NOHO PARTNERS PLC INTERIM REPORT 1 JANUARY – 31 MARCH 2021: The first quarter was dominated by strict restrictions and the closure of restaurants – the demand outlook for the summer has improved after the difficult spring

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NoHo Partners Plc

INTERIM REPORT 11 May 2021 at 8:15 a.m.

NOHO PARTNERS PLC INTERIM REPORT 1 JANUARY – 31 MARCH 2021

The first quarter was dominated by strict restrictions and the closure of restaurants – the demand outlook for the summer has improved after the difficult spring

NoHo Partners’ business was subject to strict restrictions in the first quarter of 2021 and, following an order issued by the Finnish Government, restaurant operations in Finland were shut down starting from 8 March 2021 in the regions where the COVID-19 pandemic was in the acceleration or community transmission phase. The Group’s turnover in January–March 2021 was MEUR 20.2, which represents a decrease of approximately 60 per cent compared to the corresponding period in 2020. NoHo Partners continued to implement determined adjustment measures to manage the negative impacts of the strict restrictions and shutdown on its business operations. Operating cash flow for the review period amounted to MEUR -6.7.

The financing agreement negotiated in February 2021 secures the company’s financial position for the next couple of years and facilitates the implementation of its rebuilding programme. Although the market situation remains uncertain, the demand outlook for the summer has improved. The Group expects that the market will begin to recover and operating cash flow will begin to turn positive towards the end of the second quarter of 2021.

JANUARYMARCH 2021 IN BRIEF

  • Turnover declined by 59.8% to MEUR 20.2 (MEUR 50.1).

  • EBIT fell by 47.5% to MEUR -9.7 (MEUR -6.6).

  • The EBIT percentage was -48.3% (-13.2%), a decrease of 266.5%.

  • The result for the financial period was MEUR -10.8 (MEUR -8.9), a decrease of 21.5%.

  • Earnings per share were EUR -0.49 (EUR -0.45), a decrease of 8.8%.

  • Operating cash flow fell by 104.2% to MEUR -6.7 (MEUR -3.3).

  • The gearing ratio excluding the impact of IFRS 16 liabilities was 227.4%. Interest-bearing net liabilities excluding the impact of IFRS 16 amounted to MEUR 169.9. IFRS 16 liabilities totalled MEUR 162.0. The gearing ratio including the impact of IFRS 16 was 472.2%.

  • Government grants for January–March 2021: Denmark approx. MEUR 1.7, Norway approx. MEUR 1.3 and Finland MEUR 1.0.

  • Unless otherwise stated, figures in parentheses refer to the corresponding period last year.

SIGNIFICANT EVENTS IN THE REVIEW PERIOD

  • CBO and Executive Team member Eemeli Nurminen left NoHo Partners on 1 January 2021.

  • Development Director and Executive Team member Perttu Pesonen left NoHo Partners’ Executive Team on 1 February 2021.

  • The company announced on 5 January 2021 that its co-operation negotiations resulted in changes in the organisational structure, reduction of 55 jobs and 15 jobs being made part-time in the Group Executive Team, management and administrative specialist positions, as well as part-time and full-time temporary lay-offs concerning approximately 600 at the time.

  • NoHo Partners acquired the restaurant business of Allas Sea Pool on 1 February 2021, which also made the company a tenant of the spa.

  • The company announced on 15 February 2021 that it had completed negotiations on a new long-term financing agreement with its main financing providers to secure its financial position and support the implementation of its rebuilding programme.

  • On 25 February 2021, the Finnish Government announced that it would order restaurants to be closed for in areas where the pandemic was in the acceleration and community transmission phase, with effect from 8 March 2021.

  • NoHo Partners immediately entered into new negotiations under the Act on Co-operation within Undertakings on 25 February 2021 to adapt its operations to the tighter restrictions.

  • On 26 February 2021, the Parliament approved the Finnish Government’s legislative proposal temporarily amending the Communicable Diseases Act, whereby the validity of the legislation on restrictions of restaurant operations was to be extended until the end of June 2021.

SIGNIFICANT EVENTS AFTER THE REVIEW PERIOD

  • The closure of restaurants in Finland continued until 18 April 2021. Thereafter, restaurants were allowed to open subject to strict restrictions, with alcohol service being required to end at 5 p.m. in the regions where the pandemic is in the acceleration or community transmission phase.

  • The national prohibition of alcohol service at restaurants in Norway was cancelled on a regional basis on 16 April 2021.

