Nordic Service Partners Holding AB (publ)
Management presentation, May 2015
Contents
1
Introduction to NSP
4
2
Investment highlights
8
3
Market overview
20
4
Financials
25
Appendices
A
Supporting information
34
2
Disclaimer
This presentation material (the “Material”) has been prepared by Nordic Service Partners Holding AB (publ) (556534-1970) (the “Company”) solely for use by a limited number of parties in connection with their analysis of presenting a public
offer for the company (the “Transaction”) and is provided for information purposes only and is not to be relied upon in substitution for the exercise of independent analysis and judgment. The advisor of the board for the Transaction is
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FORWARD-LOOKING STATEMENTS
This Material may contain forward-looking statements that reflect the Company’s current views with respect to certain future events and potential financial performance. Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, no assurance can be given that such expectations will materialize. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of various factors. To
the extent that this Material contains opinions, estimates, forecasts or other forward looking statements, no guarantees or undertakings that these are correct or complete are given by SEB or the Company or any of their respective members,
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achieved or that outcomes will correspond with forecasts. Information in this Material may be changed, added to or corrected without advance notification.
3
Contents
1
Introduction to NSP
4
2
Investment highlights
8
3
Market overview
20
4
Financials
25
Appendices
A
Supporting information
34
4
Passionate management team with deep industry knowledge
Morgan Jallinder
NSP CEO since
2009
NSP CFO since
2008
More than 20 years
of experience from
the restaurant & the
real estate and
financial markets
14 years of
experience as CFO
in public companies,
and from business
controlling
Holds an MBA from
the Gothenburg
School of Economics
Studied Business
Administration and
Tax at Stockholm
University
Chief Executive
Officer
Johan Wedin
Chief Financial
Officer
Johan Persson
Patrik Eliasson
Erika Falkermark
Jesper Hollstrand
Chief Operating
Officer
Chief Information
Officer
Chief Human
Resource Officer
Chief Marketing
Officer
Experience from
McDonald’s as
restaurant manager,
district manager and
franchise business
leader
Over 20 years of
experience in IT
ranging from small
to large companies,
and has been with
NSP since 2004
Experience from
Scandic Hotels
where she worked
with education and
personnel
development in HR,
Scandic Business
School
9 years experience
from McDonald’s
where he worked as
project manager in
IT and lecturing at
McDonald's
Business School on
cost control
5
Martin Jallinder
Chief Business
Development Officer
Previously assistant
to the CEO
MSc in Accounting
and Financial
Management from
Stockholm School of
Economics
Nordic Service Partners at a glance
NSP in brief
Nordic region
•
The company was founded in 2004
•
61 Burger King restaurants
•
•
•
(SEKm)
NSP is the largest multi franchisee of Burger King restaurants in the
‒
Sweden - 44 restaurants
‒
Denmark - 17 restaurants
Thousands
•
Group sales and EBITDA margin
386.7
KFC
‒
TGI Fridays
About 2,700 shareholders
‒
Market cap of about SEK 225m
633.6
623.0
5.8%
7.1%
6.4%
7.0%
7.2%
826.4
7.6%
5.1%
248.9
0.8%
1.8%
21
28
41
42
42
42
48
55
58
61
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Sales
NSP is traded on Nasdaq Stockholm since 2008
‒
733.8
698.9
570.1
5.8%
Additional brands in 2014
‒
666.2
780.6
No of restaurants
EBITDA margin
Breakdown by geography 2014
Sales
EBITDA
NSP holds a board of directors and management with long and relevant
experience in the Quick Service Restaurant (QSR) segment
15%
32%
68%
Sweden
6
Denmark
85%
Sweden
Denmark
Key historical milestones
2004 – 2005
1
•
Sales
(SEKm)
2006 – 2008
2
The foundation
Nordic Service Partners was
•
established in 2004 when the
Company acquired 21 Burger
900
•
King restaurants in Sweden from
Burger King Corporation
800
700
•
•
market grew by 5%
600
•
500
•
The NSP stock listed at NGM
•
•
•
2011 – 2014
4
Consolidation
Growth
Focus on profitable Burger King
•
NSP sold Taco Bar in Q1 2014
existing restaurants and opened 4
restaurants, development of
•
Acquired 4 Burger King
Acquired 7 of Denmark's existing
brand name, and Taco Bar
NSP acquired Taco Bar with 12
•
Established 2 food courts in the
Stockholm region
investments
Stock listed on Nasdaq First
•
restaurants and opened 8 new
NSP regained profitability in 2009
after a period of heavy
North
Equity
400
3
Acquisitions and growth
Burger King restaurants
Turnover increased by 14% for
the existing restaurants whilst the
