Sphera Franchise Group€¦ · This presentation is not, and nothing in it should be construed as,...

1

Company presentation – Dec-2019

Sphera Franchise Group

2

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 this presentation nor anything in it shall form the basis of any contract or commitment. This presentation is not intended to be relied upon as

advice or recommendation to investors or potential investors and does not take into account the investment objectives, financial situation or needs of

any investor.

All investors should consider this presentation in consultation with a professional advisor of their choosing when deciding if an investment is

appropriate.

Sphera has prepared this presentation based on information available to it, including in-formation derived from public sources that have not been

independently verified. No representation or warranty, express or implied, is provided in relation to the fairness, accuracy, correctness, completeness

or reliability of the information, opinions or conclusions ex-pressed herein.

This presentation should not be considered a comprehensive representation of Sphera's business, financial performance or results.

This presentation may contain forward-looking statements. These statements reflect Sphera’s current knowledge and its expectations and projections

about future events and may be identified by the context of such statements or words such as “anticipate,” “believe”, “estimate”, “expect”, “intend”,

“plan”, “project”, “target”, “may”, “will”, “would”, “could” or “should” or similar terminology.

Sphera undertakes no obligation to update or revise these forward–looking statements to reflect events or circumstances that arise after the date made

or to reflect the occurrence of unanticipated events. Inevitably, some assumptions may not materialize, and un-anticipated events and circumstances

may affect the ultimate financial results. Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant

business, economic and competitive risks.

Therefore, the final results achieved may vary significantly from the forecasts, and the variations may be material.

3

Sphera Franchise Group At a Glance

Leading Food Service Operator in Romania

0.7%

Normalized

EBITDA

growth(2)

1st

Full Service

Restaurant

Operator

150

Restaurants(1)

Track Record of

Rapid and

Profitable

Growth

RON 24.3m

Net profit

-25% yoy

12.0%

LfL(3) restaurant

sales growth

17.1%

Increase in no.

of restaurants

2018 pro forma results 3-year CAGR

RON 771m

Restaurant sales

+24.6% yoy

24.0%

Restaurant sales

growth

RON 72.4m

Normalized

EBITDA(2)

+4.5% yoy

9.4%

Normalized

EBITDA

margin(2)

25 Years of

Operation

Source: Pro-forma IFRS financial information

Notes: (1) As of 30-Nov-2019 ; (2) After excluding certain one-off expenses; (3) LfL performance for the reporting year is calculated by taking into account all the restaurants that have been in uninterrupted operation

from the beginning of the preceding year to the end of the reporting year

2nd

Quick Service

Restaurants

Operator

4

61

21

15

Number of Locations (split per brand / restaurant format)2

Sphera at a glance

❑ 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 KFC, Pizza Hut Dine-In and Pizza Hut Delivery under one

company

❑ In 2017, Sphera secured the franchise for operation of Taco Bell restaurants

in Romania

❑ In 2017, Sphera opened its first two KFC restaurants in Italy and is already the

largest KFC operator in Italy

❑ KFC Romania, KFC Italy, Pizza Hut, Pizza Hut Delivery Romania and Taco

Bell Romania operate under the Yum International Franchise Agreement

Introduction to Sphera Franchise Group Geographical Footprint

Notes: (1) first in FSR and second in QSR, in terms of sales, (2) As of 30-Nov-2019

Bucharest

2

133

29

11

15

KFC

PH

Pizza Hut

Delivery

Source: Company Inforrmation

Food Court In Line Drive-through KFC restaurants

PH and PH Delivery restaurants

Taco Bell restaurants

4 Taco Bell

7

1

20

3

9

13

59 Total

15

5

❑ holds the franchise

rights to operate KFC-

branded restaurants in

Moldova




certain regions of Italy


rights to operate Taco

Bell-branded

restaurants in Romania


rights to operate Pizza

Hut-branded restaurants

in Romania (Pizza Hut

Dine-In and Pizza Hut

Delivery)

❑ holds sub-franchise

rights




Romania

Sphera at a glance

US Food Network S.A.American Restaurant

System S.A.

California Fresh Flavors

S.R.L.

US Food Network S.R.L.

- Italy

US Food Network

S.R.L. - Moldova

99.9% 99.9% 99.9% 100% 80%

Corporate structure

https://plus.google.com/u/0/photos/albums/ptsl1vu3lasug9g5foedbn59uuqpa4me2?pid=6455626547879270322&oid=112160008827919013803

6

Key Investment Highlights

1 2

3

4

56

7

8

Logo/Text

Leading food service

group operating a

portfolio of internationally

recognized brands

Operational

excellence proven by

consistent top ranked

among YUM

franchisees in Europe

Significant further growth

potential in Romania and

massive white space

opportunity in Italy

Enhanced marketing

capabilities investing

directly into notable

successful marketing

campaigns

Solid macroeconomic

environment in

Romania and favorable

trends in the restaurant

sector

Proven network roll-

out capabilities with

long track record of

successful growth

Highly profitable

business model with

strong cash generation

Scalable platform

with fully fledged

process in place

allowing efficient

roll-out

7

Leading Foodservice Group in Romania

#2

#1

#2

QSR

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)

✓ customer base consists mainly of young and

middle-aged people (78%), mostly educated

(at least 35% high school), with an average

household income

✓ 80 restaurants in Romania

as of 30-Nov-2019

player on the FSR segment

(nearly 3% market share)

#3 player on the overall chained

foodservice market (7% market share)

✓ C. 60% spontaneous brand awareness among

Romanian customers

✓ customer base consists mainly of young and middle-

aged people (78%), mostly educated (at least 41% high

school & 32% university), with a focus on families with

an average to medium-high household income

✓ 23 restaurants as of 30-Nov-2019

player on the Home delivery segment (nearly 21%

market share)

✓ Order accessibility: classic call center lines,

dedicated website platform, mobile

application

✓ 22 restaurants as of

30-Nov-2019

✓ C .35% electronic orders

Source: Company information; Euromonitor, Consumer Foodservice in Romania, May 2017; Deloitte Analysis

✓ First Taco Bell was opened in

Oct-2017 in Bucharest

✓ 8 restaurants as of 30-

Nov-2019

Sphera in the Romanian Foodservice Market

8

Leading Foodservice Group in Romania

Market Structure and Competitive Overview

Source: Euromonitor, Consumer Foodservice in Romania, 2018.

KFC: no. 2 but growing faster

FSR: Pizza Hut Dine-in no. 1 and increasing distance vs no. 2 Delivery: Pizza Hut Delivery no. 1

36%

33%

16%

12%

3%

Full-Service Restaurants

Cafés/Bars

Limited-Service Restaurants

Street Stalls/Kiosks

Self-Service Cafeterias

18%

82%

Chained Independent

RON22.0b sales

970m transactions

Source: Euromonitor, Consumer Foodservice in Romania, 2018. Source: Euromonitor, Consumer Foodservice in Romania, 2018.

Source: Euromonitor, Consumer Foodservice in Romania, 2018.

# Brand Product offering 2018 Mk share ‘13-’18 var. +pp.

1Burgers, Chicken,

Salads, Desserts22.6% -4.0%

2Chicken, Burgers,

Salads, Desserts16.1% +3.2%

3 Greek food 3.3% +2.8%

4 Salads 2.8% +2.0%

5 Turkey kebabs 2.5% +1.5%

Top 5 47.5% 5.5%


1 Pizza, Pasta, Burgers 2.7% +0.4%

2Pizza, Pasta,

traditional Italian food0.5% -0.1%

3 Pizza, Pasta, Burgers 0.5% +0.5%

4Traditional Serbian

food0.4% 0.0%

5Grill, Romanian and

Moldavian cuisine0.4% +0.4%

Top 5 4.8%


1 Pizza 2.0% +0.9%

2 Pizza 1.5% 0.0%

3 Pizza 1.4% +0.9%

4 Pizza 1.1% +0.6%

5 Pizza 0.8% -0.1%

Top 5 69.8%

Chained players generates below 20% of sector sales

9

330413

503635

76

97

112

1233

12

0

100

200

300

400

500

600

700

800

900

2015 2016 2017 2018

KFC Pizza Hut Taco Bell

Successful Track Record of Growth

Sustained Growth Across All Brands

Coupled with Strong and Resilient LfL Growth

KFC remaining the key contributor at ca. 82% of revenues

Source: Company information, Consolidated Pro Forma Financial Statements.

