Release Date: November 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sphera Franchise Group SA (BSE:SFG, Financial) reported record sales for the first nine months of 2024, with a normalized net profit of RON71.4 million, a 66.3% increase compared to the same period in 2023.
- The company experienced its best third quarter ever in terms of sales, EBITDA, and net profit.
- Sphera Franchise Group SA expanded its network by opening several new restaurants, including five KFC centers in Romania, one KFC in Chisinau, and one Taco Bell in Bucharest.
- The acquisition of the franchisee rights for the Cioccolatitaliani brand is seen as a strategic move to tap into new growth opportunities and diversify the company's portfolio.
- Taco Bell reported a 7.1% increase in sales and an impressive 83.8% rise in EBITDA, indicating strong growth potential for the brand.
Negative Points
- The Romanian market faces economic uncertainty with an expected inflation rate rise to 4.9% in 2024, which could impact consumer spending.
- Pizza Hut experienced a 7.7% decline in sales due to restaurant closures over the past 12 months.
- The company is navigating a period of uncertainty due to potential fiscal changes and high deficits in Romania.
- Despite positive results, the company acknowledges the challenges of increased competition and customer pressure in the market.
- There is a concern about the low same-store growth in KFC Romania, attributed to the maturity of the restaurant network and limited price adjustments.
Q & A Highlights
Q: How many Taco Bell restaurants do you plan to open in 2025?
A: We estimate opening between 1 to 9 units next year, depending on the availability of suitable locations in shopping centers and targeted streets. - Calin Ionescu, CEO
Q: What is the rationale behind the acquisition of the Cioccolatitaliani franchise, and what revenue do you expect from this segment?
A: The acquisition is a strategic addition to diversify our brand portfolio and leverage our restaurant operation capabilities, particularly in Italy. We expect each unit to generate approximately EUR 700,000 in sales, with plans to open about four new units per year. - Valentin Budes, CFO
Q: Can you detail the cost control measures implemented and their impact on restaurant expenses?
A: Our cost control measures include renegotiating supplier contracts, investing in energy-efficient equipment, and streamlining operations. These efforts have helped stabilize costs, particularly in chicken procurement and utilities, despite market pressures. - Valentin Budes, CFO
Q: Is there room for further EBITDA margin expansion in 2025, and what will be the main drivers?
A: Yes, there is potential for EBITDA margin expansion, driven by the maturation of recently opened units and the successful turnaround of Pizza Hut, which will contribute positively to the margin. - Valentin Budes, CFO
Q: Can you elaborate on the success of the Pizza Hut restructuring and future profitability improvements?
A: The restructuring has shown positive results, with significant improvements in financial performance. We continue to implement operational changes and expect further positive outcomes in 2025. - Valentin Budes, CFO
Q: Could you elaborate on the low same-store growth in KFC Romania?
A: The low same-store growth is expected due to the maturity of the restaurants. However, we have seen a good evolution in transactions, with careful management of price adjustments. - Valentin Budes, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
