Spur seeks credit facilities for an uncertain future
DURBAN - Restaurant franchisor Spur Corporation is engaging with financial institutions to secure credit facilities should the lockdown period extend beyond the current year as it saw a 46.7 percent decline in restaurant sales for March compared to the corresponding period in 2019. Spur’s portfolio of restaurants include Spur Steak Ranches, Panarottis Pizza Pasta, RocoMamas and John Dory’s Fish Grill Sushi.
However, Spur said its financial priorities were cash preservation and tight cost management. Based on the group’s cash resources, the directors did not anticipate needing to access external funding for at least the next six months. Spur had taken measures to ensure liquidity and to provide it with greater balance sheet flexibility during the period of uncertainty.
“The group's balance sheet is ungeared and there is capacity to introduce formalised borrowings. As a precautionary measure management is engaging with financial institutions to secure credit facilities should the lockdown extend beyond the current year or should the economic impact of Covid-19 be more severe than currently expected,” Spur said.
JSE-listed Spur said sales for the period between March 16 to March 31 declined by 75.7 percent following the declaration of the state of disaster in the country, with trading stopping completely from March 26.
In March, it announced the payment of the interim dividend for the period to December 31, 2019, had been deferred for six months until October 5, subject to compliance with the South African Companies Act and JSE Listings Requirements. Looking ahead, Spur would implement a reduced work week going forward.
“Approximately 40 percent of the group's overhead costs, including marketing costs, are remuneration and employee related. While all staff have received full salaries for April and May, the group will be implementing a reduced work week and commensurate 20 percent salary reduction for all employees from June 1 in order to preserve cash.
"Fees for non-executive directors have also been reduced by 20 percent from June 1,” the group said.
Its restaurants in South Africa were closed from the start of the national lockdown on March 27 until May 1. The group said it did not earn any material income for this period.
As a result, the group granted franchisees discounts of 20 percent on franchise fees and 25 percent on marketing fees for the period March 1 to March 15 and waived fees for the remainder of March 2020. There was no trading for the month of April 2020. However, by May 10, 155 of the 559 restaurants across the group in South Africa had reopened to offer delivery-only services.
The group said the management's primary operational focus was on online ordering and enabling multi-option delivery partners. “Deliveries are mainly being undertaken by third-party providers Mr D and UberEats, with certain franchisees using small local delivery services or managing their own deliveries,” the group said.
Spur's share price closed 1.53 percent lower at R14.77 on the JSE yesterday.