Sphera Franchise Group€¦ · Source: Company information; Euromonitor, Consumer Foodservice in...
Transcript of Sphera Franchise Group€¦ · Source: Company information; Euromonitor, Consumer Foodservice in...
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Company presentation – May 2018
Sphera Franchise Group
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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.
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Sphera Franchise Group At a Glance
13.6%
Normalized
EBITDA
growth(2)
1st
Full Service
Restaurant
Operator
120
Restaurants(1)
Track Record of
Rapid and
Profitable
Growth
RON 32.6m
Net profit
-39% yoy
14.7%
LfL(3) restaurant
sales growth
14.1%
Increase in no.
of restaurants
2017 pro forma results 3-year CAGR
RON 619m
Restaurant sales
+20.3% yoy
24.0%
Restaurant sales
growth
RON 69.3m
Normalized
EBITDA(2)
-5.8% yoy
11.2%
Normalized
EBITDA
margin(2)
24 Years of
Operation
Source: Pro-forma IFRS financial information
Notes: (1) As of 15-May-2018 ; (2) After excluding certain one-off expenses related to the reorganization of Sphera and the IPO process; (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
Leading Food Service Operator in Romania
4
51
15
12
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 (two stores opened by 1-Dec-2017)
❑ In 2017, Sphera opened its first two KFC restaurants in Italy and is set to
become 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 15-May-2018
Bucharest
4
2
114
29
11
15
KFC
PH
Pizza Hut
Delivery
Source: Company Inforrmation
Food Court In Line Drive-through
19
3
KFC restaurants
PH and PH Delivery restaurants
Taco Bell restaurants
2 Taco Bell
2
810
5
❑ holds the franchise
rights to operate KFC-
branded restaurants in
Moldova
❑ holds the franchise
rights to operate KFC-
branded restaurants in
certain regions of Italy
❑ holds the franchise
rights to operate Taco
Bell-branded
restaurants in Romania
❑ holds the franchise
rights to operate Pizza
Hut-branded restaurants
in Romania (Pizza Hut
Dine-In and Pizza Hut
Delivery)
❑ holds sub-franchise
rights
❑ holds the franchise
rights to operate KFC-
branded restaurants in
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
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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
and 100% dividend
payout ratio
Scalable platform
with fully fledged
process in place
allowing efficient
roll-out
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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)
✓ c. 80% spontaneous brand awareness among
Romanian customers (YE 2017)
✓ customer base consists mainly of young and
middle aged people (78%), mostly educated
(at least 35% high school), with an average
household income
✓ 72 restaurants in Romania
as of 15 May 2018
player on the FSR segment
(nearly 3% market share)
#3 player on the overall chained
foodservice market (7% market share)
✓ 49% 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
✓ 22 restaurants as of 15 May 2018
player on the Home delivery segment (nearly 21%
market share)
✓ Order accessibility: classic call center lines,
dedicated website platform, mobile
application
✓ 18 restaurants as of
15 May 2018
✓ As of June 2017: 28% electronic
orders
Source: Company information; Euromonitor, Consumer Foodservice in Romania, May 2017; Deloitte Analysis
✓ First Taco Bell was opened on
12-Oct-2017 in Bucharest
✓ Second opened on 30-
Nov-2017, also in
Bucharest
Sphera in the Romanian Foodservice Market
8
15%
86%
Chained Independent
38%
31%
14%
12%
3%
Full-Service Restaurants/FSR
Cafes/bars
Street stalls/Kiosks
Fast Food/QSR
Self-Service Cafeterias
100% Home Delivery/Takeaway
Leading Foodservice Group in Romania
Market Structure and Competitive Overview
Chained players generated only 15% of sales (2016 data)
RON 17.8 bn
778 mn transactions
Source: Euromonitor, Consumer Foodservice in Romania, May 2017
Source: Euromonitor, Consumer Foodservice in Romania, May 2017
KFC still no. 2 but growing faster (2016 data)
# Brand Product offering 2016 Mk share ‘13-’16 var. +pp.
1Burgers, Chicken,
Salads, Desserts29.2% +0.2%
2Chicken, Burgers,
Salads, Desserts18.0% +3.3%
3Sandwiches/tortillas,
Salads3.2% +1.3%
4 Salads 2.9% +2.0%
5Bakery products,
Sandwiches, Deserts2.3% -0.7%
Top 5 55.6%
Source: Euromonitor, Consumer Foodservice in Romania, May 2017
# Brand Product offering 2016 Mk share ‘13-’16 var. +pp.
1 Pizza, Pasta, Burgers 2.8% +0.7%
2Pizza, Pasta,
traditional Italian food0.6% 0.0%
3Traditional Serbian
food0.5% +0.1%
4Romanian cuisine,
Grill0.5% 0.0%
5Grill, Romanian and
Moldavian cuisine0.4% +0.4%
Top 5 4.8%
FSR: Sphera no. 1 and increasing distance vs no. 2 (2016 data)
# Brand Product offering 2016 Mk share ‘13-’16 var. +pp.
1 Pizza 22.3% +3.4%
2 Pizza 20.6% +2.1%
3 Pizza 13.6% +7.2%
4 Pizza 10.5% -0.9%
5 Chinese Food 2.8% -0.7%
Top 5 69.8%
Delivery: Sphera no. 2 (2016 data)
Source: Euromonitor, Consumer Foodservice in Romania, May 2017
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2.2%3.0%
3.3%
3.7% 7.7%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
1,000
3,000
5,000
7,000
9,000
2011 2012 2013 2014 2015 2016 2022f
Value Sales (RON bn) % yoy growth
Supportive Macro and Sector Environment in Romania
Enjoying the Highest GDP Growth in EU28 Strong Private Consumption Growth (yoy %)
QSR Sector Development 2011 – 2022f FSR Sector Development 2011 – 2022f
Source: European Commission – European Economic Forecast – Spring 2017, Eurostat Newsrelease 7 September 2017, INNSSE
#1 yoy real GDP
growth in the EU
Q2 2018 yoy
vs.
