NOHO PARTNERS PLC HALF-YEAR REPORT FOR 1 JANUARY–30 JUNE 2019: EBIT improved by 110.3% and turnover increased by 47.6% – a clear turnaround in the company’s profitability

NoHo Partners Plc

HALF-YEAR REPORT 6 Aug 2019 at 8:00 a.m.

NOHO PARTNERS HALF-YEAR REPORT FOR 1 JANUARY–30 JUNE 2019:
EBIT improved by 110.3% and turnover increased by 47.6% – a clear turnaround in the company’s profitability

TURNOVER AND INCOME

The Group’s income for January–June 2019

Entire Group:

The Group’s turnover was MEUR 180.6 (MEUR 122.4), growth of 47.6 per cent. EBIT was MEUR 8.5 (MEUR 4.0), growth of 110.3 per cent. Earnings per share were EUR 0.22 (EUR 0.14), growth of 59.7 per cent.

Restaurant business:

The turnover of the restaurant business segment was MEUR 121.0 (MEUR 75.9), growth of 59.5 per cent. EBIT was MEUR 5.7 (MEUR 2.3), growth of 155.1 per cent.

Labour hire business:

The turnover of the labour hire business segment was MEUR 67.5 (MEUR 53.0), growth of 27.4 per cent. EBIT was MEUR 2.8 (MEUR 1.8), growth of 55.2 per cent.

The Group’s income for April–June 2019

Entire Group:

The Group’s turnover was MEUR 100.4 (MEUR 73.2), growth of 37.2 per cent. EBIT was MEUR 5.8 (MEUR 3.1), growth of 84.7 per cent. Earnings per share were EUR 0.08 (EUR 0.11), decrease of 28.4 per cent.

Restaurant business:

The turnover of the restaurant business segment was MEUR 67.7 (MEUR 45.0), growth of 50.6 per cent. EBIT was MEUR 4.0 (MEUR 2.1), growth of 88.3 per cent.

Labour hire business:

The turnover of the labour hire business segment was MEUR 37.2 (MEUR 31.6), growth of 17.9 per cent. EBIT was MEUR 1.8 (MEUR 1.0), growth of 79.8 per cent.

Figures in parentheses refer to the same period last year, unless otherwise stated.

SUMMARY

In January–June 2019, the Group’s turnover was MEUR 180.6, showing an increase of 47.6 per cent, and EBIT was MEUR 8.5, growing by 110.3 per cent, with earnings per share at EUR 0.22, up by 59.7 per cent in comparison with last year’s reference period. In April–June 2019, the Group’s turnover was MEUR 100.4, showing an increase of 37.2 per cent, and EBIT was MEUR 5.8, growing by 84.7 per cent, with earnings per share at EUR 0.08, down by 28.4 per cent in comparison with last year’s reference period.

In January–June 2019, the turnover of the restaurant business segment was MEUR 121.0, showing an increase of 59.5 per cent, and EBIT was MEUR 5.7, growing by 155.1 per cent in comparison with last year’s reference period. In April–June 2019, turnover was MEUR 67.7, showing an increase of 50.6 per cent, and EBIT was MEUR 4.0, growing by 88.3 per cent in comparison with last year’s reference period.

In January–June 2019, turnover for restaurants was MEUR 46.8 (MEUR 28.0), an increase of 67.1 per cent, and in April–June, it was MEUR 25.1 (MEUR 16.1), an increase of 56.0 per cent.

In January–June 2019, turnover for nightclubs, pubs and entertainment venues was MEUR 42.1 (MEUR 35.8), an increase of 17.6 per cent, and in April–June, it was MEUR 23.4 (MEUR 20.3), an increase of 15.1 per cent.

In January–June 2019, turnover for fast casual restaurants was MEUR 16.1 (MEUR 8.8), an increase of 82.8 per cent, and in April–June, it was MEUR 8.0 (MEUR 5.3), an increase of 51.4 per cent.

In January–June 2019, turnover for the international restaurant business was MEUR 16.0 (MEUR 3.3), an increase of 390.8 per cent, and in April–June, it was MEUR 11.2 (MEUR 3.3), an increase of 243.4 per cent.

In the restaurant business, factors influencing earnings for the review period were investments in international business, expansion to the Norwegian restaurant market, implementation of the restaurant portfolio reorganisation programme and the resulting improvement in balance sheet efficiency through unit restructuring and business divestments as well as numerous restaurant concept reinventions with their ramp-up and opening costs. The Q2/2018 comparison figures were materially affected by the MEUR 3.6 sales profit from the SuperPark transaction and other non-recurring items, with an approximately MEUR 1.4 net effect on the earnings for the reference period.

