27 August 2020
– Economic restrictions imposed in Romania, the Republic of Moldova and Italy have impacted Sphera’s results in the first half of the year (H1), but the Group has mitigated losses by reducing operational costs and focusing on developing new sales channels.
– USFN Romania and USFN Moldova, members of Sphera Franchise Group, closed H1 with operational profit in the restaurants of RON 21.4 million, while the company in Italy was severely affected.
– Since May, sales have been on an upward trend, reaching 65% of pre-pandemic level in June.
– Sphera’s consolidated sales reached RON 304.6 million in H1, down 31.6% Y/Y; consolidated sales for Q2 registered a drop of 54% Y/Y, reaching RON 106.3 million.
– Restaurant operating profit* in H1 decreased by 86.5% Y/Y to RON 6.7 million.
– Operating profit* decreased by 178% Y/Y to RON -17.8 million in H1, while the loss* for the period amounted to RON 22.4 million.
– Normalized EBITDA* went down 95.7% Y/Y to RON 1.6 million in H1.
*) Excluding the impact of IFRS 16 adoption.
Sphera Franchise Group (“Sphera”) reports consolidated sales of RON 304.6 million in H1, representing a decrease of 31.6% compared to the same period of last year. The Group’s consolidated sales in Q2 registered a 54% drop compared to Q2 2019, reaching RON 106.3 million, with the most significant negative impact recorded in April, when most of the restaurants were completely closed and delivery activity was limited.
The loss registered in Q2 was tempered by swift and firm cost saving measures, reflecting in the fact that restaurants’ expenses were lower by 47.3% in Q2 2020 compared to Q2 2019. At the same time, the results mentioned are above average in the hospitality industry**, in the context of the COVID-19 pandemic and the evolution creates premises for recovery.
“It was certainly a difficult quarter for everyone in the HoReCa industry, but not only did we manage to overpass it by adjusting as things unfolded, we are also confident about the future. We significantly reduced operational costs, maximized revenues, and remained close to our customers. For the moment, we remain prudent and we continue to regularly analyze the performance of our individual markets, brands, and stores to respond to any potential evolution in an agile manner. Our swift response in Q2 through investments in the development of the restaurant network and the switch to digital channels will definitely bring revenues and access to new customers”, said Calin Ionescu, acting CEO of Sphera.
Sphera managed to mitigate the impact of the measures to contain the spread of the pandemic in Romania, Italy and the Republic of Moldova by focusing on developing new sales channels such as through collaboration with food aggregators, along with promoting Delivery and Drive Thru channels, which continue to serve food via KFC Delivery, KFC Drive Thru and Pizza Hut Delivery. The Group has so far entered in partnership with 8 online food delivery platforms on all markets of activity, but it also has its own digital sales channels. In Q2 2020, 47% of sales in Romania were done through delivery, compared to 7% in the same period last year. The significant advance indicates a quick adjustment of the Group to the current context.
The Group continues the expansion and investments that were initially delayed by the pandemic, having opened 4 new KFC restaurants between July and the beginning of August (three in Romania and one in Italy).
Since May, sales have been on an upward trend, due to partnerships with food aggregating platforms, the reopening of restaurants in shopping malls and the overall resumption of economic activity in the markets where the Group operates. At the end of June, 97.6% of the restaurants were open in all markets of activity, and the Group expects the positive evolution of sales to be maintained in the coming months unless new lockdowns are ordered by authorities in the respective countries.
“We see clear signs of gradual recovery, following the relaxation of the restrictions meant to contain the pandemic. Even though restaurants remain closed indoors, in June 2020 we managed to reach 65% of pre-pandemic sales level. In July, the figure increased to 75%, thus giving us good reasons to be optimistic about our performance in the upcoming months. Of course, the return to pre-pandemic levels will take time but we are focusing on cost-control and accessing all available facilities provided by the local governments in our markets of activity, in order to ensure this return is as fast as possible, for the benefit of all our shareholders”, added Valentin Budes, Chief Financial Officer of Sphera.
In H1 2020, the Group reported a restaurant operating profit of RON 6.7 million, 86.5% lower compared to the same period of last year. General & Administrative expenses went down 8.2%, while the EBITDA reached RON 0.8 million, 97.9% lower compared to H1 2019 and had a margin lower by 8 pp compared to the previous period. Operating profit decreased by 178% Y/Y to RON -17.8 million and the loss for the period amounted to RON 22.4 million.
The Group continues to implement strict hygiene and distancing measures in all its restaurants, as well as in its delivery service.