Sphera Franchise Group Sa · BVB:SFG
Sphera Franchise Group Sa — Investor Presentation (May 2018)
72 slides from Sphera Franchise Group Sa's investor presentation, May 2018
Slide 1: Sphera Franchise Group Company presentation – May 2018
Sphera Franchise Group Company presentation – May 2018 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 24 Years of 120 Rapid and Restaurants Restaurant Operation Restaurants(1) Profitable Operator Operator Growth RON 619m RON 69.3m 11.2% RON 32.6m 24.0% 14.7% 14.1% 13.6% Rest
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: 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) ✓ c. 80% spontaneous brand awareness among Romanian customers (YE 20
Slide 8: Market Structure and Competitive Overview
Leading Foodservice Group in Romania Market Structure and Competitive Overview Chained players generated only 15% of sales (2016 data) KFC still no. 2 but growing faster (2016 data) 3% # Brand Product offering 2016 Mk share ‘13-’16 var. +pp. Full-Service Restaurants/FSR 12% Cafes/bars Burgers, Chick
Slide 9: Supportive Macro and Sector Environment in Romania
Supportive Macro and Sector Environment in Romania Enjoying the Highest GDP Growth in EU28 Strong Private Consumption Growth (yoy %) yoy real GDP 7.0% #1 yoy private consumption 7.0% growth in the EU 10.0% #1 #1 expenditure in the EU 6.0% 7.4% 8.0% 6.9% 4.8% 5.0% 4.5% Q2 2018 yoy 6.0% 3.9% 6.0% 4.7%
Slide 10: 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. 81% of revenues 700 (RONm) 120 3 600 CAGR 2014-2017 113 2 Deve
Slide 11: Highly Profitable Business Model
Highly Profitable Business Model Sales Restaurant Opex Structure (RONm) (% of sales) Change 100.0% 82.4% 80.2% 82.1% 84.1% ‘17 vs ‘14 90.0% 700.0 1.6% 2.5% (0.8)% 80.0% 50.0% 3.3% 2.4% 2.6% 7.9% 600.0 8.3% 8.1% 8.2% (0.4)% 70.0% 5.3% 0.1% 0.0% 5.2% 5.2% 5.2% 5.9% 500.0 5.9% 5.9% 0.0% 60.0% 5.9% 7.4%
Slide 12: 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 13: 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 14: 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 15: 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 16: Maintain strong like-for-like growth
Significant Further Growth Opportunities Maintain strong like-for-like growth on a supportive macroeconomic environment Key drivers: 20.0% 19.0% 14.0% 13.0% 18.0% 17.0% 12.0% 16.0% 10.0% ➢ Macroeconomic backdrop to 14.0% 12.6% 12.5% 10.0% remain highly supportive 12.0% 8.0% 10.0% ➢ Continue to deliv
Slide 17: 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 18: 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 19: 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 20: 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 6 7 7 8 8 8 44 Delivery Target 5 5 5 6 6 6 33 Dine in Target 1 2 2 2 2 2 11 Commitment 2 3 5 - - - 10
Slide 21: 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 10 150 139 61 113 5 34 116 53 32 2 46 98 25 100 87 39 17 76 33 9 27 3 23 116 50 106 96 86 79 72 60 65 53 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 (1) KFC KFC Italy Pizza Hut Taco Bell
Slide 22: 2017 Results
(Np) 2017 Results
Slide 23: Sphera – 2017 key events
Sphera – 2017 key events ▪ Strong sales & operational performance ▪ Double-digit same-store sales growth for the full-year ▪ Q4 same-store sales performance eased on cannibalisation impact, with some softening in customer spend facing leaping inflation ▪ Total net store openings: 15 (3 below plan on
Slide 24: Sales performance by brands
(Np) Sales performance by brands
Slide 25: Brand performance: KFC Romania
Brand performance: KFC Romania Sales growth analysis 30% ▪ All-store sales growth of 17.7% Y/Y supported 26.4% mainly by same-store performance (11.9% 25% contribution); 20.6% ▪ The 11 net openings contributed 5.8% to the Y/Y 20% 18.0% 18.8% 17.7% All-store growth, with all but one in cities with ex
Slide 26: Brand performance: Pizza Hut
Brand performance: Pizza Hut Sales growth analysis ▪ All-store sales growth of 15.5% Y/Y, with a relatively uniform performance across quarters, of which 13.4pp was the contribution of the net 12 stores opened starting Jan-2016 (+44% network growth) All-store performance 14% 13.0% ▪ Same-store sales