A finance cost entry item resulting from the IFRS 16 Leases standard, adopted at the beginning of 2019, has a MEUR -0.9 negative effect on earnings and also a negative effect on earnings per share.

In January–June 2019, the turnover of the labour hire business segment was MEUR 67.5, showing an increase of 27.4 per cent, and EBIT was MEUR 2.8, growing by 55.2 per cent in comparison with last year’s reference period. In April–June 2019, turnover was MEUR 37.2, showing an increase of 17.9 per cent, and EBIT was MEUR 1.8, growing by 79.8 per cent in comparison with last year’s reference period. In the labour hire business, earnings for the review period were affected by organic and regional growth especially in the HoReCa sector.

Especially 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.

PROSPECTS FOR 2019

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.

CEO AKU VIKSTRÖM

EBIT amounting to MEUR 8.5 – a more than 110 per cent improvement year on year

Our Group’s result for January–June 2019 was strong. The Group’s turnover was MEUR 180.6, showing an increase of 47.6 per cent, and EBIT was MEUR 8.5, growing by 110.3 per cent, with earnings per share at EUR 0.22 (EUR 0.14), up by 59.7 per cent in comparison with last year’s reference period.

During the review period, we have made significant progress with integration and the profitability programmes. The productivity of our restaurant portfolio has improved as the restructuring phase has been completed and the thorough concept renewal has begun. At the same time, the entry into the Norwegian market, carried out in April as part of our internationalisation strategy, and the associated business acquisition have exceeded our expectations.

During the first half of the year, EBIT developed positively, boosted by growth and the profitability programmes, which could also be seen in earnings per share. The Q2 comparison figures are materially affected by the MEUR 3.6 sales profit from the SuperPark transaction in the second quarter of 2018 and other non-recurring items. Their net effect on the earnings for the reference period was MEUR 1.4.

Due to the IFRS 16 Leases standard, adopted at the beginning of 2019, there is a finance cost entry item with a MEUR -0.9 negative effect on earnings and naturally also a negative effect on earnings per share.

Profitability programmes proceed on schedule

The profitability development programmes proceed on schedule and will be completed during the current financial period. In the integration of Royal Ravintolat, the consolidation of management and administration as well as the centralisation of purchase and procurement have been fully completed. The impact of the new flexible, demand-based operating model can already be seen clearly in staff efficiency in most units. The programme is still underway in approximately ten restaurant units and will be completed in the third quarter. To support staff efficiency, we launched a staff bonus model that is quite exceptional in our field: every day, we reward one of our professionals with a EUR 500 bonus based on customer feedback. At the beginning of the integration, we estimated that we would reach at least MEUR 6 synergy benefits – that figure will be exceeded.

The restaurant portfolio restructuring was completed in the second quarter when the last units to be terminated were removed from the portfolio. As part of the restructuring programme, a total of 25 restaurants were closed or sold.

During the second quarter of the year, we launched exceptionally many concept renewal projects where we utilise the combined company’s more extensive brand portfolio and skill set. The total number of restaurant concepts reinvented and new restaurant concepts introduced during the first half of the year is eight, with profit expectations estimated to be realised in the second half of the year. Portfolio and investment management will continue to be the company’s key success factor in improving operational profitability and balance sheet efficiency.

Strong first half of the year for restaurants

In January–June, turnover for restaurants was MEUR 46.8 (MEUR 28.0), an increase of 67.1 per cent. The positive market development and increased efficiency in sales operations had a positive impact on the result for the second quarter. Our strong restaurant brands, such as Elite, The Cock and Stefan’s Steakhouse, as well as new concepts, such as Yes Yes Yes and Pyynikin Brewhouse, performed particularly well and are growing clearly faster than the market.

Increasing demand in the pub and entertainment venue sector and intensified competition in the nightclub market

In January–June, turnover for nightclubs, pubs and entertainment venues was MEUR 42.1 (MEUR 35.8), an increase of 17.6 per cent. In the pub, entertainment and gaming venue sector, the winning streak continued as the market evolved. The leisure and entertainment market is growing and diversifying as consumers seek new experiences. To respond to intensified competition in the nightclub market, our strategy is to focus on growth centres and more closely defined customer segments.

