Spur Corporation will further defer the payment of its 2020 interim dividend “until future cash flows can be predicted with a greater confidence level”. This follows erratic trading patterns due to Covid-19 trading restrictions.
The franchise restaurant chain has been hit hard by the lockdowns. The implementation of curfews, a ban on the sale of alcohol and the required reduced seating capacity has battered its profits, prompting the company to defer paying the 2020 interim dividend for the third time.
Spur, which operates over 600 stores including Panarottis Pizza Pasta, RocoMamas and John Dory’s, notified its shareholders on Tuesday that paying the interim dividend would reduce the group’s cash reserves and result in a cash deficit should the country experience a third resurgence (wave) of Covid-19.
A further announcement on the payment of the interim dividend is expected ahead of the publication of the group’s results for the year ending June 30, 2021, which are expected to in September.
Although trading conditions improved in the second half of 2020 due to the easing of lockdown restrictions, this was not enough to prevent Spur from experiencing a massive 73.3% (R43.1 million) slump in profit.
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, newly-appointed CEO Val Nichas said in a statement.
The move to alert level three in late December and the subsequent imposition of a renewed nighttime curfew, as the country was recording a high number of new daily coronavirus infections, negatively impacted restaurant sales, the group says.
“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.”
Spur says it’s confident that the easing of restrictions will improve its financial position for the foreseeable future, adding however that “there is no guarantee that this will be [the] case.”
For the six months to December 2020, total restaurant sales declined by 29.5% to R2.9 billion, while sales from its South African franchise restaurants fell 31% and those of international restaurants 17.3%.
On the flip side, the restrictions boosted the group’s sales from online third parties, which now account for 27% of all restaurant sales.
Sales from online food delivery services Mr D Food and Uber Eats grew by 72% and 41% respectively for the six months.
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.
In South Africa, 17 restaurants were opened and 18 closed, while seven restaurants were opened and four closed internationally during the period. In the second half of 2021, Spur plans on opening eight to ten new restaurants in South Africa and four to six new restaurants in other African countries “where the group has a presence and the brands are well received by customers.”
Listen: Spur CEO Val Nichas discusses its interim results and how the group has tackled lockdown