  • In Denmark, the restaurant closure ended on 21 April 2021, with restaurants being allowed to open thereafter, subject to restrictions.

SUMMARY

The sudden market changes caused by the COVID-19 pandemic and the strict restrictions on the restaurant industry had a significant impact on the Group’s result in the first quarter of 2021.

In January–February 2021, the Group operated in a very restricted operating environment, with approximately 40 per cent of its restaurant capacity in use. One-third of the restaurants were closed completely and the remaining restaurants operated under restricted opening hours and limited customer capacity. Due to the restaurant restrictions imposed by the Finnish Government, restaurants in Finland were ordered to be closed on 8 March 2021 in the regions where the pandemic was in the acceleration or community transmission phase. Thereafter, the Group’s turnover was generated by the takeaway sales of 47 restaurants in Finland.

The Group’s turnover for January–March 2021 was approximately MEUR 20.2, which is roughly 40 per cent of the turnover for the corresponding period the previous year. The Group estimates that it lost more than MEUR 40 in turnover due to the pandemic during the review period. The Group’s EBIT for January–March was about MEUR 9.7 negative and operating cash flow was approximately MEUR 6.7 negative.

By reacting quickly and implementing cost savings, the Group minimised the negative impacts on operating cash flow from the strict restrictions, restaurant shutdown and the scaling down of operations.

Turnover in April 2021 was approximately MEUR 4.7, which is roughly 22 per cent of the turnover for the corresponding period in 2019. Operating cash flow in April was on a par with March 2021 and amounted to approximately MEUR 3 in the negative.

Based on the current estimate of the lifting of the restrictions, turnover in May 2021 is expected to double compared to April and operating cash flow is expected to be approximately MEUR 2 in the negative.

The Group recognised approximately MEUR 4.0 in financial support from the Finnish, Danish and Norwegian governments for the period 1 January–31 March 2021. Reductions in rent totalled approximately MEUR 0.8 in January–March 2021.

In a normal operating environment in the restaurant business, most of the profits are made during the second half of the year due to the seasonal nature of the business.

REVIEW BY THE CEO AKU VIKSTRÖM

The first quarter of the year was dominated by the third wave of the COVID-19 pandemic and the tighter restrictions imposed by the authorities in response to it. For the first two months of the year, which are also the quietest months in the restaurant industry, we operated in a highly restricted business environment. Approximately 40 per cent of our restaurant capacity was in use, with one-third of our restaurants being closed entirely and the remaining restaurants operating under restricted opening hours and limited customer capacity. The restaurant closure order that entered into effect in Finland on 8 March 2021 forced us to close our remaining restaurants and bring our entire business to a halt once again. This was naturally reflected in our turnover and result for the quarter, as the focus of our operations remained on ensuring our employees’ ability to cope with the situation and securing our cash flow. We managed to reduce our operating expenses and negative operating cash flow compared to the final quarter of 2020 (MEUR -7.2). In the period under review, the operating cash flow amounted to approximately MEUR -6.7 in spite of the restaurant closure in March. In March, operating cash flow was weighed down by additional costs arising from the closure of operations. The operating cash flow for March also included MEUR 1 in business cost support from the Finnish state.

In February, we completed financing negotiations and announced a new financing package of MEUR 141, which secures the Group’s financial position for the next few years and enables the implementation of our post-pandemic rebuilding programme. Due to the unpredictability of the market situation and the government restrictions in particular, we have strengthened our short-term liquidity by reducing our holdings in Eezy by selling Eezy shares for a total value of MEUR 6.2. Taking this into account, our liquid assets after the review period, at the end of April, amounted to approximately MEUR 9, which we expect to be sufficient even if the pandemic and the related restrictions continue into the summer. Due to the prolonged pandemic, operating cash flow in May will be negative. In June, we expect operating cash flow to be positive.

We are prepared to resume our business operations as the restrictions are lifted. We expect restrictions to begin to be relaxed starting from 13 May outside the Helsinki Metropolitan Area and also gradually in the Helsinki Metropolitan Area. We expect that business will normalise during June and we are cautiously optimistic about the coming summer as the epidemiological situation improves and the vaccination programme moves ahead. Consumer confidence has increased significantly during the spring. Consumer confidence has not been this strong since spring 2018. In recent times, households have focused on saving instead of consumption, and the saving rate has risen to an exceptionally high level. Although international tourism will gradually recover, most Finns are likely to spend their summer holiday in Finland and consume domestic services.

