Restamax Plc Six-monthly Report Q2/201807.08.2018 07:00:00 CET
Restamax Plc
SIX-MONTHLY REPORT 7 Aug 2018 at 8:00 a.m.
RESTAMAX SIX-MONTHLY REPORT FOR 1 JANUARY-30 JUNE 2018
Turnover increased by 62 per cent and profitability improved in January-June 2018
TURNOVER AND INCOME
The Group's Income for the Second Quarter of 2018
Entire Group:
The Group's turnover was MEUR 73.2 (MEUR 43.6), growth of 67.9 per cent. EBITDA was MEUR 7.8 (MEUR 3.9), growth of 98.9 per cent. Operating profit was MEUR 3.1 (MEUR 1.2), growth of 153.1 per cent.
Restaurant business:
The turnover of the restaurant business segment was MEUR 45.0 (MEUR 29.0), growth of 54.8 per cent. EBITDA was MEUR 5.7 (MEUR 2.8), growth of 102.8 per cent. Operating profit was MEUR 2.1 (MEUR 0.4), growth of 433.0 per cent.
Labour hire business:
The turnover of the labour hire business segment was MEUR 31.6 (MEUR 17.5), growth of 80.9 per cent. EBITDA was MEUR 2.0 (MEUR 1.2), growth of 65.0 per cent. Operating profit was MEUR 1.0 (MEUR 0.8), growth of 19.6 per cent.
The Group's Income for January-June 2018
Entire Group:
The Group's turnover was MEUR 122.4 (MEUR 75.6), growth of 62.0 per cent. EBITDA was MEUR 11.9 (MEUR 7.2), growth of 65.8 per cent. Operating profit was MEUR 4.0 (MEUR 2.0), growth of 103.8 per cent.
Restaurant business:
The turnover of the restaurant business segment was MEUR 75.9 (MEUR 54.6), growth of 38.9 per cent. EBITDA was MEUR 8.5 (MEUR 5.5), growth of 54.8 per cent. Operating profit was MEUR 2.3 (MEUR 0.8), growth of 195.6 per cent.
Labour hire business:
The turnover of the labour hire business segment was MEUR 53.0 (MEUR 26.1), growth of 103.0 per cent. EBITDA was MEUR 3.4 (MEUR 2.0), growth of 73.1 per cent. Operating profit was MEUR 1.8 (MEUR 1.2), growth of 45,4 per cent.
Figures in parentheses refer to the same period last year, unless otherwise stated.
SUMMARY
Restamax Plc's result for the first half of 2018 was clearly better than the previous year, as had been expected. Between January and June, turnover increased by 62.0 per cent, EBITDA by 65.8 per cent and operating profit by 103.8 per cent from the corresponding period in the previous year. In April-June, turnover increased by 67.9 per cent, EBITDA by 98.9 per cent and operating profit by 153.1 per cent from the corresponding period in the previous year.
On 27 April 2018, Restamax sold its 30.17 per cent holding in SuperPark, which operates indoor activity parks. The selling price of the shares was about MEUR 6.5, and the company recorded a sales profit of some MEUR 3.6 from the transaction. The transaction has a positive effect on the result for the 2018 financial period. With the purchase of RR Holding Oy ("Royal Ravintolat") and the integration of its operations, the Group made a number of organisational changes and investments in the second quarter, thereby significantly influencing the result for the period under review. Capital transfer taxes resulting from this and other corporate acquisitions totalled approx. MEUR 1.45 in the entire Group. In addition, other non-recurring costs relating to the transactions, such as legal expenses and consulting services, totalled approx. EUR 770,000 at the Group level. Of these, capital transfer taxes and other non-recurring costs resulting from corporate acquisitions totalled approx. EUR 320,000 in the labour hire segment.
The positive total net effect of the costs and profits of these transactions on the Group's result in the period under review was approx. MEUR 1.4.
Especially in the restaurant business, most of the profits are made in the second half of the year due to the seasonal nature of the business.
PROSPECTS FOR 2018
Results management (as of 7 August 2018):
In accordance with its strategy, Restamax estimates the Group's turnover to increase and profitability to remain at a good level in both segments in the 2018 financial period. The restaurant segment is expected to reach a turnover of over MEUR 200, and in labour hire, a turnover of approximately MEUR 110 is expected, the total turnover being some MEUR 300 after eliminations.
Restamax will further specify its long-term financial targets during the 2018 financial period.
Previous results management (as of 20 February 2018):
In accordance with its strategy, Restamax expects the Group's turnover to increase and profitability to remain on a good level in both segments in the 2018 financial period. The restaurant segment is expected to reach a turnover of approximately MEUR 140 and in labour hire, a turnover of approximately MEUR 110 is expected, the total turnover being some MEUR 240 after eliminations.
