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NoHo Partners Plc

INTERIM REPORT 12 November 2019 at 8:00 a.m.

NOHO PARTNERS PLC'S INTERIM REPORT 1 JANUARY–30 SEPTEMBER 2019:

An excellent quarter – profitability of the Group and the restaurant business was at a historical high

The Group’s labour hire business ended on 23 August 2019, when the subsidiary Smile Henkilöstöpalvelut Oyj was merged with VMP Plc and the combined company became an associated company of the NoHo Partners Group. The implementation of the strategy of profitable growth in the restaurant business is proceeding as planned. The profitability of the restaurant business is at a record-breaking level, which is a good starting point for the rest of 2019.

JANUARY–SEPTEMBER 2019 IN BRIEF:

Group (continuing and discontinued operations):

  • Turnover was MEUR 197.6 (MEUR 142.0), growth of 39.2 per cent.
  • EBIT was MEUR 23.3 (MEUR 11.1), growth of 109.7 per cent.
  • EBIT% was 11.8 per cent.
  • The result of the discontinued operation was MEUR 23.8.
  • The result of the financial period was MEUR 42.8 (MEUR 1.7), growth of 2,476.9 per cent.
  • Earnings per share were EUR 2.16 (EUR 0.09), growth of 2,189.2 per cent.
  • The gearing ratio excluding the impact of IFRS 16 liabilities is 85,8 per cent. IFRS 16 liabilities amount to MEUR 158.3. The gearing ratio including the impact of the IFRS 16 standard is 205.1 per cent.

Restaurant business (comparable continuing operations):

  • Turnover was MEUR 197.7 (MEUR 142.1), growth of 39.2 per cent.
  • EBIT was MEUR 11.7 (MEUR 1.1), growth of 1,008.5 per cent.
  • EBIT% was 5.9 per cent.
  • The result of the financial period was MEUR 7.4 (MEUR -0.3), growth of 2,302.3 per cent.
  • Earnings per share were EUR 0.29 (EUR -0.01), growth of 2,129.5 per cent.

JULY–SEPTEMBER 2019 IN BRIEF

Group (continuing and discontinued operations):

  • Turnover was MEUR 76.7 (MEUR 66.2), growth of 15.9 per cent.
  • EBIT was MEUR 9.8 (MEUR 2.5), growth of 297.2 per cent.
  • EBIT% was 12.8 per cent.
  • The result of the discontinued operation was MEUR 29.7.
  • The result of the financial period was MEUR 37.4 (MEUR -0.9), growth of 4,080.9 per cent.
  • Earnings per share were EUR 1.92 (EUR -0.06), growth of 3404.2 per cent.

Restaurant business (comparable continuing operations):

  • Turnover was MEUR 76.7 (MEUR 66.2), growth of 15.9 per cent.
  • EBIT was MEUR 6.0 (MEUR -1.2), growth of 597.6 per cent.
  • EBIT% was 7.8 per cent.
  • The review period’s EBIT includes Norwegian transaction costs amounting to MEUR 0.2.
  • The result of the financial period was MEUR 3.9 (MEUR -1.7), growth of 328.0 per cent.
  • Earnings per share were EUR 0.15 (EUR -0.10), growth of 252.3 per cent.

DESCRIPTION OF ACCOUNTING PRINCIPLES:

  • In the interim report, the labour hire segment is treated as a discontinued operation and a separate item in the income statement. Comparative information has been adjusted accordingly. For more detailed information, see Interim Report Note 3.
  • Due to the labour hire business transaction, the Group is starting to present alternative performance measures that improve comparability. It is believed that these alternative performance measures improve the understanding prevailing on the market regarding the development and financial situation of the restaurant business. The most significant item added to the comparable result is the Group’s internal staffing service purchases that took place before the transaction. In the future, these will be presented as outsourced services. The calculation principles of the key figures that improve comparability are presented in more detail in Interim Report Note 3.
  • In the interim report, the Group’s continuing and discontinued operations as well as the comparable continuing operations of the restaurant business are presented separately.
  • Starting from September 2019, the Group only has one segment: the restaurant business.
  • NoHo Partners adopted the IFRS 16 Leases standard as of 1 January 2019. The figures of the reference period 2018 have not been adjusted. More information about the application of the IFRS 16 standard and other significant interim report accounting principles can be found in the notes to the interim report.
  • Unless otherwise stated, figures in parentheses refer to the corresponding period last year.

