Helsinki / FI. (kpg) Finland’s KotiPizza Group Oyj announced its financial statements bulletin for the period 01 February 2018 to 31 January 2019. The financial year 2019 ended with comparable net sales growth of 15 percent and Ebitda growth of 10 percent in the fourth quarter, the Group said in its bulletin.
As of 05 February 2019, KotiPizza Group is part of Norway’s Orkla ASA, that now owns 99.29 percent of all shares and votes in the Finnish company. Through the acquisition of the Finnish restaurant chain Kotipizza, Orkla has attained a leading position in the Finnish pizza market. KotiPizza chain’s financial results:
November 2018–January 2019 (11/2018-01/2019)
- Chain-based net sales grew 17.6 percent (17.5 percent).
- Comparable net sales were 24.1 million EUR (21.0). Growth was 14.7 percent.
- Comparable Ebitda was 2.26 million EUR (2.06). Growth was 10.0 percent.
- Net sales were 25.4 million EUR (21.9). Growth was 16.2 percent.
- Ebit was -1.04 million EUR (1.40).
February 2018–January 2019 (02/2018-01/2019)
- Chain-based net sales grew 17.2 percent (18.2 percent).
- Comparable net sales were 91.5 million EUR (79.9). Growth was 14.6 percent.
- Comparable Ebitda was 9.39 million EUR (8.52). Growth was 10.2 percent.
- Net sales were 96.5 million EUR (84.1). Growth was 14.8 percent.
- Ebit was 4.02 million EUR (6.42).
- Net gearing was 31.0 percent (24.4 percent).
- Equity ratio was 51.7 percent (52.0 percent).
Outlook for the financial year 2020
The Group estimates for the full financial year started 1 February 2019 that the total chain sales of its restaurant concepts will increase as compared to previous year and that comparable Ebitda will increase as compared to previous year.
Board of directors’ proposal for dividend or return of capital
The board of directors proposes that no dividend nor return of capital will be paid for the financial year of 1 February 2017–31 January 2018.
Kotipizza Group’s key figures
| Key figures in TEUR | 08-10/2018 | 08-10/2017 | 02/2018-01/2019 | 02/2017-01/2018 |
| Comparable figures | ||||
| Comparable net sales | 24’098 | 21’005 | 91’489 | 79’858 |
| Comparable Ebitda | 2’261 | 2’055 | 9’389 | 8’523 |
| Comparable Ebitda of | 9.4 | 9.8 | 10.3 | 10.7 |
| net sales,% | ||||
| Comparable Ebit | 1’314 | 1’713 | 7’322 | 7’163 |
| Chain-based net sales | 33’821 | 28’760 | 127’707 | 108’990 |
| Reported figures | ||||
| Net sales | 25’434 | 21’894 | 96’517 | 84’089 |
| Ebit | -1’042 | 1’403 | 4’017 | 6’421 |
| Earnings per share | -0.12 | 0.15 | 0.50 | 0.71 |
| Net cash flows from operating activities | 4’660 | 5’603 | ||
| Net cash used in investment activities | -2’133 | -2’675 | ||
| Net gearing,% | 31.0 | 24.4 | ||
| Equity ratio,% | 51.7 | 52.0 |
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Chief Executive’s Review
Chief Executive Tommi Tervanen: “Kotipizza’s chain-based net sales continued their good growth in the final quarter of the financial year. In the final quarter, the chain-based net sales grew by 13.5 percent compared to the same period in the previous year and were 31.8 million EUR (28.0). The chain-based net sales are equivalent to the total net sales of the company’s franchisees, based on which the company’s franchising fees are invoiced monthly. Chain-based net sales also include the sales of the restaurants owned directly by Kotipizza Group.
Following Kotipizza Group’s new strategy and ‘Road to 2020′ roadmap, approved in the first quarter of the financial year, the Group’s strategy is to manage a portfolio of brands. This means that the company will develop and operate various restaurant concepts and markets, building on the fast casual phenomenon, franchising business model and high-quality customer experience. Key mega trends influencing the company’s operations include urbanisation, digitalisation and the rising popularity of home delivery.
During the review period, investments were primarily made in particular in the two key areas, or must-win battles, on the Kotipizza chain’s ‘Road to 2020′ roadmap: leadership in digital and home delivery. Sales of Kotipizza’s new online store, opened to consumers in the previous quarter, continued to present strong growth and is now equivalent to fifteen percent of the chain’s total sales. Similarly, the amount of home deliveries and number of restaurants offering home delivery have continued to develop favourably.
Also in the review period, Kotipizza Group invested in future growth and new fast casual concepts by continuing to develop the No Pizza’s concept in the proof-of-concept restaurant, opened in June in Helsinki’s Citycenter shopping mall, and by continuing to build the Social Burgerjoint restaurant, acquired in the previous financial year, into a franchisee chain. In the review period, a fourth Social Burgerjoint Restaurant was opened in Kerava. This is the chain’s first restaurant outside Helsinki and first one operated by franchisees. In the financial year just ended, approximately one million euros in total were invested in developing the new No Pizza, Social Burgerjoint and other concepts.
