Covid-19 knocks 70% off Spur profits
Multi-brand restaurant franchisor Spur said yesterday that its profits took a massive hit on the harsh Covid-19 lockdown trading restrictions, falling more than 70 percent in the six months to the end of December.
The group said the second wave exerted more pressure on its bottom line, with sales and profitability tumbling.
Spur said its headline earnings fell 76.4 percent to R26.8 million, and diluted headline earnings per share (Heps) fell 74.5 percent to 31.88 cents a share, while revenue declined 40.2 percent to R314.2m.
Its total franchised restaurant sales dropped by 29.5 percent to R2.9 billion. Sales from franchised restaurants in South Africa declined 31 percent, and sales from international restaurants decreased 17.3 percent.
Chief executive Val Nichas said trading throughout the pandemic was particularly challenging, as the national curfew limited trading hours and customers chose to avoid social contact by staying at home.
“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,” Nichas said. “Customers are gravitating to their trusted brands to ensure a quality, reliable meal experience for their spend, which is now under pressure.”
Spur said restaurant turnover tumbled 25.8 percent in December as the second wave of Covid-19 infections led to the imposition of more trade restrictions.
“The closure of beaches immediately impacted restaurants in coastal regions in this traditionally high trading month, with sales declining by up to 40 percent in these areas,” she said.
The curfew also hit Spur’s dinner sales, which declined 39 percent, and alcohol sales also fell 39 percent as a result of the ban on the sale of alcohol for part of the period.
However, Nichas said online ordering systems and the partnerships with third party delivery services Mr D Food and Uber Eats helped to drive customer support during the pandemic.
“Take-away sales more than doubled over the previous year and now account for 27 percent of total restaurant sales, with take-away sales in RocoMamas comprising 53 percent of the brand’s sales. We grew our sales with Mr D by 72 percent and Uber Eats by 41 percent during the period,” she said.
Nesan Nair, a senior portfolio manager at Sasfin Securities, said the sales drop and subsequently the 75 percent fall in earnings were mostly attributable to the lockdown restrictions – initially the closing of restaurants and then the opening with social distancing. However, I must say I was impressed by how they managed to make a profit of 32c a share at the headline level and increased their cash to 178.1m from the previous year,” Nair said, adding that the easing of lockdown regulations would help.
She said the completion of vaccinations and the lowering of restrictions on Sunday would restore normality to the restaurant sector.
Nichas said: “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.”