Sphera Franchise Group Sa · BVB:SFG
Sphera Franchise Group Sa — Investor Presentation (December 2019)
68 slides from Sphera Franchise Group Sa's investor presentation, Dec 18, 2019
Slide 1: Sphera Franchise Group Company presentation – Dec-2019
Sphera Franchise Group Company presentation – Dec-2019 1
Slide 2: Disclaimer
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
Slide 3: Sphera Franchise Group At a Glance
Sphera Franchise Group At a Glance Leading Food Service Operator in Romania 2nd 1st Track Record of Quick Service Full Service 25 Years of 150 Rapid and Restaurants Restaurant Operation Restaurants(1) Profitable Operator Operator Growth RON 771m RON 72.4m 9.4% RON 24.3m 24.0% 12.0% 17.1% 0.7% Restau
Slide 4: Sphera at a glance
Sphera at a glance Introduction to Sphera Franchise Group Geographical Footprint ❑ Sphera is one of the leading food operators in Romania(1), operating also through its subsidiaries in Moldova and in Italy ❑ Sphera was incorporated in May 2017 to consolidate all brands operated by the Group, namely
Slide 5: Sphera at a glance: Corporate structure
Sphera at a glance Corporate structure 99.9% 99.9% 99.9% 100% 80% American Restaurant California Fresh Flavors US Food Network S.R.L. US Food Network US Food Network S.A. System S.A. S.R.L. - Italy S.R.L. - Moldova ❑ holds the franchise ❑ holds the franchise ❑ holds the franchise ❑ holds the franchi
Slide 6: Key Investment Highlights
Key Investment Highlights 1 2 Leading food service Solid macroeconomic group operating a environment in portfolio of internationally Romania and favorable recognized brands trends in the restaurant sector 8 3 Significant further growth Proven network roll- potential in Romania and out capabilities w
Slide 7: Leading Foodservice Group in Romania
Leading Foodservice Group in Romania Sphera in the Romanian Foodservice Market QSR #2 player on the QSR segment (18% market share) and #1 on the chicken segment #2 player on the overall chained foodservice market (15% market share) ✓ 83% spontaneous brand awareness among Romanian customers (YE 2018)
Slide 8: Market Structure and Competitive Overview
Leading Foodservice Group in Romania Market Structure and Competitive Overview Chained players generates below 20% of sector sales KFC: no. 2 but growing faster 3% # Brand Product offering 2018 Mk share ‘13-’18 var. +pp. 12% Full-Service Restaurants Cafés/Bars Burgers, Chicken, 18% 1 22.6% -4.0% Sal
Slide 9: Successful Track Record of Growth
Successful Track Record of Growth Long Track Record of Successful Network Development Sustained Growth Across All Brands (1) KFC Pizza Hut Dine-In Pizza Hut Delivery Taco Bell Transformation Phase KFC remaining the key contributor at ca. 82% of revenues 138 900 800 12 CAGR 2015-2018 113 5 Developmen
Slide 10: Profitable Business Model
Profitable Business Model Sales Restaurant Opex Structure Change (RONm) (% of sales) ‘18 vs ‘15 80.2% 82.1% 84.1% 86.7% 100.0% 100.0% 6.5% 900.0 90.0% 50.0% 800.0 2.7% +0.1% 2.4% 2.5% 80.0% 2.6% 9.0% +0.9% 700.0 0.0% 8.2% 7.9% 8.1% 5.3% 5.3% 0.0% 70.0% 5.2% 600.0 5.2% 5.9% 5.9% 0.0% 5.9% 5.9% 60.0%
Slide 11: Scalable Platform Allowing Efficient Roll-out
Scalable Platform Allowing Efficient Roll-out Restaurant / Unit Selection Criteria New Restaurant Opening Process Market Analysis Identify Best Locations Generators (leisure – e.g. shopping centres, cinemas or retail – Traffic Traffic & Market Research e.g. DIY, hypermarkets, furniture stores etc) P
Slide 12: Operational Excellence as Top Ranked YUM Operator
Operational Excellence as Top Ranked YUM Operator Constant top ranker in YUM’s …due to excellent operational results #1 European Franchisee Business Units (EFBU) tables enabling a successful growth strategy! significantly closed the gap on McDonalds over last five years: closest penetration levels t
Slide 13: Enhanced Marketing Capabilities
Enhanced Marketing Capabilities Key Objectives Marketing Strategy Highlights ▪ Enhancement of marketing expenditure across Increase customer’s awareness of the all brands results in increased brand awareness Company’s brands and loyalty to its product offering and customer loyalty ▪ Working with awa
