Sfinks: yet another quarter of net profit

Tuesday, March 4, 2014 - 14:10

In 2013, the Sfinks Polska group – owner of the Sphinx, WOOK and Chłopskie Jadło chains – increased its consolidated sales revenues to PLN 176.65 million from PLN 171.12 million in 2012. At the same time, last year the group improved its consolidated result on operating activities by PLN 7.2 million, and its consolidated net result – by PLN 9.44 million. This means that Sfinks generated in 2013 the consolidated profit on operating activities of PLN 3.55 million compared to the previous year’s loss of PLN -3.66 million, and last year’s consolidated net loss amounted to a mere PLN -0.55 million compared to PLN -9.99 million in 2012. In the fourth quarter of 2013, Sfinks generated the consolidated net profit of PLN 0.92 million compared to a loss of PLN -0.87 million a year before. The company promises further growth – in 2014, it intends to allocate about PLN 12.7 million for development of its restaurant chains.

The further increase of profitability results largely from consistent organizational and parallel sales-boosting changes. Today, franchise is only possible at Sfinks if the franchisee contributes the premises-related expenses. If the expenses are borne by Sfinks, the restaurant bases on the operator model where the company acquires all revenues and profits, while the operator is paid a turnover-based remuneration. New restaurants are opened, and the existing ones are transformed in accordance with this rule. As recently as early last year, there were 54 operator restaurants within our chains; in December 2013 that number went up to 87, while the number of franchises went down during that same period from 46 to 21. By the end of the first quarter, we plan to transform 9 more franchised restaurants where our company paid all premises-related expenses into operator ones, says Sylwester Cacek, President of the Management Board of Sfinks Polska SA.

The changes significantly influence our results. The target EBITDA profitability of an operator restaurant is estimated at 20%, while the franchise fee amounts to 7%. Besides, with the increase in the number of operator restaurants, the parent company’s unit revenues go up, as does also its share in the consolidated profit. The further growth of the chains will proceed along these lines, Sylwester Cacek explains.

In 2013 Sfinks opened 12 new restaurants trading as Sphinx and Chłopskie Jadło. Most of them were opened in prestigious locations, such as Galeria Krakowska, Poznań City Center, Galeria Mokotów in Warsaw or Wrocław Futura Park, where the first free-standing Sphinx restaurant was opened. However, at the end of 2013 the chain managed by Sfinks was actually extended by only 1 restaurant compared to 2012 (with the total of 109 outlets), as 2012 was yet another year when Sfinks closed its outlets in underperforming locations. At the same time, due to the much bigger size of the newly opened restaurants as well as the makeover and organizational changes of the existing ones, the total number of seats within the chains managed by Sfinks Polska increased from 12,222 to 12,824, i.e. by about 5%.

In 2014, we intend to allocate about PLN 12.7 million for new restaurants and modernization of the existing ones. Also this year, we plan to start about 15 new operator restaurants and no less than 10 new franchised ones. We want to continue growth in prestigious locations: a Sphinx restaurant will be opened in Błękitny Wieżowiec in Warsaw, and negotiations are in progress concerning further outlets in other attractive locations in the capital city as well as Poznań, Wrocław and Kraków. As follows from our experiences from the Futura Park center in Wrocław, also the opening of free-standing restaurants can be profitable: this is another direction of our future development, the President of Sfinks explains.

The consistent investment policy, works aimed at changing the chains’ structure and post-sales activities such as marketing campaigns or organizational changes within individual restaurants have resulted in the increase of the 2013 consolidated gross profit on sales of Sfinks Polska to PLN 25.32 million, that is by 86% compared to 2012. At the same time, the chains’ EBITDA went up from PLN 19.23 million to PLN 24.43 million, i.e. by 27%. The sale support and marketing activities are also reflected in the bigger average bill within the largest restaurant chain managed by Sfinks Polska – Sphinx, which went up from PLN 55.56 to PLN 60.57.

The changes that take place at our restaurants are received most positively by the customers. According to a Millward Brown survey of November 2013 as many as 99% of the Sphinx chain customers like the interior design changes, and 86% - the menu changes. The surveys also show that the Sphinx brand has loyal customers and generates traffic. As many as 56% of our customers visit us within a planned outing. In most cases, they meet with their families and friends – as declared by 89% of the customers of Sphinx restaurants, says Sylwester Cacek.

The results for 2013 have been quoted on the basis of information for four quarters. They will be verified by the auditor before publication of the annual statements for 2013.

Information about the survey: a national survey carried out by Millward Brown Polska by order of Sfinks Polska in November 2013; sample: 731 respondents.

Wed, 2014-03-05