Sphera Franchise Group Interim results: Jan-Jun 2019 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 – H1-2019 key events All-store sales up 27.3% with same-store sales growth of 9.0% ▪ Same-store double-digit growth from KFC, improved performance of Pizza Hut, marginally positive for KFC Italy Total store openings: 7 in Q2; on track to deliver full-year target; network size 145 @ 30 June 2019 KFC sales remained strong, with another double-digit quarterly growth, as delivery operations gain momentum Pizza Hut curbs sales decline on better Delivery activity, but profitability remains the key challenge under labour pressure Both KFC Italy and Taco Bell performance significantly improved both at restaurant level and G&A, on track to deliver breakeven EBITDA ▪ Interim results* H1-2019 Q2-2019 RONm Y/Y* Margin RONm Y/Y Margin ▪ Sales 445.6 +27.3% 230.8 +28.4% ▪ Restaurant profit 49.4 +6.2% 11.1% 27.6 +35.1% 12.0% ▪ Normalized EBITDA 36.7 +13.6% 8.2% 21.2 +57.1% 9.2% ▪ Net Profit 18.1 (3.5)% 4.1% 13.0 +108.9% 5.6% *) excluding the impact from the adoption of IFRS 16. 3
Macro environment CPI stabilizes as labour market remains tight Annualized CPI Salaries (RON) (Y/Y%) 6% 6,000 60% Average gross salary (Y/Y% change) - rhs 5% Average gross salary 5,000 50% 4% Minimum salary 3% 4,000 40% 2% 1% 3,000 30% 0% 2,000 20% -1% -2% 1,000 10% -3% -4% 0 0% Jan-16 Jan-17 Jan-18 Jan-19 Jan-16 Jan-17 Jan-18 Jan-19 ▪ ▪ CPI consolidates around 4.0% in Q2-2019 Average salary up 13.1% in Q2-2019 and 14.2% in H1-2019 Retail sales (mainly food & drinks) Unemployment rate 50% 8% 45% 7% 40% 6% 35% 5% 30% 4% 25% 20% 3% 15% 2% 10% 1% 5% 0% 0% Jan-16 Jan-17 Jan-18 Jan-19 Jan-16 Jan-17 Jan-18 Jan-19 ▪ Retail sales Y/Y growth reaches 6.2% in Q2-2019 and 4.7% ▪ Unemployment rate remains stable at c. 4.0% in Q2-2019 in H1-2019 4
Sales performance by brands
Brand performance: KFC Romania Sales growth analysis 30% ▪ All-store sales growth of 18.9% Y/Y in Q2-2019 26.4% supported mainly by same-store growth of 13.0%; 25% 23.2% ▪ The 9 net openings (since Jan-2018) contributed 21.5% 19.6% 20.1% 20.4% c. 6pp to the Y/Y growth in Q2-2019, six of these 19.5%18.9% 20% 17.7% All-store openings were in new cities. performance 15% 10% 5% 0% 2016 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2018 2018 2018 2018 2019 2019 2019 2019 18% 17.0% 15.6% ▪ Same-store sales growth of 13.0% Y/Y in Q1-2019 16% 14.0% on the back of stronger performance from the 14% 13.0% foodcourt format, as well as a better performance 12.5% 12% 11.0% of the restaurants located outside Bucharest; 10.9% 10.7% 9.9% ▪ 10% Average ticket was up 13.0% and transactions fell Same-store 0.9% in H1-2019 vs H1-2018. performance 8% 6% 4% 2% 0% 2016 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2018 2018 2018 2018 2019 2019 2019 2019 6
Brand performance: Pizza Hut Sales growth analysis 30% 28.0% ▪ All-store sales growth of 7.4% Y/Y in Q2-2019, driven by the 6 stores opened starting Jan-2018 25% (of which 3 in existing cities); 20% All-store 15.5% performance 15% 11.4% 9.8% 9.5% 10% 8.4% 8.5% 7.3% 7.4% 5% 0% 2016 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2018 2018 2018 2018 2019 2019 2019 2019 14% 13.0% ▪ 12% Same-store sales fell 0.5% Y/Y in Q2-2019, with the improving performance compared to Q1-2019 10% being explained by the significant slowdown in the 8% loss of Delivery sales; 6% ▪ Average ticket was up 6.4% and transactions were Same-store down 7.2% in H1-2019 vs H1-2018. 4% performance 3.1% 1.6% 2% 1.1% 0.7% 0.4% 0% -0.5% -2% -2.0% -2.0% -4% 2016 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2018 2018 2018 2018 2019 2019 2019 2019 7
Development
Development Restaurant openings in 2019 Total stores Openings Total stores 2019 Opening BoY Q2-2019 end Q2-2019 Plan 78 1 79 8 10 4 14 10 0 23 0 23 1 22 0 22 5 5 2 7 138 7 145 24 9
Brand news
Brand news Q2-2019 highlights ▪ KFC focused on building favorability for its burger layer by successfully launching a new and innovative burger in Q2 called Real Burger, with a distinctive communication campaign and maintaining strong same-store sales growth ▪ The brand relaunched studycoin , a platform that rewards teens who solved math problems with digital coins that could be redeemed in the stores; this year we added a math coach that helped students solve over 85K problems in the first 3 weeks of the campaign ▪ Continuous effort in reinforcing the “value for money” perception by communicating Tuesday Bucket through a 360 campaign that drove traffic in the stores ▪ Building a digital brand through our social entertainment channel by launching a new series called Random as part of an integrated campaign that resulted in double-digit same-store sales growth Self-ordering kiosks & digital menu boards ▪ Roll-out of kiosks completed in 20 stores ▪ Roll-out of digital menu-boards completed in 54 Random – campaign results stores ▪ +19M paid views registered ▪ +8M engagements generated ▪ +490M secs of content viewed = 15.6 years in real life 11
Brand news Q2-2019 highlights ▪ Pizza Hut reinforced its product and menu variety by launching Ribs but leveraging in the communication our pizza superiority and enjoyed single-digit positive sales growth ▪ With the aim of increasing penetration among lapsed and new users, the brand communicates Crazy Tuesday, a disruptive value offer on pizza valid one day per week ▪ Pizza Hut Delivery launched the same innovation campaign, Ribs and was present on TV with a tail on the brand commercial, enjoying a healthy sales mix of the product ▪ Overall online orders exceeding 45% of delivery sales, part of the percentage coming through aggregator platforms ▪ Taco Bell continued to build brand equity and top line by opening its sixth & seventh stores and communicated the launch in Sibiu & Timisoara utilizing proximity outdoor and digital marketing ▪ The brand focused its communication in existing stores on innovation by launching a new taco, with the aim of creating favorability & differentiation while reinforcing the belief that Taco Bell is the expert in tacos ▪ Top Social Brands 2019, 1st place in QSR - KFC is the most visible & innovative brand in social media in this category ▪ Effie Awards for KFC, GOLD for BoxMaster in Branded Content, BRONZE for Booster in Restaurants, SILVER for Garlic Sauce in Packaged Food and BRONZE for Xmas Bucket in Seasonal Marketing 12
Marketing Q2-2019 campaigns 13
Sphera Sustainability Report 2018 In April, we launched the first Sustainability Report of Sphera Group for 2018 with specific strategic goals to be reached by 2025 Our mission : ”Excellence in everything we do” Our vision: ”Development through relevance and trust” SAFEST AND EXCELLENCE IN HIGH-QUALITY EVERYTHING WE DO FOOD Business Products People & Environment Community SOCIAL ENVIRONMENTAL RESPONSABILITIES RESPONSABILITY and ENGAGEMENT in COMMUNITIES 14
Financials
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