Slide 14: Significant Further Growth Opportunities
Significant Further Growth Opportunities Long-term growth strategy based on four key pillars Text Maintain Strong Continue Organic Develop a Significant Expand Brand LFL Sales Growth Network Roll-out KFC Business in Italy Portfolio – Taco Bell Note: Size of segments do not constitute indication to t
Slide 15: Maintain strong like-for-like growth
Significant Further Growth Opportunities Maintain strong like-for-like growth on a supportive macroeconomic environment 19.0% Key drivers: 20% 14% 13.0% 18% 17.0% 12% 16% 10.0% ➢ Macroeconomic backdrop to 14% 12.5% 10% remain highly supportive 12% 11.0% 8% 10% ➢ Continue to deliver strong 6% 8% mark
Slide 16: Continue organic network roll-out in Romania
Significant Further Growth Opportunities Continue organic network roll-out in Romania via distinct directions to capture still existing market development potential KFC Network Pizza Hut Dine-In Pizza Hut Delivery ❑ Continue development of KFC network to capture ❑ Estimated market potential of ca. 3
Slide 17: Develop a significant KFC business in Italy
Significant Further Growth Opportunities Develop a significant KFC business in Italy to become the largest KFC operator in the country Opportunity for Italian Market Sphera’s Strategy for Italy ❑ 3rd largest national economy in the Eurozone and the world’s 8th largest economy 1) Identify and develop
Slide 18: Expand brand portfolio through Taco Bell launch
Significant Further Growth Opportunities Expand brand portfolio through the launch of Taco Bell in Romania Taco Bell Developing Taco Bell High market potential as QSR brand with scalability ❑ Develop Taco Bell as the contemporary, dynamic Californian brand, opening 14 restaurants in the initial 3 an
Slide 19: Restaurants roll-out plan by brands
Significant Further Growth Opportunities Restaurants roll-out plan by brands 2017 2018 2019 2020 2021 2022 Total Commitment 4 6 7 8 9 9 43 KFC Romania Target 7 7 7 10 10 10 51 Pizza Hut Commitment 5 5 7 8 9 - 34 (Dine-in & Delivery) Target 6 7 7 8 8 8 44 Commitment 2 3 5 - - - 10 Taco Bell Romania T
Slide 20: Total Restaurants at year-end
Significant Further Growth Opportunities Total Restaurants at year-end 241 250 221 14 14 194 200 12 77 166 69 138 10 150 139 61 113 5 34 116 53 32 2 98 46 25 100 87 39 17 76 33 9 27 3 23 116 106 50 96 86 79 72 60 65 53 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 (1) KFC KFC Italy Pizza Hut Taco B
Slide 21: Full-year results: 2018
(Sp) Fullyear results: 2018
Slide 22: Sphera – 2018 key events
Sphera – 2018 key events All-store sales up 34.5% with same-store sales growth of 9.0% ▪ continued strong growth from KFC, increasing contributions from KFC Italy and Taco Bell Total store openings: 25 (8x KFC Romania, 8x KFC Italy, 1x PH, 5x PHD, 3x TB) ➔ Network size: 138 @ 31-Dec-2018 ▪ 2018 stor
Slide 23: Macro environment has become more challenging
Macro environment has become more challenging Significant pick-up in CPI, strong salary growth and record low unemployment Annualized CPI (RON) Annualized average Salaries and minimum gross salaries (Y/Y%) 6% (Y/Y% growth rates) 6,000 30% 100% 5% Average gross salary (Y/Y% change) - rhs 4% 5,000 Ave
Slide 24: Sales performance by brands
(Sp) Sales performance by brands
Slide 25: Brand performance: KFC Romania
Brand performance: KFC Romania Sales growth analysis ▪ All-store sales growth of 21.5% Y/Y in FY-2018 30% 26.4% supported mainly by same-store growth of 11.0%; 25% 23.2% ▪ The 13 net openings (since Jan-2017) contributed 21.5% 20.6% 20.4% 11.5pp to the Y/Y growth in FY-2018, with six of 18.8% 19.6%2
Slide 26: Brand performance: Pizza Hut
Brand performance: Pizza Hut Sales growth analysis ▪ All-store sales growth of 9.5% Y/Y in FY-2018, 30% 28.0% with virtually all growth being contributed by the 12 stores opened starting Jan-2017 (of which 7 in 25% existing cities); 20% All-store 16.8%16.6% 15.5% 14.9% performance 14.1% 15% 11.4% 9.