CAGR 2015-2018 24.0%

Note: (1) Includes KFC restaurants in Romania, Moldova and Italy. (2) As of 30-Nov-2018.

1 1 1 1 2 3 5 7 1118 23

32 37 40 4349 52 53

5965

72

88

1 1 1 1 3 3 3 3 3 3 44

5

11

1313

1313

15 14 14

18

21

22

23

1

34

78

10 9 9

9

12

17

22

2

5

'94

'95

'96

'97

'98

'99

'00

'01

'02

'03

'04

'05

'06

'07

'08

'09

'10

'11

'12

'13

'14

'15

'16

'17

'18

KFC Pizza Hut Dine-In Pizza Hut Delivery Taco Bell

Long Track Record of Successful Network Development

First KFC

in Romania

First KFC

outside

Bucharest

First Drive

Thru KFC

(Sibiu)

First Pizza

Hut

Delivery in

Romania

First Pizza

Hut outside

Bucharest

First Pizza

Hut Delivery

outside

Bucharest

First Pizza

Hut in

Romania

First KFC

in Rep.

Moldova

1 1 1 2 4 4 4 5 6 8

1115

23

35

48

54

6064

74 75 76

86

98

113

(1)

Initial Phase

Acceleration Phase

Transformation Phase

Development Phases

Sphera

holding

company

created

First KFC

in Italy

First Taco

Bell in

Romania

138

19.0%

17.0%

12.5%11.0%

10.0%

13.0%

3.1%

0.4%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

2015 2016 2017 2018

KFC Pizza Hut

10

80.2% 82.1% 84.1% 86.7%

0.0%

50.0%

100.0%

406

514

619

771

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

900.0

2015 2016 2017 2018

Profitable Business Model

Sales Restaurant Opex Structure

(RONm)Change

‘18 vs ‘15

6.5%

(% of sales)

Source: Company information, Consolidated Pro Forma Financial Statements

Note: (1) After excluding certain one-off expenses;

+0.5%

+5.0%

(0.1)%

0.0%

0.0%

+0.9%

+0.1%

67.9 73.5 69.3 72.4

16.7%

14.3%

11.2%9.4%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

0.0

20.0

40.0

60.0

80.0

100.0

120.0

2015 2016 2017 2018

Normalized EBITDA(1)

(RONm) Margin (%)

47.351.6

32.624.3

11.7%

10.0%

5.3%

3.1%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

2015 2016 2017 2018

Net profit

(RONm) Margin (%)

35.2% 35.6% 35.4% 35.7%

16.0% 17.9% 19.7% 21.0%

7.2%6.9% 7.4% 7.1%5.9%5.9%

5.9% 5.9%5.2%5.2%

5.3% 5.3%8.1%8.2%

7.9% 9.0%2.6%2.4%

2.5%2.7%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

2015 2016 2017 2018

Food and material expenses Payroll and employee benefits

Rent Royalties

Advertising Other operating expenses, net

Depreciation and amortisation

11

Identify locations around

Residential

areas

Traffic

Scalable Platform Allowing Efficient Roll-out

New Restaurant Opening ProcessRestaurant / Unit Selection Criteria

Market Analysis

Identify Best Locations

Traffic & Market Research

Project Management

Architects & Designers

Contractors & Vendors

Generators

(leisure – e.g. shopping

centres, cinemas or retail –

e.g. DIY, hypermarkets,

furniture stores etc)

Construction

Grand Opening

12

Operational Excellence as Top Ranked YUM Operator

Constant top ranker in YUM’s

European Franchisee Business

Units (EFBU) tables

✓ First place in CEE Guest Experience Survey (GES),

Leader out of 17 KFC markets

✓ 4 restaurants in Top 10 GES – Overall Satisfaction, out of

a total of 472 restaurants

#1

2016

2015

2014

2013

✓ Transition to GES; third place in CEE out of 15 KFC Markets

✓ 51 restaurants in Target – Overall Satisfaction

✓ First place in EFBU out of 11 KFC Markets

✓ 10 restaurants with maximum score

✓ First place in EFBU out of 12 KFC Markets

✓ 7 restaurants with maximum score

…due to excellent operational results

enabling a successful growth strategy!

KFC: most

loved QSR

brand in

Romania (1)

significantly closed the gap on McDonalds over last five

years: closest penetration levels to McDonalds in the region &

one of few markets in CEE successfully opening restaurants in

cities <100k inhabitants

# of total restaurants at year end in Romania

63 68

57 67

52 67

51 65

vs.

➔

developed successful

model for PH Dine-In

and Pizza Hut

Delivery enabling

expansion outside

capital city; resumed

expansion (for PH in

2015 and for Pizza Hut

Delivery in 2016)

+25 in 5Y +14 in 5Y

Note: (1) Sphera market surveys, Brand Image Tracker (YUM)

2017 68 71

✓ Third place in CEE Guest Experience Survey (GES) out

of 16 KFC markets

2018 76 79

✓ Fourth place in CEE Guest Experience Survey (GES)

out of 17 KFC markets (Moldova – 3rd place)

13

Enhanced Marketing Capabilities

Key Objectives

▪ Enhancement of marketing expenditure across

all brands results in increased brand awareness

and customer loyalty

▪ Working with award-winning partners for both

advertising and public relations

▪ Increased technology and digital focus across all

brands with online ordering topping 25% of Pizza

Hut Delivery sales, significantly above competition

▪ Optimised channel-mix and focus on the right mix

of objectives delivers business results

Marketing Strategy Highlights

Source: Company information and Deloitte Analysis

Contractual

obligation YUM to

invest at least 5% of

sales in marketing

Increase customer’s awareness of the

Company’s brands and loyalty to its product offering

Attract new customers in markets where Sphera

is present

Encourage existing customers to visit Sphera’s

restaurants more frequently

➢ Advertising produced in Romania with local

consumer insights to drive core messages

➢ KFC now has 48 weeks a year on TV, with PH

also on TV with 5 campaigns on average each

year

✓ KFC - the most loved brand in the sector

ahead of McDonald’s (one of the few countries

globally achieving this position)

✓ Pizza Hut benefits from the highest

awareness among key chains

14

Significant Further Growth Opportunities

Note: Size of segments do not constitute indication to their contribution to the overall growth.

Text

Long-term growth strategy based on four key pillars

Maintain Strong LFL Sales Growth

Continue Organic Network Roll-out

Develop a Significant KFC Business in Italy

Expand Brand Portfolio – Taco Bell

15


Key drivers:

➢ Macroeconomic backdrop to

remain highly supportive

➢ Continue to deliver strong

marketing

➢ Product innovation

➢ Price campaigns

❑ LfL performance for the reporting year is calculated by taking into account all the restaurants that have

been in uninterrupted operation from the beginning of the preceding year to the end of the reporting year

Maintain strong like-for-like growth on a supportive macroeconomic environment

19.0%

17.0%

12.5%

11.0%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

2015 2016 2017 2018

10.0%

13.0%

3.1%

0.4%

0%

2%

4%

6%

8%

10%

12%

14%

2015 2016 2017 2018

https://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwi5r9vgnYfVAhVISRoKHaNFCtoQjRwIBw&url=https://en.wikipedia.org/wiki/File:KFC_logo.svg&psig=AFQjCNHiDsYxVRekK1hCI5oJKp5BWn7fuw&ust=1500068762628882

16

2017 2018 2019 2020 2021 2022 Total

KFC RomaniaCommitment 4 6 7 8 9 9 43

Target 7 7 7 10 10 10 51


❑ Estimated market potential of ca. 30 restaurants

❑ Expand Pizza Hut Dine-in networks outside

Bucharest targeting major cities with a population

of below 200k

❑ Test latest YUM latest design and décor elements

in refurbishment of Flagship restaurant in

Bucharest (Sep 2017)