As final result of Orkla ASAs voluntary public cash tender offer, on 6 February 2019 the shares acquired by Orkla represented approximately 99.30 percent of all the shares and votes in Kotipizza Group. Orkla’s objective is to acquire all of Kotipizza’s shares and on 23 January 2019, it filed an application with the Redemption Board of the Finland Chamber of Commerce to initiate compulsory redemption proceedings for the remaining Kotipizza shares under the Finnish Companies Act. In addition, Orkla intends to cause the shares of Kotipizza to be delisted from Nasdaq Helsinki Ltd. as soon as permitted and practicable under applicable laws.
Comparable net sales of the Group grew 14.7 percent in the final quarter and were 24.1 million EUR (21.0). Comparable Ebitda was 2.26 million EUR (2.06) in the fourth quarter, representing an increase of 10.0 percent. Costs related to increasing consumers’ awareness of our new brand No Pizza as well as that of Chalupa weakened the company’s traditionally solid operating leverage. On the other hand, Social Burgerjoint had a strong quarter, which turned the segment’s full-year Ebitda into positive. The Group had a solid financial standing with net gearing of 31 percent and equity ratio of 52 percent at the end of the quarter.
According to MaRa, the growth of sales in the restaurant sector will remain favourable in 2019, supported by favourable trends in the Finnish national economy and consumer confidence, although it appears that the peak of this growth period has already been passed. However, development will be particularly strong in the fast food sector, as fast food restaurants account for a considerable proportion of restaurant dining. Finnish consumers still spend a smaller proportion of their income on restaurant dining than consumers in most of the countries of comparison. Thus, we have reason to believe that the growth of restaurant dining will continue in the coming years.
We believe that the financial development of the restaurant business and the consumer trends support Kotipizza Group’s investment in the fast casual concept, that is, restaurants that offer casual, fresh and responsibly produced food at an affordable price in a restaurant environment. We estimate for the full financial year started 1 February 2019 that both the total chain sales of our restaurant concepts and that comparable Ebitda will increase as compared to previous year.”
Group net sales
Chain sales November 2018 to January 2019
| Kotipizza chain | 11/2018-01/2019 | 11/2017-01/2018 | Change |
| Chain sales, total | 31’778 | 27’995 | 13.5% |
| Brick-and-mortar restaurants | 27’507 | 24’024 | 14.5% |
| Shop-in-shop restaurants | 4’271 | 3’973 | 7.5% |
| Online sales | 4’647 | 2’563 | 81.3% |
| Average number of restaurants | 281 | 263 | 6.9% |
| Average number of restaurants offering delivery | 85 | 74 | 15.3% |
| Chalupa chain | 11/2018-01/2019 | 11/2017-01/2018 | Change |
| Chain sales, total | 606 | 535 | 13.3% |
| Average number of restaurants | 13 | 13 | 0.0% |
| Social Burgerjoint chain | 11/2018-01/2019 | 11/2017-01/2018 | Change |
| Sales, total | 1’242 | 230 | 440.0% |
| No Pizza restaurant | 11/2018-01/2019 | 11/2017-01/2018 | Change |
| Sales, total | 195 | – | – |
| Chain sales, total | 33’821 | 28’760 | 17.6% |
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Chain-based net sales grew 17.6 percent (17.5 percent) year on year and were 33.8 million EUR (28.8) in the fourth quarter of the year.
Chain sales in the Kotipizza chain grew 13.5 percent compared to the previous year, driven by good sales development in brick-and-mortar restaurants and online sales. Average purchase in brick-and-mortar restaurants increased 2.9 percent, and the number of customers 11.9 percent. The Kotipizza chain’s online sales grew 81.3 percent compared to the previous year. In the online store, both the average purchase and customer volumes increased from previous year. During the fourth quarter, 3 brick-and-mortar restaurants and 2 shop-in-shop restaurants were opened, and 4 shop-in-shop restaurants were closed.
Chain sales in the Chalupa chain increased by 13.3 percent compared to the previous year. At the end of the review period, the chain had 13 (13) restaurants. Average purchase grew by 5.3 percent, and the number of customers per restaurant remained at previous year’s level. The public demand for Mexican food did not match our expectations. However, we have updated the Chalupa chain’s product portfolio based on customer feedback and invested in strengthening the chain’s visibility so as to lift customer volumes.
Sales in the Social Burgerjoint chain increased 440.0 percent compared to the previous year. Due to opening several new restaurants, the relevant data on average purchase and number of customers per restaurant is not available. The total chain sales of Social Burgerjoint were boosted by two new brick-and-mortar restaurants opened in Helsinki together with one franchise-led restaurant opened in Kerava.
Sales of the No Pizza restaurant, opened at the end of the second quarter, were EUR 195 thousand in the review period. To boost sales, work to develop the No Pizza concept was continued by paying more attention to updating our lunch concept and improving the functionality of digital ordering.
The chain-based net sales are equivalent to the total net sales of the company’s franchisees, based on which the company’s franchising fees are invoiced monthly. Chain-based net sales also include the sales of the restaurants owned directly by Kotipizza Group.
