The coronavirus pandemic (COVID-19) has had a significant impact on the business operations of NoHo Partners. We have provided answers to some of the most frequently asked questions on this page. We will update it as the situation progresses.
Published on 3 April 2020. Last updated 29 July 2020 at 16:50.
QUESTION: How has the coronavirus pandemic affected the business operations of NoHo Partners?
ANSWER: The coronavirus pandemic has had a serious impact on the market and restaurant industry. The sudden change in the market has also considerably affected the operations of NoHo Partners. We announced on 3 April 2020 that the negotiations with the company’s current financers in all of its market areas in Finland, Denmark and Norway have been concluded and an agreement was reached regarding a financing package of EUR 34 million. The interest on the bridge financing is under 4 per cent, including Finnvera’s guarantee commission for EUR 15 million of the financing.
On 29 May 2020 we announced that we finalised our refinancing programme for its maturing debt as part of its overall financing package. As the final part of the financing package, the company has agreed on a debt of EUR 10 million with a right to conversion with the Finnish Industry Investment Ltd (Tesi). (See question “How are the funding negotiations proceeding”?)
On 5 May 2020 we refined the estimates of turnover and costs during the state of emergency (see next question) given earlier (on 3 April 2020). The company estimates that its monthly turnover during the state of emergency will be approximately EUR 1,5 million and monthly expenses will be approximately EUR 2–3 million per month, depending on the ongoing lease negotiations.
Under normal conditions, we operate with a negative working capital position of approximately EUR 15 million that partly funds our growth. In the current exceptional situation, we are forced to finance this amount using external debt. The situation will naturally get back to normal as soon as our normal business operations restart and our turnover returns. With the working capital financing raised now, we can fulfill our obligations towards our subcontractors.
QUESTION: How do you expect the business to recover?
ANSWER: We have prepared a three-stage action plan for managing the impacts of the coronavirus pandemic.
- Stage 1: The operating environment during the emergency (lockdown)
At the beginning of the first stage, the company focused on quickly reducing expenses, laying off personnel and balancing its finances while restrictions on its business are in place. Read more about the steps below in the stock exchange release published on 5 May 2020.
- Stage 2: Restricted operating environment
Business operations will resume in a managed and gradual manner over the next 6–12 months. Decisions on the resumption of business will be made on a weekly basis and separately for each business location. The aim of the company is to ensure a positive operating cash flow, even in the restricted operating environment, as the restaurant industry gradually recovers.
- Stage 3: Strengthening competitiveness
During the coming months, the company’s Board of Directors will commence the third stage of the action plan, which is focused on strengthening the company’s competitiveness in the post-pandemic restaurant market in 2021 and strengthening the capital structure.
QUESTION: What does the future look like? Are you planning your operations based on the scenarios?
ANSWER: We cancelled the previously provided profit guidance for 2020 on 13 March 2020. At this point, we are not specifying our turnover and profitability forecast for this year in more detail due to the uncertain market situation. We announced on 9 June 2020, in conjunction with the publication of the result for the first quarter of 2020, that we will cancel our financial targets previously set for 2021 and that we will specify them and our profit guidance for 2020 later this year. We will also provide monthly reports on the development of our business during these exceptional circumstances.
The orders issued by the authorities and consumer psychology have a significant impact on the company’s future outlook. We are prepared for three different scenarios:
Basic scenario: sales will be approximately 70–85% of the normal level and the operating cash flow will be positive for the rest of the year.
Low scenario: sales will be approximately 50% of the normal level, the operating cash flow will be neutral and investments are mainly frozen.
High scenario: sales recover to the normal level during the fourth quarter of 2020 and the operating cash flow will be strongly positive.
Even in the worst scenario, we are operationally and cash-wise prepared for the possible second wave of the pandemic.
We believe that the restaurant market will recover to the 2019 level during 2021. In our opinion, risks posed by the situation are the continuation of restrictions concerning large events, nightclubs and company events and the decrease in purchasing power. On the other hand, the return to healthy capacity and competition especially in shopping centres, possible tax reliefs, digital channels enabling home consumption and efficiency of digital marketing are the opportunities provided by the situation.
QUESTION: What can be expected from the result of the second quarter of 2020 and the operating cash flow?
ANSWER: While our business operations collapsed, we have concentrated on minimising our burn-rate and shifted from income statement steering to cash flow steering. Our turnover in April was MEUR 1.8 and operating cash flow was MEUR -2.6. Our turnover in May was MEUR 3 and operating cash flow was approximately MEUR -1.5. On 6 July 2020 we announced, that our turnover in June 2020 exceeded EUR 13.5 million, which is approximately 55 per cent of the turnover in the corresponding period last year. The operating cash flow of our business was positive in June and we were able to focus on the controlled resumption of our business and employing personnel.
QUESTION: How do you benefit from the Government compensations?