❑ Aim to cascade key elements to all new or

refurbished restaurants

KFC Network

❑ Continue development of KFC network to capture

market estimated potential of ca. 120 restaurants

over the next 5 years

❑ Future development with focus on Drive Thru (“DT”)

format in both Bucharest and outside the capital city

❑ Viability of DT format proven by McDonalds

expansion

❑ Smaller Drive Thru restaurant format in order to

enter smaller cities

❑ Estimated market potential of ca. 40 restaurants

❑ Growth aimed at targeting cities with population of below

150k

❑ Additional growth boost via sub-franchised locations –

with focus on smaller cities

Pizza Hut Dine-In Pizza Hut Delivery

Network roll-out plans (number of restaurants)

Continue organic network roll-out in Romania via distinct directions to capture

still existing market development potential

Pizza Hut

(Dine-in & Delivery)

Commitment 5 5 7 8 9 - 34

Target 6 7 7 8 8 8 44

17

1) Identify and develop restaurant locations within the areas

of operation that Sphera’s has already secured by the end

of 2022

2) Develop a sizeable KFC network in North East Italy and

Piemonte, and also secure further geographic

opportunities in the North of the country as they come

available

3) Build a diversified portfolio of restaurants, including initially

Food Courts, but further on Drive Thrus, as well as Flag

Ship / In Line restaurants, when the opportunity arises

4) Hire and retain a dedicated management team

headquartered in Milan to drive business and network

expansion in the country


Opportunity for Italian Market

❑ 3rd largest national economy in the Eurozone and the world’s 8th largest economy

❑ Top tourist destination in Europe and the world: 51 m. tourists/year, ranking 5th in the

world in terms of tourist incomings per year and 7th in terms of value (tourism receipts)

❑ Northern part of the country is most developed (highly industrialized, lower

unemployment rate and higher per capita income)

❑ Foodservice industry dominated by independent operators, but during the economic

crisis, the number of independent food service operators declined, while chain restaurants

increased their revenues

❑ Franchise chains benefits from brand awareness, marketing, activities and technical

and management support

❑ Growth in QSR is a feature of eating out market representing an opportunity for a brand like

KFC to gain market share from full service restaurants

❑ Italians are changing their food consumption behavior, with food habits switching from

“traditional home country” leading to market opportunities for KFC and QSR players

❑ Proof of concept, American branded chains have strongly penetrated the Italian market

(e.g. McDonalds with over 550 restaurants, and Burger King with over 140 restaurants)

Sphera’s Strategy for Italy

Network Roll-out Plans (number of restaurants)

2017 2018 2019 2020 2021 2022 Total

KFC North East Italy

and Piemonte

Commitment 3 6 8 7 7 1 32

Target 3 6 8 8 7 2 34

Develop a significant KFC business in Italy to become the largest KFC operator in

the country

18

5543 35 32 26 25 22 13 8

-4 -3 -3 -4 -6 -9 -9 -17 -16-20

-3

14

31

48

65

Romanian Italian Greek French Turkish Mexican American Chinese Lebanese

I would definetly try it I would definetly not try it

Attitude to a new QSR chain by type of cuisine, Nov 2015, %, N=1,500

Good Perception of Mexican Food by the Romania consumer

Taco Bell

❑ Develop Taco Bell as the contemporary, dynamic Californian brand,

opening 14 restaurants in the initial 3 and thereafter growing the brand

steadily across the country

❑ Focus initial development in Bucharest and the more affluent cities over

200k population

❑ Planned restaurants will be located at malls, other types of restaurants

(In Line, drive through) will be considered in the future

Developing Taco Bell


2017 2018 2019 2020 2021 2022 Total

Commitment 2 3 5 - - - 10

Target 2 3 5 2 2 - 14

Network Roll-out Plan (number of restaurants)❑ Romanians are in general willing to try Mexican food and would like to see

more variety in foodservice offering – e.g. more than American

High market potential as QSR brand with scalability

Taco Bell most profitable QSR brand in the US

Spicy food meets Romanian taste preferences

Restaurant profile / customer profile similar to KFC

Brand focuses on young consumers / social media

Expand brand portfolio through the launch of Taco Bell in Romania

19


KFC RomaniaCommitment 4 6 7 8 9 9 43

Target 7 7 7 10 10 10 51

Taco Bell RomaniaCommitment 2 3 5 - - - 10

Target 2 3 5 2 2 - 14

KFC Italy (North-East

& Piemonte)

Commitment 3 6 8 7 7 1 32

Target 3 6 8 8 7 2 34

Restaurants roll-out plan by brands

TOTAL OPENINGSCommitment 14 20 27 23 25 10 129

Target 18 23 27 28 27 20 143

2017 2018 2019 2020 2021 2022 Total

Pizza Hut

(Dine-in & Delivery)

Commitment 5 5 7 8 9 - 34

Target 6 7 7 8 8 8 44

20


Total Restaurants at year-end

5360 65

7279

8696

106116

3

9

17

25

32

34

23

27

33

39

46

53

61

69

77

2

5

10

12

14

14

0

50

100

150

200

250

2014 2015 2016 2017 2018 2019 2020 2021 2022

KFC KFC Italy Pizza Hut Taco Bell

Notes: (1) Includes KFC Romania and KFC Moldova

(1)

76

87

98

116

139

166

194

221

241

113

138

Full-year results: 2018

22

Sphera – 2018 key events

▪ Consolidated financial results Full-year 2018

RONm Y/Y* Margin

▪ Sales 717.2 +34.5%

▪ Restaurant profit 103.2 +11.5% 13.4%

▪ Normalized EBITDA 72.4 +10.3% 9.4%

▪ EBITDA 51.6 +0.4% 6.7%

▪ Net Profit 24.0 (22.8)% 3.1%

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 store opening target missed by 1 store; 2 Stores planned for December postponed due to mall opening delay

KFC and Pizza Hut continue to lead top of mind awareness in Romania; strong operational performance with all brands

performing well in league tables measuring operational metrics and customer feedback

KFC delivery services significantly extended in Bucharest and introduced in other cities; now operating 16 stores in Bucharest

(covering 70% of the city) and a further 5 stores outside Bucharest (3 in Cluj & 2 in Oradea) with growing contribution to sales

Pizza Hut Dine-In new menu rolled out in all restaurants, supported by strong marketing campaign with TV coverage resulting in

significant bounce back of sales by high single-digit growth. Pizza Hut Delivery experienced slow down in H2 due to aggressive

growth of aggregators

Italy ahead of growth plan with 10 stores open by 2018 YE with strong pipeline for 2019, including a contract signed with Grandi

Stazioni to provide accelerated development plan in Italy, over and above current geographies

Significant subsequent event: New CEO and CFO to assume roles starting May-2019

Taco Bell development target fully reached, including the first store opened outside Bucharest (Cluj, Q4 2018)

23

▪ Unemployment rate fell below 4% in Q4-2018

▪ Average salary increased 9.7% in 2018 and 42% since

2015, with 2019 growth expected at around 8-10%

Macro environment has become more challenging

Significant pick-up in CPI, strong salary growth and record low unemployment

▪ CPI has fallen 2pp since June peak to below 3.5% but

expected to resume growth on energy and salary spikes

▪ Retail sales volume Y/Y growth remained stable at around

5% in Q4-2018, with full-year average at around 6%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

Jan-15 Jan-16 Jan-17 Jan-18

Annualized CPI

0%

1%

2%

3%

4%

5%

6%

7%

8%


Unemployment rate

0%

5%

10%

15%

20%

25%

30%


Annualized average and minimum gross salaries (Y/Y% growth rates)

Average gross salary

Minimum gross salary

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%


Retail sales (mainly food & drinks) - Y/Y%

0%

20%

40%

60%

80%

100%

0

1,000

2,000

3,000

4,000

5,000

6,000


Salaries

Average gross salary (Y/Y% change) - rhs


Minimum salary

(RON) (Y/Y%)

Sales performance by brands

25

Brand performance: KFC Romania

Sales growth analysis

Same-store

performance

All-store

performance

▪ All-store sales growth of 21.5% Y/Y in FY-2018

supported mainly by same-store growth of 11.0%;

▪ The 13 net openings (since Jan-2017) contributed

11.5pp to the Y/Y growth in FY-2018, with six of

these openings being in new cities.

▪ Same-store sales growth of 11.0% Y/Y in FY-2018

on the back of continued strong performance from

the Drive-Thru format, as well as a better

performance of the restaurants located outside

Bucharest;

▪ Delivery launched in 21 stores during 2018 with

increasing impact on sales growth;

▪ Average ticket was up 11.0% and transactions

were flat in FY-2018 vs FY-2017.