SUMMARY

The factors influencing the Group’s earnings in January–September 2019 were the discontinuation of the labour hire business, the progress made in the restaurant portfolio reorganisation programme, the opening of new restaurants, concept reinventions and investments in international business.

The adoption of the IFRS 16 Leases standard has a MEUR -1.2 negative effect on earnings for January–September 2019.

In the restaurant business, most of the profits are made during the second half of the year due to the seasonal nature of the business.

Turnover in the business areas of the restaurant business:

In January–September 2019, turnover for restaurants was MEUR 76.5 (MEUR 54.5), an increase of 40.4 per cent, and in July–September, it was MEUR 29.7 (MEUR 26.5), an increase of 12.2 per cent.

In January–September 2019, turnover for nightclubs, pubs and entertainment venues was MEUR 67.5 (MEUR 62.2), an increase of 8.5 per cent, and in July–September, it was MEUR 25.4 (MEUR 26.4), a decrease of 3.7 per cent.

In January–September 2019, turnover for fast casual restaurants was MEUR 25.0 (MEUR 18.0), an increase of 39.3 per cent, and in July–September, it was MEUR 8.9 (MEUR 9.1), a decrease of 2.6 per cent.

In January–September 2019, turnover for the international restaurant business was MEUR 28.7 (MEUR 8.3), an increase of 246.6 per cent, and in July–September, it was MEUR 12.7 (MEUR 5.0), an increase of 153.0 per cent.

REVIEW BY THE CEO: AKU VIKSTRÖM

The Group’s profit at a historical high

The past quarter was exceptional and record-breaking. NoHo Partners disengaged from the labour hire business and, as a result of the transaction, the Group’s EBIT in January–September 2019 was MEUR 23.3 and the profit for the period amounted to MEUR 42.8. Earnings per share for the financial period 2019 will be at a historical high, EUR 2.16 at the end of the third quarter.

The Smile transaction strengthens the balance sheet and creates added value for the shareholders

As a result of the business transaction conducted in August, the company’s net liabilities decrease by MEUR 29.3 after which the company’s net liabilities excluding the impact of the IFRS 16 standard are MEUR 112.1 and gearing ratio is 85.8 per cent. In addition, the company’s balance sheet contains an asset with a market value of more than MEUR 40, which is believed to create added value for the shareholders in the future.

The profitability of the restaurant business is developing at a record-breaking rate

In the third quarter, the profitability of the restaurant business operations has developed as planned, with the EBIT margin exceeding the 8-per-cent limit, without non-recurring items, during the review period. Cumulatively year-to-date, the EBIT margin was also at a historically high level, which is an indication of success in improving portfolio productivity and operational efficiency when it comes to the cost structure. This is a good starting point for the year’s last – and most important – quarter as well as a solid foundation for next year’s progress towards the next phase in our strategy of profitable growth.

The outlook for the restaurant business remains positive as eating out is increasing and becoming more of an everyday thing. When demand increases, supply also increases and diversifies. In addition to the flexible operating model and the extensive portfolio, the company’s competitive advantage in the growing market is continuous customer experience development, with skilled and motivated staff at centre stage.

Fast and casual eating is increasing and, as a response to this trend, the company is developing its fast casual restaurant brand portfolio. As changes are taking place in flows of people in growth centres, the distribution channel strategy and micro-locations will be even more significant in the future. The digital distribution channel is becoming increasingly important and, in the coming months, the company will launch new solutions that facilitate purchases. In consumer marketing, the Hanko Sushi, American Diner and Pizzarium restaurants joined Kesko’s Plussa customer loyalty system, which makes it possible to reach up to 3.5 million consumers.