2009 – 2010
•
Remodeled ~30 of NSP’s existing
restaurants
•
Reached franchise agreements
Cost savings program put in place
with Yum! Brands and Carlson
in 2008 had an effect of SEK 10m
Companies to launch KFC
Acquired 9 Burger King
(Kentucky Fried Chicken) and TGI
restaurants
Fridays (TGIF) in 2014
Acquired the rights for Tasty Thai
concept in Sweden and opened 1
300
Tasty Thai restaurant in
Stockholm
200
•
100
Stock listed on Nasdaq
Stockholm
2005
2006
2007
2008
2009
2010
7
2011
2012
2013
2014
Contents
1
Introduction to NSP
4
2
Investment highlights
8
3
Market overview
20
4
Financials
25
Appendices
A
Supporting information
34
8
Key investment highlights
4
3
2
1
Excellent growth pipeline driven by new concepts
Proven ability to drive operational excellence
First class brand portfolio supports NSP’s position in
the value chain
Market driven by strong structural trends
9
Market driven by strong structural trends
1
Growth in Danish consumer spending
Growth in Swedish consumer spending
(Index 100)
220
(Index 100)
220
205
205
190
190
175
175
160
160
145
145
130
130
115
115
100
100
85
85
'04A '05A '06A '07A '08A '09A '10A '11A '12A '13A '14A '15F '16F '17F '18F
'04A '05A '06A '07A '08A '09A '10A '11A '12A '13A '14A '15F '16F '17F '18F
Restaurants and cafés
Food and non-alc
Restaurants and cafés
Food and non-alc
Alcohol and tobacco
Clothing and footwear
Alcohol and tobacco
Clothing and footwear
Transport
Communication
Transport
Communication
Leisure and recreation
Lodging
Leisure and recreation
Lodging
Market
drivers
Growth in
population and
new customers
Continued
urbanization
Single occupancy
Source: Euromonitor
10
Consumers
spend less time
on preparing food
Increasing
number of
shopping centres
and malls
2
First class brand portfolio
Strong brand partners ensure high quality throughout the value chain and strengthen NSP’s offering
“In here, it’s always Friday”
•
Social and fun dining with
friends or family
•
The world’s largest casual
dining concept
“Home of the Whopper”
Strong brand partners with
well known concepts and
high quality
“So good”
•
Real flame grilled burgers
•
•
High quality, affordable
chicken meals
Second largest hamburger fast
food chain in the world
•
The world's most popular
chicken restaurant chain
Primary
Activities
Trademark owners
Secure and
certify suppliers
Purchase
NSP
Franchisee and
food safety
control
11
Marketing and
product
development
Sales & Service
2
First class brand portfolio (cont.)
KFC is well known with Swedish consumers even before launch
Brand awareness study
15-19yrs
20-34yrs
97% 99% 98%
35-49yrs
98%
95% 97%
93%
98% 97%
95% 96% 95%
87%
71%
54%
40%
1
•
Market research shows that 87% of NSP’s target customers, between age 15-19, knows KFC
•
Brand awareness is high for KFC, with 57% national recognition, even though there are no restaurants in Sweden to date
Source: Here Are Lions research
1) For KFC, if spelled out in full name, Kentucky Fried Chicken, the brand awareness amounts to 83%, 71%, and 61% for the three age categories respectively
12
44%
48%
Proven ability to drive operational excellence
3
Focus on improving efficiency throughout the organisation
Development
Operations
•
•
•
•
•
Daily monitoring of key KPIs to adjust and optimise
main cost drivers, e.g. food cost and labour
•
•
Daily stocktaking of main inventory items
Structured process to evaluating new locations
Strong relationships with landlords
Turnkey solution towards landlords
Long experience from new restaurant openings and
acquisitions ensure high quality from day 1 as well
as clear road to profitability
6
Quality and efficiency regularly benchmarked
through mystery visits performed both by NSP and
trademark owners
1
IT
Marketing
•
System support for key operational processes, e.g.
workforce management and sales monitoring
•
Roll-out of Qlik to support integration between
restaurant systems and management reporting, a
state of the art Business Intelligence system, which
also applies to the other systems in use; Micros
(Oracle), Quinyx, and Navision
•
2•
5
•
3
4
HR
National marketing activities coordinated with
trademark owners and master franchisees
Local marketing plans developed to follow and
strengthen national campaigns
Local competition analysed three times per year to
differentiate and optimise pricing for each restaurant
Finance
•
Clear incentive structures to align motivation of
managers and employees
•
Investment decisions followed and approved
centrally to ensure correct prioritisation
•
Optimised staffing through close monitoring of
changes in demand and IT support
•
Central control of rental agreements and leasing
agreements
•
Internal education program
•
Purchasing coordinated and monitored centrally
13
Proven ability to drive operational excellence (cont.)
