Sphera Franchise Group Interim results: Jan-Jun 2018 1
Disclaimer This presentation is not, and nothing in it should be construed as, an offer, invitation or recommendation in respect of shares issued by Sphera Franchise Group SA ("Sphera"), or an offer, invitation or recommendation to sell, or a solicitation of an offer to buy shares in Sphera. Neither this presentation nor anything in it shall form the basis of any contract or commitment. This presentation is not intended to be relied upon as advice or recommendation to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any investor. All investors should consider this presentation in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. Sphera has prepared this presentation based on information available to it, including in-formation derived from public sources that have not been independently verified. No representation or warranty, express or implied, is provided in relation to the fairness, accuracy, correctness, completeness or reliability of the information, opinions or conclusions ex-pressed herein. This presentation should not be considered a comprehensive representation of Sphera's business, financial performance or results. This presentation may contain forward-looking statements. These statements reflect Sphera’s current knowledge and its expectations and projections about future events and may be identified by the context of such statements or words such as “anticipate,” “believe”, “estimate”, “expect”, “intend”, “plan”, “project”, “target”, “may”, “will”, “would”, “could” or “should” or similar terminology. Sphera undertakes no obligation to update or revise these forward – looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. Inevitably, some assumptions may not materialize, and un-anticipated events and circumstances may affect the ultimate financial results. Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant business, economic and competitive risks. Therefore, the final results achieved may vary significantly from the forecasts, and the variations may be material. 2
Sphera – H1-2018 key events All-store sales up 21.6% with same-store sales growth of 8.0% ▪ continued strong growth from KFC, increasing contributions from KFC Italy and Taco Bell Total store openings: 7 (6x KFC, 1x PHD), of which 3 in Q1 ▪ An additional 4 stores opened so far in Q3-2018 (1x KFC, 2x Pizza Hut Delivery, 1x Taco Bell) Network size: 121 @ 30-Jun-2018, 125 @ 14-Aug-2018 ▪ 2018 store opening target expected to be exceeded by 3 (+3x KFC Italy) totalling 26, with a year-end network size of 142 KFC Romania and Moldova in Yum’s top 4 CEE GES performance, with 5 stores in Italy in top 10 performance chart KFC delivery services extended in Bucharest and Cluj; preliminary tests on self-ordering kiosks successful; Pizza Hut Dine-In new menu rolled out in all restaurants; delivery online ordering approaching 35% Contract signed with Grandi Stazioni to provide accelerated development plan in Italy, over and above current geographies ▪ Interim results* RONm Y/Y* Margin ▪ Sales 350.1 +21.6% ▪ Restaurant profit 46.6 (8.3)% 13.3% ▪ Normalized EBITDA 32.3 (15.9)% 9.2% ▪ EBITDA 31.4 (18.3)% 9.0% ▪ Net Profit 18.8 (33.8)% 5.4% 3 *) Comparison between H1-2018 consolidated results and H1-2017 pro forma results.
KFC – “Franchisee of the Year” award The Franchisee of the Year award is the highest recognition YUM! offers around the globe and is offered to the franchise that proves constant excellence in all business activities and that is an authentic ambassador for the KFC brand. It is also worth mentioning that KFC Romania was nominated for awards in other three categories, namely Operations, Marketing and Human Resources. The award was granted during the 10 th edition of the Yum! Franchise Convention, a week-long global event organized every other year with all franchisees within the Yum! Universe. 4