The nightclub, pub and entertainment venue business is the most profitable form of restaurant business. During the past year, NoHo Partners has developed and streamlined the nightclub, pub and entertainment portfolio and reduced capacity in markets that have no competitiveness. The company has a strong foothold as the operator of the top nightclubs in the largest cities, profitable pub business operations and a briskly growing entertainment venue business. As the market leader, we will contribute to the development of the sector in the future, too, at the same time as the experience market is developing in a more premiumised and content-driven direction.

Two-stage progress in international business

International business is growing strongly in line with the strategy and currently accounts for nearly 15 per cent of the restaurant business turnover. In the Danish business operations, the focus area is profitability development. This aim will be achieved by improving the productivity of the current portfolio, gaining savings in administrative costs and ensuring the stronger practical implementation of the company’s operating model. To support this aim, the Danish country management has been changed and an administrative savings programme has been carried out in the third quarter.

The Norwegian business operations have developed more strongly than expected and are already operating above the company’s EBIT margin. In Norway, the company has a very strong partner, a functional and diversified portfolio and good outlook for both organic and acquisition-based growth. This is a good starting point for the company for accelerating profitable growth in Norway next year, especially with business acquisitions.

Proceeding to the next strategy phase with a stronger organisation

As the company moves towards the next phase of the strategy period, it has strengthened its organisation. Preparations for future growth include the appointments of Deputy CEO and the new CFO, which especially support major growth projects, business acquisitions and digitalisation. The company’s management system has been developed and middle management’s leadership training has been launched. The You’re a Star programme, launched among restaurant staff, has already reached more than150 star employees that have received the EUR 500 bonus. The post-integration year of major changes and challenges is now approaching its end and we are proceeding towards a clearer phase of profitable growth.

Aku Vikström, CEO

KEY FIGURES     
(EUR thousand)1 July–30 Sept. 20191 July–30 Sept. 2018 1 Jan.–30 Sept. 20191 Jan.–30 Sept. 20181 Jan.–31 Dec. 2018
KEY FIGURES, entire Group (Continuing and discontinued operations)     
Turnover76,72066,178197,641141,998209,627
EBITDA20,81010,10656,03624,95633,072
EBITDA, %27.1%15.3%28.4%17.6%15.8%
Operating profit9,8032,46823,31111,11615,635
Operating profit, %12.8%3.7%11.8%7.8%7.5%
Result of the review period
to parent company shareholders
7,1741,77718,0639,62713,892
Result of the financial period
to parent company shareholders
36,865-1,06541,8911,7294,581
Result to minority shareholders555125890-69-350
Continuing operations’ earnings per share (euros) for the review period attributable to the shareholders of the parent company0.350.100.900.530.77
Earnings per share (euros) for the review period attributable to the shareholders of the parent company1.92-0.062.160.090.26
Interest-bearing net liabilities, EUR  270,369141,610138,500
Gearing ratio, %  205.1%199.1%184.3%
Equity ratio, %  28.0%23.7%24.6%
Return on investment, % (p.a.)  8.1%3.9%5.2%
Net finance costs, EUR9491,2745,1862,0602,478
Material margin, %73.8%73.8%73.8%73.2%74.0%
Staff expense, %30.2%31.8%32.5%31.5%32.1%

 

Restaurant business
(Comparable continuing operations)
     
(EUR thousand)1 July–30 Sept. 20191 July–30 Sept. 2018 1 Jan.–30 Sept. 20191 Jan.–30 Sept. 20181 Jan.–31 Dec. 2018
Turnover76,73366,204197,733142,075209,725
EBITDA16,9626,44144,42314,89619,643
EBITDA, %22.1%9.7%22.5%10.5%9.4%
Operating profit5,954-1,19611,6971,0552,206
Operating profit, %7.8%-1.8%5.9%0.7%1.1%
Earnings per share (euros)0.15-0.100.29-0.010.04

PROSPECTS FOR 2019

Profit guidance (as of 12 November 2019):

Due to the labour hire business transaction and the outlook of the restaurant business during the rest of the year, NoHo Partners estimates that, during the financial period 2019, the Group achieves a total turnover of approximately MEUR 260 and an EBIT margin of more than 10 per cent. The turnover of the restaurant business (comparable continuing operations) is estimated to be approximately MEUR 260 million and the EBIT margin to exceed 6 per cent.