4.2%
2.4%
#1
0.3%
3.5%3.1%
3.9%
4.8%
7.0%
4.5%
-0.1%
0.2%
1.6%
2.2%2.0%
2.4% 2.3%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2008-12 2013 2014 2015 2016 2017 2018e
Romania Bulgaria Hungary Czech Republic
Poland Slovakia EU28
0.7%
4.7%
6.0%
7.4%6.9%
4.7%
-0.1%
1.2%
2.1% 2.3%1.7% 1.6%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
2013 2014 2015 2016e 2017f 2018f
Romania Bulgaria Hungary Czech Rep. Poland Slovakia EU
Source: European Commission – European Economic Forecast – Spring 2017, Eurostat
#1yoy private consumption
expenditure in the EU
3.4%4.5%
8.0%7.2%
5.0%
0%
2%
4%
6%
8%
10%
12%
14%
1,000
2,000
3,000
4,000
2011 2012 2013 2014 2015 2016 2022f
Value Sales (RON bn) % yoy growth
Source: Euromonitor, Consumer Foodservice in Romania, May 2017; forecasts according to Deloitte Analysis
1.7
2.2
Source: Euromonitor, Consumer Foodservice in Romania, May 2017; forecasts according to Deloitte Analysis
5.5
6.79.05,504 restaurants
dominated by
independents – 95%
1,816 restaurants,
with chains
accounting for 38%
3.3
CAGR (%)
CAGR (%)
10
12.6%
19.0%
17.0%
12.5%
4.0%
10.0%
13.0%
3.1%0.0%
5.0%
10.0%
15.0%
20.0%
2014 2015 2016 2017
KFC Pizza Hut
262330
413503
63
76
97
112
3
0
100
200
300
400
500
600
700
2014 2015 2016 2017
KFC Pizza Hut Taco Bell
(RONm)
Successful Track Record of Growth
Sustained Growth Across All Brands
Coupled with Strong and Resilient LfL Growth
KFC remaining the key contributor at ca. 81% of revenues
Source: Company information, Consolidated Pro Forma Financial Statements.
CAGR 2014-2017
24.0%
Note: (1) Includes KFC restaurants in Romania, Moldova and Italy. (2) As of October 12 , 2017
1 1 1 1 2 3 5 7 1118
2332
37 40 4349 52 53
5965
7278
1 1 1 1 3 3 3 3 3 34
4
5
11
1313
1313
1514 14
18
21
22
22
1
34
78
10 9 9
9
12
17
182
2
'94
'95
'96
'97
'98
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
'17
15-M
ay-1
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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
120
11
82.4% 80.2% 82.1% 84.1%
0.0%
50.0%
100.0%
324.9
405.8
514.5
618.8
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
2014 2015 2016 2017
Highly Profitable Business Model
Sales Restaurant Opex Structure
(RONm) Change
‘17 vs ‘14
1.6%
(% of sales)
Source: Company information, Consolidated Pro Forma Financial Statements
Note: (1) After excluding certain one-off expenses related to the reorganization of Sphera and the IPO process;
(0.1)%
3.6%
(0.7)%
0.0%
0.1%
(0.4)%
(0.8)%
47.3
67.9 73.5 69.3
14.5%
16.7%
14.3%
11.2%
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
2014 2015 2016 2017
Normalized EBITDA(1)
(RONm) Margin (%)
28.9
47.351.6
32.6
8.9%
11.7%
10.0%
5.3%
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
2014 2015 2016 2017
Net profit
(RONm) Margin (%)
CAGR 2014 – 2016
3.3%
35.5% 35.2% 35.6% 35.4%
16.1% 16.0% 17.9% 19.7%
8.1% 7.2%6.9%
7.4%5.9% 5.9%
5.9%5.9%
5.2% 5.2%5.2%
5.3%8.3% 8.1%
8.2%7.9%
3.3%2.6%
2.4%2.5%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
2014 2015 2016 2017
Food and material expenses Payroll and employee benefits
Rent Royalties
Advertising Other operating expenses, net
Depreciation and amortisation
12
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
13
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
2012
✓ 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
✓ First place in EFBU for our KFC Moldova restaurant
✓ Third place in EFBU out of 16 KFC Markets & 379 restaurants
✓ 4 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.
48 64
➔
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)
+20 in 5Y +7 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
14
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
15
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
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Significant Further Growth Opportunities
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
12.6%
19.0%
17.0%
12.5%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
2014 2015 2016 2017
4.0%
10.0%
13.0%
3.1%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2014 2015 2016 2017
17
2017 2018 2019 2020 2021 2022 Total
KFC RomaniaCommitment 4 6 7 8 9 9 43
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
Significant Further Growth Opportunities
❑ Estimated market potential of ca. 30 restaurants
❑ Expand Pizza Hut Dine 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. 110 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
❑ Aggressive growth planned by 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
18
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
Significant Further Growth Opportunities
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
19
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
Significant Further Growth Opportunities
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
20
Significant Further Growth Opportunities
KFC RomaniaCommitment 4 6 7 8 9 9 43
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
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 15 22 27 23 24 18 129
Target 18 23 27 28 27 20 143
2017 2018 2019 2020 2021 2022 Total
21
Significant Further Growth Opportunities
