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First major casualties of COVID-19 step forward

24 March 2020 Author :  

On 23 March 2020, President Cyril Ramaphosa announced that effective 26 March, the country will be on lockdown for 21 days.

This was done to reduce the spread of COVID-19 with 551 reported cases (correct at the time of publishing of this release). While these measures are necessary to prevent a nationwide disaster, there will be many casualties along the way.

In an interview with Fin24, the owner of food brands Steers and Wimpy – Famous Brands – has warned that the coronavirus outbreak could negatively impact its sales, with performance for March already taking a knock.
Famous Brands told Fin24 that initial indications are that sales have deteriorated steadily at the beginning of March as government made early moved to promote social distancing.

Worrying declines
Famous Brands pointed out that markets in which the virus has been prevalent for longer than South Africa have been hit very hard. These include Italy, Spain, France, the UK, Ireland and the United Arab Emirates. Cases of infection are now increasing in the US, Canada and South America Up to now, there have been concerning declines in sales in South Africa with some temporary restaurant closures in the country.

There have also been similar closures in Australia, Mauritius and Kenya in what is now a global contagion Famous Brands pointed out that the board and management anticipate that trading over the coming weeks will become increasingly difficult and will undoubtedly result in significantly reduced like-for-like sales.

Famous Brands, like other businesses, must adhere to new restrictions placed by Government in order to contain the spread of the coronavirus. Government announced that restaurants may no longer stay open but are authorized instead to make home deliveries. According to the lockdown, restaurants are compelled to close.

More deliveries, less contact
There is some silver lining though. Famous Brands told Fin24 that it expects its online deliveries to pick up, as lower foot traffic is expected at shopping malls.. Famous Brands added that the company has also implemented a policy of no-contact delivery for orders paid online. Drivers will maintain a practical distance when delivering orders and limit any physical contact with customers.
Its UK business, Gourmet Burger Kitchen, as well as its Wimpy restaurants in the country, have been closed since Saturday, 21 March 2020.

So far, Famous Brands said its supply chain operations have not experienced significant disruptions. Famous Brands has instituted a crisis leadership team to respond to the situation as it develops.

Massive opportunity
COVID-19 is devastating and will have a lasting impact on the economy. Without being a Prophet of Doom, there will be many companies who will not survive this pandemic.

This presents a massive opportunity to business turnaround practitioners. As companies move from crisis management to disaster management to reassessment to recovery, there will be some good news and some bad news.
The good news is that the services of business rescue practitioners will be needed now more than ever. Companies that see liquidation as a last resort will need to rebuild their business models in the same way that Famous Brands did. This will need expert advice.

There will unfortunately be some companies that simply will not have any other option but to liquidate. It will be a busy time for business rescue practitioners, are we up for the challenge as the new world of work is forced upon us?

Note: The Fin24 article can be read here.

Bruce Berry CEO TMA-SA

Bruce Berry CEO


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