The fast casual business continued to grow

In January–June, turnover for fast casual restaurants was MEUR 16.1 (MEUR 8.8), an increase of 82.8 per cent. Growth was particularly driven by the Hanko Sushi and Hook concept and digital sales. There are significant differences between shopping centres in how the fast casual business grows and the distribution channel strategy is an increasingly important success factor for our scalable business operations in the future. Sales from fast and casual take-away and home-delivery meals continue to grow. Going forward, we will develop more digital services to make it easier for the consumer to buy and order food at home and at work.

International operations expanded to Norway

In January–June, turnover for our international business was MEUR 16.0 (MEUR 3.3), a year-on-year increase of 390.8 per cent. In Denmark, the number of our restaurants has more than doubled from 11 to 23 during the year. After an intensive growth phase, the focus will now be shifted to harmonising the operating model and enhancing its efficiency as well as to streamlining the organization.

At the beginning of April, we expanded our operations to the Norwegian market that is characterised by high purchasing power and amounts to roughly EUR 9 billion. The EV/EBITDA ratio of the strategically attractive and profitable transaction was under 5 when measured with the figures for the year 2018. The Norwegian business operations have got off to a very promising start and growth prospects are good both organically and through market consolidation. In our international business, our focus during the remainder of the year is on integrating the Danish and Norwegian operations into the Group and there are no plans for entering new markets.

Strong performance continued in the labour hire business

During the review period, Smile’s strong organic growth continued especially in the HoReCa sector. In January–June 2019, turnover for the labour hire business was MEUR 67.5, showing an increase of 27.4 per cent, and EBIT was MEUR 2.8, growing by 55.2 per cent in comparison with last year’s reference period. The relative profitability of business operations has improved significantly. All businesses acquired in 2018 have been successfully integrated into Smile and synergy benefits can be seen especially in EBIT improvement. During the second quarter, service development continued through the expansion of hiring to service centres, among other actions. Despite the slight slowing down of general economic growth, the economic outlook in staffing services is better than in other service sectors. Although there are an increasing number of challenges with regard to the availability of labour, which slows down growth in the entire sector, staffing services are considered a future growth sector, in which Smile will continue to grow.

Future growth in the new markets

Immediately after the review period, we announced the potential merger of our subsidiary Smile Henkilo¨sto¨palvelut with VMP Plc, one of the largest companies in this field. The completion of the transaction is conditional on a resolution of VMP’s general meeting and on obtaining the necessary consents from the financier banks. We will provide more detailed information about the effects of the transaction on our earnings and balance sheet upon the completion of the transaction. If the planned transaction is completed, the merged VMP and Smile will become our affiliate, of which NoHo Partners Plc will own 30.27 per cent, being the company’s largest individual shareholder.

We expect that the business combination will significantly increase our Group’s shareholder value and create added value to us as a shareholder, thanks to the new company’s stronger market position and increased competitiveness. The planned transaction will strengthen our Group’s financial position significantly. Smile’s potential separation from the Group enables us to fully concentrate our resources on the profitable growth and development of our core business operations.

At the beginning of August, we announced that we will expand to a new operating area: the lunch and staff restaurant market. The size of the market is considerable and our view is that its premiumisation holds potential for value creation in the future. Our strategic entry into this market is the acquisition of Pihka restaurants, well-known for their responsible and sustainable business approach. In the long term, we will concentrate on the growing and developing experience market and value creation especially in those segments where we consider our scale and operating model to give us a competitive advantage both in Finland and internationally.

Aku Vikström, CEO

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

A press conference for media, analysts and investors will be held today Tuesday 6 August 2019 starting 10:00am at Restaurant Savoy at Eteläesplanadi 14, 00130 Helsinki. At the event, NoHo Partners CEO Aku Vikström and Group subsidiary Smile Henkilöstöpalvelut Oyj Managing Director Sami Asikainen will go through the key events of the second quarter of 2019, present the result for the second 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-q2-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 Half-year Report for January-June 2019 is appended to this release in PDF format. The Half-year Report is also available on the company's website at www.noho.fi.

NOHO PARTNERS PLC

Board of Directors

APPENDIX: NoHo Partners Plc Half-year Report Q2/2019

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 and labour hire. The compa- ny, 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, Lo¨yly, 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 4,500 people converted into full-time workers. NoHo Partners Plc’s subsidiary Smile Henkilo¨sto¨palvelut Oyj employed approximately 10,000 people during the 2018 financial period.

NoHo Partners corporate website: www.noho.fi
NoHo Partners consumer websites: www.ravintola.fi and www.royalravintolat.fi
Smile Henkilöstöpalvelut: www.smilepalvelut.fi

Attachment

• NoHo Partners Plc Half-year Report Q2/2019