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
2017 Results
23
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 permitting delays; 2 have already been opened, third to open
during Mar-2018)
▪ 9 stores opened in Q4-2017 (5x KFC, 2x Pizza Hut, 2x Taco Bell)
▪ Network size: 113 @ YE 2017, 115 @ 26-Feb-2018
▪ 2018 network target: +23 (excluding the 3 included in the 2017 plan) to 139
▪ KFC and Pizza Hut continue to lead top of mind awareness in Romania
▪ Strong Taco Bell sales performance for both stores
▪ Both KFC Italy stores generated operating profits in December, on combined sales better than expected
▪ Preliminary results
Consolidated Pro forma Change in pro forma margin
▪ Sales +37.3% +20.3%
▪ Restaurant profit +18.3% +7.0% (2.0)pp
▪ Normalised EBITDA* (2.9)% (5.8)% (3.1)pp
▪ EBITDA (21.0)% (25.1)% (5.4)pp
▪ Net Profit (35.5)% (38.9)% (5.1)pp
* Normalised EBITDA was adjusted for one-off expenses totaling RON 14.2m (revised upward from RON 11.8m
as initially communicated, following reclassification of certain items from recurring G&A)
Sales performance by brands
25
Brand performance: KFC Romania
Sales growth analysis
Same-store
performance
All-store
performance
▪ All-store sales growth of 17.7% Y/Y supported
mainly by same-store performance (11.9%
contribution);
▪ The 11 net openings contributed 5.8% to the Y/Y
growth, with all but one in cities with existing KFC
stores;
▪ same-store sales growth of 12.5% Y/Y on the back
of continued strong performance from the Drive-
Thru format, as well as a better performance of
the restaurants located outside Bucharest;
▪ Q4 performance slightly affected by increased
cannibalization, as all new stores opened in cities
with existing KFC presence (Bucharest, Arad,
Oradea, Ramnicu Valcea);
▪ Average ticket was up 6% in 2017 and 4.5% in
Q4, with transactions advancing 6.3% in 2017 and
5.2% in Q4;
26.4%
17.7% 18.0%
20.6%18.8%
14.0%
0%
5%
10%
15%
20%
25%
30%
2016 2017 Q1 Q2 Q3 Q4
26
Brand performance: Pizza Hut
Sales growth analysis
Same-store
performance
All-store
performance
▪ 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)
▪ Same-store sales growth of 3.1% Y/Y, which is
deemed to be a significant performance given the
magnitude of the brand growth over the past two
years (with 8 of the 12 net openings taking place
in cities with existing Pizza Hut stores);
▪ We expect same-store growth to be in slight
negative territory at least for the next couple of
quarters as we plan further roll-outs in some of the
existing cities;
▪ Average ticket up 8% in 2017 and 7% in Q4, with
transactions falling 4.4% in 2017 and 6.0% in Q4;
13.0%
3.1%
1.4%
5.6% 5.4%
0.6%
0%
2%
4%
6%
8%
10%
12%
14%
2016 2017 Q1 Q2 Q3 Q4
Development
28
Development
Restaurant openings in 2017
OpeningsTotal stores BoY New store locations
8
5
2
65
12
0
21
▪ Romania: Bucharest (1x DT, 1x IL), Oradea (1x
DT, 1x FC), Arad (1x FC), Valcea (1x FC)
▪ Italy: 2x FC
▪ Closed stores: Romania (Oradea: 1x FC)
▪ Bucharest (4x IL), Ploiesti (1x IL)
▪ Bucharest (2x FC)
Legend: FC – foodcourt; IL – inline (street); DT – Drive-Thru
-1
Plan Total stores EoY
10*
1
72
17
2
22
1598 18 113
▪ Galati (1x FC)
2
1
5
* The three restaurants planned for 2017 opened in Jan-2018 (Botosani - DT), Feb-2018 (Bucharest – DT) and Mar-2018 (Italy - FC).
29
30
31
Marketing / CSR
33
Marketing
Note: size of campaigns’ pictures are not an indication of exact duration of the respective campaign
Continuous activities to promote our brands
January February March April May June July August September October November December
34
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 website was launched, which has resulted in increased traffic and longer interaction
with the site.
▪ Extended the delivery test in Bucharest after encouraging start.
▪ Continued to be recognized for outstanding digital marketing performance with numerous awards
at FIBRA, including most creative client.
▪ launched Pepperoni Stuffed Crust pizza, which enjoyed notable sales mix throughout the campaign
▪ The new enhanced dine-in menu was extended to additional stores and offers customers wider
variety and higher product quality
▪ Access to the Delivery channel through digital platform is increasing, with 31% of all orders coming
through the digital, of which 9% through the Pizza Hut app
▪ Strong communication campaign (with a total budget of c. RON 1m) through all relevant channels
(guerilla marketing activities, digital & social media, special brand and product videos, dedicated
launch website, engagement of local communities, OOH (Bucharest, Vienna, Prague and
Budapest), special signage inside and around the store’s location, VIP Party and Special Launch
ceremony)
35
‘Hospice, House of Hope’“SOS Children’s Villages Bucharest”
‘Physics (taught) differently’ (with CEAE)‘I want to go to high-school’ (with World Vision Romania)
Corporate Social Responsibility
Ongoing CSR campaigns & programs
EUR 140k
raised in
2017, to
finance
school for 200
children
36
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 and sell them. All the money that
we raise will be donated to the Hospice House
of Hope.
