Review by the CEO
- Recent video interview: Q1-Q3 2022 results interview, 8 November 2022
The restaurant summer of all time – profitability continued record high
Strong profit performance continued in the third quarter of the year with an EBIT margin of 9.7%. This is about two percentage points higher than in the pre-pandemic year of 2019. An EBIT margin continuing at its current level going into the traditionally best season of the year, proves that the strategic target of a profitability level of 10% is realistic.
Behind a profitability that is better than the industry average is the company’s business model. The model combines scale benefits gained from growth and size together with an entrepreneurial operational model and an up-to-date data-driven management approach. The profitability level correction is driven by changes implemented during the Covid-19 pandemic in the restaurant portfolio, which is in better shape than ever.
In addition to developing the restaurant portfolio, the company has learned from the international markets what type of business leads to better return on investment. The analysis of successful growth investments in the past years indicate that the company can reach a return on investment of over 20%. At its best, the return expectations when scaling brand concepts, such as Friends & Brgrs, Campingen and Hook, are over 20%. Creating new restaurant concepts, on the other hand, the risks are greater. As the cost of capital rises, lessons learned and careful deliberation will increasingly drive the focus areas of the growth strategy towards steady cash flow targets. An activated M&A market in the restaurant industry supports growth through acquisitions.
Profit performance helps strengthening the balance sheet to the levels targeted in the strategy. The target of the ratio of net debt to operational EBITDA, adjusted for IFRS 16 lease liability, being under three will, according to the company’s estimate, be reached already by the end of the year. Historically, excluding the Covid-19 years, the company has operated at this level, which it can manage with its current profitability and cash flow, even in a changing interest rate environment. As the balance sheet recovers and with a renewed financing agreement signed after the reporting period, the company’s financial position stabilised essentially to the state prior to the Covid-19 crisis. The renewed financing agreement enables growth investments during the strategy period.
The outlook for the rest of the year is good with a booking situation exceeding the 2019 level. The company is prepared for the traditionally quieter season in the beginning of the year by keeping its operations efficient and costs proportional to demand. Our competitive advantages are the diversity of our portfolio, the flexible operational model mastered during the pandemic and committed employees.
CEO, NoHo Partners