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Press release – Sphera Franchise Group shift focus on its delivery and Drive-Thru lines at KFC and Pizza Hut to mitigate the effects of the coronavirus pandemic

14 May 2020

Key events:
– Extensive lockdown measures in Romania, the Republic of Moldova and Italy have impacted Sphera’s results, but the company has managed to partially mitigate the effects by focusing on its Delivery and Drive Thru channels for KFC and Pizza Hut Delivery;
– Sphera’s consolidated sales reached RON 198.3 million in Q1, down 7.6% Y/Y;
– Restaurant operating profit* decreased by 66% Y/Y to RON 7.4 million in Q1, while the operational result* registered a loss of RON 6.5 million, or 160% down Y/Y;
– Normalized EBITDA* went down 77% Y/Y to RON 3.5m in Q1.
*) Excluding the impact of from the adoption of IFRS 16.

Sphera Franchise Group (“Sphera”) reports consolidated sales of RON 198.3 million (c. EUR 28.6 million) for Q1 2020, representing a drop of 7.6% compared to the same period of the previous year. The drop was principally triggered by the closure or limitation of restaurant activity imposed by the governmental authorities in the markets we operate.

The company has managed to partially mitigate the impact of the extensive lockdown measures in Romania, Italy and the Republic of Moldova by shifting focus on Delivery and Drive Thru channels, which continue to serve food via KFC Delivery, KFC Drive Thru and Pizza Hut Delivery. While the initial impact has been an overall drop in sales of 80% Y/Y (in the first three weeks of lockdown), the group managed to gradually increase its operations so that its current level of sales are 65% below the previous year’s level.

Sphera currently has 82 stores in operation (out of the total of 154 stores), of which 46 KFC stores in Romania, 10 KFC stores in Italy, 1 KFC store in Republic of Moldova, 20 Pizza Hut stores and 5 Taco Bell stores.

“These are certainly trying times for the restaurant industry and our business is not sheltered from the measures to contain the pandemic. Nevertheless, we have a strong business model that has proven capable of adapting fast to the new environment and we are currently working to recover some of our lost sales and margins. We will continue to prioritize the safety of our employees and customers, while ensuring continuous quality operations and safeguarding our shareholders value”, said Calin Ionescu, acting CEO of Sphera.

Restaurant operating profit* decreased to RON 7.4 million in Q1-2020 (3.8% of sales), down 66% compared with the previous year, while the operational result registered a loss of RON 6.5 million, compared to a profit of 8.7 million in the previous year.
Normalized EBITDA* fell 77% Y/Y to RON 3.5 million in Q1 2020, as a result of reduced sales following generalized lockdown. Net loss* reached RON 9.6 million in Q1 2020, compared with a net profit of RON 5.1 million in Q1 2019.

“We have strengthened the grip on our operational expenses, not only by using the support extended by the Romanian and Italian governments, but also by engaging in good-faith negotiation with our landlords and suppliers of all other services to our restaurants and headquarters.”, said Chief Financial Officer Valentin Budes.
Sphera restricted its restaurant operations in Romania on 18 March, following the order issued by the Ministry of Internal Affairs prohibiting the serving of food in enclosed spaces. The Group decided to implement additional safety measures in all operating restaurants around the country, strengthening hygiene and safety procedures already in place.

Since the start of the pandemic, the company has donated EUR 100,000 for medical equipment to the Romanian Red Cross and delivered daily meals from KFC and Pizza Hut brands to part of the employees of the INBI “Prof Dr Matei Bals” and Public Health Direction, in Bucharest. Moreover, the company has redirected part of its raw materials (food products) to different organizations in Bucharest and in the country, who support people from disadvantaged environments.