Financials
38
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 (P&L only)
KFC Romania
KFC Moldova
Pizza Hut
KFC Italy
Taco Bell
Pro forma financials
40
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 the new businesses (KFC
Italy and Taco Bell);
▪ Restaurant operating profit up 7.0% Y/Y, with margin down 2pp, especially on salary costs and impact from new openings and new areas of business;
▪ G&A expenses up 88.5%, or 3.5pp up in sales, driven by increased head-office payroll expenses (on both higher headcount and selected salary adjustments)
and to one-off expenses (RON 14.2m, or 2.3% of sales);
▪ EBITDA fell 25.1% Y/Y and EBITDA margin contracted 5.4pp, of which 3.5pp due to higher G&A and 1.9pp due to higher restaurant expenses;
▪ Normalized EBITDA (excluding one-offs) fell 5.8% Y/Y and normalized EBITDA fell 3.1pp;
▪ Net profit was 38.9% lower Y/Y and net profit margin fell by 5.1pp compared to the 5.5pp drop in operating profit margin, on lower income tax expense
(-38.4%, or 0.6pp of sales)
Y/Y% % of Sales
Data in RON'000 2017 2016 2017/2016 2017 2016 Δ%
Restaurant sales 618,804 514,475 20.3%
Restaurant expenses 520,031 422,204 23.2% 84.0% 82.1% 2.0%
Food and material 219,232 183,409 19.5% 35.4% 35.6% -0.2%
Payroll and employee benefits 121,623 91,960 32.3% 19.7% 17.9% 1.8%
Rent 45,512 35,525 28.1% 7.4% 6.9% 0.4%
Royalties 36,567 30,356 20.5% 5.9% 5.9% 0.0%
Advertising 32,727 26,521 23.4% 5.3% 5.2% 0.1%
Other operating expenses, net 48,720 41,972 16.1% 7.9% 8.2% -0.3%
Depreciation and amortization 15,650 12,461 25.6% 2.5% 2.4% 0.1%
Restaurant operating profit 98,773 92,271 7.0% 16.0% 17.9% -2.0%
General and administration expenses, net 60,297 31,988 88.5% 9.7% 6.2% 3.5%
Operating profit 38,476 60,283 -36.2% 6.2% 11.7% -5.5%
Finance costs 2,354 929 153.4% 0.4% 0.2% 0.2%
Finance income 220 113 94.7% 0.0% 0.0% 0.0%
Profit before tax 36,342 59,467 -38.9% 5.9% 11.6% -5.7%
Income tax expense 3,786 6,144 -38.4% 0.6% 1.2% -0.6%
Profit for the year 32,556 53,323 -38.9% 5.3% 10.4% -5.1%
EBITDA 55,065 73,502 -25.1% 8.9% 14.3% -5.4%
Normalised EBITDA 69,268 73,502 -5.8% 11.2% 14.3% -3.1%
41
20.3%
14.1%
0.2%
2.4% 2.9%
0.6% 0.1%0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Sph
era
US
FN
(R
O)
US
FN
(M
D)
US
FN
(IT
)
AR
S
CF
F
Cons.A
dj
20.3%
17.7%
13.3%
15.5%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Sph
era
US
FN
(R
O)
US
FN
(M
D)
US
FN
(IT
)
AR
S
CF
F
Cons.A
dj
Financial performance: Pro-forma
Breakdown of results by Group companies – year 2017
Y/Y Sales growth by companies Contribution to Sales growth by companies Contribution to normalized EBITDA by companies
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 7,648 12,501 3,837 0 (909) (1) 241 520,031
Food and material 180,421 30,422 3,628 3,822 1,087 0 (146) (2) 219,232
Payroll and employee benefits 85,660 29,920 1,252 4,005 786 0 0 0 121,623
Rent 33,719 9,643 796 878 476 0 0 0 45,512
Royalties 28,754 6,514 506 736 57 0 0 0 36,567
Advertising 23,835 6,846 364 809 969 0 (75) (21) 32,727
Other operating expenses, net 34,068 12,433 831 1,734 320 0 (688) 22 48,720
Depreciation and amortization 10,737 3,742 271 517 142 0 0 0 241 15,650
Restaurant operating profit 85,393 12,491 844 (124) (961) 12,420 (11,049) 0 (241) 98,773
General and administration expenses, net 32,612 12,576 241 1,601 791 23,525 (11,049) 60,297
Operating profit 52,781 (85) 603 (1,725) (1,752) (11,105) 0 0 (241) 38,476
Finance costs 1,491 811 138 358 37 141 (622) 2,354
Finance income 14,634 7 15 0 0 30 (14,466) 220
Profit before tax 65,924 (889) 480 (2,083) (1,789) (11,216) (13,844) 0 (241) 36,342
Income tax expense 4,375 1,346 82 (428) 11 (1,600) 0 3,786
Profit for the year 61,549 (2,235) 398 (1,655) (1,800) (9,616) (13,844) 0 (241) 32,556
EBITDA 64,257 3,783 926 (1,208) (1,610) (11,083) 0 0 0 55,065
Normalised EBITDA 64,752 3,968 926 (1,208) (1,610) 2,439 0 0 0 69,268
42
Financial performance: Pro-forma
Restaurant operating expenses
▪ Operational expenses increased 23.3% Y/Y to RON 520.0m in 2017,
▪ As percentage of sales, operational expenses increased by 1.9pp Y/Y to 84.0% in 2017, of which:
▪ By main areas of business:
▪ +1.7pp was the combined effect of the changes in the restaurant expenses of KFC Romania, Pizza
Hut and KFC Moldova (+1.5pp from payroll cost);
▪ +0.6pp was the combined impact of our new KFC stores in Italy and Taco Bell stores (+0.3pp from
payroll cost and +0.2pp from advertising);
▪ By expense category:
▪ +1.8pp from payroll cost
▪ +0.4pp from rent expenses (mostly related to new stores),
▪ (0.2)pp from cost of food and materials
▪ (0.3)pp from other operating expenses.
▪ In Q4-2017, cost of labour fell 1.6pp to 19.3% on stronger seasonal sales, cost of food advanced 1.2pp to
36.5% on higher acquisition prices for a number of products, while depreciation increased 0.6pp on higher
number of store openings.
Change Percentage of sales
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% Payroll and employee benefits 121,623 91,960 32.3% 19.7% 17.9% Rent 45,512 35,525 28.1% 7.4% 6.9% Royalties 36,567 30,356 20.5% 5.9% 5.9% Advertising 32,727 26,521 23.4% 5.3% 5.2% Other operating expenses 48,720 41,972 16.1% 7.9% 8.2% Depreciation 15,650 12,461 25.6% 2.5% 2.4%
Contribution to change in restaurant opex margin
Contribution to change in restaurant profit
Guidance for 2018
▪ While we expect the same-store restaurant operating margin to improve by up to 0.5pp in 2018 (0.5pp decrease in cost of sales, 0.5pp increase in cost of labour,
0.2pp decrease in rent, 0.3pp decrease in depreciation), we believe the all-store restaurant profitability will decrease by up to 1pp on the impact of the new stores (of
which 0.8pp from increased depreciation expense).
43
Financial performance: Pro-forma
G&A expenses
▪ General and administration expenses increased 88% Y/Y to RON 60.3 million in 2017 (9.7% of sales, up from
6.2% in 2016).
▪ The company’s G&A expense was mainly impacted by a series of incremental one-off costs and expenses,
totaling RON 14.2m (revised upward from RON 11.8m as initially communicated, following further
reclassification of management bonuses and professional legal and commercial services). These one-off
costs most notably include the payment of a significant management bonus as well as expenses relating to
legal, advisory, and audit fees relating to the corporate restructuring work that was undertaken during the
year.