17.0%

12.5%

11.0% 10.7%

15.6%

14.0%

9.9%

11.8%

8.5%

11.4%12.3%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2016 2017 2018 Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

26.4%

17.7%

21.5%

18.0%

20.6%18.8%

14.0%

19.6%20.1%20.4%

23.2%

0%

5%

10%

15%

20%

25%

30%

2016 2017 2018 Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

26

Brand performance: Pizza Hut


Same-store

performance

All-store

performance

▪ All-store sales growth of 9.5% Y/Y in FY-2018,

with virtually all growth being contributed by the 12

stores opened starting Jan-2017 (of which 7 in

existing cities);

▪ Same-store sales grew 0.4% Y/Y in FY-2018, with

an improving performance from the Dine-In format

(supported by a dedicated advertising campaign

for the promotion of the new product menu) being

offset by weaker Delivery sales (due to both new

store sales cannibalization and the increasing

presence of food aggregators);

▪ Average ticket was up 9.6% and transactions were

down 8.4% in FY-2018 vs FY-2017.

13.0%

3.1%

0.4%1.4%

5.6% 5.4%

0.6%1.6%

-2.0%

1.1% 0.7%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

2016 2017 2018 Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

28.0%

15.5%

9.5%

16.8%16.6%14.9%

14.1%

9.8%8.4%

11.4%

8.5%

0%

5%

10%

15%

20%

25%

30%

2016 2017 2018 Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

Development

28

Development

Restaurant openings in 2018

Openings

2018

8

5

3

1

25

Total stores

end-2018

78

22

5

23

138

2018 Initial

Plan (2)

9(1)

26

3

2

5

(1) Of which 2x KFC Romania and 1x KFC Italy were part of the 2017 plan.

Total stores

BoY

70

17

2

22

113

Difference vs

plan

(1)

0

0

(1)

(1)

8 10 7(1)2 1

29

KFC Bucharest Sun Plaza (DT)

30

KFC Italy – Venice Santa Lucia

31

Pizza Hut Dine-in Craiova

32

Pizza Hut Delivery Brasov

33

TB Bucharest Park Lake

Brand news

35

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 same-store sales growth;

▪ Activities to build KFC as a digital brand have been significantly enhanced by making the brand more relevant for the millennials

(Studycoins, online “smart job” platform, Social Me and FriendZone social entertainment channels, ;

▪ Delivery services expanded to 16 stores in Bucharest (covering 70% of the city) and introduced in Cluj and Oradea as well,

generating incremental sales;

▪ Roll-out of kiosks completed in 6 stores and digital menu-boards completed in 24 stores;

▪ New menu (designed in cooperation with chef Nico Lontras) rolled out in all dine-in restaurants by the end of Q2, being later

supported by strong marketing campaign with TV coverage resulting in significant bounce back of sales by high single-digit growth.

▪ Pizza Hut Delivery experienced slow down in H2 due to aggressive growth of aggregators; overall online orders stabilizing at

around 35% of delivery sales;

▪ Taco Bell continued to build brand equity and top line by opening three new stores in 2018, including the first one outside Bucharest

(in Cluj);

▪ Launch of the online platform “Proud supporters of beginners” as a brand manifesto for the Live Mas philosophy, while being

relevant and insightful for the Romanian consumers;

▪ Exceeded the development commitment in Italy by reaching 10 stores at the end of 2018

▪ Further development outside current geographies already achieved, following the signing of a contract with Grandi Stazioni and

opening of a store near Florence (Il Gigli, one of the busiest commercial centers in Italy)Italy

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

38

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);

▪ Restaurant operating profit up 4.5% Y/Y, with margin down 2.6pp, especially on cost of food and other operating expenses (mainly, new openings and new

areas of business)

▪ excluding KFC Italy and Taco Bell, restaurant operating profit margin would have higher by 1.2pp to 14.6%;

▪ G&A expenses up 21.1% Y/Y, reaching 9.5% of sales; normalized G&A expenses up 13.5% Y/Y, reaching 6.8% of sales;

▪ Normalized EBITDA* up 4.5% Y/Y and normalized EBITDA margin contracted 1.8pp to 9.4% of sales, virtually due to higher restaurant expenses;

▪ excluding KFC Italy and Taco Bell, normalized EBITDA margin would have higher by 1.6pp Y/Y to 11.0%;

▪ EBITDA fell 6.2% Y/Y and EBITDA margin contracted 2.2pp to 6.7% of sales;

▪ Net profit was down 25.5% Y/Y and net profit margin fell by 2.1pp to 3.1% of sales.

Y/Y% % of Sales

Data in RON'000 Dec-18 Dec-17 2018/2017 Dec-18 Dec-17 Δ%

Restaurant sales 771,197 618,804 24.6%

Restaurant expenses 668,018 520,031 28.5% 86.6% 84.0% 2.6%

Food and material 275,497 219,232 25.7% 35.7% 35.4% 0.3%

Payroll and employee benefits 161,874 121,623 33.1% 21.0% 19.7% 1.3%

Rent 54,372 45,512 19.5% 7.1% 7.4% -0.3%

Royalties 45,532 36,567 24.5% 5.9% 5.9% 0.0%

Advertising 41,059 32,727 25.5% 5.3% 5.3% 0.0%

Other operating expenses, net 69,227 48,720 42.1% 9.0% 7.9% 1.1%

Depreciation and amortization 20,458 15,650 30.7% 2.7% 2.5% 0.1%

Restaurant operating profit 103,179 98,773 4.5% 13.4% 16.0% -2.6%

General and administration expenses, net 73,048 60,297 21.1% 9.5% 9.7% -0.3%

Operating profit 30,131 38,476 -21.7% 3.9% 6.2% -2.3%

Finance costs 3,102 2,306 34.5% 0.4% 0.4% 0.0%

Finance income 106 172 -38.1% 0.0% 0.0% 0.0%

Profit before tax 27,135 36,342 -25.3% 3.5% 5.9% -2.4%

Income tax expense 2,874 3,786 -24.1% 0.4% 0.6% -0.2%

Profit for the period 24,262 32,556 -25.5% 3.1% 5.3% -2.1%

EBITDA 51,638 55,065 -6.2% 6.7% 8.9% -2.2%

Normalised EBITDA* 72,360 69,267 4.5% 9.4% 11.2% -1.8%

*) Excluding non-recurring expenses of RON 20.7m in 2018 and RON 14.2m in 2017.

39


Breakdown of 2018 results by Group companies

Y/Y Sales growth by companies Contribution to Sales growth by companies Contribution to EBITDA by companies

24.6%21.5%

15.0%

212%

9.7%

318% 227%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

Sph

era

US

FN

(R

O)

US

FN

(M

D)

US

FN

(IT

)

AR

S

CF

F

Oth

er

24.6%

16.8%

0.2%

4.2%

1.7% 1.5%0.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Sph

era

US

FN

(R

O)

US

FN

(M

D)

US

FN

(IT

)

AR

S

CF

F

Oth

er

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 491,278 116,150 8,105 40,540 12,075 0 (130) 668,018

Food and material 221,240 33,201 4,060 12,332 4,663 0 (0) 275,497

Payroll and employee benefits 108,857 36,302 1,464 12,043 3,208 0 0 161,874

Rent 39,200 10,347 763 2,933 1,132 0 (2) 54,372

Royalties 35,166 7,188 586 2,317 275 0 0 45,532

Advertising 29,010 8,338 307 2,616 864 0 (76) 41,059

Other operating expenses, net 44,860 15,990 623 6,400 1,405 0 (51) 69,227

Depreciation and amortization 12,946 4,784 302 1,898 528 0 0 20,458

Restaurant operating profit 95,182 6,670 1,659 (1,927) (42) 88,312 (86,675) 103,179

General and administration expenses, net 42,127 11,521 362 4,543 2,657 48,207 (36,369) 73,048