3
Demonstrated ability to improve acquired restaurants – example from Örebro and Swedburger
Örebro
Swedburger
(SEKm)
(SEKm)
1.8
1.8
1.7
13.9
12.5
22%
20%
15%
16%
15%
15%
0.6
2.7
7%
2011
1
2012
EBITDA
2013
2014
Implemented
changes
•
•
2013
EBITDA
Labour
Diligent control of the raw materials in
•
Control of scheduling is a key to success
each restaurant
•
With a model of 30 minute precision to
Daily check of inventories to manage the
match expected sales Swedburger has
food cost gap
increased EBITDA margin from about
Goal – maximum 0.2% in gap will result in
15% to approximately 22%
improved Gross Profit
1)
2)
2
EBITDA margin
Raw material
•
2012
Nine months of operations in 2011
Three months of operations in 2012
14
2014
EBITDA margin
Local store marketing
•
Marketing of the different stores in the
local markets where they operate
3
Proven ability to drive operational excellence (cont.)
Organisation experienced in finding the right locations
Key locations
Drive Thru
NSP locations
Existing Restaurants Sweden
Commentary
•
Structured process to evaluating new locations
based on internally developed and refined
scorecard model
10
13
21
City Centers
•
Strong relationships with landlords
•
Turnkey solution towards landlords
•
NSP owns all drawings
•
NSP handles all project management
•
Long experience from new restaurant openings and
acquisitions ensure high quality as well as clear
City Centers
Drive Thru
Shopping Center
Existing Restaurants Denmark
4
Shopping Centers
13
City Centers
Drive Thru
15
road to profitability
Proven ability to drive operational excellence (cont.)
3
Structured approach to restaurant openings leads to quick payback
Roskilde
Växjö
(DKKm)
3.0
0.6
0.4
0.2
0.0
-0.2
-0.4
-0.6
-0.8
2.5
2.0
1.5
1.0
0.5
0.0
Sales
EBITDA (rhs)
(SEKm)
3.0
4.0
2.5
3.0
2.0
2.0
1.5
1.0
1.0
0.5
0.0
0.0
-1.0
Accumulated EBITDA (rhs)
Sales
Nyköping
4.0
(SEKm)
1.2
1.5
3.0
1.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
0.8
2.0
0.6
1.0
1.0
0.4
0.5
0.0
0.2
0.0
-1.0
0.0
EBITDA (rhs)
Accumulated EBITDA (rhs)
Jägersro
(SEKm)
2.0
Sales
EBITDA (rhs)
Sales
Accumulated EBITDA (rhs)
EBITDA (rhs)
Accumulated EBITDA (rhs)
•
Investments in new restaurants are around SEK 5.5 – 6.0 million. On average, the initial investments is paid back already after 3 years
•
Roskilde reached a quicker break-even with new methods such as staying at opening levels of staff for a longer period
16
4
Excellent growth pipeline driven by new concepts
New concepts have significantly expanded NSP’s growth pipeline
Strategic initiatives for 2015 and onwards
•
•
Restaurant pipeline
Restaurants per phase scheduled to open per year
Corporate
‒
NSP brand building
‒
New organisation and collaboration with new franchisees
12
10
Burger King
‒
Optimize marketing and local store marketing
‒
Focus on maintaining and increasing the current BK business
8
that forms the base which will finance the growth of KFC and
Fridays as well as opening new BK restaurants
•
•
6
KFC and TGI Fridays
‒
Open new restaurants
‒
Building operative organisation
‒
Prospecting and development of new sites
4
Extensive and well-prepared pipeline with restaurant openings for roll-
2
out over the next five years
‒
8 restaurants in contract and construction phase
‒
23 sites under negotiation
‒
7 additional opportunities identified
0
2015
2016
Contract / construction
17
2017
Negotiations
2018
Opportunity
2019
4
Case study: KFC opening in Lockarp
KFC location
Commentary
•
400,000 people living within 20 minute drive
time
•
•
High visibility from the motorway
‒
28m pylon
‒
37,000 cars
77 parking spaces + 4 handicapped parking
spaces
•
4 Drive Thru parking spaces
•
Good Drive Thru flow
•
One of OKQ8’s largest gas stations under
construction
Source: Company information.
