South African franchise restaurant chain Spur Corporation said on Wednesday, as a precautionary measure it is talking to financial institutions to secure credit facilities should the coronavirus lockdown extend beyond the current year.
Based on the group’s cash resources, management does not anticipate needing to access external funding for at least the next six months, Spur said in a statement.
But as a precautionary measure should the economic impact of the new coronavirus pandemic be more severe than currently expected, it is engaging with financial institutions, the owner of Spur steak house and Panarottis Pizza Pasta, added.
Spur has been taking steps to preserve cash and managing its costs. In March it said it would defer the payment of its 2020 interim dividend until October 5.
The company will also cut salaries and fees for non-executive directors by 20% from June 1.
“Budgets and expenses have been reviewed across all business units and discretionary costs are being reduced, without prejudicing key strategic projects,” Spur said.
It also cut marketing costs by placing all traditional media advertising on hold although the group said it continued to invest in its growing online and social media presence.
The country took its first steps on May 1 towards rolling back one of the world’s strictest COVID-19 lockdowns, seeking a balance between containing the respiratory disease and providing much-needed relief for the economy.
Restaurants have now resumed business, but just for food deliveries, which is not sustainable for some restaurants, according to the Restaurant Association of South Africa’s Chief Executive Wendy Alberts.
About 155 of the 559 restaurants across Spur group in South Africa have reopened, with the company saying while the initial response from customers to the delivery food offering has been favourable, “it is too early to determine whether the current momentum will be sustained”.
Spur’s restaurant sales slowed dramatically in March, dropping 46.7% over the corresponding period in 2019. Sales for the period March 16 to 31, following the declaration of the state of disaster and lockdown, tumbled 75.7%, with trading ceasing on March 26 for the lockdown, it said.
Spur shares fell 3.33% to trade at R14.50 at 1203 GMT.
The group did not earn any material income from franchise fees and related income for the March and April period, it said.
It granted franchisees discounts of 20% on franchise fees and 25% on marketing fees for the period March 1 to 15 and waived fees for the remainder of the month.
It has granted more discounts for May.
Limited trading is being permitted in most of the group’s international locations, with 43 of the 87 restaurants currently offering delivery-only or takeaway food.