ANSWER: The total compensation amount from the Government for the entire Group is estimated to be approximately MEUR 5 million, including entrepreneur-driven subsidiaries. The Group’s parent company NoHo Partners Plc is estimated to receive approximately MEUR 0.5 of the total compensation amount. The financial support received by the Group from the Danish and Norwegian governments for the period 1 January–31 March 2020 will amount to approximately MEUR 0.9, and for the second quarter of 2020, the financial support will total approximately MEUR 2.6.
QUESTION: Which measures has NoHo Partners taken to secure the safety of the personnel and the company’s ability to operate during the crisis?
ANSWER: In accordance with the recommendations issued by the Finnish Government on 12 March 2020, we immediately cancelled all public events of more than 500 people until the end of May 2020. In addition, we followed elevated hygiene measures in our restaurants. We closed our nightclubs and restaurants in accordance with the recommendations of the authorities before the official order of the Finnish Government to close down all restaurants.
Once the impact of the COVID-19 crisis became apparent, we reacted immediately by starting determined adjustment measures and preparing for the changed market conditions. At the same time, we started funding negotiations with the current funders for the duration of the state of emergency.
We announced on 3 April 2020 that the negotiations with the company’s current financers in all of its market areas in Finland, Denmark and Norway have been concluded and an agreement was reached regarding a financing package of EUR 34 million. On 29 May we announced that we finalised our refinancing programme for its maturing debt as part of its overall financing package and agreed on a debt of EUR 10 million with a right to conversion with the Finnish Industry Investment Ltd (Tesi).
As our business starts again in June, we have prepared for the openings by drafting special safety and hygiene instructions aimed at protecting the personnel and customers in accordance with the national recommendations and guidelines.
QUESTION: Which measures have you taken to adjust costs and how quickly will these have an impact on your costs? Which measures have you taken with regard to your fixed costs?
ANSWER: Staff expenses and rents are our biggest fixed costs. We launched determined adjustment measures regarding them immediately once the impact of the COVID-19 crisis became apparent.
We announced negotiations in accordance with the Act on Cooperation within Undertakings on 13 March 2020 and their rapid progress on 18 March 2020, in which we reported that, due to the sudden change in the circumstances of the coronavirus pandemic and the recommendations and orders issued by the authorities and the Finnish Government, the company had made a decision concerning layoffs without prior cooperation negotiations. The layoffs are temporary, with a duration of 90 days at most, and they concern all of the Group’s personnel in Finland, totalling approximately 1,300 employees. Starting on 1 April 2020, the company has temporarily laid off seven of the eleven members of NoHo Partners’ Executive Team and 1,030 of its regular employees. Persons on family and study leave or other long leave are not included in the scope of the layoffs. On 15 May 2020 we announced that the company begins co-operation negotiations on continuing temporary layoffs due to uncertain market situation. On 15 June 2020 we announced that as a result of the negotiations, the continuation of the layoffs, either full-time or part-time, currently concerns approximately 550 employees. The final number of laid off employees and the duration of the layoffs will be specified at a later time if the market situation changes.
We estimate that our monthly expenses during the state of emergency will be approximately EUR 2–3 million per month, depending on the ongoing lease negotiations. The situation on 5 May 2020 is that we have negotiated rent relief until the end of May for approximately 70% of our leases. Negotiations concerning rent for the month of June will continue. In Denmark and Norway, the state is covering approximately 80 per cent of our lease costs during the crisis.
QUESTION: Has NoHo Partners reassessed its strategy?
ANSWER: We are currently fully focused on managing our costs and cash flow as well as financing arrangements in order to ensure that we are ready to continue our business operations as quickly as possible after the coronavirus crisis. The time for reassessing the company’s strategy will come once the crisis stage has been survived and business has been resumed.
QUESTION: How are the funding negotiations proceeding?
ANSWER: We announced on 3 April 2020 that the negotiations with the company’s current financers in all of its market areas in Finland, Denmark and Norway have been concluded and an agreement was reached regarding a financing package of EUR 34 million. The interest on the bridge financing is under 4 per cent, including Finnvera’s guarantee commission for EUR 15 million of the financing. As part of its financing agreement, the company negotiated a repayment holiday until April 2021 for its current funding.
On 29 May we announced that we finalised our refinancing programme for its maturing debt as part of its overall financing package. As the final part of the financing package, the company has agreed on a debt of EUR 10 million with a right to conversion with the Finnish Industry Investment Ltd (Tesi). The financing is for stabilisation provided by Tesi in the coronavirus situation. At the same time we announced that we have continued our commercial paper programme in respect of the EUR 22 million debts falling due in May 2020 as regards EUR 12.5 million until autumn 2020, and that a total of EUR 9.5 million of the debt has been repaid.
