Spur Corporation realizes 19.4% decline in full year earnings impacted by drastic drop in sales

SOUTH AFRICA – Spur Corporation, steakhouse franchise restaurant headquartered in South Africa has reported a 19.4% decline in full year revenue to R761.6 million (US$49.75m) for the period ended 30 June 2020, resulting from dwindling sales impacted by the COVID-19 disruptions.

Its headline earnings decreased by 56.1% to R72.5 million (US$4.7m) with diluted headline earnings per share 52.1% lower at 82.96 cents.

According to the fast-food chain, revenue from its South African operations, which accounted for 95.7% of total group revenue, decreased by 19.3% while international revenue declined by 20.9% mainly due to the weak performance from the Australasian operations.

“The global COVID-19 pandemic and the resultant national lockdown and trading restrictions in South Africa and all countries of operation has had a material impact on the group’s business operations and financial performance,” indicated Spur.

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The COVID-19 lockdown mostly impacted its trading in the last four months of the financial year, leading to the group’s total franchised restaurant sales declined by 21.7% to R6.0 billion (US$391.95m) 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.

The dramatic decline wiped off the gains of after restaurant sales which had increased by 6.0% in South Africa and 4.0% in the international operations in the eight months to February 2020.

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.

Despite the shutdown, Spur 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 global COVID-19 pandemic and the resultant national lockdown and trading restrictions in South Africa and all countries of operation has had a material impact on the group’s business operations and financial performance.”

Spur Corporation

Spur Corporation’s recovery post-lock down

With continuing operations, the group has started to show strong recovery, with a steadily improving monthly sales growth trend ahead of management’s expectations.

By the end of October, 612 of the group’s 631 restaurants had reopened.

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In addition, Spur Corporation has introduced its first virtual brands 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,” said CEO Pierre van Tonder.

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 further 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.

Pierre van Tonder is set to retire from the firm on 31 December 2020 after 38 years of service. The company has named Val Nichas as the new executive director and group Chief Executive Officer.

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