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SPHERA FRANCHISE GROUP - SFG

Q3-2018 Financial esults

Release Date: 11/15/2018 8:00:10 AM

IRIS Code: 2A531

Sales of Sphera reached RON 551.6 million in the first nine months of 2018, up 23.4% compared to the pro forma sales of the previous year. The main driver for this performance were the growth in the sales of KFC Romania (up 20.9% Y/Y), which had a contribution of 16.4pp in the pro forma sales growth rate. ARS sales advanced 9.9% compared to the previous year and had a contribution of 1.8pp to the pro forma sales growth rate. At the same time, KFC Italy operations contributed 2.9pp, while Taco Bell operations contributed another 1.8pp in the pro forma sales growth rate.

On a quarterly basis, consolidated sales increased by 26.6% Y/Y in Q3-2018 compared to an increase of 20.8% Y/Y in Q2-2018; the acceleration in sales growth from Q2 to Q3 was mainly due to the increased contribution coming from KFC Italy and Taco Bell operations and, to a lesser extent, to Pizza Hut operations.

Pro forma operational expenses reached RON 477.0 million in the first nine months of 2018, representing an increase of 28.1% compared to the previous year. As percentage of sales, operational expenses increased by 3.2pp year-on-year to 86.5% in the first nine months of 2018, driven mainly by a 0.8pp increase in cost of labour, a 0.7pp increase in the cost of food and materials and 0.8pp increase in other operating expenses.

On a quarterly basis, the operating expenses as percentage of sales increased by only 1.1pp Y/Y to 86.1% in Q3-2018 compared a 5.3pp Y/Y increase to 88.6% in Q2-2018. The reduction of 2.5pp between Q2-2018 and Q3-2018 was the result of improving performance amid almost all restaurant expense categories. 

Restaurant operating profit reached RON 74.6 million in the first nine months of 2018 (13.5% of sales), down 0.1% compared with the previous year (16.7% of sales), of which RON 47.8 million was accounted for by USFN Romania operations (1.6% above previous year) and another RON 3.2 million by ARS Romania (62% below previous year).

On a quarterly basis, restaurant operating profit increased 17.3% Y/Y to RON 28.0m in Q3-2018, compared to a reduction of 17.6% Y/Y to RON 20.5m in Q2-2018, which was due both to the increased restaurant margin (13.9% in Q3 vs 11.4% in Q2) and the reduction of the margin loss compared to the previous year (loss of 1.1pp Y/Y in Q3 vs a loss of 5.3pp Y/Y in Q2).

General and administration expenses reached RON 37.7 million in the first nine months of 2018 (6.8% of sales), up 30.5% compared to previous year (6.5% of sales). Of the RON 8.8 million increase in this expense category, RON 4.0 million was accounted for by USFN Italy and Taco Bell operations.

On a quarterly basis, general and administrative expenses stood at 6.2% of sales in Q3-2018, compared to 7.2% in Q2-2017.

Normalized EBITDA reached RON 53.3 million in the first nine months of 2018, down 7.4% than in the previous year, EBITDA reached RON 52.4 million in the first nine months of 2018, down 9.1% than in the previous year, while operating profit reached RON 36.9 million in the first nine months of 2018, down 19.4% lower than in the previous year. The drop in the EBITDA margin (by 3.4pp to 9.5% in the first nine months of 2018) and operating profit margin (by 3.6pp to 6.7% in the first nine months of 2018) was due to the decrease in the restaurant operating profit (down 3.2pp), as described above.

Net profit reached RON 32.4 million in the first nine months of 2018, being 22.7% lower than in the previous year. The reduction in the net profit margin, by 3.5pp to 5.9% of sales in the first nine months of 2018, was driven by the 3.6pp decrease in the operating profit margin.

On a quarterly basis, normalized EBITDA advanced 9.4% to RON 21.0m in Q3-2018 (10.4% of sales in Q3-2018 vs 12.1% in Q3-2017), compared to a fall of 33.4% to RON 12.5m in Q2-2018 (7.5% of sales in Q2-2018 vs 12.7% in Q2-2017). Operating profit advanced 2.4% to RON 15.6m in Q3-2018 (7.7% of sales in Q3-2018 vs 9.6% in Q3-2017), compared to a fall of 50.2% to RON 7.6m in Q2-2018 (4.2% of sales in Q2-2018 vs 10.2% in Q2-2017). Net profit advanced 0.5% to RON 13.6m in Q3-2018 (6.8% of sales in Q3-2018 vs 8.5% in Q3-2017), compared to a fall of 55.0% to RON 6.2m in Q2-2018 (3.5% of sales in Q2-2018 vs 9.3% in Q2-2017).

 

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