Slide 27: Development
(Np) Development
Slide 28: Restaurant openings in 2018
Development Restaurant openings in 2018 Total stores Openings Total stores 2018 Initial Difference vs BoY 2018 end-2018 Plan (2) plan 70 8 78 9(1) (1) 2 8 10 7(1) 1 22 1 23 2 (1) 17 5 22 5 0 2 3 5 3 0 113 25 138 26 (1) (1) Of which 2x KFC Romania and 1x KFC Italy were part of the 2017 plan. 28
Slide 29: KFC Bucharest Sun Plaza (DT)
KFC Bucharest Sun Plaza (DT) 29
Slide 30: KFC Italy – Venice Santa Lucia
KFC Italy – Venice Santa Lucia 30
Slide 31: Pizza Hut Dine-in Craiova
Pizza Hut Dine-in Craiova 31
Slide 32: Pizza Hut Delivery Brasov
Pizza Hut Delivery Brasov 32
Slide 33: TB Bucharest Park Lake
B Bucharest Park Lake \ rat cues” Set | set
Slide 34: Brand news
(Np)Brandnews
Slide 35: Brand news: 2018 highlights
Brand news 2018 highlights ▪ KFC’s marketing strategy continued to blend value-oriented campaigns (such as Smart Menu and Ceva/Something) with innovations (Teriyaki product platform, BoxMaster), sharing offers (Christmas buckets) and new consumption occasions, leading to another year of double digit
Slide 36: Pro forma financials
Pro forma financials Note: FY-2018 pro forma results are identical to consolidated results FY-2017 pro forma results include ARS performance for the full period FY-2017 consolidated results do not include ARS performance for Jan-May period
Slide 37: Financial performance: FY-2018 vs FY-2017 Statement of comprehensive income
Financial performance: FY-2018 (Consolidated) vs FY-2017 (Pro-forma) Statement of comprehensive income ▪ Pro forma sales up 24.6% Y/Y on strong performance from KFC Romania/Moldova (+21.5% Y/Y) and Pizza Hut (+9.7% Y/Y) and increasing contributions from the new businesses (KFC Italy and Taco Bell);
Slide 38: Breakdown of 2018 results by Group companies
Financial performance: FY-2018 (Consolidated) vs FY-2017 (Pro-forma) Breakdown of 2018 results by Group companies Data in RON'000 USFN (RO) ARS USFN (MD) USFN (IT) CFF SFG Cons.Adj SFG Cons. Restaurant sales 586,460 122,820 9,764 38,613 12,033 26,514 (25,007) 771,197 Restaurant expenses 491,278 116,
Slide 39: Restaurant operating expenses and margin
Financial performance: FY-2018 (Consolidated) vs FY-2017 (Pro-forma) Restaurant operating expenses and margin Y/Y% % of Sales Contribution to change in restaurant opex ratio Data in RON'000 Dec-18 Dec-17 2018/2017 Dec-18 Dec-17 Δ% Restaurant expenses 668,018 520,031 28.5% 86.6% 84.0% 2.6% Food and m
Slide 40: G&A expenses
Financial performance: FY-2018 (Consolidated) vs FY-2017 (Pro-forma) G&A expenses Y/Y% % of Sales Contribution to growth in G&A expense Data in RON'000 Dec-18 Dec-17 2018/2017 Dec-18 Dec-17 General and adm inistration expenses (net), of w hich: 73,048 60,296 21.1% 9.5% 9.7% Employee benefits 30,563
Slide 41: Consolidated financials
(Sp) Consolidated financials
Slide 42: Sphera – Consolidated financial performance
Sphera – Consolidated financial performance Statement of comprehensive income ▪ Consolidated sales up 34.5% Y/Y on strong performance from KFC Romania (+21.5% Y/Y), while the consolidation of ARS (Pizza Hut restaurants), starting with June 2017, contributed 9.8pp in the consolidated sales growth rat
Slide 43: Consolidated financial performance: Statement of financial position
Sphera – Consolidated financial performance Statement of financial position Data in RON'000 31-Dec-18 31-Dec-17 Change ▪ Total assets increased by 41% in 2018 to RON 352.2m, principally on the back of the continued Assets expansion of the group’s operations through the opening of new units, which we