Slide 27: Development
(Np) Development
Slide 28: Restaurant openings in 2017
Development Restaurant openings in 2017 Total stores BoY Openings Plan Total stores EoY New store locations 65 8 10* 72 ▪ Romania: Bucharest (1x DT, 1x IL), Oradea (1x DT, 1x FC), Arad (1x FC), Valcea (1x FC) ▪ Italy: 2x FC -1 ▪ Closed stores: Romania (Oradea: 1x FC) 21 1 1 22 ▪ Galati (1x FC) 12 5
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Slide 32: Marketing/CSR
(Np) Marketing/CSR
Slide 33: Marketing: Continuous activities to promote our brands
Marketing Continuous activities to promote our brands January February March April May June July August September October November December Note: size of campaigns’ pictures are not an indication of exact duration of the respective campaign 33
Slide 34: Marketing: Q4-2017 highlights
Marketing Q4-2017 highlights ▪ Christmas campaign focused on buckets with the aim to drive top line in Q4 whilst building on the freshness pillar and enjoyed higher sales mix Y/Y ▪ launched digital menu boards in the first two stores with the aim to continue roll-out throughout 2018. ▪ new brand web
Slide 35: Corporate Social Responsibility: Ongoing campaigns & programs
Corporate Social Responsibility Ongoing CSR campaigns & programs ‘I want to go to high-school’ (with World Vision Romania) ‘Physics (taught) differently’ (with CEAE) EUR 140k raised in 2017, to finance school for 200 children “SOS Children’s Villages Bucharest” ‘Hospice, House of Hope’ 35
Slide 36: Corporate Social Responsibility: Replate Waste
Corporate Social Responsibility Replate Waste (partnership with Shutterstock US) We take all the food that’s left on the plates when people leave our restaurant and, with the help of a food stylist and photographer, we create new, stunning plates. Then, we take photos, we upload them on Shutterstock
Slide 37: Financials
Financials
Slide 38: Sphera – Financial reports in brief
Sphera – Financial reports in brief Consolidation perimeter 2016 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D Sphera - Consolidated financials KFC Romania KFC Moldova Pizza Hut KFC Italy Taco Bell Sphera - Pro forma information
Slide 39: Pro forma financials
(Rp) Proforma financials
Slide 40: Financial performance: Pro-forma Statement of comprehensive income
Financial performance: Pro-forma Statement of comprehensive income ▪ Pro forma sales up 20.3% Y/Y on strong performance from KFC Romania/Moldova and Pizza Hut and increasing contributions from t he new businesses (KFC Italy and Taco Bell); ▪ Restaurant operating profit up 7.0% Y/Y, with margin down
Slide 41: Breakdown of results by Group companies – year 2017
Financial performance: Pro-forma Breakdown of results by Group companies – year 2017 Data in RON'000 USFN (RO) ARS USFN (MD) USFN (IT) CFF SFG Cons.Adj ICO ellim . PPA Adj. SFG Cons. Restaurant sales 482,587 112,011 8,492 12,377 2,876 12,420 (11,958) (1) 618,804 Restaurant expenses 397,194 99,520 7,
Slide 42: Pro-forma Restaurant operating expenses
Financial performance: Pro-forma Restaurant operating expenses Change Percentage of sales Contribution to change in restaurant opex margin Data in RON thousand 2017 2016 2017/2016 2017 2016 Restaurant expenses 520,031 422,204 23.2% 84.0% 82.1% Food and material 219,232 183,409 19.5% 35.4% 35.6% Payr
Slide 43: Pro-forma G&A expenses
Financial performance: Pro-forma G&A expenses Change Percentage of sales Contribution to growth in G&A expense Data in RON thousand 2017 2016 2017/2016 2017 2016 General and administration 60,297 31,988 88.5% 9.7% 6.2% expenses (net), of which: Payroll and employee benefits 34,695 13,564 155.8% Thir
Slide 44: Overall guidance for 2018
Financial performance: Pro-forma Overall guidance for 2018 ▪ Sales ▪ Same-store sales: +6-8% ▪ All-store sales: 20-25% ▪ Restaurant operating margin ▪ Same-store margin: +0.5pp to 18.5% ▪ All-store margin: -1.0pp to 15.0%, of which impact from Depreciation: -0.8pp (3.3% of sales) ▪ G&A expenses ▪ 7.
