Measures adopted to manage the meltdown and survive COVID-19 – JIN, RBL, CKF, DMP

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Measures adopted to manage the meltdown and survive COVID-19 – JIN, RBL, CKF, DMP

 Measures adopted to manage the meltdown and survive COVID-19 – JIN, RBL, CKF, DMP

In the current economic turmoil, governmentsall over the world are taking appropriateactions to lift the momentum or at least minimize the damage to their economies. The Australian government has also come up with specific measures to combat the adverse effect of COVID-19.

As announced on 31 March 2020, the Government of Australia had collaborated with private health providers to ensure the availability of105,000 nurses and staff and 30,000 hospital beds to fight againstthe coronavirus. As on 01 April 2020, the researchers had received more than $13 million from The Medical Research Future Fund to expedite their research into medicines for the COVID-19 pandemic.

The most recent and vital steps undertaken by the government include stimulus packages and JobSeeker subsidy.

The states and territories of Australia announced stimulus packages, and the economic support package involves the following three points:

  • To aid entities for keeping people in a job
  • To help households comprising sole-traders, casuals, retirees
  • Providing financial support and regulatory protection to entities to continuetheir business

By the end of March, theFederal Government had announced a total of $213.6 billion and $105 billion was declared along with Reserve Bank of Australia.Also, $11.8 billion were funded from the states.

Also Read: Is stimulus package really beneficial, or is it just delaying the inevitable?

Job Seeker subsidy / Wage subsidy package: The aim was to ensure regular payments to employees of non-essential businesses, or any entity impacted by the coronavirus outbreak.

Several entities are fighting their own battles for survival. The difference is that this time its not a battle to survive in a competitive environment but to stay afloat in a dwindling economy. Almost every entity has been impacted by this disease either directly or indirectly. The degree of damage may vary depending on the type of sectors.

Businesses are adopting specific proven measures to eradicate or minimize the spread of the pandemic disease. Some of the steps are mentioned below:

  • Adopting social distancing practices mainly in the high traffic areas for example counter queues
  • All offices, stores and distribution centres are intensively cleaned
  • Processes selected to manage customer store traffic
  • Encouraging cashless transactions
  • Impeding travels and face to face meetings

To flatten the curve of the virus hit cases, the restaurants and retailers serving in Australia are urged to shut their operations till further notice.

Let’s hear from the CEOs’ of Australian Retailers Association and Restaurant and Catering Industry Association of Australia, on the prevailing situation created by the coronavirus

outbreak.

Let us delve deep into four stocks, two each in retail and restaurant business, and figure out their recent updates on coronavirus.

Jumbo Interactive Limited (ASX:JIN)

An ASX-listed Company, Jumbo Interactive Limited sold its first lottery ticket in 2000. JIN is a digital retailer which sells two types of lotteries: charity and officialgovernment lotteries.

Impact of COVID-19 and Measures Taken

During these uncertain times, the Company highlighted that the impact has been relatively small considering the nature of its business which is mainly online. However, Jumbo has made sure that the employees’ safety comes first and has provided options to work while staying home. JIN is also assessing the situation regularly and adhering to the government guidelines. To ensure that the business runs smoothly, the Company has created sufficient capacity for sales of online lottery tickets.

JIN expects the demand of online to go up lottery (before the outbreak, approximately 75 per cent of all lottery tickets were sold through retail channels) given the impact of restrictions on retail outlets. However, the Company believes that due to the prevailing conditions, sales could be impacted by customer activities as well as large jackpot activities.

Source: Company's announcements

The Company also assured that the payment for FY 2020 final dividend is still likely to be paid. JIN’s dividend policy of 85 per cent of NPAT for the entire fiscal year remains unchanged.

Redbubble Limited (ASX:RBL)

Incorporated in 2006, Redbubble Limited is the owner and operator of TeePublic and Redbubble, which are the marketplaces for independent artists. The Company had maintained its current financial position with no debt and $31 million of cash balance, as at 31 March 2020, however, Redbubble had suspended its guidance for FY 2020.

Business Update and Measures

The Company has taken the following measures to make sure that the business is managing costs and taking care of its employees at the same time:

  • RBL’s framework supporting employees working remotely since 10 March 2020
  • The remuneration (cash component) of the Company’s Non-executive Directors’ would be slashed by 20 per cent.
  • Other employees would be urged by the Company to move to a 4-day week (with pro-rated pay).
  • A hiring freeze has been put in effect, and discretionary spending is put on hold.

The Company’s operations,as well as supply chain, remain healthy with no apparent disruption of the fulfilment and delivery of orders to date. RBL highlighted that the growing dependence on online sales had cushioned the effects of COVID-19. RBL does not expect to take debt or raise additional capital soon.

Collins Foods Limited (ASX:CKF)

The ASX-listed CompanyCollins Foods Limited is a franchisor for Sizzler in Asia and the owner of Sizzler restaurants in Australia. CKF is also a KFC franchisee in Germany and the Netherlands, and a Taco Bell and KFC franchisee in Australia.

COVID-19 Business Impact and Measures Adopted

On 13 March 2020, the Company disclosed that one of its team members from KFC Deagon restaurant tested positive for COVID-19. As a result, the in-restaurant dining areas of KFC Australia and Taco Bell were closed starting from 18 March 2020, thereby, allowing only drive-thru, take-away and delivery services. Beginning 23 March 2020, as directed from the Australian government, all the restaurants were allowed for the delivery and take away (including drive-thru) services.

Collins Foods had proactively shut its in-restaurant dining areas on 18 March 2020, even before the government directives. The Company is also diligently following government guidelines in other geographies including the Netherlands and Germany. CKF has also taken operational initiatives to conserve cash by reducing operational expenditure and postponing capital expenditure.

The performance for first 20 weeks of 2H FY 2020 (from 14 October 2019 until 1 March 2020)

  • The sales growth from the stores located in Australia and Germany were 3.5 per cent and 5.6 per cent, respectively.
  • Sales from the Netherlands based KFC store was -3.6 per cent.

The Company highlighted that increased focus on drive-thru outlets puts it in a relatively stable position. However, the drive-thru culture is not prominent in Europe, and thus the

Netherlands and Germany have seen a significant decline in sales.


Domino’s Pizza Enterprises Limited (
ASX:DMP)

DMP is the Domino’s Pizza’s biggest franchise in the world and is the biggest Australian pizza chain.

Update on COVID-19 and precautionary measures adopted

With the advent of restrictions imposed by the New Zealand government, DMP had closed all its stores from 26 March 2020 for a period of four weeks.

On 19 March 2020, with the closure of stores in France for the next 15 days, the Company mentioned that it is uncertain to comment on the material effect on its FY 2020 results.

DMP has adopted the following measures:

  • Focus more on delivery orders and increase Zero Contact payment by limiting cash transactions
  • Recruiting more drivers across multiple regions to meet the growing demand for home delivery
  • Limiting staff availability in line with the government orders

The Companyhas a strong balance sheet and has a significant headroom in its committed covenants and facilities.

Dominos Group CEO and MD, Don Meij shared his thought that home delivery will reduce the crowd at supermarkets and also helps in maintaining social distancing, thereby, the Company is hiring more drivers in all its operational regions.


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