As the future outlook becomes clearer, we will specify our plans for the coming years in more detail. We will publish our strategy and long-term financial targets until 2024 on 17 June 2021. We also aim to provide more specific guidance for this year in connection with our reporting on the second quarter.

Aku Vikström
CEO

OUTLOOK

The Market

The economic outlook and consumer confidence have improved quickly during the spring. Nevertheless, the first months of the year have been very difficult for the restaurant industry, and the situation will not improve significantly as long as the restrictions on restaurants remain in place. The drastic adjustment of costs has continued. With regard to demand, there are many encouraging factors and the outlook for the summer gives cause for cautiously optimism, but the company’s profit performance will depend significantly on the development of the epidemiological situation and the restrictions imposed by the authorities.

Profit guidance

At this time, the company will not issue a turnover and profitability forecast for 2021 due to the uncertain market situation. The financial impact of the pandemic on the Group’s business and outlook cannot be fully determined at present because the timetable for the lifting of restaurant restrictions imposed by governments remains unknown.

The profit guidance for 2021 will be updated when visibility is improved and the overall impact of the COVID-19 pandemic on the operating environment and the Group’s business can be assessed more accurately. The Group expects to be able to provide more detailed information in connection with the half-year report 2021.

The company will also provide monthly reports on the development of its business during these exceptional
circumstances.

Financial targets

The Group’s long-term financial targets for the strategy period 2022–2024 will be published on 17 June 2021.

KEY FIGURES

NoHo Partners Group, total

(EUR 1,000)

1 Jan.–31 Mar. 2021

1 Jan.–31 Mar. 2020

1 Jan.–31 Dec. 2020

KEY FIGURES,
ENTIRE GROUP

Turnover

20,160

50,089

156,771

EBIT

-9,730

-6,596

-23,880

EBIT, %

-48.3%

-13.2%

-15.2%

Result of the financial period

-10,754

-8,852

-29,469

Earnings per share (EUR) for the review period attributable to the owners of the Company

-0.49

-0.45

-1.44

Operating cash flow, EUR

-6,707

-3,284

-5,124

Interest-bearing net liabilities excluding IFRS 16 impact, EUR

169,946

139,922

163,431

Gearing ratio excluding IFRS 16 impact, %

227.4%

138.2%

192.0%

Interest-bearing net liabilities, EUR

331,978

288,817

316,621

Gearing ratio, %

472.2%

286.8%

391.0%

Equity ratio, %

15.5%

22.6%

18.1%

Return on investment, %, (p.a.)

-8.9%

-6.6%

-5.9%

Adjusted net finance costs*, EUR

3,032

1,798

10,197

Material margin, %

70.8%

71.7%

72.0%

Personnel expenses, %

48.3%

33.2%

38.0%

*The changed calculation formula can be found at the Interim Report "Calculation formulas for key figures" section.

TURNOVER OF THE BUSINESS AREAS

1 Jan.–31 Mar. 2021

1 Jan.–31 Mar. 2020

1 Jan.–31 Dec. 2020

Restaurants

Turnover (MEUR)

8.7

19.1

58.0

Percentage of the total turnover

43.2%

38.1%

37.0%

Change in turnover

-54.6%

-24.3%

Units, number

80

79

77

Turnover/unit (MEUR)

0.11

0.24

0.75

Entertainment venues

Turnover (MEUR)

3.1

14.7

43.9

Percentage of the total turnover

15.3%

29.3%

28.0%

Change in turnover

-79.1%

-35.2%

Units, number

64

64

67

Turnover/unit (MEUR)

0.05

0.23

0.66

Fast casual restaurants

Turnover (MEUR)

8.2

6.5

31.2

Percentage of the total turnover

40.9%

13.0%

19.9%

Change in turnover

26.4%

24.7%

Units, number

50

47

53

Turnover/unit (MEUR)

0.14

0.14

0.59

International restaurants

Turnover (MEUR)

0.1

9.9

23.6

Percentage of the total turnover

0.7%

19.7%

15.1%

Change in turnover

-98.6%

-16.5%

Units, number

39

39

40

Turnover/unit (MEUR)

0.25

0.25

0.59

CASH FLOW, INVESTMENTS AND FINANCING

The Group’s operating net cash flow in January–March 2021 was MEUR 0.3 (MEUR 3.8).

NoHo Partners made a growth investment in the first quarter of 2021 by acquiring the restaurant business of Allas Sea Pool, which is located in Helsinki’s Katajanokka district, starting from 1 February 2021.