Slide 45: Consolidated financials
(Wp) Consolidated financials
Slide 46: Sphera – Consolidated financial performance
Sphera – Consolidated financial performance Statement of comprehensive income ▪ Consolidated sales up 37.3% Y/Y on strong performance from KFC Romania (+17.7% Y/Y), while the consolidation of ARS (Pizza Hu t restaurants), starting with June 2017, contributed 15.9pp in the consolidated sales growth r
Slide 47: Consolidated financial performance: Statement of financial position
Sphera – Consolidated financial performance Statement of financial position All data in RON'000 31-Dec-17 31-Dec-16 All data in RON'000 31-Dec-17 31-Dec-16 Assets Equity and liabilities Non-current assets 176,123 54,246 Total equity 104,544 58,253 Property, plant and equipment 105,220 47,551 Equity
Slide 48: Interim results: Jan-Mar 2018
Interim results: Jan-Mar 2018
Slide 49: Sphera – Q1-2018 key events
Sphera – Q1-2018 key events ▪ Strong sales & operational performance ▪ All-store sales up 22.5% with same-store sales growth of 9.7% ▪ continued strong growth from KFC, increasing contributions from KFC Italy and Taco Bell ▪ Total store openings: 3 (3x KFC, all being part of 2017 development plan) ▪
Slide 50: Sales performance by brands
(Np) Sales performance by brands
Slide 51: Brand performance: KFC Romania
Brand performance: KFC Romania Sales growth analysis 30% ▪ All-store sales growth of 19.6% Y/Y supported 26.4% mainly by same-store performance (11.6pp 25% contribution); 20.6% 18.8% 19.6% ▪ The 8 net openings contributed 7.8pp to the Y/Y 20% 17.7% 18.0% All-store growth, with all but one in cities
Slide 52: Brand performance: Pizza Hut
Brand performance: Pizza Hut Sales growth analysis 30% 28.0% ▪ All-store sales growth of 9.8% Y/Y, with a relatively uniform performance across quarters, of which 25% 8.2pp was the contribution of the net 6 stores opened starting Jan-2016; 20% 16.8% 16.6% 15.5% 14.9% 14.1% All-store 15% performance
Slide 53: Development
(Np) Development
Slide 54: Restaurant openings in Q1-2018
Development Restaurant openings in Q1-2018 Total stores BoY Openings Plan Total stores EoP New store locations 72 3* 13 75 ▪ Romania: Bucharest (1x DT), Botosani (1x DT) ▪ Italy: 1x FC 22 0 2 22 17 0 5 17 2 0 3 2 113 3 23 116 * All three restaurants opened in Q1-2018 were part of 2017 development pl
Slide 55: KFC Bucharest Sun Plaza (DT)
KFC Bucharest Sun Plaza (DT) 55
Slide 56: KFC Botosani (DT)
KFC Botosani (DT) 56
Slide 57: KFC Italy - Villesse
KFC Italy - Villesse 57
Slide 58: Brand news
(Np) Brandnews
Slide 59: Brand news: Q1-2018 highlights
Brand news Q1-2018 highlights ▪ KFC focused on communicating value for Q1, successfully re-launching Smart Menu (full meal for 12.9 RON) and Ceva (Something) (value bundle for 5 RON) and maintaining strong same-store sales growth; ▪ Continuous activities to build KFC as a digital brand by making the
Slide 60: Brand news: Q1-2018 highlights
Brand news Q1-2018 highlights ▪ Pizza Hut started the year by communicating abundant value through its Pizza Festival all-you-can- eat signature campaign; ▪ The new menu designed by a well-know chef was introduced in selected stores with the aim of covering all stores by end of Q2; ▪ Pizza Hut Deliv
