12 november 2020

Sphera Franchise Group registers in Q3 consolidated sales up 86.2% compared to Q2

Key events:

• Sphera registered in Q3 the normalized EBITDA of RON 26.9 million, with only 11.8% lower than in Q3 2019 and a net profit of RON 17.6 million, with 12.3% lower than in Q3 2019.
• Deliveries through its own channels as well as through delivery platforms helped Sphera to achieve increased consolidated sales in Q3 compared to Q2.
• Despite the pandemic, in the third quarter, Sphera opened four restaurants – three in Romania and one in Italy. Also, in mid-October a new KFC restaurant was inaugurated in Romania, and in mid-November were inaugurated: a KFC restaurant in Italy and a Taco Bell restaurant in Romania.
• The operating profit of restaurants * decreased by 60.5% Y / Y, reaching the amount of RON 34.8 million.
• Sphera’s consolidated sales reached RON 502.4 million in the first nine months, down 27.6% compared to the same period last year; consolidated sales in Q3 decreased by 20.5% Y / Y, reaching RON 197.9 million.
• USFN Romania (KFC Romania) and USFN Moldova (KFC Moldova) together recorded a net profit of RON 30.7 million. In Q3, both companies registered one of the highest operating margins, KFC Romania of 19.2%, and KFC Moldova of 21.2%.
• The normalized EBITDA margin increased from 12.3% in Q3 2019 to 13.6% in Q3 2020, the highest quarterly margin ever recorded since the Sphera group’s listing.

*) Excluding the impact of IFRS 16 adoption.

Sphera Franchise Group (“Sphera”) reported consolidated sales of RON 502.4 million in the first nine months of the year, representing a 27,6% decrease compared to the same period last year. The Group’s consolidated sales in the third quarter amounted to RON 197.9 million, a decrease of 20.5% compared to the same period last year, but up by 86.2% compared to the second quarter of this year. The performance recorded in Q3 managed to reduce the negative impact of the pandemic recorded in Q2.

Deliveries through own channels and partnerships with online order aggregators have contributed to improved performance in Q3. Thus, between July and September, 24% of all orders were generated through delivery channels, while 76% were sold in restaurants. For comparison, in the same period last year, only 6% of orders were generated through the delivery channel. Regarding the contribution to sales by countries, in the first nine months, Romania represented 87.5%, Italy 11.3%, and Moldova 1.1%.

“After an extremely difficult second quarter, the third quarter showed signs of recovery. During this period we reopened all restaurants and focused mainly on expanding delivery services, optimizing menus to suit market conditions, redesigning customer and production flows, analyzing and improving cost structures to maximize performance. Despite the pandemic, we continued to implement the plan to open new restaurants, as well as identify new spaces for future developments. We thank all the team members for their continuous involvement and dedication”, said Călin Ionescu, General Manager of Sphera.

In the third quarter, Sphera was able to implement significant cost-cutting measures, both in the restaurants and in general and administrative expenses. Moreover, during the third quarter, the Group benefited from state aid from the Romanian government, which contributed to the decrease of salary expenses by 33.4%, and the renegotiation with the owners of commercial spaces contributed to the decrease of expenses, with rent, by 20.7%. Also, advertising costs were reduced by 34.9%, compared to Q3 2019.

In the first nine months, restaurants registered an operating profit of RON 34.8 million, 60.5% lower compared to the same period last year. Despite the decrease in general and administrative expenses by 17.4%, Sphera ended the first nine months with an operating loss of RON 0.4 million. However, it significantly improved its operating margin in Q3, ending the January-September period with normalized EBITDA of RON 28.4 million and an operating margin of 5.7%, considerably higher compared to normalized EBITDA of RON 1.6 million. and the operating margin of 0.5% reported for H1 2020. The Group closed Q3 with a normalized EBITDA of RON 26.9 million, only 11.8% lower than Q3 2019 and a net profit of RON 17.6 million , 12.3% lower than in Q3 2019.

“We are pleased with our performance, as today we present to investors a strong, profitable quarter. Our performance in Q3 contributed to the recovery of RON 26.9 million in EBITDA and to the reduction of the net loss recorded on June 30 by RON 17.6 million. It is important to point out the increase in the normalized EBITDA margin, from 12.3% in Q3 2019 to 13.6% in Q3 2020, the highest quarterly level recorded since the group’s listing. For comparison, in Q1 the normalized EBITDA margin at Group level was 1.8%, and in Q2 -1.9%. I must also mention the performance of KFC Romania, which recorded an impressive operating margin of 19.2% and KFC Moldova of 21.2%. At the same time, I would like to emphasize the solid position that we register in terms of liquidity with a balance of 113 million RON” added Valentin Budes, Chief Financial Officer of Sphera.

From the beginning of the year until now, three new restaurants have opened in Italy and five in Romania. In the third quarter, four restaurants were inaugurated – three in Romania and one in Italy. Also, in mid-October a new KFC restaurant was inaugurated in Romania, and in mid-November were inaugurated: a KFC restaurant in Italy and a Taco Bell restaurant in Romania. As of September 30, the Group had 158 restaurants, of which 157 were open and serving customers, while respecting the safety measures imposed in the context of the pandemic.