In the Group’s restaurant business, the long-term guidance remains unchanged: the goal is to achieve a turnover of approximately MEUR 350 and an EBIT margin of approximately 8 per cent by the end of 2021. The Group will update the estimate for the financial period on an annual basis in conjunction with the publication of the result for the fourth quarter.

Previous profit guidance (as of 14 February 2019):

NoHo Partners estimates that the Group’s turnover and profitability will increase this year. The Group aims to achieve, after eliminations, a total turnover of approximately MEUR 390 and an EBIT margin of approximately 5.8 per cent (approximately MEUR 22.5) by the end of 2019. The restaurant segment aims to achieve a turnover of approximately MEUR 250 and an EBIT margin of over 6 per cent (over MEUR 15). The labour hire segment aims to achieve a turnover of approximately MEUR 150 and an EBIT margin of approximately 5 per cent (approximately MEUR 7.5).

The long-term goal of the Group is to achieve a turnover of over MEUR 600 and an EBIT margin of approximately 7.5 per cent by the end of 2021. The restaurant segment aims to achieve a turnover of approximately MEUR 350 and an EBIT margin of approximately 8 per cent. The labour hire segment aims to achieve a turnover of approximately MEUR 300 and an EBIT margin of approximately 6.5 per cent. The Group will update the estimate for the financial period on an annual basis in conjunction with the publication of the result for the fourth quarter.

PRESS CONFERENCE FOR MEDIA, ANALYSTS AND INVESTORS AT 10:00 am

A press conference for media, analysts and investors will be held today Tuesday 12 November 2019 starting 10:00am at Restaurant Espa at Pohjoisesplanadi 17, 00130 Helsinki. At the event, NoHo Partners CEO Aku Vikström will go through the key events, present the result for the third quarter of 2019, and discuss the company’s future outlook.

The event can be viewed in a live webcast at https://noho.videosync.fi/2019-q3-tulosinfo. The event will be held in Finnish. The presentation material and a recording of the event will become available on the company’s website later today.

The full NoHo Partners Interim Report for January-September 2019 is appended to this release in PDF format. The Interim Report is also available on the company's website at www.noho.fi.

NOHO PARTNERS PLC

Board of Directors

APPENDIX: NoHo Partners Plc Interim Report Q3/2019

Additional information:
Aku Vikström, CEO, tel +358 44 011 1989
Jarno Suominen, CFO, tel +358 40 721 5655

Distribution:
NASDAQ Helsinki
Major media
www.noho.fi

NoHo Partners Plc is a Finnish group established in 1996, specialising in restaurant services. The company, which was listed on NASDAQ Helsinki in 2013 and became the first Finnish listed restaurant company, has continued to grow strongly throughout its history. The Group companies include some 220 restaurants in Finland, Denmark and Norway. Well-known restaurant concepts of the company include Elite, Savoy, Teatteri, Yes Yes Yes, Stefan’s Steakhouse, Palace, Löyly, Hanko Sushi and Cock’s & Cows. In 2018, NoHo Partners Plc’s turnover was MEUR 323.2 and EBIT MEUR 7.2. Depending on the season, the Group employs approximately 2,100 people converted into full-time workers.

NoHo Partners corporate website: www.noho.fi
NoHo Partners consumer websites: www.ravintola.fi ja www.royalravintolat.fi

Attachment

NoHo Partners is one of the leading restaurant groups in Finland. As a strongly growing and increasingly international operator, we want to advance and enrich the Northern European restaurant field by taking tried and true concepts seamlessly to new markets and bringing in the latest trends from abroad.