Tesi’s debt does not require collateral and it will fall due 18 months after the drawdown of the debt. The annual interest of the debt is 10%. Interests will fall due on the due date together with the principal (PIK). It is possible to repay the debt partly or in full before the due date. Tesi has the right, but not the obligation, to convert the debt and its interests partly or in full into a maximum of 2,400,000 NoHo Partners Plc’s new shares in one or more instalments at any time after the due date. In a conversion situation, the conversion price per share is the average share price in Nasdaq Helsinki weighted with trading volumes of the previous three months before the conversion grounds.
Jussi Hattula, Director of Tesi:
“NoHo Partners is a major employer in the corona-ravaged restaurant industry and the company also has an extensive impact on the Finnish food and raw materials industry through small producer purchases. Tesi invests its stabilization program in companies that are able to cope with the financial problems caused by the corona situation with additional financing. Thanks to the financing package, NoHo Partners will be able to continue its restaurant operations in June and get over the exception period with minimal damage.”
QUESTION: What is the liquidity situation of NoHo Partners?
ANSWER: We announced the completion of the funding negotiations and agreement on a funding package of EUR 34 million on 3 April 2020. Under normal conditions, we operate with a negative working capital position of approximately EUR 15 million that partly funds our growth. The amount of this working capital also varies by season to some extent in the restaurant industry. So, we have put this component of our funding package into use. After this, approximately EUR 19 million of the funding package remains in our cash reserves.
Our new funding package therefore gives us the ability to fulfil our obligations towards our subcontractors because, in the current exceptional situation, we are forced to finance this amount using external debt. The situation will naturally get back to normal and working capital will recover as soon as our normal business operations restart and our turnover returns.
On 29 May we announced that we finalised our refinancing programme for its maturing debt as part of its overall financing package and agreed on a debt of EUR 10 million with a right to conversion with the Finnish Industry Investment Ltd (Tesi). (See question How are the funding negotiations proceeding?) The financing negotiations for the duration of the coronavirus crisis have now been completed and the financing package will ensure the sufficiency of our cash reserve during this exceptional situation, and now we can concentate on the resumption of our business and financing our operations through our cash flow.
QUESTION: When will NoHo Partners provide more information about its financial position and plans?
ANSWER: As a listed company, we will provide information about essential changes by way of stock exchange press releases. As we announced on 13 March 2020, we have cancelled the profit guidance for 2020 issued on 5 March 2020. At this point, we are not specifying our turnover and profitability forecast for this year in more detail due to the uncertain market situation. The financial impact of the coronavirus cannot currently be fully estimated because it depends on the duration and length of the measures implemented to mitigate the spread of the virus as well as on the markets’ speed of recovery.
We announced on 9 June 2020 that we cancel the financial targets previously set for 2021 and will specify the targets and our profit guidance for 2020 later this year. We will also provide monthly reports on the development of its business during these exceptional circumstances. We will update information about our situation from time to time via this Q&A page as well.
On 6 July 2020 we announced, that our turnover in June 2020 exceeded EUR 13.5 million, which is approximately 55 per cent of the turnover in the corresponding period last year. The operating cash flow of our business was positive in June and we were able to focus on the controlled resumption of our business and employing personnel. The development of turnover in July and August 2020 will be reported on 11 August and on 8 September.
QUESTION: How have you communicated your business risks to investors previously?
ANSWER: We have regularly communicated about our risks in conjunction with financial statements, annual reports and quarterly financial reviews. Most recently, we communicated about the risks and uncertainty factors in conjunction with the financial statements release for 2019, published on 5 March 2020. In addition, we have engaged in continuous active dialogue concerning the risks with our analysts.
QUESTION: You are a major shareholder of Eezy Plc. How has the crisis affected the business operations of Eezy?
ANSWER: In its company press release published on 20 March 2020, Eezy Plc announced that its business environment has been significantly affected by the global coronavirus epidemic. Especially the business volumes for HoReCa customers are estimated to have decreased significantly, at least for the upcoming months, as a significant share of restaurants have been closed and larger events have been cancelled.
The manufacturing and construction business has so far experienced relatively small changes in demand, but the epidemic may also impact it negatively, along with the company’s other businesses. To date, the retail, logistics and doctors staffing businesses have been exceptions in which demand has clearly grown. Eezy Plc has decided to cancel its profit guidance for the year 2020 given on 5 March 2020. At this point, the company will not set a new guidance for the year 2020.
QUESTION: Why did NoHo Partners postpone the publication of its financial statements and annual report for 2019?
ANSWER: We will update the notes to the financial statements and annual report for 2019 to correspond with the situation on the date of signing with regard to events after the close of the financial period, risks, future outlook and financial situation. As we announced on 24 April 2020 the financial statement of 2019 and annual report will be published on 26 May 2020.
QUESTION: How will the share issue related to the Friends & Brgrs acquisition affect the current shareholders’ share of ownership of the company? When will the change take place?
ANSWER: The issued new shares comprise 0.8% of all of the company’s shares after the share issue. The share issue will reduce the current shareholders’ share of the company. The change will take place in connection with the registration of the new shares on April 8, 2020.