18
4
Case study: TGI Fridays opening in Copenhagen
TGI Fridays location
Commentary
•
Exclusive development agreement with TGI
Fridays regarding Denmark
‒
Hard Rock
Cafe (new)
DKK 55m
•
TGI Fridays at Höjbro Plads
‒
Café
Norden
DKK 60m
Five restaurants in five years
Located in the heart of
Copenhagen, between
Rådhuspladsen and Nyhavn, 240+
seats plus outdoor seating
‒
Management team in place
‒
Opening planned for end of June
2015
Café
Europa
DKK 35m
TGI
Fridays
19
Contents
1
Introduction to NSP
4
2
Investment highlights
8
3
Market overview
20
4
Financials
25
Appendices
A
Supporting information
34
20
The Nordic restaurant market
Commentary
•
Stable growth in the restaurant business
Sales (SEKbn)
The Nordic fast food market consists of companies providing customers
160
with ready packed food over the counter but with no table service
•
•
140
Combined value of the Swedish and Danish restaurant market was SEK
120
155bn in 2014, an increase of 120% since 2004
100
80
A general trend of an increasing amount of international and well known
60
franchise restaurants
•
•
40
The “fast food” market can be divided into two main sub segments
‒
Quick Service Restaurants in which NSP operates
‒
Home Meal Replacement
20
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Denmark
The QSR market has seen a gradual expansion since the beginning of
Stable growth in the QSR segment
the 1990’s, even though the most recent financial crises have had a
Sales (EURbn)
4.0
negative affect
−
3.5
Restaurant business in Denmark has grown by almost 60%
−
CAGR 4.0%
2.5
In Sweden hamburger restaurants have increased their market
2.0
share and grown more than the general restaurant business
1.5
1.0
Fast food accounts for 27% of the food consumed outside
0.5
homes
•
CAGR 3.5%
3.0
since 2006
−
Sweden
0.0
Examples of QSR operators in the Nordics are Burger King, Subway,
McDonald’s and Max
Denmark
Source: Swedish Central Bureau of Statistics, Statistics Denmark and Euromonitor
21
Sweden
Swedish and Danish restaurant market
Sweden
•
Denmark
•
The Swedish restaurant market was valued at SEK 105bn in
2013, which was an increase of 5% from the previous year
‒
The Danish restaurant market with over 15,000
restaurants was valued at SEK 45bn in 2014 compared to
SEK 43bn in 2013
13%, or SEK 13bn, derived from the
‒
QSR industry
•
The Swedish market differs from other Nordic
markets in terms of having hot food for lunch,
restaurants
SEK
111bn
•
which implies a bigger market
•
•
•
~50% deriving from lunch and evening
Lunch is, normally only 30min where people
bring sandwiches
•
Franchise operators gained market share on
Majority of players are own restaurant
behalf of smaller players but also grocery stores
operators but clear trend towards
In 2013, the hamburger market had a turnover of SEK 7.5bn where
increasing number of franchise operators
SEK
45bn
McDonald’s had 63% of the market, followed by Max with 20%, and Burger
•
Burger King has 31 restaurants in Denmark of which 17 are owned by NSP
King with 13%
•
Other players in the market are Sunset Boulevard (owned by DKR
Holding), Domino’s Pizza, DSB minibar, King Chicken among others
Approximately 23,000 restaurants in Sweden with 97,000 employees in
2013
Swedish restaurant market 2014
Type
Lunch/Evening
Hotels
Fast Food
Entertainment
Trafic hub
Staff restaurants
Cafées
Danish restaurant market 2014
Type
%
44%
14%
12%
11%
8%
6%
5%
Lunch/Evening
49%
Cafées, inns and discos
15%
Fast Food
14%
Other restaurants
15%
Event catering
Source: Company information, Swedish Central Bureau of Statistics, Statistics Denmark and Visitas
22
%
6%
Increasing demand for chicken
Swedish meat consumption
(kg per person and year)
90
80
70
60
50
40
30
20
10
0
1980
2013
Beef
Pork
Poultry
•
The consumption of chicken has shown strong growth over the past decades
•
Overall, Swedish meat consumption (measured in volume) has increased by 1% annually between 1980-2013, mainly driven by a growth in chicken consumption
•
However, the chicken consumption in Sweden remains low in an international context
Source: Swedish Board of Agriculture statistics
23
Home Meal
Replacement
•
Food prepared in a store and consumed at
home or in-store which require little or no
preparation by the consumer
•
Also known as “quick-serves,” these
restaurants are known for fast, efficient,
take-out-ready foods at affordable prices.