Slide 44: Sphera – Stand-alone financial performance
Sphera – Stand-alone financial performance Statement of comprehensive income Data in RON'000 2018 2017 Revenues Dividend revenues 61,798 - Revenue from service contracts 26,514 12,420 Total revenues 88,312 12,420 Expenses Payroll and employee benefits 21,598 21,101 Impairment loss of investments in
Slide 45: Interim results: Jan-Sep 2019
Interim results: Jan-Sep 2019
Slide 46: Sphera – 9-mth 2019 key events
Sphera – 9-mth 2019 key events All-store sales up 25.9% with same-store sales growth of 8.2% ▪ Q3 overall sales growth of 23.5%, same-store sales growth of 6.8% Total store openings: 1 in Q3; network size 146 @ 30 September 2019 KFC sales remained strong, with another double-digit quarterly growth,
Slide 47: Macro environment: CPI stabilizes as labour market remains tight
Macro environment CPI stabilizes as labour market remains tight Annualized CPI (RON) Salaries (Y/Y%) 6% 6,000 60% 5% Average gross salary (Y/Y% change) - rhs 5,000 Average gross salary 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
Slide 48: Sales performance by brands
(Sp) Sales performance by brands
Slide 49: Brand performance: KFC Romania
Brand performance: KFC Romania Sales growth analysis ▪ All-store sales growth of 17.1% Y/Y in Q3-2019 30% 26.4% with same-store growth reaching 7.7%; 25% 23.2% ▪ The 9 net openings (since Jan-2018) contributed 21.5% 20.4% c. 9.5pp to the Y/Y growth in Q3-2019. 19.6%20.1% 19.5%18.9% 20% 17.7% All-sto
Slide 50: Brand performance: Pizza Hut
Brand performance: Pizza Hut Sales growth analysis 30% 28.0% ▪ All-store sales growth of 7.1% Y/Y in Q3-2019, with majority of growth coming from the 6 stores opened starting Jan-2018; 25% 20% All-store 15.5% performance 15% 11.4% 9.5% 9.8% 10% 8.4% 8.5% 7.3% 7.4% 7.1% 5% 0% 2016 2017 2018 Q1 Q2 Q3
Slide 51: Development
(Np) Development
Slide 52: Restaurant openings in 2019
Development Restaurant openings in 2019 Total stores Openings Openings Openings Total stores 2019 Opening BoY Q1-2019 Q2-2019 Q3-2019 end Q3-2019 Plan 78 0 1 0 79 8 10 0 4 1 15 10 23 0 0 0 23 0 22 0 0 0 22 1 5 0 2 0 7 5 138 0 7 1 146 24 53
Slide 53: Brand news
(Np)Brandnews
Slide 54: Brand news: Q3-2019 highlights (KFC)
Brand news Q3-2019 highlights ▪ Already a summer tradition in KFC, this year innovation platform featured 3 limited-time offer products (Holiday Burger, Summer Twister and Crispy Box) aiming at increasing frequency of visits; ▪ For the back-to-school calendar window, KFC launched a new format produc
Slide 55: Brand news: Q3-2019 highlights (Pizza Hut)
Brand news Q3-2019 highlights ▪ To unlock new pizza territories and stay relevant to our clients, Pizza Hut introduced a new pizza innovation (San Francisco Dough) over the summer, made with Sourdough for more artisanal taste, with the aim of attracting new users. ▪ Targeting improving transaction l
Slide 56: Marketing Q3-2019 campaigns
Marketing Q3-2019 campaigns 57
Slide 57: Financials
Financials
Slide 58: Financial performance: 9-mth 2019 Statement of comprehensive income
Financial performance: 9-mth 2019 Statement of comprehensive income ▪ Sales up 25.9% Y/Y on strong performance from KFC Romania/Moldova (+18.1% Y/Y, 13.5pp contribution), with increasing contribution from KFC Italy (8.6pp) and Taco Bell (2.7pp); ▪ Restaurant operating profit up 20.0% Y/Y, with margi
Slide 59: Impact of IFRS 16 - Leases on 9-mth 2019 results