▪ We awarded RON 12.2m in extraordinary remuneration to the senior management, including the heads
of all key functions of the business, in order to reward the significant growth and value creation that has
been achieved over the recent years, and incentivize key individuals towards what is committed and
planned to be achieved as part of our 5-year plan.
▪ We incurred RON 2.0m in one-off third-party expenses, relating mainly to legal, advisory, and audit fees
as part of our reorganization process and we treat these fees as non-recurring.
Change Percentage of sales
Data in RON thousand 2017 2016 2017/2016 2017 2016
General and administration expenses (net), of which:
60,297 31,988 88.5% 9.7% 6.2%
Payroll and employee benefits 34,695 13,564 155.8%
Third-party services 13,605 10,197 33.4%
Depreciation and amortization 939 758 23.9%
Rent 2,344 1,736 35.0%
Banking charges 1,921 1,525 26.0%
Transport 2,599 1,314 97.8%
Other expenses 4,194 2,894 44.9%
Contribution to growth in G&A expense
Breakdown of one-off costs
Total one-off costs, of which: 14,202
Management bonuses 12,154
Third-party 2,048
Legal services 681
Commercial due diligence 652
Audit services 534
Other 181
▪ A second important component of growth in G&A were head-office salaries which, excluding the new businesses (KFC Italy and Taco Bell), increased by
approximately RON 9.5m Y/Y.
▪ c. RON 6.5m represent increased expenses with base salaries of the head-office staff, due to the significant increase in headcount and salary adjustments for a
number of key employees;
▪ c. RON 3.0m represent increased expenses with the bonus accruals for the year 2017 that will be paid in 2018 to both the management team and head-office
staff.
▪ A third distinct component was represented by the new businesses (KFC Italy and Taco Bell operations), which generated RON 2.4m in G&A expenses.
Guidance for 2018
▪ We expect normalized G&A to reach approximately 7.0% of sales in 2018, with a 0.5pp seasonal variation between quarters (20-25% increase in payroll, with
4% increase in existing salaries and 30-40 new hires, 10% decrease in third-party, 8% increase in other G&A positions)
44
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
▪ 7.0% of sales
▪ Normalized EBITDA margin
▪ 11.0-11.5%
Consolidated financials
46
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 Hut restaurants), starting
with June 2017, contributed 15.9pp in the consolidated sales growth rate;
▪ Restaurant operating profit up 18.3% Y/Y, with margin down 2.6pp, especially on salary costs and impact from new openings and new areas of business;
▪ G&A expenses up 143%, or 4.3pp up in sales, driven by increased head-office payroll expenses (on both higher headcount and selected salary adjustments)
and to one-off expenses (RON 14.2m, or 2.5pp of sales);
▪ EBITDA fell 21.0% Y/Y and EBITDA margin contracted 6.6pp, of which 4.3pp due to higher G&A and 2.3pp due to higher restaurant expenses;
▪ Normalized EBITDA (excluding one-offs) increased 0.9% Y/Y and normalized EBITDA margin fell 4.1pp;
▪ Net profit was 35.5% lower Y/Y and net profit margin fell by 6.2pp compared to the 6.8pp drop in the operating profit margin, on lower income tax expense
(-44.1%, or 0.8pp of sales)
Y/Y% % of Sales
Data in RON'000 2017 2016 2017/2016 2017 2016 Δ%
Restaurant sales 573,175 417,535 37.3%
Restaurant expenses 480,647 339,314 41.7% 83.9% 81.3% 2.6%
Food and material 206,704 157,302 31.4% 36.1% 37.7% -1.6%
Payroll and employee benefits 109,858 69,577 57.9% 19.2% 16.7% 2.5%
Rent 41,615 27,498 51.3% 7.3% 6.6% 0.7%
Royalties 33,885 24,654 37.4% 5.9% 5.9% 0.0%
Advertising 30,231 20,736 45.8% 5.3% 5.0% 0.3%
Other operating expenses, net 44,412 30,313 46.5% 7.7% 7.3% 0.5%
Depreciation and amortization 13,942 9,234 51.0% 2.4% 2.2% 0.2%
Restaurant operating profit 92,528 78,221 18.3% 16.1% 18.7% -2.6%
General and administration expenses, net 55,925 22,975 143.4% 9.8% 5.5% 4.3%
Operating profit 36,603 55,246 -33.7% 6.4% 13.2% -6.8%
Finance costs 2,156 825 161.3% 0.4% 0.2% 0.2%
Finance income 214 95 125.3% 0.0% 0.0% 0.0%
Profit before tax 34,661 54,516 -36.4% 6.0% 13.1% -7.0%
Income tax expense 3,233 5,783 -44.1% 0.6% 1.4% -0.8%
Profit for the year 31,428 48,733 -35.5% 5.5% 11.7% -6.2%
EBITDA 51,424 65,070 -21.0% 9.0% 15.6% -6.6%
Normalised EBITDA 65,627 65,070 0.9% 11.4% 15.6% -4.1%
47
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 attributable to equity holders of the parent 104,525 58,292
Intangible assets 67,471 6,365 Issued capital 581,990 190
Deposits for rent guarantee 1,288 290 Share premium (520,578) -
Deferred tax assets 2,144 40 Other capital reserves - 19
Retained earnings 43,191 58,124
Current assets 73,255 65,399 Foreign currency translation reserve (78) (41)
Inventories 8,509 5,744 Non-controlling interests 19 (39)
Trade and other receivables 8,418 8,780
Prepayments 3,673 1,907 Non-current liabilities 42,190 16,304
Cash and short-term deposits 52,655 48,968 Interest-bearing loans and borrowings 39,520 14,630
Trade and other payables 2,670 1,674
Assets held for sale 195 -
Current liabilities 102,839 45,088
Total assets 249,573 119,645 Trade and other payables 77,647 37,292
Interest-bearing loans and borrowings 25,192 7,796
Total liabilities 145,029 61,392
Total equity and liabilities 249,573 119,645
Interim results: Jan-Mar 2018
49
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)
▪ other 4 stores opened so far in Q2-2018 (3x KFC,1x Pizza Hut Delivery)
▪ Network size: 116 @ 31-Mar-2018, 120 @ 15-May-2018
▪ 2018 network target: +23 (excluding the 3 included in the 2017 plan) to 139
▪ KFC Romania and Moldova in Yum’s top 4 CEE GES performance, with both stores in Italy leading the
Italian performance chart
▪ KFC and Pizza Hut continue to lead top of mind awareness in Romania
▪ Taco Bell restaurant operating margin moving into positive territory at 4%
▪ KFC Italy restaurant operating margin improving to 3.5%
▪ Interim results*
RONm Y/Y* Margin
▪ Sales 170.2 +22.5%
▪ Restaurant profit 26.1 +0.5% 15.3%
▪ EBITDA 18.8 (3.9)% 11.1%
▪ Net Profit 12.5 (13.7)% 7.4%
*) Comparison between Q1-2018 consolidated results and Q1-2017 pro forma results.