Operating profit 53,055 (4,850) 1,296 (6,470) (2,698) 40,105 (50,306) 30,131

Finance costs 1,613 949 61 1,253 521 1,268 (2,562) 3,102

Finance income 1,672 7 0 24 0 965 (2,562) 106

Profit before tax 53,115 (5,793) 1,235 (7,699) (3,219) 39,802 (50,306) 27,135

Income tax expense 2,626 1,448 211 (1,783) 108 264 0 2,874

Profit for the period 50,489 (7,241) 1,025 (5,916) (3,327) 39,538 (50,306) 24,262

EBITDA 66,359 124 1,652 (4,561) (2,099) 40,468 (50,306) 51,638

Normalised EBITDA* 78,769 124 1,652 (4,561) (2,099) 60,272 (61,798) 72,360

40


Restaurant operating expenses and margin

▪ Operational expenses increased 28.5% Y/Y to RON 668.0m in FY-2018;

▪ As percentage of sales, operational expenses increased by 2.6pp Y/Y to 86.6% in FY-2018, of which:

▪ +1.3pp from payroll expenses

▪ +1.1pp from other operating expenses

▪ +0.3pp from cost of food and materials

▪ excluding KFC Italy and Taco Bell, restaurant operating profit margin would have higher by 1.2pp to 14.6%;

Contribution to change in restaurant opex ratio

Contribution to change in restaurant profit

Y/Y% % of Sales



Food and material 275,497 219,232 25.7% 35.7% 35.4% 0.3%


Rent 54,372 45,512 19.5% 7.1% 7.4% -0.3%

Royalties 45,532 36,567 24.5% 5.9% 5.9% 0.0%

Advertising 41,059 32,727 25.5% 5.3% 5.3% 0.0%




41


G&A expenses

▪ In FY-2018, G&A ratio improved 0.2pp Y/Y to 9.5% of sales (RON 73.0m):

▪ Normalized G&A fell 0.7pp Y/Y to 6.8% of sales;

▪ Note: Other expenses include non-recurring expenses worth RON 20.7m, of which:

▪ RON 11.5m - provision for potential liabilities (VAT and late penalties) that the Sphera estimates to

pay as result of the tax audit performed at USFN RO by the fiscal authorities for the periods 2013 -

2017 (VAT) and 2012-2016 (income tax).

▪ RON 8.3m - impairment loss in relation with the goodwill recorded on the acquisition of ARS,

▪ RON 0.95m - compensations claimed in court and paid to a former employee who has suffered

injuries in a work accident,

▪ Note on Sphera stand-alone results:

▪ G&A expenses include an impairment loss of investment in ARS in amount of RON 19.8m; this

impairment loss may be reversed in the future financial years, subject to improving performance of

ARS.

Contribution to growth in G&A expenseY/Y% % of Sales

Data in RON'000 Dec-18 Dec-17 2018/2017 Dec-18 Dec-17

General and administration

expenses (net), of which: 73,048 60,296 21.1% 9.5% 9.7%

Employee benefits 30,563 34,695 -11.9%

Third-party expenses 7,890 13,605 -42.0%

Depreciation 1,049 939 11.7%

Rent 3,478 2,372 46.6%

Banking charges 2,921 1,921 52.1%

Transport 3,063 2,599 17.8%

Other expenses 24,083 4,165 478.3%

Consolidated financials

43*) Excluding non-recurring expenses of RON 20.7m in 2018 and RON 14.2m in 2017.

Sphera – Consolidated financial performance


▪ 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 rate;

▪ Restaurant operating profit up 11.5% Y/Y, with margin down 2.8pp, especially on salary costs and impact from new openings and new areas of business;

▪ G&A expenses up 30.6% Y/Y, down 0.3pp to 9.5% of sales, mainly due to the new businesses and non-recurring expenses;

▪ Normalized G&A* expenses up 25.4% Y/Y, down 0.5pp to 6.8% of sales, with large part of the growth being accounted for by KFC Italy and Taco Bell operations;

▪ EBITDA grew 0.4%% Y/Y and EBITDA margin contracted 2.3pp to 6.7%, mainly driven by lower restaurant operating margin;

▪ Normalized EBITDA* rose 10.3% Y/Y and normalized EBITDA margin contracted 2.1pp to 9.4%, mainly due to higher restaurant expenses;

▪ Net profit decreased 22.8% Y/Y and net profit margin fell by 2.3pp to 3.1%.

Y/Y% % of Sales



Dividend revenue 0 0


Food and material 275,497 206,704 33.3% 35.7% 36.1% -0.3%


Rent 54,372 41,615 30.7% 7.1% 7.3% -0.2%

Royalties 45,532 33,885 34.4% 5.9% 5.9% 0.0%

Advertising 41,059 30,231 35.8% 5.3% 5.3% 0.0%





Operating profit 30,131 36,603 -17.7% 3.9% 6.4% -2.5%

Finance costs 3,102 2,108 47.2% 0.4% 0.4% 0.0%

Finance income 106 166 -35.9% 0.0% 0.0% 0.0%


Income tax expense 2,874 3,233 -11.1% 0.4% 0.6% -0.2%


EBITDA 51,638 51,424 0.4% 6.7% 9.0% -2.3%

Normalised EBITDA* 72,360 65,626 10.3% 9.4% 11.4% -2.1%

44


Statement of financial position

Data in RON'000 31-Dec-18 31-Dec-17 Change

Assets

Non-current assets 229,173 176,123 53,050

Property, plant and equipment 158,122 105,220 52,902

Intangible assets 62,150 67,471 (5,321)

Deposits for rent guarantee 5,219 1,288 3,931

Deferred tax assets 3,682 2,144 1,538

Current assets 122,979 73,291 49,688

Inventories 10,564 8,509 2,055

Trade and other receivables 16,444 8,454 7,990

Prepayments 5,306 3,673 1,633

Cash and short-term deposits 90,665 52,655 38,010

Assets held for sale - 195 (195)

Total assets 352,152 249,609 102,543

Equity and liabilities

Total equity 128,825 104,544 24,281

Equity attributable to equity holders of the parent 128,679 104,525 24,154

Issued capital 581,990 581,990 -

Share premium (520,578) (520,578) -

Retained earnings 67,247 43,191 24,056

Foreign currency translation reserve 20 (78) 98

Non-controlling interests 146 19 127

Non-current liabilities 91,536 42,191 49,345

Interest-bearing loans and borrowings 86,787 39,520 47,267

Trade and other payables 4,749 2,671 2,078

Current liabilities 131,790 102,874 28,916

Trade and other payables 82,658 77,682 4,976

Interest-bearing loans and borrowings 37,669 25,192 12,477

Provisions 11,463 11,463

Total liabilities 223,327 145,065 78,262

Total equity and liabilities 352,152 249,609 102,543

▪ Total assets increased by 41% in 2018 to RON

352.2m, principally on the back of the continued

expansion of the group’s operations through the

opening of new units, which were mainly financed by

bank loans.

▪ Non-current assets increased 30% in 2018 to RON

229.2m, representing 65% of total assets;

▪ Current assets increased 68% to RON 123.0m,

representing 35% of total assets; the majority of

current assets are represented by cash and short-

term deposits, which reached 90.6m at the end of

2018;

▪ Total equity increased 23% to RON 128.8m, due to

the incorporation of net profits;

▪ Total interest-bearing loans and borrowings

increased 92% to RON 124.4m, mainly as a result of

new bank loans aimed at financing the network

expansion.

45

Sphera – Stand-alone financial performance


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 subsidiaries 19,804 -

Other expenses 6,805 2,424

Total expenses 48,207 23,525

Operating profit/(loss) 40,105 (11,105)

Finance costs 1,268 141

Finance income 965 31

Profit/(Loss) before tax 39,802 (11,215)

Income tax expense/(credit) 264 (1,600)

Profit/(Loss) for the period 39,538 (9,615)

Total comprehensive income for the period, net of tax 39,538 (9,615)

Interim results: Jan-Sep 2019

47

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, as delivery operations gain momentum

Pizza Hut sales recover on stronger Delivery activity, pushing 9-month EBITDA in positive territory

KFC Italy and Taco Bell displayed another quarter of significant same-store sales and margin performance, sending 9-month

EBITDA above breakeven level

▪ Interim results* Jan-Sep 2019 Q3-2019

RONm Y/Y* Margin RONm Y/Y Margin

▪ Sales 694.3 +25.9% 248.7 +23.5%

▪ Restaurant profit 88.2 +18.3% 12.7% 38.8 +38.5% 15.6%

▪ Normalized EBITDA 67.2 +26.0% 9.7% 30.5 +45.1% 12.3%

▪ Net Profit 38.2 17.9% 5.5% 20.1 +47.4% 8.1%

*) excluding the impact from the adoption of IFRS 16.