Financial performance: 9-mth 2019 Impact of IFRS 16 - Leases on 9-mth 2019 results ▪ Starting 1 January 2019, Sphera applied IFRS 16 that sets out the principles for the recognition, measurement, presentation and disclosure of leases. Sphera uses the modified retrospective approach for this transiti
Slide 60: 9-mth 2019 excluding impact of IFRS 16 adoption
Financial performance: 9-mth 2019 Statement of comprehensive income (excluding impact of IFRS 16 adoption) ▪ Sales up 25.9% Y/Y on strong performance from KFC Romania/Moldova (+18.1% Y/Y, 13.5pp contribution), with increasing contribution from KFC Italy (8.6pp) and Taco Bell (2.7pp); ▪ Restaurant op
Slide 61: Financial performance: Q3-2019 excluding IFRS 16
Financial performance: Q3-2019 Statement of comprehensive income (excluding impact of IFRS 16 adoption) ▪ Sales up 23.5% Y/Y on strong performance from KFC Romania/Moldova (+13.6% Y/Y, 10.5pp contribution), with significant contribution from KFC Italy (9.2pp) and Taco Bell (2.7pp); ▪ Restaurant oper
Slide 62: Financial performance: Margin trend (Quarterly and YTD)
2018-Q1 7.3% 2018-Q1 22.5% Q2 6.6% Q2 20.8% Q3 6.2% Q3 26.6% Q4 7.1% Q4 27.8% 2019-Q1 6.1% 2019-Q1 26.1% Quarter Quarter Q2 5.9% Q2 28.4% Q3 6.4% Q3 23.5% 2018-Q1 7.3% 2018-Q1 22.5% Q2 6.9% Q2 21.6% Q3 6.7% Q3 23.4% Normalized G&A ratio Q4 6.8% Q4 24.6% YTD YTD 2019-Q1 7.3% 2019-Q1 22.5% Restaurant
Slide 63: 9-mth 2019 Breakdown of results by Group companies
Financial performance: 9-mth 2019 Breakdown of results by Group companies Data in RON'000 USFN (RO) ARS USFN (MD) USFN (IT) CFF SFG Cons.Adj SFG Cons. Restaurant sales 497,837 95,584 8,214 68,968 22,844 22,370 (21,500) 694,317 Dividend revenue 0 0 0 0 0 51,239 (51,239) 0 Restaurant expenses 417,582
Slide 64: 9-mth 2019 Breakdown excluding IFRS 16 impact
Financial performance: 9-mth 2019 Breakdown of results by Group companies (excluding impact of IFRS 16 adoption) Data in RON'000 USFN (RO) ARS USFN (MD) USFN (IT) CFF SFG Cons.Adj SFG Cons. Restaurant sales 497,837 95,584 8,214 68,968 22,844 22,370 (21,500) 694,317 Dividend revenue 0 0 0 0 0 51,239
Slide 65: 9-mth 2019 Restaurant operating expenses and margin
Financial performance: 9-mth 2019 Restaurant operating expenses and margin Including the impact of IFRS 16 adoption Contribution to change in restaurant opex ratio* Y/Y% % of Sales Data in RON'000 Sep-19 Sep-18 2019/2018 Sep-19 Sep-18 Δ% Restaurant expenses 604,825 476,993 26.8% 87.1% 86.5% 0.6% Foo
Slide 66: Q3-2019 Restaurant operating expenses and margin
Financial performance: Q3-2019 Restaurant operating expenses and margin Including the impact of IFRS 16 adoption Contribution to change in restaurant opex ratio* Y/Y% % of Sales Data in RON'000 Q2-2019 Q2-2018 2019/2018 Q2-2019 Q2-2018 Δ% Restaurant expenses 210,104 173,490 21.1% 84.5% 86.1% -1.6% F
Slide 67: 9-mth 2019 G&A expenses
Financial performance: 9-mth 2019 G&A expenses Including the impact of IFRS 16 adoption Contribution to growth in G&A expense* Y/Y% % of Sales Data in RON'000 Sep-19 Sep-18 2019/2018 Sep-19 Sep-18 General and adm inistration expenses (net), of w hich: 42,285 37,661 12.3% 6.1% 6.8% Employee benefits
Slide 68: Consolidated financial performance: Statement of financial position
Sphera – Consolidated financial performance Statement of financial position Excluding impact of Impact of IFRS 16 IFRS 16 adoption adoption Data in RON'000 30-Sep-19 31-Dec-18 Change 30-Sep-19 Assets Non-current assets 486,396 229,173 257,223 270,405 215,991 Property, plant and equipment 188,104 158
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