Spur group again postpones div

Photo credit: Spur Steak Ranches Facebook page

Spur group again postpones dividend to conserve cash

Management is wary of a possible second wave of infections that would interrupt trading and affect profitability yet again.

Spur group again postpones div

Photo credit: Spur Steak Ranches Facebook page

Restaurant group Spur will again postpone issuing a dividend to shareholders over concerns that there may be a wave of secondary COVID-19 infections which will impact its business.

It is therefore taking a conservative approach and conserving cash reserves until it can re-evaluate the situation prior to the group’s next interim results announcement in March 2021.

Second wave is ‘reasonably foreseeable’

The company said in an announcement to the JSE’s Stock Exchange News Service (SENS) on Thursday that it was “reasonably foreseeable” stricter trading restrictions could again be placed on restaurants if the infection rate increases.

Similarly, if the current level of restrictions continues in the longer term, there will be a significant impact on revenue, which is already below what was anticipated prior to the pandemic, and despite the eased trading conditions allowed under Level Two.

“Based on an assessment of the most likely projected cash flows and currently available information, the board is confident that the group’s current cash reserves will be sufficient for the foreseeable future,” the company said.

Cash deficit would be a possibility

“The payment of the interim 2020 dividend would, however, significantly reduce the group’s available cash reserves and would result in a cash deficit should certain of the scenarios projected occur.”

The SENS statement added: “Accordingly, in compliance with the Companies Act, the board has had to defer the payment of the interim 2020 dividend and will reassess the solvency and liquidity test prior to the publication of its interim results for the period ending 31 December 2020, which are expected to be issued in March 2021.”

Spur Corporation operates around 600 restaurants in South Africa and various other parts of the world including the rest of Africa, Mauritius, Australasia and the Middle East. Its brands include Spur, RocoMamas, John Dory’s and The Hussar Grill.

Heavy trading declines in May and June

Following the total prohibition of restaurant trading in April, Spur’s franchised restaurant sales declined by 85.7% for May and by 79.0% for June, as restaurants were restricted to deliveries only in May and to deliveries and takeaways in June.

Trading has steadily improved since the beginning of May, although still significantly down on pre-lockdown levels, the company noted.