Many consider the term “quick-serve” as
synonymous with “fast food”
•
A type of restaurant that does not offer full
table service, but promises a higher quality
of food and atmosphere than a fast food
restaurant. It is a relatively new and
growing concept positioned between fast
food and casual dining
•
Provide table service but no educated
chefs. Comprises a market segment
between fast food and fine dining
restaurants. Often have a full bar with
separate bar staff, a larger beer menu and
a limited wine menu
•
Offers the finest in food, service and
atmosphere. It is also the highest priced
Fast Casual
Dining
Casual
Dining
Dining
Restaurant market
QSR
Eating
Home
Competitive landscape
24
Contents
1
Introduction to NSP
4
2
Investment highlights
8
3
Market overview
20
4
Financials
25
Appendices
A
Supporting information
34
25
Financial overview
Sales and EBITDA margin development
(SEKm)
2011
2012
20131
2014
LTM
Sales
623.0
733.8
780.6
826.4
842.0
% growth
-1.7%
17.8%
6.4%
5.9%
7.8%
Gross profit
466.5
548.8
588.4
625.6
639.3
% of sales
74.9%
74.8%
75.4%
75.7%
75.9%
39.6
51.2
56.3
62.8
63.5
% of sales
6.4%
7.0%
7.2%
7.6%
7.5%
D&A
-29.0
-34.3
-34.8
-39.1
-40.7
EBIT
10.6
16.9
21.5
23.7
22.8
% of sales
1.7%
2.3%
2.8%
2.9%
2.7%
Net financial items
-11.0
-12.2
-11.2
-12.5
-14.2
-0.4
4.7
10.3
11.3
8.6
-0.0%
0.6%
1.3%
1.4%
1.0%
Thousands
NSP financial overview
(SEKm)
842.0
826.4
781.4
780.6
7.6%
733.8
7.5%
7.3%
623.0
7.2%
EBITDA
7.0%
6.4%
EBT
% of sales
2011
1)
2012
2013
Sales
2014
•
Sales CAGR of 10% over the last four years which is better than the general performance of the market
•
Increased performance with LTM Q1 2015 sales of SEK 842m as compared to SEK 781m LTM Q1 2014
•
Stable and improving gross and EBITDA margins, averaging around 75% and 7% respectively since 2010
•
In Q1 2014 NSP sold Taco Bar and all the rights to the restaurants. The net loss of SEK 2.1m was recorded for the 2013 financial year
Excluding Taco Bar, divested Q1 2014..
26
LTM Q1 '14
EBITDA margin
LTM Q1 '15
Revenue visibility via long term contracts
Geographic footprint
Maturity of outstanding contracts
20
18
16
9
Avg. maturity
11.13 years
14
10
12
10
8
6
4
2
0
Maturities by year
22
20
18
16
14
12
10
Structure of the contracts
8
6
4
2
0
15yrs + 5yrs
20yrs
10yrs + 10yrs
27
Scalable business model and flexible cost structure
SG&A split
SG&A development
(SEKm)
(SEKm)
826.4
8.3%
666.2
780.6
733.8
698.9
633.6
623.0
22.1
6.4%
5.0%
4.8%
5.6%
5.0%
16.3
5.6%
33.2
2008
2009
2010
2011
Sales
2012
2013
2014
2008
15.5
13.9
14.4
19.8
20.7
21.0
2010
2011
2012
28.2
2009
SG&A %
Labour
Other SG&A
14.5
13.2
24.2
25.1
2013
2014
Sales
(SEKm)
2008
2009
2010
2011
2012
2013
2014
Labour
33.2
28.2
19.8
20.7
21.0
24.2
23.9
Other
22.1
16.3
15.5
13.3
14.4
14.5
17.2
Total SG&A
55.4
44.4
35.3
34.0
35.4
38.8
41.1
8.3%
6.3%
5.6%
5.5%
4.8%
5.0%
5.0%
44
44
42
48
55
58
61
SG&A as % of sales
No of restaurants
28
Balance sheet
Commentary
•
Balance sheet overview
The tangible asset base mainly consists of inventory, equipment and
(SEKm)
2011
2012
2013
2014
Q1 ’15
installations in the restaurants
Goodwill
181.2
195.9
184.3
192.1
189.1
6.3
7.5
5.9
6.5
7.9
116.5
129.9
147.2
174.3
170.4
Deferred tax asset
17.3
15.3
13.0
8.2
9.4
Financial assets
10.8
10.1
9.8
12.7
12.5
332.0
358.7
360.2
393.7
389.4
5.3
6.1
7.9
8.0
6.5
Other receivables
35.9
42.2
33.3
49.7
53.8
Cash
32.1
38.0
32.4
104.9
91.3
73.3
86.4
73.5
162.6
151.6
-
-
16.7
-
-
•
Intangible assets primarily comprise goodwill
•
Due to the nature of NSP’s business the working capital requirements are
Other intangible assets
Fixed assets
very low
‒
Other receivables consists mainly of credit card payments and
Total non-current assets
“Rikskuponger”
Raw material
•
Two convertible and subordinated loans with maturity in 2015 and 2016
•
Assets for sale refer to Taco Bar which was sold in January 2014
•
Due to the many part-time employees, NSP’s deferred costs in relation to
Total current assets
Assets for sale
salaries is a large share of the Other current liabilities
•
Total assets
405.3
445.1
450.4
556.3
541.0
Total equity
124.6
122.4
136.2
148.7
135.5
Interest bearing debt
127.4
129.5
111.5
-
-
Interest bearing lease
45.9
61.4
80.1
79.2
72.9
-
-
-
195.8
196.0