Restamax's goal is to reach a turnover of approximately MEUR 400 by the end of 2020 after internal eliminations. The goal of the restaurant segment is to reach a turnover of approximately MEUR 200, and the goal of the labour hire segment is to reach a turnover of approximately MEUR 220 by the end of 2020.
| KEY FIGURES | |||||
| Restamax Group in total | |||||
| (EUR thousand) | 4-6/2018 | 4-6/2017 | 1-6/2018 | 1-6/2017 | 1-12/2017 |
| KEY FIGURES, entire Group | |||||
| Turnover | 73,174 | 43,587 | 122,392 | 75,556 | 185,856 |
| EBITDA | 7,764 | 3,903 | 11,893 | 7,174 | 22,404 |
| EBITDA, % | 10.6% | 9.0% | 9.7% | 9.5% | 12.1% |
| Operating profit | 3,134 | 1,238 | 4,045 | 1,985 | 10,767 |
| Operating profit, % | 4.3 % | 2.8 % | 3.3% | 2.6% | 5.8% |
| Review period result | 2,199 | 550 | 2,600 | 902 | 5,492 |
| To shareholders of the parent company | 2,036 | 305 | 2,476 | 792 | 5,058 |
| To minority shareholders | 163 | 244 | 124 | 110 | 434 |
| Earnings per share (euros) to the shareholders of the parent company | 0.11 | 0.02 | 0.14 | 0.05 | 0.30 |
| Interest-bearing net liabilities | 142,642 | 47,306 | 43,649 | ||
| Gearing ratio, % | 203.6% | 115.1% | 93.1% | ||
| Equity ratio, % | 23.2% | 35.3% | 35.3% | ||
| Return on investment, % (p.a.) | 5.2% | 4.9% | 10.7% | ||
| Net financial expenses | 718 | 404 | 866 | 583 | 2,810 |
| Restaurant business | |||||
| (EUR thousand) | 4-6/2018 | 4-6/2017 | 1-6/2018 | 1-6/2017 | 1-12/2017 |
| Turnover | 44,970 | 29,048 | 75 871 | 54 609 | 122,174 |
| EBITDA | 5,741 | 2,830 | 8 454 | 5 463 | 16,325 |
| EBITDA, % | 12.8% | 9.7% | 11.1% | 10.0% | 13.4% |
| Operating profit | 2,113 | 396 | 2 252 | 762 | 6,920 |
| Operating profit, % | 4.7% | 1.4% | 3.0% | 1.4% | 5.7% |
| KEY FIGURES | |||||
| Material margin, % | 72.5% | 73.4% | 72.7% | 73.6% | 74.1% |
| Staff expenses, % | 32.2% | 29.2% | 31.2% | 29.3% | 28.0% |
| Labour hire business | |||||
| (EUR thousand) | 4-6/2018 | 4-6/2017 | 1-6/2018 | 1-6/2017 | 1-12/2017 |
| Turnover | 31,581 | 17,460 | 53,036 | 26,120 | 75,612 |
| EBITDA | 2,008 | 1,217 | 3,424 | 1,978 | 6,603 |
| EBITDA, % | 6.4% | 7.0% | 6.5% | 7.6% | 8.7% |
| Operating profit | 1,006 | 841 | 1,779 | 1,223 | 3,834 |
| Operating profit, % | 3.2% | 4.8% | 3.4% | 4.7% | 5.1% |
| KEY FIGURES | |||||
| Staff expenses, % | 82.3% | 85.1% | 83.2% | 85.0% | 83.7% |
| Key figures for the labour hire segment with the reference data adjusted* | |||||
| (EUR thousand) | 4-6/2018 | 4-6/2017 | 1-6/2018 | 1-6/2017 | 1-12/2017 |
| Turnover | 31,581 | 17,179 | 53,036 | 25,590 | 74,366 |
| EBITDA | 2,008 | 936 | 3,424 | 1,448 | 5,356 |
| EBITDA, % | 6.4% | 5.4% | 6.5% | 5.7% | 7.2% |
| Operating profit | 1,006 | 846 | 1,779 | 1,228 | 3,834 |
| Operating profit, % | 3.2% | 4.9% | 3.4% | 4.8% | 5.2% |
| KEY FIGURES | |||||
| Staff expenses, % | 82.3% | 86.5% | 83.2% | 86.8% | 85.1 % |
*) The labour hire reference data for 2017 presented in the table has been adjusted to correspond to the application method of the IFRS 15 standard adopted in the labour hire segment in 2018.
