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Spur expects Covid-19 effects to linger longer

The restaurant group’s annual profits are down over 21% due to lockdown restrictions.
Image: Moneyweb

Spur, the owner of RocoMamas, John Dory’s Fish Grill Sushi and Nikos Coalgrill Greek, expects the economic devastation of Covid-19 and the subsequent lockdown to linger over the medium term. 

Spur was on its way to achieving a 6% increase in restaurant sales in South Africa in the eight months to February 2020, even opening up 21 new restaurants in South Africa before the lockdown started. But in the weeks leading up the lockdown, the company says its South Africa sales declined by 46.7% (for March 2020).

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The company expects the weak economic environment to continue to place strain on consumer pockets, despite the easing of lockdown restrictions. The fragile economy could worsen in the wake of a resurgence of the virus or further widespread job losses, the company said in a statement on Friday.

“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,” Spur chief executive Pierre van Tonder said. 

The group’s restaurants in South Africa were closed from the start of the lockdown at the end of March until May 1, 2020 and it did not earn any income during this period. When restrictions under alert level three eased in June, restaurants were only permitted to provide delivery services to customers.

On Friday, the group reported a 21.7% decline in total restaurant sales to R6 billion for the year ended June 30, 2020.

Sales from its domestic franchised restaurants, which represent 88.5% of the group’s total sales, declined by 22.3%, with sales from its international restaurants decreasing by 16.7%. 

May sales were down 87.2% in South Africa compared with the previous year, while group sales for June declined by 83.6% compared to the prior year. 

Spur share price over 12 months

Restaurants were allowed to resume sit-down operations from June 29, but were still subject to strict Covid-19 protocols of social distancing. The ban on the sale of alcohol and the nighttime curfew proved to be “challenging” according to Spur.

The Hussar Grill was the brand most impacted by the restriction on the sale of alcohol and the ban on foreign travel into South Africa.

Revenue for the year declined by 19.4% to R761.6 million. Revenue from the South African operations, which accounted for 95.7% of total group revenue, decreased by 19.3%, while international revenue declined by 20.9%.

Headline earnings decreased by 56.1% to R72.5 million and no final dividend was declared. 

Following the further easing of restrictions in July, the franchisees started to report stronger turnover levels. The South African restaurants traded at 92.8% of the prior year’s turnover for the month of October, improving from 36.5% for July, 56.7% for August and 73.8% for September. 

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

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, Eswatini, Ghana, Zimbabwe and Saudi Arabia.

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