Total equity amounted to SEK 135 million as at 31 March 2015
Bond loan
Convertible loan
29
4.7
9.2
9.2
9.2
9.2
Other current liabilities
102.7
122.7
113.3
123.4
127.3
Total equity and liabilities
405.3
445.1
450.4
556.3
541.0
NWC and capex development
Core net working capital1
(SEKm)
2011
Capital expenditure
Operating cash flow
(SEKm)
2012
2013
(SEKm)
2014
7.2
-3.7%
-3.5%
KFC/TGIF
23.0
13.6
-3.3%
5.5
-4.4%
BK
32.5
23.6
95.4%
98.0%
16.2 97.9%
59.9
1.6
Properties
14.7
Total
32.5
74.7%
50.2
42.0
38.7
19.5
31.3
-26.1
Core NWC
Core NWC % of sales
Net working capital has remained stable with an
•
average NWC in relation to sales of -4%
‒
‒
6.9
6.8
8.5
9.2
2011
2012
2013
2014
Maintenance
Remodeling
New restaurants
Acquisitions
(SEKm)
2011
2012
2013
2014
EBITDA
39.6
51.2
56.3
62.8
6.1
5.7
-5.8
6.3
Maintenance capex
-6.9
-6.8
-8.5
-9.2
Operating cash flow
38.7
50.2
42.0
59.9
week depending on sales volume, ca
investments
‒
payment term
Average capex for the period of SEK
60m
Accounts receivable without credit
Accounts payable with 15-30 days
Change in NWC
Cash conversion
Annual investment of SEK 100,000 per restaurant
is required as well as refurbishment required every
8 years at approximately SEK 2m
1)
2)
2013
2014
Cash conversion
gone towards remodeling existing restaurants, but
Raw material deliveries 2-3 times per
•
2011
2012
Operating cash flow
Historically the majority of NSP’s investments have
focus will shift more toward new restaurant
1% of assets
‒
14.3
-26.3
-32.5
•
18.4
14.4
-23.6
Core net working capital defined as raw material and accounts receivable less accounts payable
Cash conversion defined as operating cash flow in relation to EBITDA
30
2
97.9% 98.0% 74.7% 95.4%
NSP outlook 2015
Quarter on Quarter
Sales development
Δ QoQ
Q1 '14
Q1 '15
Sales
181.2
196.9
8.6%
Gross profit
135.4
149.2
10.1%
% of sales
74.7%
75.8%
(SEKm)
7.2
7.9
4.0%
4.0%
D&A
-9.0
-10.6
18.2%
EBIT
5.4
5.2
-3.9%
3.0%
2.6%
-2.6
-4.4
67.8%
2.8
0.8
-70.8%
1.5%
0.4%
EBITDA
% of sales
% of sales
Net financial items
EBT
% of sales
9.8%
Growth
8.6%
Q1 '15
Q1
881.7
22.3%
21.9%
7.9
69.5
11.3%
11.4%
Startup costs
0.0
4.0
0.0%
0.0%
12.0%
11.4%
7.9
65.5
% of sales
4.0%
7.9%
D&A
-10.6
-41.8
22.9%
25.3%
6.2%
21.9%
EBIT
% of sales
Net financial items
EBT
% of sales
FY
2015
2015F Q1 %of FY15 Q1 %of FY14
196.9
EBITDA
2014
EBITDA development
Adj. EBITDA
Sales
Growth
6.7%
196.9
181.2
Q1 as share of 2015
(SEKm)
684.8
645.1
5.2
23.7
2.6%
2.7%
-4.4
-16.0
20.9%
27.3%
0.8
7.7
3.8%
10.6%
0.4%
0.9%
65.5
62.8
Growth
9.8%
7.9
7.2
Q1
31
Growth
4.3%
2014
2015
FY
New restaurant concepts
Concept
Investments
•
Item
QSR
Inline
(SEKm)
Furnishings
3.0
Kitchen
1.5
IT
0.5
Signs
0.2
Total
5.2
Item
QSR
Drive Thru
(SEKm)
Furnishings
3.6
Kitchen
1.5
IT
0.5
Signs
0.9
Total
6.5
Item
TGI Fridays
•
Investments vary depending on status of
premises, e.g. need for installation of
ventilation, water and electricity – estimates
assume full refurbishment
•
Full investment cost for a new inline
restaurant estimated at SEK 5.0-5.5m
•
Full investment cost for a new inline
restaurant estimated at SEK 6.0-6.5m
•
Total investment of SEK 20m is paid through
7-8% rent1
(DKKm)
Furnishings
4.5
Kitchen
2.0
Bar
0.5
IT
1.0
Total
8.0
•
Full investment cost for a new inline
restaurant estimated at approximately SEK
8.0
Annual investment of SEK 100,000 per restaurant is required as well as refurbishment required every 8 years at approximately SEK 2m
Source: Company information
1) Total investment of SEK 20m in building a QSR Drive Thru about SEK 5m for the land, SEK 3m preparing the land, and SEK 12m building and furnishings
32
Contents
1
Introduction to NSP
4
2
Investment highlights
8
3
Market overview
20
4
Financials
25
Appendices
A
Supporting information
34
33
NSP’s business partners
No obligations or penalties if no new opening of restaurants – only opportunities
Yum! Brands
•
Burger King
•
Yum! Brands is the world’s leading restaurant company with over 40,000
restaurants in 128 countries
company mainly focusing on hamburgers
•
More than USD 13bn in sales 2014
•
On the top 100 Best Corporate Citizens by Corporate Responsibility
•
With about 14,000 restaurants in over 95 countries Burger
King is one of the largest restaurant chain in the world
•
Magazine.