Sales performance by brands
51
Brand performance: KFC Romania
Sales growth analysis
Same-store
performance
All-store
performance
▪ All-store sales growth of 19.6% Y/Y supported
mainly by same-store performance (11.6pp
contribution);
▪ The 8 net openings contributed 7.8pp to the Y/Y
growth, with all but one in cities with existing KFC
stores;
▪ same-store sales growth of 11.8% Y/Y on the back
of continued strong performance from the Drive-
Thru format, as well as a better performance of
the restaurants located outside Bucharest;
▪ Average ticket was up 8.2% and transactions were
up 3.3% in Q1-2018 vs Q1-2017;
17.0%
12.5%
10.7%
15.6%
14.0%
9.9%
11.8%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2016 2017 Q12017
Q22017
Q32017
Q42017
Q12018
26.4%
17.7% 18.0%
20.6%18.8%
14.0%
19.6%
0%
5%
10%
15%
20%
25%
30%
2016 2017 Q12017
Q22017
Q32017
Q42017
Q12018
52
Brand performance: Pizza Hut
Sales growth analysis
Same-store
performance
All-store
performance
▪ All-store sales growth of 9.8% Y/Y, with a relatively
uniform performance across quarters, of which
8.2pp was the contribution of the net 6 stores
opened starting Jan-2016;
▪ Same-store sales growth of 1.6% Y/Y, still
reflecting a certain cannibalization impact from the
stores opened since Jan-2017 (with 4 of the 6 net
openings taking place in cities with existing Pizza
Hut stores);
▪ Average ticket was up 7.6% and transactions were
down 5.5% in Q1-2018 vs Q1-2017;
28.0%
15.5%16.8% 16.6%
14.9% 14.1%
9.8%
0%
5%
10%
15%
20%
25%
30%
2016 2017 Q12017
Q22017
Q32017
Q42017
Q12018
13.0%
3.1%
1.4%
5.6% 5.4%
0.6%1.6%
0%
2%
4%
6%
8%
10%
12%
14%
2016 2017 Q12017
Q22017
Q32017
Q42017
Q12018
Development
54
Development
Restaurant openings in Q1-2018
OpeningsTotal stores BoY New store locations
3*
0
0
▪ Romania: Bucharest (1x DT), Botosani (1x DT)
▪ Italy: 1x FC
Legend: FC – foodcourt; IL – inline (street); DT – Drive-Thru
Plan Total stores EoP
13
0
75
17
2
22
3 23 116
3
2
5
* All three restaurants opened in Q1-2018 were part of 2017 development plan.
72
17
2
22
113
55
KFC Bucharest Sun Plaza (DT)
56
KFC Botosani (DT)
57
KFC Italy - Villesse
Brand news
59
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 story more relevant for the
millennials: they could apply to an online “smart job” platform in order to gain experience and win prizes;
the digital activation had c. 29k online participants that generated over 120k sessions;
▪ c. 4.5% price increase done in mid-February;
Delivery
▪ Delivery test
expanded to four
stores in Bucharest
and two in Cluj, with
very encouraging
results;
Self-ordering kiosks
▪ Model and journey
selected and
customized for local
market needs and
specifications;
▪ Integrations with IT
systems and bank’s
POS solution finalized
▪ Pilot kiosks to be
implemented in
selected locations;
▪ Expected roll-out by
year-end
60
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 Delivery experienced positive same-store sales growth in Q1 after launching Mix for 2,
an abundant value campaign;
▪ Overall online orders exceeding 30% of delivery sales;
▪ c. 5% price increase done in mid-February;
▪ Taco Bell continued to use social media as its main brand awareness builder and launched a
Monday offer to help value perception and boost sales;
▪ 2018 awards: ADC school of creativity - KFC client of the year; CSR awards - KFC & Pizza Hut for
involvement in education; MomentUM media awards - Silver for KFC “Winter is not coming”
campaign, best content creation
61
Marketing
Q1-2018 campaigns
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
64
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 the new businesses (KFC
Italy and Taco Bell);
▪ Restaurant operating profit up 0.5% Y/Y, with margin down 3.4pp, especially on food and salary costs, as well as impact from new openings and new areas of
business;
▪ G&A expenses up 16.7% Y/Y, but 0.3pp down to 7.3% of sales, driven mainly by head-office payroll expenses;
▪ EBITDA fell 3.9% Y/Y and EBITDA margin contracted 3.0pp to 11.1% of sales, virtually due to higher restaurant expenses;
▪ Net profit was 13.7% lower Y/Y and net profit margin fell by 3.0pp to 7.4% of sales.