Macro environment becomes increasingly challenging Retail sales have cooled down notably amid rampant inflation Annualized CPI Annualized average and minimum gross salaries (Y/Y% growth rates) 6% 30% 5% 4% 25% 3% 20% 2% 15% 1% 0% 10% -1% 5% -2% 0% -3% Jan-15 Jan-16 Jan-17 Jan-18 -4% Average gross salary Minimum gross salary Jan-15 Jan-16 Jan-17 Jan-18 ▪ ▪ CPI peaked at 5.4% in June, highest level since 2008, and Salary pressure is easing but still remains at an annualized is expected to ease towards 4% by year end growth rate of over 10% Retail sales (mainly food & drinks) - Y/Y% Unemployment rate 8% 50% 45% 7% 40% 6% 35% 5% 30% 25% 4% 20% 3% 15% 2% 10% 1% 5% 0% 0% Jan-15 Jan-16 Jan-17 Jan-18 Jan-15 Jan-16 Jan-17 Jan-18 ▪ Retail sales Y/Y growth dropped by c. 5pp to an average of ▪ Unemployment rate remains close to minimum record, 4.7% in Q2 vs Q1, with further cooling expectations further fueling high labour mobility and salary pressure 5
Sales performance by brands
Brand performance: KFC Romania Sales growth analysis 30% 26.4% ▪ All-store sales growth of 19.8% Y/Y in H1 supported mainly by same-store growth of 10.1%; 25% 20.6% ▪ 19.6% 20.1% In Q2, all-store sales advanced 20.1%, with same- 18.8% 20% 18.0% 17.7% store sales improving by 8.5%; All-store ▪ The 9 net openings (since Jan-2017) contributed 14.0% 15% performance 10pp to the Y/Y growth in H1, with all but two in cities with existing KFC stores; 10% 5% 0% 2016 2017 Q1 Q2 Q3 Q4 Q1 Q2 2017 2017 2017 2017 2018 2018 17.0% 18% 15.6% 16% ▪ Same-store sales growth of 10.1% Y/Y on the 14.0% back of continued strong performance from the 14% 12.5% Drive-Thru format, as well as a better performance 11.8% 12% 10.7% of the restaurants located outside Bucharest; 9.9% 10% ▪ 8.5% Average ticket was up 8.8% and transactions were Same-store 8% up 1.2% in H1-2018 vs H1-2017; performance 6% 4% 2% 0% 2016 2017 Q1 Q2 Q3 Q4 Q1 Q2 2017 2017 2017 2017 2018 2018 7
Brand performance: Pizza Hut Sales growth analysis 30% 28.0% ▪ All-store sales growth of 9.1% Y/Y in H1, with 25% virtually all growth being contributed by the 7 stores opened starting Jan-2017 (of which 5 in 20% existing cities); 16.8% 16.6% 15.5% ▪ 14.9% 14.1% All-store In Q2, all store sales advanced 8.4% Y/Y, while 15% same-store sales fell 2.0% performance 9.8% 8.4% 10% 5% 0% 2016 2017 Q1 Q2 Q3 Q4 Q1 Q2 2017 2017 2017 2017 2018 2018 13.0% 14% 12% ▪ Same-store sales dropped 0.2% Y/Y in H1, triggered mainly by weaker performance of the 10% Dine-In format, while Delivery continued to remain 8% in positive territory despite the opening of 5 units 5.6% 5.4% 6% in Bucharest; Same-store 3.1% 4% ▪ Average ticket was up 7.7% and transactions were performance 1.6% down 7.3% in H1-2018 vs H1-2017; 1.4% 2% 0.6% 0% -2% -2.0% -4% 2016 2017 Q1 Q2 Q3 Q4 Q1 Q2 2017 2017 2017 2017 2018 2018 8
Development
Development Restaurant openings in H1-2018 QTD (2) Total stores Total stores 2018 Initial 2018 Total Openings (1) Total YTD (2) BoY EoP Openings Plan Expectation Expected YE 72 7 79 1 80 13 16 91 2 2 22 0 22 0 22 24 5 5 17 1 18 2 20 22 3 3 2 0 2 1 3 5 113 8 121 4 125 23 26 142 (1) Of which three KFC restaurants opened in H1-2018 were part of 2017 development plan. (2) As at 14-Aug-2018. 10
KFC Bistrita (DT) 11
PHD Bucurestii Noi (Delivery) 12
KFC Italy – Udine Citta Fiera 13
Brand news
Brand news H1-2018 highlights ▪ KFC focused on building innovation by driving share of burger occasion in Q2, successfully launching new recipes for well-known products like Zinger & Fillet and maintaining strong same-store sales growth; ▪ Launched studycoin , a platform that rewarded teens who solved math problems with digital coins that could be redeemed in the stores; above target results with over 30k unique participants, 280K math problems solved in a month and half a million visitors in the platform; ▪ Continuous effort in building new consumption occasions by communicating breakfast products through a 360 campaign that drove both traffic in the stores and awareness; Being transparent and staying relevant for a desired target, the millennials, by launching the “open kitchen” ▪ program that offered hundreds of participants the chance to visit our kitchens. Delivery Self-ordering kiosks ▪ ▪ Delivery test Pilot kiosks were expanded to seven implemented in the first stores in Bucharest store in May; and three in Cluj, with ▪ Positive feedback from very encouraging clients and 70% of eat-in results; and take-away orders done through the kiosk with the help of KFC employees ▪ Expected roll-out to first 10 stores by year-end
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