•
Founded in 1953, Burger King is an American fast food
Approximately 11 million visitors every day and in 2014 the system-wide
sales reached USD 17bn
KFC, Pizza Hut and Taco Bell are the global leaders of the chicken, pizza
and Mexican-style food categories
•
NSP signed an agreement with Yum in 2014 regarding KFC
TGI Fridays
•
•
•
Other restaurant companies
TGI Fridays is an American restaurant chain focusing
•
NSP has a close relation to Rasta with two joint locations
on casual dining that was founded in 1965, New York
•
Rasta houses are located on most major roads in Sweden and the
The company is a portfolio company of private equity firms Sentinel Capital
restaurants offer a nice selection of home cooked dishes, freshly baked
Partners and TriArtisan Capital Partners
bread, beer, soft drinks, and coffee
TGI Fridays operates over 900 restaurants in more than 60 countries
Source: Company websites
34
Overview of franchise agreements
Structure
of
contracts
Agreements are formed for each restaurant, thus NSP
has 61 contracts with BK with a 20 year term.
NSP has signed a binding letter of understanding
which sets out the legal structure for the development
of the brand in Sweden.
Agreements are formed for each new restaurant, thus
NSP has 1 contract with TGI Fridays with a 15 + 5
year term.
No restrictions on change of control exist as long as
the shares in NSP are listed. A bidder is advised to
contact franchisor before a binding bid is submitted.
No restrictions on change of control exist as long as the shares in NSP
are listed. However, a procedure is agreed, which is designed to impede
a competitor of Yum! to acquire a substantial part of NSP without
approval of Yum! A bidder is advised to contact franchisor before a
binding bid is submitted.
No restrictions on change of control exist as long as
the shares in NSP are listed. A bidder is advised to
contact franchisor before a binding bid is submitted.
Franchisor
expansion
demands
NSP has no obligation to expand, but is encouraged
to do so. NSP is allowed expansion elsewhere, and is
encouraged to enter the Germany.
NSP holds a Franchise Corporate position vis-à-vis
Yum! whereby NSP finances own expansion without
an obligation to do so. NSP is allowed expansion
elsewhere, and is encouraged to enter the Germany.
NSP has a 5 year master franchise agreement with
Fridays under which NSP is obliged to open 1
restaurant per year. A penalty of USD 15k per
restaurant imposed per restaurant not opened.
Franchisor
location
interference
BK has employees in Sweden and Denmark who
present opportunities that NSP takes into
consideration. Location approval from King Foods
required.
Yum! has no physical presence in Sweden or
Denmark and leaves scouting for sights up to NSP.
Location approval from Yum! Required.
TGI Fridays has no physical presence in Sweden or
Denmark and leaves scouting for sights up to NSP.
Location approval from Fridays required.
NSP vendors and suppliers must be approved by
Yum! NSP’s ability to engage in competing business is
limited.
NSP vendors and suppliers must be approved by
Fridays. NSP’s ability to engage in competing
business is limited in Denmark (i.e.the Territory).
Royalty of 6% and Adfund of 5% of net sales
cannot be changed during the contract term.
Royalty of 4% and Adfund of 2% of net sales
cannot be changed during the contract term.
Change
of
control
Franchisor NSP vendors and suppliers must be approved by BK.
operational
NSP’s ability to engage in competing hamburger
interference
business is limited.
Royalty &
Adfund
costs
Royalty of 6.25% and Adfund of 3.75% of net sales
cannot be changed during the contract term.
35
Board of Directors and Management
Management
Morgan Jallinder
CEO
Johan Wedin
CFO
Johan Persson
COO
Patrik Eliasson
CIO
Erika Falkermark
HR
•
•
•
•
•
Board of Directors
20+ years experience from restaurants, real estate and
finance
Experience as CFO and business controller with focus on
growth and business development
Experience from McDonald’s as restaurant manager,
district manager and franchise business leader
Over 20 years in IT ranging from small to large companies
•
•
•
Born 1951
Jaan Kaber
Chairman
Born 1964
Anders Wehtje
•
•
•
Born 1956
Jens Engwall
•
•
•
•
•
•
Born 1968
•
•
•
Born 1957
Jeppe Droob
Experience from Scandic Hotels where she worked with
education and personnel development in HR, Scandic
Business School.