Y/Y% % of Sales
Data in RON'000 Mar-18 Mar-17 2018/2017 Mar-18 Mar-17 Δ%
Restaurant sales 170,232 138,970 22.5%
Restaurant expenses 144,119 112,988 27.6% 84.7% 81.3% 3.4%
Food and material 61,909 49,138 26.0% 36.4% 35.4% 1.0%
Payroll and employee benefits 33,010 25,964 27.1% 19.4% 18.7% 0.7%
Rent 12,416 10,260 21.0% 7.3% 7.4% -0.1%
Royalties 9,918 8,288 19.7% 5.8% 6.0% -0.1%
Advertising 7,060 5,770 22.4% 4.1% 4.2% 0.0%
Other operating expenses, net 14,938 10,126 47.5% 8.8% 7.3% 1.5%
Depreciation and amortization 4,867 3,443 41.4% 2.9% 2.5% 0.4%
Restaurant operating profit 26,113 25,983 0.5% 15.3% 18.7% -3.4%
General and administration expenses, net 12,350 10,586 16.7% 7.3% 7.6% -0.4%
Operating profit 13,764 15,397 -10.6% 8.1% 11.1% -3.0%
Finance costs 487 278 75.3% 0.3% 0.2% 0.1%
Finance income 183 131 39.4% 0.1% 0.1% 0.0%
Profit before tax 13,459 15,250 -11.7% 7.9% 11.0% -3.1%
Income tax expense 910 705 29.1% 0.5% 0.5% 0.0%
Profit for the period 12,549 14,545 -13.7% 7.4% 10.5% -3.1%
EBITDA 18,836 19,598 -3.9% 11.1% 14.1% -3.0%
65
22.5%
15.5%
0.1%
2.9%1.9% 1.8%
0.3%0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Sph
era
US
FN
(R
O)
US
FN
(M
D)
US
FN
(IT
)
AR
S
CF
F
Cons.A
dj
22.5%
19.6%
6.3%
9.8%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Sph
era
US
FN
(R
O)
US
FN
(M
D)
US
FN
(IT
)
AR
S
CF
F
Cons.A
dj
Financial performance: Q1-2018 (Consolidated) vs Q1-2017 (Pro-forma)
Breakdown of results by Group companies
Y/Y Sales growth by companies Contribution to Sales growth by companies Contribution to EBITDA by 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 3,978 2,440 0 (67) 144,119
Food and material 50,363 8,452 954 1,215 975 0 (51) 61,909
Payroll and employee benefits 22,858 7,745 326 1,284 798 0 0 33,010
Rent 9,210 2,522 191 286 205 0 2 12,416
Royalties 7,821 1,670 130 246 51 0 0 9,918
Advertising 4,890 1,802 49 232 103 0 (15) 7,060
Other operating expenses, net 10,480 3,659 192 506 104 0 (3) 14,938
Depreciation and amortization 3,218 1,164 72 209 205 0 0 4,867
Restaurant operating profit 22,168 2,948 274 145 104 5,949 (5,474) 26,113
General and administration expenses, net 7,334 2,755 61 800 615 6,257 (5,474) 12,350
Operating profit 14,834 192 213 (656) (512) (308) 0 13,764
Finance costs 339 144 30 131 76 168 (401) 487
Finance income 455 46 5 0 0 78 (401) 183
Profit before tax 14,949 94 188 (787) (587) (398) 0 13,459
Income tax expense 732 347 19 (184) 28 (32) 0 910
Profit for the period 14,217 (252) 169 (603) (615) (367) 0 12,549
EBITDA 18,153 1,412 298 (447) (307) (273) 0 18,836
66
Financial performance: Q1-2018 (Consolidated) vs Q1-2017 (Pro-forma)
Restaurant operating expenses and margin
▪ Operational expenses increased 27.6% Y/Y to RON 144.1m in Q1-2018,
▪ As percentage of sales, operational expenses increased by 3.4pp Y/Y to 84.7% in Q1-2018, of which:
▪ By main areas of business:
▪ +3.4pp was the combined effect of the changes in the restaurant expenses of KFC Romania and
KFC Moldova (+1.6pp from cost of sales, +1.5pp from other operating expenses);
▪ +0.5pp was the impact from ARS operations
▪ (0.3)pp was the combined impact of our new KFC stores in Italy and Taco Bell stores;
▪ By expense category:
▪ +1.5pp from other operating expenses
▪ +1.0pp from cost of food and materials
▪ +0.7pp from payroll expenses
▪ Compared to Q4-2017, restaurant opex ratio fell 1.3pp, mainly attributed to lower advertising expenses;
cost of food and cost of labor remained virtually unchanged, while other operating expenses increased by
1.1pp on expenses associated with the newer stores.
Contribution to change in restaurant opex ratio
Contribution to change in restaurant profit
Y/Y% % of Sales
Data in RON'000 Mar-18 Mar-17 2018/2017 Mar-18 Mar-17
Restaurant expenses 144,119 112,988 27.6% 84.7% 81.3%
Food and material 61,909 49,138 26.0% 36.4% 35.4%
Payroll and employee benefits 33,010 25,964 27.1% 19.4% 18.7%
Rent 12,416 10,260 21.0% 7.3% 7.4%
Royalties 9,918 8,288 19.7% 5.8% 6.0%
Advertising 7,060 5,770 22.4% 4.1% 4.2%
Other operating expenses, net 14,938 10,126 47.5% 8.8% 7.3%
Depreciation and amortization 4,867 3,443 41.4% 2.9% 2.5%
Restaurant operating profit 26,113 25,983 0.5% 15.3% 18.7%
67
Financial performance: Q1-2018 (Consolidated) vs Q1-2017 (Pro-forma)
G&A expenses
▪ General and administration expenses increased 16.7% Y/Y to RON 12.3 million in Q1-2018 (7.3% of sales,
up from 7.6% in Q1-2017).