Slide 61: Marketing Q1-2018 campaigns
Marketing Q1-2018 campaigns 61
Slide 62: Financials
Financials
Slide 63: Pro forma financials
Pro forma financials Note: Q1-2018 pro forma results are identical to consolidated results Q1-2017 pro forma results include ARS performance for the full period Q1-2017 consolidated results do not include ARS performance
Slide 64: Financial performance: Q1-2018 vs Q1-2017 Statement of comprehensive income
Financial performance: Q1-2018 (Consolidated) vs Q1-2017 (Pro-forma) Statement of comprehensive income ▪ Pro forma sales up 22.5% Y/Y on strong performance from KFC Romania/Moldova and Pizza Hut and increasing contributions from t he new businesses (KFC Italy and Taco Bell); ▪ Restaurant operating p
Slide 65: Breakdown of results by Group companies
Financial performance: Q1-2018 (Consolidated) vs Q1-2017 (Pro-forma) 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 131,007 29,962 2,188 4,123 2,544 5,949 (5,541) 170,232 Restaurant expenses 108,839 27,014 1,914 3
Slide 66: Restaurant operating expenses and margin
Financial performance: Q1-2018 (Consolidated) vs Q1-2017 (Pro-forma) Restaurant operating expenses and margin Y/Y% % of Sales Data in RON'000 Mar-18 Mar-17 2018/2017 Mar-18 Mar-17 Contribution to change in restaurant opex ratio Restaurant expenses 144,119 112,988 27.6% 84.7% 81.3% Food and material
Slide 67: G&A expenses
Financial performance: Q1-2018 (Consolidated) vs Q1-2017 (Pro-forma) G&A expenses Change Percentage of sales Contribution to growth in G&A expense Data in RON thousand Mar-18 Mar-17 2018/2017 Mar-18 Mar-17 General and administration 12,350 10,586 16.7% 7.3% 7.6% expenses (net), of which: Payroll and
Slide 68: Consolidated financials
(Wp) Consolidated financials
Slide 69: Sphera – Consolidated financial performance
Sphera – Consolidated financial performance Statement of comprehensive income ▪ Consolidated sales up 52.4% Y/Y on strong performance from KFC Romania (+19.6% Y/Y), while the consolidation of ARS (Pizza Hu t restaurants), starting with June 2017, contributed 26.8pp in the consolidated sales growth r
Slide 70: Consolidated financial performance: Statement of financial position
Sphera – Consolidated financial performance Statement of financial position Data in RON'000 31-Mar-18 31-Dec-17 Data in RON'000 31-Mar-18 31-Dec-17 Assets Equity and liabilities Non-current assets 180,192 176,123 Total equity 117,114 104,544 Property, plant and equipment 108,305 105,220 Equity attri
Slide 71: Pro forma financials – 2014-2017
Pro forma financials – 2014-2017
Slide 72: Pro forma financials 2014-2017 absolute data
Sphera – Consolidated financial performance Statement of financial position Abolute data (RON'000) % of Sales Y/Y% change 2014 2015 2016 2017 2014 2015 2016 2017 2015 2016 2017 Restaurant sales 324,912 405,830 514,475 618,804 100.0% 100.0% 100.0% 100.0% 24.9% 26.8% 20.3% Restaurant expenses 267,699
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