CEO AKU VIKSTRÖM
Second quarter of 2018 makes Finnish restaurant history
The second quarter of 2018 became an important milestone in the history of both the company and the entire Finnish restaurant business. In June, we made the largest corporate acquisition in the history of the Finnish restaurant business, as Restamax purchased Royal Ravintolat. By joining forces, the two restaurant pioneers became the country's largest restaurant company, with a total of some 220 restaurants in Finland and Denmark.
The integration of Royal Ravintolat has started well and is expected to continue throughout next year. Now, looking at the company from the inside, I see two companies with various and supplementary strengths that we can utilise to achieve significant benefits from synergy and scale. In our estimate, the synergy benefits gained by the Group will total at least MEUR 6 by the end of 2019. These will result from removing overlaps in administration and management, achieving scale benefits in purchase and acquisition volumes as well as improving staff efficiency. To enable efficient completion, we have strengthened our organisation and appointed a new Executive Team for the Group with members from both companies. I started as the CEO of Restamax and Chairman of the Executive Team on 1 June 2018. My predecessor Juha Helminen takes charge of our company's international operations and their development. The composition of the Group's Board of Directors was revamped on 1 June 2018, and the new Executive Team will begin on 1 September 2018.
As expected, the integration of restaurant operations in Denmark has also started well. Two new restaurants have now been opened at Copenhagen Airport, and we are currently looking into expansion opportunities in the Danish restaurant market. In addition, we are conducting negotiations about openings in a few markets.
Joining forces to become Northern Europe's largest
Two big Finnish restaurant entrepreneur stories unified in the beginning of June. One of Finland's fastest-growing listed companies, Restamax, has experienced strong, steady growth throughout its history (2006-2017 CAGR +32%). At the same time, the company has managed to keep profitability at a good level.
The roots of Restamax's operations date from the mid-1990s and, during 12 years in the hands of its present chief shareholders, it has grown from a company with a turnover of MEUR 8 to a Group of almost MEUR 190. Royal Ravintolat, in turn, has been a pioneer in Finnish cuisine for nearly 30 years, basing its corporate culture on high quality and an entrepreneurial operating model.
The success stories of both companies are based on strong entrepreneurship, the resulting quick decision-making and controlled risk-taking as well as dedicated, passionate people. I regard reinforcing this culture as one of the most important success factors of our future. Together, we form a restaurant company that combines an entrepreneurial approach in everything we do, an attitude that emphasises the role and profit responsibility of restaurateurs as well as a big company's development resources and benefits of scale.
The competence areas and market strengths of the new company will also complement each other well. Royal Ravintolat's strong market position in Helsinki and Restamax's foothold in key Finnish cities and seasonal hotspots will guarantee an excellent position in Finland's growing restaurant market, which is becoming increasingly consolidated. The companies' pools of competence also complement each other - whereas Royal Restaurants' high customer satisfaction and loyal customer relationships are its competitive assets, I consider Restamax's experience and operative efficiency the best in the market in terms of quality.
With its market leadership in the growing restaurant business and its proven growth strategy, the company has a good growth platform for continuing domestic market consolidation and developing its profitability. This also enables achieving new growth through internationalisation. In the next 3-5 years, our goal is to become the largest restaurant company in Northern Europe.
The Group's strong and profitable growth continues
In terms of profit, January-June 2018 was highly successful. The turnover of the entire Group increased by 62 per cent, EBITDA by nearly 66 per cent and operating profit by nearly 104 per cent from the corresponding period in the previous year. The Group's strong growth is still continuing and its relative profitability is developing positively.
In the period under review, we made exceptionally many transactions and that affected our result. Our result was adversely affected by the capital transfer taxes from corporate acquisitions, totalling approx. MEUR 1.45. In addition, non-recurring costs relating to the transactions, such as legal expenses and consulting services, totalled approx. EUR 770,000 in both business segments combined. In April, we sold our approx. 30 per cent holding in SuperPark, which operates indoor activity parks. A sales profit of approx. MEUR 3.6 was recorded for this. The transaction had a positive effect on our result and will support the financing of our future growth. The positive total net effect of the costs and profits of these transactions on our result was approx. 1,4 million euros.
A strong restaurant portfolio and proven, well-working strategy have been driving our growth for 10 years now. Our extensive restaurant portfolio now covers Finland's most interesting and heavily growing markets in terms of both geography and customer segments. At the same time, its diversity makes it less dependent on external factors, such as weather.
General economic development and change in consumer behaviour regarding the consumption of services and eating out can be seen as positive market development. The warm weather in the early summer resulted in positive customer flows in various summer events, amusement parks, terrace restaurants and, in particular, seaside restaurants in Helsinki. Tourist flows are also still increasing in Helsinki city centre and Tampere.