48

▪ Unemployment rate remains stable at c. 4.0% in Q3-2019

▪ Average salary up 12.4% in Q3-2019 and 13.6% in 9-mth

2019

Macro environment

CPI stabilizes as labour market remains tight

▪ CPI edges lower to 3.5% in Sep-2019

▪ Retail sales Y/Y growth reaches 5.9% in Q3-2019 and 5.1%

in 9-mth 2019

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%


Retail sales (mostly food & drinks)

0%

10%

20%

30%

40%

50%

60%

0

1,000

2,000

3,000

4,000

5,000

6,000


Salaries

Average gross salary (Y/Y% change) - rhs


Minimum salary

(RON) (Y/Y%)

0%

1%

2%

3%

4%

5%

6%

7%

8%


Unemployment rate

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%


Annualized CPI

Sales performance by brands

50

Brand performance: KFC Romania


Same-store

performance

All-store

performance

▪ All-store sales growth of 17.1% Y/Y in Q3-2019

with same-store growth reaching 7.7%;

▪ The 9 net openings (since Jan-2018) contributed

c. 9.5pp to the Y/Y growth in Q3-2019.

▪ Same-store sales growth of 7.7% Y/Y in Q3-2019

lower than in the previous two quarters as the

growth rates of a number of stores cooled down

from high double-digit levels;

▪ Average ticket was up 12.6% and transactions fell

1.9% in 9-mth 2019 vs 9-mth 2018.

26.4%

17.7%

21.5%

19.6%20.1%20.4%

23.2%

19.5%18.9%17.1%

0%

5%

10%

15%

20%

25%

30%

2016 2017 2018 Q12018

Q22018

Q32018

Q42018

Q12019

Q22019

Q32019

Q42019

17.0%

12.5%

11.0% 10.7%

15.6%

14.0%

9.9%10.9%

13.0%

7.7%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2016 2017 2018 Q12018

Q22018

Q32018

Q42018

Q12019

Q22019

Q32019

Q42019

51

Brand performance: Pizza Hut


Same-store

performance

All-store

performance

▪ 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;

▪ Same-store sales advanced 1.0% Y/Y in Q3-2019,

with the improving performance compared to Q2-

2019 being helped by a strong recovery in

Delivery sales;

▪ Average ticket was up 5.0% and transactions were

down 5.3% in 9-mth 2019 vs 9-mth 2018.

28.0%

15.5%

9.5% 9.8%8.4%

11.4%

8.5%7.3% 7.4% 7.1%

0%

5%

10%

15%

20%

25%

30%

2016 2017 2018 Q12018

Q22018

Q32018

Q42018

Q12019

Q22019

Q32019

Q42019

13.0%

3.1%

0.4%

1.6%

-2.0%

1.1% 0.7%

-2.0%

-0.5%

1.0%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

2016 2017 2018 Q12018

Q22018

Q32018

Q42018

Q12019

Q22019

Q32019

Q42019

Development

53

Development

Restaurant openings in 2019

Openings

Q1-2019

0

0

0

0

0

Total stores

end Q3-2019

2019 Opening

Plan

8

24

5

0

1

Total stores

BoY

0 10

79

22

7

23

146

15

78

22

5

23

138

10

Openings

Q2-2019

1

0

2

0

7

4

Openings

Q3-2019

0

0

0

0

1

1

Brand news

55

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 product (Crispy Hot Dog),

building on entry level value with the objective of maximizing transactions, as well as an abundant

meal for one (The Box), with medium-term role of increasing average spend;

• KFC Haunted Camping – Untold: the first partnership of KFC with a music festival in Romania was an

activation dedicated to the popular Garlic Sauce; the brand challenged the consumers to enter a

competition to win tickets for the festival and accommodation in the KFC camp located in the most

haunted forest in the world (Hoia-Baciu Forest) with the garlic sauce serving as protection.

Self-ordering

kiosks & digital

menu boards

▪ Roll-out of

kiosks

completed in 24

stores

▪ Roll-out of digital

menu-boards

completed in 58

stores

KFC Arena

▪ KFC and gaming are a natural

match that the brand

approached this year for the

first time by launching a

CS:GO tournament for non-pro

teams in partnerships with one

of the biggest gaming events

in Romania, Bucharest

Gaming Week

▪ Over 1.000 unique gamers

registered for the online

qualifiers, and over 200.000

people watched the live

streaming

56

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 levels, the brand communicated “All you can eat Pizza”, the most

iconic offer in Pizza Hut, by promoting our hero product (Pan Pizza) into our most valuable offer;

the campaign was communicated through an anniversary price (25 Lei);

▪ Pizza Hut Delivery launched for a second year Couple Combo, one of our best abundant value

offers (2 medium pizza plus 2 bottles of soda for a special price), with very good results in terms of

both sales and transactions;

▪ Overall online orders approaching 50% of delivery sales, of which over 20% coming through

aggregator platforms.

▪ Communication focused on innovation by launching new products, with the aim of creating

favorability & differentiation from local competitors and build deeper connection with consumers to

grow the brand cult by communicating the core products as being our unique, creative, innovative

& iconic

• Silver Drum for Untold Haunted Camping - Protected by KFC Garlic Sauce

Silver Drum for KFC Social Entertainment Channel at Golden Drum 2019th edition

• Webstock 2019:

1st place – KFC Best Brand on YouTube

1st place – KFC Best Online Video Show (Random)

1st place – Best Experiential Campaigns for Untold Haunted Camping by KFC Garlic Sauce

2nd place – KFC Best Online Video Shows (Friendzone)

3rd place – KFC Best Digital Innovation (Smartchat)

57

Marketing

Q3-2019 campaigns

Financials

59

Financial performance: 9-mth 2019


▪ 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 margin down 0.6pp, especially on labour (+2.2pp) and other operating expenses (+1.0pp), while cost of food

improved (-1.8pp);

▪ G&A expenses up 12.3% Y/Y, reaching 6.1% of sales (down 0.7pp Y/Y);

▪ Normalized EBITDA up 92.1% Y/Y, with EBITDA margin up 5.1pp to 14.8% of sales, mainly due to adoption of IFRS 16 as well as to lower G&A expenses;

▪ excluding KFC Italy and Taco Bell, EBITDA margin would have been 5.1pp higher Y/Y at 15.9% of sales;

▪ Net profit down 1.8% Y/Y, with net profit margin down 1.3pp to 4.6% of sales, due to the incremental finance cost (especially forex depreciation) as a result of

IFRS 16 adoption.

*) Excluding a non-recurring expense for litigation worth RON 0.95m recorded in Jan-Sep 2018.

Y/Y% % of Sales

Data in RON'000 Sep-19 Sep-18 2019/2018 Sep-19 Sep-18 Δ%





Rent 16,063 40,014 -59.9% 2.3% 7.3% -4.9%

Royalties 40,780 32,497 25.5% 5.9% 5.9% 0.0%

Advertising 34,230 30,421 12.5% 4.9% 5.5% -0.6%





Operating profit 47,207 36,907 27.9% 6.8% 6.7% 0.1%

Finance costs 12,926 2,071 524.3% 1.9% 0.4% 1.5%

Finance income 121 118 2.0% 0.0% 0.0% 0.0%


Income tax expense 2,570 2,549 0.9% 0.4% 0.5% -0.1%


EBITDA 102,468 52,394 95.6% 14.8% 9.5% 5.3%

Normalised EBITDA* 102,468 53,340 92.1% 14.8% 9.7% 5.1%

60


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 transition, thus not restating comparative amounts for the comparative periods presented;

▪ At the commencement date of a lease, a lessee recognizes a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use

the underlying asset during the lease term (i.e., the right-of-use asset). Lessees are required to separately recognize the interest expense on the lease liability

and the depreciation expense on the right-of-use asset;

▪ In 9-mth 2019, following the adoption of IFRS 16, Sphera recognized additional depreciation expense of RON 31.5m (4.5% of sales) and finance cost of RON

8.1m (1.2% of sales) – of which RON 2.7m in forex expenses related to the revaluation of FCY-denominated lease liability (c. EUR 47m); concomitantly, rent

expenses were reduced by RON 33.1m (4.8% of sales);

▪ As a result, EBITDA margin was increased by 5.1pp to 14.8%, while net profit was reduced by 0.9pp to 4.6%.