Chain sales February 2018 to January 2019
| Kotipizza chain | 02/2018-01/2019 | 02/2017-01/2018 | Change |
| Chain sales, total | 122’066 | 106’281 | 14.9% |
| Brick-and-mortar restaurants | 103’479 | 89’178 | 16.0% |
| Shop-in-shop restaurants | 18’588 | 17’103 | 8.7% |
| Online sales | 13’999 | 8’602 | 62.7% |
| Average number of restaurants | 275 | 264 | 4.3% |
| Average number of restaurants offering delivery | 80 | 71 | 13.4% |
| Chalupa chain | 02/2018-01/2019 | 02/2017-01/2018 | Change |
| Chain sales, total | 2’335 | 1’856 | 25.8% |
| Average number of restaurants | 13 | 9 | 37.2% |
| Social Burgerjoint chain | 02/2018-01/2019 | 02/2017-01/2018 | Change |
| Sales, total | 2’864 | 853 | 235.8% |
| No Pizza restaurant | 02/2018-01/2019 | 02/2017-01/2018 | Change |
| Sales, total | 442 | – | – |
| Chain sales, total | 127’707 | 108’990 | 17.2% |
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Chain-based net sales grew 17.2 percent (18.2 percent) year on year and were 127.7 million EUR (109.0) in the financial year.
Chain sales in the Kotipizza chain grew 14.9 percent compared to the previous year driven by good sales development in brick-and-mortar restaurants and online sales. In March, a new record was set for monthly sales in the chain as sales reached 10.2 million EUR. In June, sales reached 10.3 million EUR and a new monthly sales record in the chain was once again set in July as monthly chain sales reached 11.1 million EUR. Finally, a new record was once again set in December with a monthly sales of 11.5 million EUR. Average purchase in brick-and-mortar restaurants increased 5.6 percent, and the number of customers 10.3 percent compared to the previous year. The Kotipizza chain’s online sales grew 62.7 percent compared to the previous year. In the financial year, 13 brick-and-mortar restaurants and 11 shop-in-shop restaurant were opened, and 7 shop-in-shop restaurants were closed.
Chain sales in the Chalupa chain increased 25.8 percent compared to the previous year, driven mainly by restaurant openings 13 (9). Average purchase in Chalupa restaurants grew 2.4 percent, and the number of customers per restaurant decreased by 16.4 percent. In the financial year, 2 new restaurants were opened and one was closed.
Sales in the Social Burgerjoint chain increased 235.8 percent compared to the previous year. Due to opening several new restaurants, relevant data on the average purchase and number of customers per restaurant is not available. Sales figures that are reported on a monthly basis did not include sales of the Social Burgerjoint food truck that was in operation in the period of April–October 2018 with total sales of 146 thousand euros. However, the food truck’s sales for the period in question are included in the figures reported in interim and half-year reports. The total chain sales were boosted by two new restaurants opened in Helsinki together with one franchisee-led restaurant opened in Kerava.
Sales of the No Pizza restaurant, opened at the end of the second quarter, were EUR 442 thousand in the review period. To boost sales, work to develop the No Pizza concept was continued by paying more attention to updating our lunch concept and improving the functionality of digital ordering.
Outlook for the financial year 2020
According to the Finnish Hospitality Association MaRa, Finnish restaurant businesses continued to see positive development in 2018. The total net sales of restaurant businesses is estimated to have grown by five per cent. In spite of the positive development, it should be noted that the Finnish tourism and restaurant industry went through “a lost decade” after 2008–2009, and it is only in the past two years that service demand has returned to the levels seen before the financial crisis.
Growth has been particularly strong in the fast food market. MaRa estimates that the sales of fast food restaurants in Finland increased by as much as nearly 10 per cent in 2018.
The total value of the Finnish restaurant market is approximately 5.3 billion euros. The most important factors influencing the development of the sector include the general economic development, consumers’ disposable income, taxation and government regulations. Consumers’ preferences and, increasingly, food trends influence financial development within the sector.
The growth of the combined sales of the Kotipizza Group’s chains and the Kotipizza chain, in particular, has continuously outperformed the growth of the entire restaurant market and the fast food market in recent years. It can even be estimated that the strong growth of the Kotipizza chain has contributed to the more positive development of the fast food market compared with the rest of the restaurant market.
According to MaRa, the growth of sales in the restaurant sector will remain favourable in 2019, supported by favourable trends in the Finnish national economy and consumer confidence, although it appears that the peak of this growth period has already been passed. Development will be particularly strong in the fast food sector, as fast food restaurants account for a considerable proportion of restaurant dining.
Finnish consumers still spend a smaller proportion of their income on restaurant dining than consumers in most of the countries of comparison. Thus, we have reason to believe that the growth of restaurant dining will continue in the coming years.
The financial development of the restaurant business and consumer trends support Kotipizza Group’s investment in the fast casual concept, that is, restaurants that offer casual, fresh and responsibly produced food at an affordable price in a restaurant environment.
The Group estimates for the full financial year started 1 February 2019 that the total chain sales of its restaurant concepts will increase as compared to previous year and that comparable Ebitda will increase as compared to previous year.