The Group’s gearing ratio excluding the impact of IFRS 16 liabilities was 227.4%. Interest-bearing net liabilities excluding the impact of IFRS 16 amounted to MEUR 169.9. IFRS 16 liabilities totalled MEUR 162.0. The Group’s interest-bearing net liabilities (including IFRS 16 liabilities) at the end of March 2021 were MEUR 332.0 (MEUR 288.8). Adjusted net finance costs in January–March 2021 were MEUR 3.0 (MEUR 1.8). The equity ratio was 15.5% (22.6%) and the gearing ratio was 472.7% (286.8%).

THE IMPACT OF THE COVID-19 PANDEMIC ON THE GROUP’S BUSINESS

The COVID-19 pandemic has had a significant impact on the Group’s business since March 2020. The spread of the pandemic, the restrictions imposed by the Finnish Government on the restaurant industry to mitigate it and the impacts of the pandemic on customer demand have had a highly negative effect on NoHo Partners’ business operations and financial results. As the ultimate duration and overall impacts of the pandemic are difficult to predict, its effects on NoHo Partners’ future turnover, result, cash flow and financial position may deviate from the current estimates and assumptions of the management. The Group has taken determined action to reduce the pandemic’s impacts, uncertainties and risks and to secure the Group’s financial position and sufficient financing.

In January–March 2021, the Group operated in all of its operating countries in a strictly restricted business environment, where the nightclub, event venue and international business were at a standstill. At the beginning of March, the restaurant business in Finland was brought to a nearly complete halt.

In Finland, stricter restrictions on restaurants were introduced in November 2020 due to the deterioration of the pandemic. Alcohol service was ordered to end at midnight nationwide and restaurants could stay open until 1 a.m. In the regions where the pandemic was in the acceleration phase, alcohol service was permitted until 10 p.m. and restaurants that primarily serve alcohol could stay open until 11 p.m. In nightclubs, bars and pubs, the customer capacity was restricted to half of the normal capacity. In restaurants that primarily serve food, the permitted customer capacity was 75 per cent and they could stay open until midnight. In regions where the pandemic was in the community transmission phase, restaurants that primarily serve food had to close at 11 p.m. With a legislative proposal approved by the Parliament on 26 February 2021, the validity of the restrictions on restaurant operations was extended until the end of June 2021.

In February 2021, the Group completed negotiations on a financing agreement with its financing providers, securing the Group’s financial position for the coming years and facilitating measures to be taken in the rebuilding phase.

In March, following the acceleration of the pandemic situation, the Finnish Government ordered the closure of restaurants on 8 March 2021 in regions where the pandemic was in the acceleration or community transmission phase. From that date onwards, only take-away sales were allowed. NoHo Partners immediately entered into new negotiations under the Act on Co-operation within Undertakings in order to adapt its operations to the tighter restrictions. The co-operation negotiations concerned all of the Group’s employees, totalling approximately 1,250 employees in Finland. The restrictions on restaurants also indirectly impact the approximately 2,000 people working for the Group as leased staff.

The three-week closure order was extended until 18 April 2021. Pursuant to an order issued by the Finnish Government, restaurants could be opened on 19 April 2021 subject to strict restrictions on opening hours, alcohol service and customer capacity. In regions where the pandemic is in the acceleration or community transmission phase, restaurants serving alcohol are allowed to stay open until 6 p.m. and restaurants that serve food are allowed to stay open until 7 p.m. Alcohol service is ordered to end at 5 p.m. in both types of restaurants. Areas in the baseline phase of the pandemic returned to restricting alcohol service to 10 p.m. The restrictions will continue for the time being.

On 30 April 2021, the Finnish Government issued a proposal to the parliament on the temporary amendment of the Communicable Diseases Act to extend the validity of the temporary regulations until 31 December 2021.

In the first quarter of 2021, the Group recognised business cost support from the Finnish state in the amount of MEUR 1.0 based on costs that arose during the period 1 November 2020–28 February 2021.

In Denmark, due to the acceleration of the COVID-19 pandemic, restaurants were closed across the country on 9 December 2020, with only take-away sales allowed. In response to the improved pandemic situation, Denmark allowed restaurants to reopen, subject to restrictions, starting from 21 April 2021. Customers can enter restaurants by having a COVID-19 passport and making a reservation for a table. Alcohol serving hours are restricted to 10 p.m. and opening hours to 11 p.m. Customer capacity is limited to approximately half of normal capacity. For indoor events, a gradual reopening plan has been drawn up in Denmark: Starting from 6 May, parties of 25 people at most are allowed to get together in restaurants within their normal opening hours. The maximum group size will increase to 50 persons on 21 May and 100 persons on 11 June. This will enable longer selling hours after 11 p.m. at a reduced customer capacity.

