerships with third party delivery services Mr D Food and Uber Eats helped drive customer support during the pandemic. “Take-away sales more than doubled over the previous year and now account for 27% of total restaurant sales, with take-away sales in RocoMamas comprising 53% of the brand’s sales. We grew our sales with Mr D by 72% and Uber Eats by 41% for the six months.”
She said the COVID-19 pandemic and related restrictions and safety protocols have had a dramatic influence on consumer lifestyle habits, shopping behaviour and food consumption patterns.
“Consumers are opting to dine closer to home at local neighbourhood restaurants which has resulted in a decline in foot traffic in larger shopping malls. Customers are gravitating to their trusted brands to ensure a quality, reliable meal experience for their spend, which is now under pressure. Customers are also spending more time at home, with their use of technology and online connections having increased dramatically. Online shopping and home deliveries have grown exponentially as consumers limit social contact to reduce exposure to COVID-19.”
Nichas said research indicated that younger consumers are embracing change and willing to explore different brands and service offerings. “The youth are setting new trends, primarily all starting from home or any remote wifi-enabled locations. They are creating the ground rules for the new normal, a world characterised by no physical office, no standard working hours, exploring and socialising online, and engaging in experiences and products which are new and relevant to their personal needs.”
Early in the national lockdown the group launched several virtual kitchen brands to capitalise on the growing global trend to home consumption which has been accelerated by COVID-19. These virtual, online, delivery-only brands operate from existing host restaurants.
“Our virtual kitchen brands require limited additional investment by franchisees and over 420 restaurants have participated in these brands. The burger and pizza categories have generated the highest sales among these virtual kitchen brands, with the Bento burger brand reporting an encouraging re-order rate of approximately 25%.”
Discussing trading patterns following the end of the reporting period, Nichas said the imposition of the adjusted level 3 lockdown restrictions at the end of December 2020 contributed to restaurant sales in South Africa representing 66.2% of the prior years’ sales for the month of January.
“The reintroduction of the national curfew severely limited evening trading hours, compounded by the ban on the sale of alcohol and the stringent reduction on restaurant seating capacity. Trading showed a marked improvement in February 2021 following the partial lifting of restrictions which extended our trading hours to 22:00 and allowed for the sale of alcohol in our restaurants. Sales for February were at 82% of the prior year, with Spur and RocoMamas being our strongest performing brands.”
On the outlook for trading, Nichas said the multi-level cycle of lockdown restrictions had directly impacted the restaurant industry in many ways, while consumers’ lifestyles have had to change to accommodate the new way of living. “We expect the erratic trading patterns to continue and our brands will need to be nimble, adaptable and responsive to shifting pandemic trends,” she added.
Spur Corporation has welcomed the country’s move to Covid-19 alert level 1, announced by President Ramaphosa on Sunday.
“This is great news for our business, franchisees and customers alike, as well as the South African economy. We will now be able to increase seating in our restaurants from a maximum of 50 to 100 customers, while reverting to our normal trading hours, without being limited by the curfew. The hospitality and restaurant sector is a major employer and the further opening of the local economy is very positive for job creation,” said Nichas.
In the second half of the financial year the group plans to open eight to ten new restaurants in South Africa. International expansion will focus mainly on the rest of Africa in countries where the group has a presence and the brands are well received by customers, with an estimated four to six new sites planned.

Issued by Tier 1 Investor Relations on behalf of Spur Corporation
For further information kindly contact
Val Nichas, Spur Corporation 021 555-5100
Graeme Lillie, Tier 1 Investor Relations 082 468 1507

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