% of Sales

Including Excluding Impact of Including Excluding Impact of

Data in RON'000 impact of impact of IFRS 16 impact of impact of IFRS 16

IFRS 16 IFRS 16 adoption IFRS 16 IFRS 16 adoption

Restaurant sales 694,317 694,317 0 100.0% 100.0%

Restaurant expenses 604,825 606,107 -1,282 87.1% 87.3% -0.2%

Food and material 235,421 235,421 0 33.9% 33.9%

Payroll and employee benefits 158,397 158,397 0 22.8% 22.8%

Rent 16,063 49,123 -33,060 2.3% 7.1% -4.8%

Royalties 40,780 40,780 0 5.9% 5.9%

Advertising 34,230 34,230 0 4.9% 4.9%

Other operating expenses, net 67,871 67,625 246 9.8% 9.7%

Depreciation and amortization 52,062 20,530 31,532 7.5% 3.0% 4.5%

Restaurant operating profit 89,492 88,210 1,282 12.9% 12.7% 0.2%

General and administration expenses, net 42,285 42,644 -359 6.1% 6.1% -0.1%

Operating profit 47,207 45,566 1,642 6.8% 6.6% 0.2%

Finance costs 12,926 4,822 8,104 1.9% 0.7% 1.2%

Finance income 121 121 0 0.0% 0.0%

Profit before tax 34,402 40,864 -6,463 5.0% 5.9% -0.9%

Income tax expense 2,570 2,650 -80 0.4% 0.4%

Profit for the period 31,831 38,214 -6,383 4.6% 5.5% -0.9%

EBITDA 102,468 67,223 35,245 14.8% 9.7% 5.1%

61


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 operating profit up 18.3% Y/Y, with margin down 0.8pp, especially on labour (+2.2pp) and other operating expenses (+1.0pp), while cost of food

improved (-1.8pp);

▪ G&A expenses up 13.2% Y/Y, reaching 6.1% of sales (down 0.7pp Y/Y);

▪ Normalized EBITDA up 26.0% Y/Y, with EBITDA margin unchanged at 9.7% of sales, helped by lower G&A expenses;


▪ Net profit up 17.9% Y/Y, with net profit margin down 0.4pp to 5.5% of sales.

*) Excluding a non-recurring expense for litigation worth RON 0.95m recorded in Jan-Sep 2018.

Y/Y% % of Sales






Rent 49,123 40,014 22.8% 7.1% 7.3% -0.2%

Royalties 40,780 32,497 25.5% 5.9% 5.9% 0.0%

Advertising 34,230 30,421 12.5% 4.9% 5.5% -0.6%





Operating profit 45,566 36,907 23.5% 6.6% 6.7% -0.1%

Finance costs 4,822 2,071 132.9% 0.7% 0.4% 0.3%

Finance income 121 118 2.0% 0.0% 0.0% 0.0%

Profit before tax 40,864 34,955 16.9% 5.9% 6.3% -0.5%

Income tax expense 2,650 2,549 4.0% 0.4% 0.5% -0.1%

Profit for the period 38,214 32,406 17.9% 5.5% 5.9% -0.4%

EBITDA 67,223 52,394 28.3% 9.7% 9.5% 0.2%


62

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 operating profit up 38.5% Y/Y, with margin up 1.7pp, as lower cost of food (-3.2pp) and advertising (-0.5pp) were partly offset by higher labour (+0.6pp)

and other operating expense (+1.1pp);

▪ G&A expenses up 28.9% Y/Y, reaching 6.4% of sales (up 0.3pp Y/Y);

▪ Normalized EBITDA up 45.1% Y/Y, with EBITDA margin improving 1.8pp to 12.3% of sales, helped by higher restaurant margin;


▪ Net profit up 47.4% Y/Y, with net profit margin up 1.3pp to 8.1% of sales.

*) Excluding a non-recurring provision for litigation worth RON 0.93m recorded in Q3-2018.

Y/Y% % of Sales

Data in RON'000 Q3-2019 Q3-2018 2019/2018 Q3-2019 Q3-2018 Δ%


Restaurant expenses 209,969 173,490 21.0% 84.4% 86.1% -1.7%



Rent 17,481 14,453 21.0% 7.0% 7.2% -0.1%

Royalties 14,705 11,846 24.1% 5.9% 5.9% 0.0%

Advertising 13,843 12,235 13.1% 5.6% 6.1% -0.5%



Restaurant operating profit 38,781 28,003 38.5% 15.6% 13.9% 1.7%

General and administration expenses, net 16,012 12,424 28.9% 6.4% 6.2% 0.3%

Operating profit 22,768 15,579 46.1% 9.2% 7.7% 1.4%

Finance costs 1,355 911 48.7% 0.5% 0.5% 0.1%

Finance income 58 (30) 293.7% 0.0% 0.0% 0.0%

Profit before tax 21,471 14,638 46.7% 8.6% 7.3% 1.4%

Income tax expense 1,354 989 36.9% 0.5% 0.5% 0.1%

Profit for the period 20,118 13,649 47.4% 8.1% 6.8% 1.3%

EBITDA 30,512 21,011 45.2% 12.3% 10.4% 1.8%


63

Financial performance: Margin trend (Quarterly and YTD)

(excluding impact of IFRS 16 adoption)2

2.5

%

20

.8%

26

.6%

27

.8%

26

.1%

28

.4%

23

.5%

22

.5%

21

.6%

23

.4%

24

.6%

22

.5%

27

.3%

25

.9%

28

.8%

201

8-Q

1

Q2

Q3

Q4

201

9-Q

1

Q2

Q3

201

8-Q

1

Q2

Q3

Q4

201

9-Q

1

Q2

Q3

FY

Quarter YTD 2019Budget

Restaurant sales - Y/Y% growth

15

.3%

11

.4%

13

.9%

13

.0%

10

.2%

12

.0%

15

.6%

15

.3%

13

.3%

13

.5%

13

.4%

15

.3%

11

.1%

12

.7%

12

.0%

201

8-Q

1

Q2

Q3

Q4

201

9-Q

1

Q2

Q3

201

8-Q

1

Q2

Q3

Q4

201

9-Q

1

Q2

Q3

FY


Restaurant operating profit margin

7.3

%

6.6

%

6.2

%

7.1

%

6.1

%

5.9

%

6.4

%

7.3

%

6.9

%

6.7

%

6.8

%

7.3

%

6.0

%

6.1

%

6.0

%

201

8-Q

1

Q2

Q3

Q4

201

9-Q

1

Q2

Q3

201

8-Q

1

Q2

Q3

Q4

201

9-Q

1

Q2

Q3

FY


Normalized G&A ratio

11

.1%

7.5

%

10

.4%

8.7

%

7.2

%

9.2

%

12

.3%

11

.1%

9.2

%

9.7

%

9.4

%

11

.1%

8.2

%

9.7

%

9.7

%

201

8-Q

1

Q2

Q3

Q4

201

9-Q

1

Q2

Q3

201

8-Q

1

Q2

Q3

Q4

201

9-Q

1

Q2

Q3

FY


Normalised EBITDA margin

64


Breakdown of results by Group companies




Dividend revenue 0 0 0 0 0 51,239 (51,239) 0

Restaurant expenses 417,582 91,657 6,800 69,631 21,044 0 (1,889) 604,825

Food and material 178,022 25,221 3,234 20,988 7,955 0 0 235,421


Rent 14,305 546 57 909 246 0 0 16,063

Royalties 29,916 5,587 494 4,144 639 0 0 40,780

Advertising 24,464 5,640 319 4,393 1,299 0 (1,886) 34,230


Depreciation and amortization 28,581 11,514 705 8,676 2,586 0 0 52,062

Restaurant operating profit 80,255 3,926 1,414 (664) 1,800 73,610 (70,849) 89,492