Smile Henkilöstöpalvelut's position in the labour hire market strengthens
Smile Henkilöstöpalvelut became part of Restamax in 2014. Back then, the company's turnover was approx. MEUR 6.8, whereas it was MEUR 76.5 in 2017. The business growth rate has been wild - and it is not slowing down. Smile is further strengthening its position as the leader in Finland's labour hire business.
In the second quarter, Smile supplemented its organic growth with significant corporate acquisitions, buying 80 per cent of the construction-sector hired labour company Adicio Oy and purchasing the Jobio companies specialising in industrial, construction and logistics labour hire services as well as Job Services Two Oy and Job Services Three Oy, which operate in the Helsinki Metropolitan Area. The company also signed a staffing services contract worth MEUR 100 with Restamax, making Smile responsible for Restamax's labour hire, direct recruitment and payroll services also in the future. The contract further reinforces Smile's position in the HoReCa sector, and the acquisition of Royal Ravintolat strengthens the company's foothold in the labour hire market in the Helsinki Metropolitan Area, in particular. Smile plays a significant role in the integration of Royal Ravintolat. By collaborating with Smile, we will ensure the availability of professional labour as well as efficient HR administration and its continuous development.
Demand and growth continue in the labour hire sector. According to the Confederation of Finnish Industries' economic barometer of April 2018, the labour hire sector has reached a record level, exceeding the high levels of 2005-2007. New parties and capital investors are interested in the market, and consolidation can be seen in the sector. In the past year, Smile has taken significant efforts to strengthen its market position, including raising its national profile by means of marketing and investing in its staff competence and customer commitment.
In June, we announced that we would continue to evaluate the listing of Smile Henkilöstöpalvelut on the Nasdaq Helsinki Ltd Stock Exchange. The listing would support Smile Henkilöstöpalvelut's balance sheet and further accelerate its growth. As part of the evaluation work, we have met potential new investors, and we will release more information as progress is made.
A strong foundation for continuing the success story
Our system and growth drivers are intact and our market position is steady. We have a strong portfolio and the field's most competent personnel that today consists of 3,500 people. I am delighted by our employees' positive attitude towards the change, and our customers have also reacted well to the news. Our focus is now strongly on the integration and on completing the synergy programmes next year. At the same time, we will update our strategic objectives and profitable growth programme for the next three years. In the short term, we will move the focus from strong growth to developing relative profitability. We will be further specifying our profit guidance in 2018, when the strategy update has been completed and processed by the Board.
Our strong cash flow is guaranteed by our core business, which lies on a strong and steady foundation, as well as our business model, which works with negative working capital in the restaurant business segment. The synergy benefits of the Royal Ravintolat arrangement will strengthen our cash flow and improve our loan servicing capacity.
Our operations have a strong foundation. We will continue our successful story on its basis, building a shared future as an ever-stronger actor together with our employees, customers, shareholders and other interest groups.
Aku Vikström, CEO
Press conference for media and analysts at 10:00 am
There will be a press conference for media and analysts today, Tuesday 7 August 2018, starting 10:00 am at Restaurant Teatteri at Pohjoisesplanadi 2, 00130 Helsinki. Restamax Plc's CEO Aku Vikström and Smile Henkilöstöpalvelut Oy's Managing Director Sami Asikainen will present the result for the review period and speak about topical issues and market prospects. The presentation material and a video recording will become available on the company website later today.
The full Restamax six-monthly report for January-June 2018 is appended to this release in PDF format. The six-monthly report is also available on the company's website at www.restamax.fi.
RESTAMAX PLC
Board of Directors
APPENDIX: Restamax Plc Six-monthly Report Q2/2018
Additional information:
Aku Vikström, CEO, Restamax Plc, tel +358 50 524 9445
Jarno Suominen, CFO, Restamax Plc, tel +358 40 721 5655
Distribution:
NASDAQ Helsinki
Major media
www.restamax.fi
Restamax Plc is a Finnish group established in 1996, specialising in restaurant services and labour hire. 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, nightclubs and entertainment centres all over Finland. The company also has restaurant business operations in Denmark. In June 2018, the company purchased Royal Ravintolat. Well-known restaurant concepts of the Group include Stefan's Steakhouse, Viihdemaailma Ilona, Classic American Diner, Hanko Sushi, Sandro, Savoy and Teatteri. In 2017, Restamax Plc's turnover was MEUR 185.9 and EBITDA MEUR 22.4. Depending on the season, the Group employs approximately 3,500 people converted into full-time workers. Restamax's subsidiary Smile Henkilöstöpalvelut Oy employs approximately 9,000 people per month.
Restamax company website: www.restamax.fi, Restamax consumer website: www.ravintola.fi, Royal Ravintolat: www.royalravintolat.fi, Smile Henkilöstöpalvelut: www.smilepalvelut.fi