In Denmark, the state has supported companies in the restaurant industry during the crisis by covering 80 per cent of their fixed expenses, relative to the decline in turnover. In addition to fixed expenses, the Danish state has also covered 80 per cent of wage expenses starting from March 2021. The compensation schemes by the Danish state will remain in effect until the end of June 2021. The state will also pay employees’ wages for the first seven days starting from the reopening of restaurants on 21 April 2021.

In Norway, alcohol sales in restaurants were prohibited entirely effective from 9 November 2020. The company’s restaurants in Norway are primarily entertainment venues, and they were closed. The restriction on serving alcohol was cancelled regionally in the third week of January 2021. However, in Oslo, for example, the ban on serving alcohol continued until 2 March 2021, when restaurants in Oslo were ordered to close entirely. The prohibition of alcohol service in Norway was reinstated nationally effective from 26 March 2021. It was subsequently cancelled on a regional basis on 16 April 2021. From that date onwards, restaurants in certain municipalities have been allowed to stay open until 10:30 p.m., with alcohol service ending at 10:00 p.m. Customer capacity is limited to approximately half of normal capacity. In Oslo, the prohibition of alcohol service remains in effect for the time being.

The Norwegian state’s compensation for fixed costs was 80 per cent during the review period. The compensation policy is expected to remain in effect for as long as the restrictions are in place, until at least the end of June 2021. Companies are also paid additional financial support in Norway through municipalities. NoHo Partners’ share of the additional financial support during the review period was approximately MEUR 0.4. The state-run organisation Arts Council Norway also has a compensation scheme for companies that have had to cancel events. If the restrictions are extended, the distribution of additional financial support to restaurants will also continue. The Norwegian State also supports employment by paying 50 per cent of the wages of re-employed personnel until the end of June 2021.

Government assistance during the state of emergency

In January–March 2021, the Group received support amounting to approximately MEUR 1.7 from the Danish state, approximately MEUR 1.3 from the Norwegian state and MEUR 1.0 from the Finnish state. The financial support received by the Group from the Danish, Norwegian and Finnish governments for the period 1 January–31 March 2021 totalled approximately MEUR 4.0.

A more detailed account of government assistance and the distribution thereof is presented in Note 3 Government grants in the Interim Report.

BRIEFING FOR THE MEDIA, ANALYSTS AND INVESTORS AT 10:00 A.M.

A briefing for the media, analysts and investors will be organised today, Tuesday 11 May 2021 at 10:00 a.m. at restaurant Strindberg, Pohjoisesplanadi 33, 00130 Helsinki. In the briefing, NoHo Partners CEO Aku Vikström will review NoHo Partners Plc's Q1/2021 financial performance, key events, the current state of business and the outlook.

The briefing is available as a live webcast at https://noho.videosync.fi/2021-q1-tulos. The briefing will be held in Finnish. During the briefing, there will be an opportunity to ask questions online. The presentation materials and a recording of the briefing will be available on the company’s website later today.

NoHo Partners’ full Interim Report for January–March 2021 is attached to this release as a PDF file. The Interim Report is also available at www.noho.fi.

Tampere, 11 May 2021

NOHO PARTNERS PLC

Board of Directors

ATTACHMENT: NoHo Partners Plc Interim Report Q1/2021

More information available from:
Aku Vikström, CEO, NoHo Partners Plc, tel. +358 44 011 1989
Jarno Suominen, Deputy CEO, NoHo Partners Plc, tel. +358 40 721 5655

NoHo Partners Plc
Hatanpään valtatie 1 B
FI-33100 Tampere

www.noho.fi

NoHo Partners Plc is a Finnish group established in 1996, specialising in restaurant services. The company, which was listed on NASDAQ Helsinki in 2013 and became the first Finnish listed restaurant company, has continued to grow strongly throughout its history. The Group companies include some 250 restaurants in Finland, Denmark and Norway. The well-known restaurant concepts of the company include Elite, Savoy, Teatteri, Stefan’s Steakhouse, Palace, Löyly, Hanko Sushi, Friends & Brgrs and Cock’s & Cows. Depending on the season, the Group employs approximately 2,100 people converted into full-time workers. The company’s vision is to be the most significant restaurant company in Northern Europe. www.noho.fi

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