Press release – Sphera Franchise Group delivered the best sales quarter in history in Q2 2022

Highlights:

• Sphera Franchise Group registered the best quarter in its history for all brands and all markets we operate on
• The share of own sales channels in Q2 2022 reached 81%, the highest level since the onset of the pandemic
• Like-for-like sales increased by 32% in Q2 2022 vs Q2 2021
• Restaurant operating profit reached RON 25.7 mn in H1 2022, 28% lower than in H1 2021
• EBITDA amounted to RON 21.2 mn in H1 2022, -29% compared to H1 2021
• Total network of 174 restaurants as of 30 June 2022

Sphera Franchise Group (“Sphera”) delivered the best sales quarter in history in Q2 2022, with revenues amounting to RON 327.4 million, a 40% increase compared to Q2 2021. All three brands – KFC, Pizza Hut and Taco Bell – registered record sales across all markets – Romania, Italy and the Republic of Moldova – in a rapid ramp-up following the lifting of the COVID-19 restrictions.

The significant increase versus previous quarter was due to three major factors. Firstly, lifting of indoor dining restrictions and eliminating the Covid certificate entry requirements across Romania, Italy, and the Republic of Moldova, leading to an increase in transactions overall. Secondly, the contribution of the stores opened in the preceding 12 months and, thirdly, continuing the strategy to build our loved and trusted brands.

“The second quarter of 2022 was excellent for Sphera. We registered double-digit increases for all brands, in all markets, with total revenues 40% higher compared to the same quarter of 2021. More importantly, with the lifting of pandemic restrictions, we have achieved the highest share of own sales channels since the onset of the pandemic, as 81% of all orders in Q2 were delivered in our restaurants or using our own delivery capacity, which allows us to retain a larger part of the sales margin. We are glad that we continued investing in growing our restaurant network in Romania and Italy over the last two years, bringing our iconic brands closer to our customers, because the results of this decision are starting to bring results,” said Călin Ionescu, CEO, Sphera Franchise Group.

The Group ended Q2 2022 with a positive result, registering EBITDA of RON 17.5 million (1% increase compared to Q2 2021) and a net profit of RON 2.2 million (a 54% decrease compared to Q2 2021). The decrease in net profit in Q2 2022 was due to the inflationary pressures on the cost side, growing energy prices resulting from the war in Ukraine, and a less favourable context than in Q2 2021, which helped lift the bottom line (i.e., government facilities such as technical unemployment or renegotiations opportunities for rental costs). However, Q2 2022 net profit has registered a substantial increase of RON 13.1 million vs. Q1 2022.

The like-for-like sales in Q2 2022 grew by 32% across Sphera brands. Between 30 June 2021 and 30 June 2022, Sphera opened 14 new restaurants – 13 in Romania and one in Italy. The new locations helped the Group’s performance, with 5 new Pizza Hut locations contributing to the increase by 46% of the all-store performance in Q2 2022, the 6 new KFC locations growing YoY by 37% and the 2 new Taco Bell locations improving all store performance 39% YoY in Q2 2022.

In terms of channels, the sales in restaurants registered a significant increase in Q2 2022 compared to Q1 2022, due to the complete lifting of indoor dining and mall entry restrictions, as well as good weather that historically has driven sales in the second quarter of the year. On the other hand, the sales for delivery declined by 10% QoQ in Q2 2022, reaching RON 70.3 million. This channel’s contribution to total sales in the first six months of 2022 was RON 148.4 million, of which 12% were delivered using Sphera’s delivery capacity. Sphera has its own delivery service in Romania for KFC and Pizza Hut, while for Taco Bell as well as for KFC in Italy and the Republic of Moldova, the Group delivers exclusively through food aggregating platforms such as Glovo, Tazz, Uber Eats or Bolt.

Significant increases across brands & markets in H1 2022
The excellent top-line performance and positive bottom line in the second quarter helped recover part of the Group’s losses registered in Q1 2022. Consequently, for the first six months of 2022, the Group recorded, compared to H1 2021, RON 606 million in consolidated revenue (a 36% increase), EBITDA of RON 21.2 million (a 29% decline), and a net loss of RON 8.7 million, versus a net profit of RON 5.2 million.

“The excellent top-line performance and positive bottom line in the second quarter helped recover part of the losses we registered in a difficult first quarter of this year. Despite continuous challenges caused by the inflation, we have managed to successfully offset part of restaurant expenses in Q2 of this year, as their shares in total sales decreased from 98%, as registered in Q1 2022, to 95%. We will continue our efforts to improve the bottom-line performance through strict cost-control measures across the Group for the remaining of the year. We expect further challenges due to increasing foodstuff prices, growing energy costs, salary increases, and the general inflationary environment but we remain optimist about the capability of our Group to address them and maximize the bottom-line result” said Valentin Budeș, CFO, Sphera Franchise Group.

The Group closed the first six months of 2022 with a 33% increase in sales in Romania, 34% in the Republic of Moldova and 64% in Italy.

In terms of individual performance, all companies in the Group registered significant sales increases in H1 2022 compared to the same period of 2021, and KFC Romania and KFC Moldova closed H1 2022 profitable. Due to strong performance in Q2 2022, KFC Italy has lowered the net loss by 36% despite increasing the sales by only 16% due to the maturity of the existing units, thus validating the Group’s business model in Italy.

As of 30 June 2022, the Group had 5,230 employees, of which 4,885 in Romania, 260 in Italy and 85 in the Republic of Moldova.