Operating profit 57,305 (2,787) 1,200 (4,614) (276) 47,701 (51,321) 47,207

Finance costs 7,941 2,408 185 3,136 1,187 1,418 (3,348) 12,926

Finance income 2,063 7 0 16 0 1,383 (3,348) 121


Income tax expense 2,551 1,180 166 (1,444) 213 (95) 0 2,570

Profit for the period 48,876 (6,368) 849 (6,290) (1,675) 47,761 (51,321) 31,831

EBITDA 87,551 8,867 1,932 4,078 2,371 48,991 (51,321) 102,468

25.9%

17.1%20.0%

222%

7.1%

184%

-21%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

Sph

era

US

FN

(R

O)

US

FN

(M

D)

US

FN

(IT

)

AR

S

CF

F

Oth

er

25.9%

13.2%

0.2%

8.6%

1.2%2.7%

0.0%-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Sph

era

US

FN

(R

O)

US

FN

(M

D)

US

FN

(IT

)

AR

S

CF

F

Oth

er

65


Breakdown of results by Group companies (excluding impact of IFRS 16 adoption)


25.9%

17.1%20.0%

222%

7.1%

184%

-21%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

Sph

era

US

FN

(R

O)

US

FN

(M

D)

US

FN

(IT

)

AR

S

CF

F

Oth

er

25.9%

13.2%

0.2%

8.6%

1.2%2.7%

0.0%-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Sph

era

US

FN

(R

O)

US

FN

(M

D)

US

FN

(IT

)

AR

S

CF

F

Oth

er



Dividend revenue 0 0 0 0 0 51,239 (51,239) 0

Restaurant expenses 418,864 91,763 6,836 69,399 21,133 0 (1,889) 606,107

Food and material 178,022 25,221 3,234 20,988 7,955 0 0 235,421


Rent 33,417 8,179 581 4,943 2,003 0 0 49,123

Royalties 29,916 5,587 494 4,144 639 0 0 40,780

Advertising 24,464 5,640 319 4,393 1,299 0 (1,886) 34,230


Depreciation and amortization 10,998 3,986 217 4,410 918 0 0 20,530

Restaurant operating profit 78,972 3,821 1,378 (432) 1,711 73,610 (70,849) 88,210


Operating profit 55,923 (2,996) 1,163 (4,413) (381) 47,590 (51,321) 45,566

Finance costs 2,785 1,352 82 1,929 899 1,124 (3,348) 4,822

Finance income 2,063 7 0 16 0 1,383 (3,348) 121


Income tax expense 2,551 1,180 146 (1,344) 213 (95) 0 2,650

Profit for the period 52,650 (5,520) 936 (4,981) (1,493) 47,944 (51,321) 38,214

EBITDA 67,318 1,131 1,409 14 597 48,076 (51,321) 67,223

66



▪ Excluding the impact of IFRS adoption, operational expenses increased 30.5% Y/Y to RON 396.1m in 9-

mth 2019;

▪ As percentage of sales, operational expenses increased by 2.2pp Y/Y to 88.9% in 9-mth 2019, of which:


▪ +0.9pp from other operating expenses

▪ -1.1pp from cost of food and materials

Contribution to change in restaurant opex ratio*

Contribution to change in restaurant profit*

Excluding the impact of IFRS 16 adoption

Including the impact of IFRS 16 adoption

*) Excluding the impact of IFRS 16 adoption

Y/Y% % of Sales





Rent 16,063 40,014 -59.9% 2.3% 7.3% -4.9%

Royalties 40,780 32,497 25.5% 5.9% 5.9% 0.0%

Advertising 34,230 30,421 12.5% 4.9% 5.5% -0.6%




Y/Y% % of Sales





Rent 49,123 40,014 22.8% 7.1% 7.3% -0.2%

Royalties 40,780 32,497 25.5% 5.9% 5.9% 0.0%

Advertising 34,230 30,421 12.5% 4.9% 5.5% -0.6%




67

Financial performance: Q3-2019


▪ Excluding the impact of IFRS adoption, operational expenses increased 27.5% Y/Y to RON 203.2m in

Q3-2019;

▪ As percentage of sales, operational expenses decreased by 0.6pp Y/Y to 88.0% in Q3-2019, of which:

▪ -1.7pp from cost of food and materials

▪ -1.4pp from advertising expenses


Contribution to change in restaurant opex ratio*

Contribution to change in restaurant profit*




Y/Y% % of Sales

Data in RON'000 Q2-2019 Q2-2018 2019/2018 Q2-2019 Q2-2018 Δ%




Rent 6,351 14,453 -56.1% 2.6% 7.2% -4.6%

Royalties 14,705 11,846 24.1% 5.9% 5.9% 0.0%

Advertising 13,843 12,235 13.1% 5.6% 6.1% -0.5%




Y/Y% % of Sales

Data in RON'000 Q3-2019 Q3-2018 2019/2018 Q3-2019 Q3-2018 Δ%




Rent 17,481 14,453 21.0% 7.0% 7.2% -0.1%

Royalties 14,705 11,846 24.1% 5.9% 5.9% 0.0%

Advertising 13,843 12,235 13.1% 5.6% 6.1% -0.5%




68


G&A expenses

▪ Excluding the impact of IFRS adoption, G&A ratio improved 0.7pp Y/Y to 6.1% of sales (RON 42.6 million),

mainly on slower growth in payroll expenses;

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



Employee benefits 25,727 21,496 19.7%

Third-party expenses 7,043 5,200 35.4%


Rent 2,693 2,566 4.9%


Transport 1,891 1,985 -4.8%

Other expenses 1,886 3,664 -48.5%

Y/Y% % of Sales

Data in RON'000 Sep-19 Sep-18 2019/2018 Sep-19 Sep-18



Employee benefits 25,727 21,496 19.7%

Third-party expenses 7,043 5,200 35.4%


Rent 262 2,566 -89.8%


Transport 1,891 1,985 -4.8%

Other expenses 1,886 3,664 -48.5%

69


Statement of financial position

Excluding

impact of

IFRS 16

adoption

Impact of

IFRS 16

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 188,104 158,122 29,982 190,025 (1,921)

Right-of-use assets 217,832 217,832 - 217,832

Intangible assets 64,646 62,150 2,496 64,646 -

Deposits for rent guarantee 10,304 5,219 5,085 10,304 -

Deferred tax assets 5,509 3,682 1,827 5,429 80

Current assets 119,079 122,979 (3,900) 121,892 (2,814)

Inventories 9,780 10,564 (783) 9,780 -

Trade and other receivables 28,396 16,444 11,952 28,396 -

Prepayments 2,743 5,306 (2,563) 5,556 (2,814)

Cash and short-term deposits 78,160 90,665 (12,505) 78,160 -

Assets held for sale - - - - -

Total assets 605,475 352,152 253,323 392,297 213,178

Equity and liabilities

Total equity 149,886 128,825 21,061 153,032 (3,146)

Equity attributable to equity holders of the parent 149,738 128,679 21,059 152,914 (3,176)

Issued capital 581,990 581,990 - 581,990 -

Share premium (519,998) (520,578) 580 (519,998) -

Retained earnings 87,837 67,247 20,590 91,023 (3,186)

Foreign currency translation reserve (90) 20 (110) (100) 10

Non-controlling interests 148 146 2 118 30

Non-current liabilities 259,118 91,536 167,581 79,415 179,703

Interest-bearing loans and borrowings 78,695 86,787 (8,093) 78,695 -

Finance lease liabilities 180,423 180,423 427 179,996

Trade and other payables 4,749 (4,749) 293 (293)

Current liabilities 196,471 131,790 64,681 159,850 36,621

Trade and other payables 102,572 82,658 19,913 107,054 (4,482)

Interest-bearing loans and borrowings 40,941 37,669 3,272 40,941 -

Finance lease liabilities 41,495 41,495 392 41,103

Provisions 11,463 11,463 - 11,463 -

Total liabilities 455,589 223,327 232,262 239,265 216,324

Total equity and liabilities 605,475 352,152 253,323 392,297 213,178

Sphera Franchise Group€¦ · This presentation is not, and nothing in it should be construed as,...

Documents

Transcript of Sphera Franchise Group€¦ · This presentation is not, and nothing in it should be construed as,...