SPUR CORPORATION LIMITED - Impact of Covid 19 on Business Operations and Trading Update
13 May 2020 12:03
Impact of Covid 19 on Business Operations and Trading Update: 
Impact of Covid 19 on Business Operations and Trading Update

Spur Corporation Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/000828/06)
Share code: SUR
ISIN: ZAE 000022653
(“Spur Corporation” or “the group”)


The outbreak of the Covid-19 pandemic in South Africa and the resultant national
lockdown and trading restrictions is having a material impact on Spur Corporation’s
business operations and financial performance.

Trading update for 1 March 2020 to 30 April 2020
Restaurant sales slowed dramatically in March 2020 and declined by 46.7% over
the corresponding period in 2019. Sales for the period 16 to 31 March 2020,
following the declaration of the state of disaster in the country, were 75.7% lower
than the prior period, with trading ceasing on 26 March 2020.

All restaurants in South Africa were closed from the start of the national lockdown
on 27 March 2020 until 1 May 2020. As a restaurant franchisor, the group’s income
comprises primarily franchise fee and related income which is linked to franchised
restaurants sales. The group did not earn any material income for this period.

The group granted franchisees discounts of 20% on franchise fees and 25% on
marketing fees for the period 1 to 15 March 2020 and waived fees for the remainder
of March 2020. There was no trading for the month of April 2020.

Trading under level 4 lockdown restrictions
The country’s move to level 4 lockdown status with effect from 1 May 2020 has
permitted restaurants to provide delivery-only food to customers.

By 10 May, 155 of the 559 restaurants across the group in South Africa had
reopened to offer these delivery-only services. The breakdown of restaurants
trading across the brands is as follows:

 Brand                           Restaurants   Total SA
                                 trading       restaurants
 Spur Steak Ranches              82            303
 Panarottis Pizza Pasta          19            87
 RocoMamas                       47            77
 John Dory’s Fish Grill Sushi    7             53

In this environment, management’s primary operational focus is 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.

Additional restaurants are expected to reopen as trading restrictions are relaxed
to allow for takeaway services and sit-down eating subject to social distancing
protocols. The reopening of further restaurants is also dependent on franchisee
rental negotiations with landlords.

While the initial response from customers to the delivery food offering from the
beginning of May 2020 has been favourable, it is too early to determine whether
the current momentum will be sustained. Competition is also expected to intensify
as more national food chains reopen for delivery services.

Management has granted franchisees a 40% discount in franchise fees for May.
Marketing fees have been discounted by 75% for the Spur, Panarottis and John
Dory’s brands, and 50% for the remaining brands. Factors influencing the level of
discount are the low revenue expectations for the month, commissions payable to
third-party delivery partners, the costs incurred by franchisees related to reopening
restaurants and the need for franchisees to pay suppliers to secure future supply.
Franchise and marketing fees will be reviewed monthly. Franchisee rental
negotiations with landlords are ongoing, with most franchisees not having paid rent
for April.

The required Department of Health and National Institute for Communicable
Diseases protocols are being implemented across the group, with all restaurants
being deep cleaned before trading commences and staff being provided with the
necessary personal protective equipment. Restaurants are also being
reconfigured to allow access to third-party delivery drivers and to comply with
social distancing requirements. The number of staff working in restaurants has also
been limited.

International restaurants
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,
while the other outlets are currently closed.

Cash and cost management
The group’s financial priorities are cash preservation and tight cost management.
Based on the group’s cash resources the directors do not anticipate needing to
access external funding for at least the next six months. 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.
As previously advised to shareholders, the payment of the interim dividend for the
period to 31 December 2019 has been deferred for six months until 5 October
2020, subject to compliance with the South African Companies Act and JSE
Listings Requirements at that time, to provide the group with greater balance sheet
flexibility during this period of uncertainty.

Approximately 40% 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% salary reduction for all employees from 1 June in order to
preserve cash. Fees for non-executive directors have also been reduced by 20%
from 1 June.

Budgets and expenses have been reviewed across all business units and
discretionary costs are being reduced, without prejudicing key strategic projects.
Marketing costs have been cut by placing all traditional media advertising on hold
although the group continues to invest in its growing online and social media

The information in this announcement has not been reviewed or reported on by
the group’s external auditor.

Cape Town
13 May 2020

Sasfin Capital
A member of the Sasfin Group

Date: 13-05-2020 12:00:00
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