Eva Gidlöf
36
Board member since 2009
Other: Among others, previously board member of Diffchamb
AB,Riddarhyttan Resources AB, and Dunross & Co AB
Board member since 2004
Other: Founder and Chairman of Kilimanjaro Properties AB.
Previously CEO of Allokton, Deputy CEO of Volito, and CFO at
McDonald’s Sweden.
Board member since 2011
Other: CEO and Board Member of Hemfosa Fastigheter AB.
Previously CEO for Kungsleden AB and involved in Skanska, BPA
and CA Fastigheter. Also Board Member of Ikano S.A. and Bonnier
Fastigheter AB
Board member since 2012
Other: Owner and CEO of the Danish fast food company Sunset
Boulevard with 45 restaurants in Denmark
Board member since 2014
Other: Executive positions within Tieto Group, BGC, and
Capgemini Group
Ownership structure
(SEKm)
Number of shares (A and B)
% of capital and votes
Droob1
3,540,758
29.9
2. Abrinvest AB
1,619,000
13.6
1,186,665
10.0
4. Morgan Jallinder
983,166
8.3
5. Jaan Kaber
948,500
8.0
6. Peter Bahrke
488,050
4.1
7. Daniel Nilsson
415,000
3.5
8. Southrock AB
189,290
1.6
9. SHB Life Insurance AB
86,617
0.7
10. Avanza Pension Insurance AB
82,066
0.7
11. Hannes Kaber
70,000
0.6
12. SHB Funds
56,780
0.5
13. Nordnet Pension Insurance AB
43,328
0.4
14. Kerstin Abrinder
42,002
0.4
1. Jeppe
3. Long Term
AB2
15. QLI Ltd
41,250
0.3
Total, listed owners
9,792,472
82.6
Total, other owners
2,068,944
17.7
11,861,416
100.0
Total, all owners
Source: SIS Ägarservice as at March 31, 2015
1) Jeppe Droob, member of the board, ownership via Danske Konceptrestauranger Holding and JE D APS.
2) Anders Wehtje, member of the board, has by part-ownership in Long Term AB controlling influence over the shares.
37
Bond
Summary terms
•
Call structure
Senior Secured Notes with an issue size of SEK 200m and a nominal
104
amount of SEK 1m
Tenor of 5 years and NC 2.5
•
Use of proceeds includes refinancing of existing debt, investments in
103
new restaurants, acquisitions, and general corporate purposes
•
102
Call price
•
Maintenance covenants include that net interest bearing debt to EBITDA
101
100
is not greater than 4.00x at any time during the life of the bond
•
Key covenants include a dividend restriction of 60% of consolidated net
profit, incurrence test for new debt with a carve out for finance leases of
30-36
SEK 120m, negative pledge, asset disposal restrictions and change in
Incurrence test is met if:
‒
Net interest bearing debt to EBITDA is not greater than 4x
‒
Interest Coverage Ratio (EBITDA to Net Finance Charges)
•
Secured by pledge of shares in all material subsidiaries directly owned
by the Issuer
•
49-54
≥ 55
Voluntary partial redemption to max 10% of the nominal amount per
year during the first 3 years at 104.00%
exceeds 3x
•
43-48
Call month
business restrictions
•
37-42
Change of control put at 101 of par
38
Leverage and current debt structure
Net debt to EBITDA
180
160
4.00
2.83
3.33
140
3.50
2.98
2.78
3.00
120
Net debt / EBITDA
Net debt (SEKm)
2.71
3.57
2.50
100
80
60
134
141
124
170
159
153
2.00
1.50
1.00
40
0.50
20
0
0.00
2009
2010
2011
2012
Net debt
2013
2014
Net Debt / EBITDA
Key ratios
Debt structure
2009
2010
2011
2012
2013
2014
LT interest bearing debt
110.4
82.5
146.2
159.9
155.5
255.7
Convertible loan
ST interest bearing debt
-
4.7
4.7
9 .2
9.2
9.2
48.4
45.8
26.9
31.0
36.2
-
Cash position
24.5
12.1
32.1
38.0
32 .4
104.9
Key credit ratios
2009
2010
2011
2012
2013
2014
Total debt
0.2
132.9
178.0
200.0
200.9
275.0
Total net debt
0.1
120.8
145.8
162.0
168.5
170.1
Net debt to EBITDA
3.26
2.78
3.56
2.98
2.83
2.71
EBITDA
40.3
44.8
39.6
51.2
56.3
62.8
39