▪ The main contributor to the G&A growth was payroll (up 12.0% Y/Y), which accounted for 6.9pp of the total
growth rate;
Contribution to growth in G&A expense Change Percentage of sales
Data in RON thousand Mar-18 Mar-17 2018/2017 Mar-18 Mar-17
General and administration expenses (net), of which:
12,350 10,586 16.7% 7.3% 7.6%
Payroll and employee benefits 6,828 6,098 12.0% Third-party services 2,405 2,191 9.8% Depreciation and amortization 205 334 -38.6% Rent 738 418 76.6% Banking charges 635 383 65.8% Transport 742 483 53.8% Other expenses 797 680 17.2%
Consolidated financials
69
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 Hut restaurants), starting
with June 2017, contributed 26.8pp in the consolidated sales growth rate;
▪ Restaurant operating profit up 20.0% Y/Y, with margin down 4.2pp, especially on salary costs and impact from new openings and new areas of business;
▪ G&A expenses up 69.9% Y/Y, up 0.7pp to 7.3% of sales, driven mainly by the consolidation of ARS and the KFC Italy and Taco Bell operations;
▪ EBITDA advanced 9.3% Y/Y and EBITDA margin contracted 4.3pp to 11.1%, mainly due to higher restaurant expenses;
▪ Net profit was 10.9% lower Y/Y and net profit margin fell by 5.2pp to 7.4%.
Y/Y% % of Sales
Data in RON'000 Mar-18 Mar-17 2018/2017 Mar-18 Mar-17 Δ%
Restaurant sales 170,232 111,726 52.4%
Restaurant expenses 144,119 89,963 60.2% 84.7% 80.5% 4.1%
Food and material 61,909 41,566 48.9% 36.4% 37.2% -0.8%
Payroll and employee benefits 33,010 19,300 71.0% 19.4% 17.3% 2.1%
Rent 12,416 8,071 53.8% 7.3% 7.2% 0.1%
Royalties 9,918 6,687 48.3% 5.8% 6.0% -0.2%
Advertising 7,060 4,317 63.5% 4.1% 3.9% 0.3%
Other operating expenses, net 14,938 7,587 96.9% 8.8% 6.8% 2.0%
Depreciation and amortization 4,867 2,436 99.8% 2.9% 2.2% 0.7%
Restaurant operating profit 26,113 21,763 20.0% 15.3% 19.5% -4.1%
General and administration expenses, net 12,350 7,270 69.9% 7.3% 6.5% 0.7%
Operating profit 13,764 14,493 -5.0% 8.1% 13.0% -4.9%
Finance costs 487 141 245.1% 0.3% 0.1% 0.2%
Finance income 183 93 97.6% 0.1% 0.1% 0.0%
Profit before tax 13,459 14,445 -6.8% 7.9% 12.9% -5.0%
Income tax expense 910 355 156.8% 0.5% 0.3% 0.2%
Profit for the period 12,549 14,090 -10.9% 7.4% 12.6% -5.2%
EBITDA 18,836 17,230 9.3% 11.1% 15.4% -4.4%
70
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 attributable to equity holders of the parent 117,059 104,525
Intangible assets 67,938 67,471 Issued capital 581,990 581,990
Deposits for rent guarantee 1,606 1,288 Share premium (0) (520,578)
Deferred tax assets 2,343 2,144 Other capital reserves 55,705 -
Retained earnings (520,578) 43,191
Current assets 66,310 73,291 Foreign currency translation reserve (59) (78)
Inventories 8,185 8,509 Non-controlling interests 55 19
Trade and other receivables 9,779 8,454
Prepayments 3,757 3,673 Non-current liabilities 40,975 42,190
Cash and short-term deposits 44,588 52,655 Interest-bearing loans and borrowings 38,419 39,520
Trade and other payables 2,557 2,670
Assets held for sale 195 195
Current liabilities 88,607 102,874
Total assets 246,697 249,609 Trade and other payables 62,800 77,682
Interest-bearing loans and borrowings 25,808 25,192
Total liabilities 129,583 145,064
Total equity and liabilities 246,697 249,608
Pro forma financials – 2014-2017
72
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 267,699 325,134 422,204 520,031 82.4% 80.1% 82.1% 84.0% 21.5% 29.9% 23.2%
Food and material expenses 115,286 142,859 183,409 219,232 35.5% 35.2% 35.6% 35.4% 23.9% 28.4% 19.5%
Payroll and employee benefits 52,401 65,135 91,960 121,623 16.1% 16.0% 17.9% 19.7% 24.3% 41.2% 32.3%
Rent 26,447 29,020 35,525 45,512 8.1% 7.2% 6.9% 7.4% 9.7% 22.4% 28.1%
Royalties 19,103 23,830 30,356 36,567 5.9% 5.9% 5.9% 5.9% 24.7% 27.4% 20.5%
Advertising 16,777 20,960 26,521 32,727 5.2% 5.2% 5.2% 5.3% 24.9% 26.5% 23.4%
Other operating expenses, net 26,864 32,904 41,972 48,720 8.3% 8.1% 8.2% 7.9% 22.5% 27.6% 16.1%
Depreciation and amortization 10,821 10,426 12,461 15,650 3.3% 2.6% 2.4% 2.5% -3.7% 19.5% 25.6%
Restaurant operating profit 57,213 80,696 92,271 98,773 17.6% 19.9% 17.9% 16.0% 41.0% 14.3% 7.0%
General and administration expenses, net 21,419 23,912 31,988 60,297 6.6% 5.9% 6.2% 9.7% 11.6% 33.8% 88.5%
Operating profit 35,794 56,784 60,283 38,476 11.0% 14.0% 11.7% 6.2% 58.6% 6.2% -36.2%
Finance costs 1,287 1,013 929 2,354 0.4% 0.2% 0.2% 0.4% -21.3% -8.3% 153.4%
Finance income 247 417 113 220 0.1% 0.1% 0.0% 0.0% 68.8% -72.9% 94.7%
Profit before tax 34,754 56,188 59,467 36,342 10.7% 13.8% 11.6% 5.9% 61.7% 5.8% -38.9%
Income tax expense 5,195 8,421 6,144 3,786 1.6% 2.1% 1.2% 0.6% 62.1% -27.0% -38.4%
Profit for the period from continuing operations 29,559 47,767 53,323 32,556 9.1% 11.8% 10.4% 5.3% 61.6% 11.6% -38.9%
Loss after tax from discontinued operations (620) (476) (1,683) -0.2% -0.1% -0.3% 23.2% -253.6%
Profit for the period 28,930 47,291 51,640 32,556 8.9% 11.7% 10.0% 5.3% 63.5% 9.2% -37.0%