RESTAMAX PLC INTERIM REPORT FOR 1 JANUARY-31 DECEMBER 2017: Turnover increased by almost 43% and profitability remained at a good level

Restamax Plc

INTERIM REPORT 20 February 2018 at 8:00 a.m.

RESTAMAX PLC INTERIM REPORT FOR 1 JANUARY-31 DECEMBER 2017:
Turnover increased by almost 43% and profitability remained at a good level

TURNOVER AND INCOME

The Group's result for October-December 2017

Entire Group:

The Group's turnover was MEUR 54.4 (MEUR 34.4), growth of 58.3 per cent. EBITDA was MEUR 7.7 (MEUR 5.9), growth of 30.4 per cent. Operating profit was MEUR 4.3 (MEUR 3.5), growth of 23.1 per cent.

Restaurant business:

The turnover of the restaurant business segment was MEUR 34.4 (MEUR 28.5), growth of 20.7 per cent. EBITDA was MEUR 5.9 (MEUR 5.1), growth of 15.3 per cent. Operating profit was MEUR 3.5 (MEUR 3.0), growth of 19.1 per cent.

Labour hire business:

The turnover of the labour hire business segment was MEUR 23.4 (MEUR 8.6), growth of 171.5 per cent. EBITDA was MEUR 1.9 (MEUR 1.0), growth of 96.5 per cent. Operating profit was MEUR 0.8 (MEUR 0.5), growth of 44.7 per cent.

The Group's result for January-December 2017

Entire Group:

The Group's turnover was MEUR 185.9 (MEUR 130.1), growth of 42.9 per cent. EBITDA was MEUR 22.4 (MEUR 19.4), growth of 15.5 per cent. Operating profit was MEUR 10.8 (MEUR 9.0), growth of 19.7 per cent.

Restaurant business:

The turnover of the restaurant business segment was MEUR 122.2 (MEUR 107.5), growth of 13.6 per cent. EBITDA was MEUR 16.3 (MEUR 16.5), decrease of 0.9 per cent. Operating profit was MEUR 6.9 (MEUR 7.4), decrease of 6.5 per cent.

Labour hire business:

The turnover of the labour hire business segment was MEUR 75.6 (MEUR 34.1), growth of 121.5 per cent. EBITDA was MEUR 6.6 (MEUR 3.4), growth of 91.9 per cent. Operating profit was MEUR 3.8 (MEUR 1.6), growth of 140.1 per cent.

Figures in parentheses refer to the same period the previous year, unless otherwise stated.

Restamax Plc's result for January-December 2017 was clearly better than the previous year, as had been expected. The turnover of the entire Group increased by 42.9 per cent from last year, EBITDA by 15.5 per cent and operating profit by 19.7 per cent.

Abnormally cold and rainy weather in the summer put a strain on the Group's restaurant business in the second and third quarter of the year, affecting the result and relative profitability of the 2017 financial period of the entire Group. The growth rate of business operations accelerated towards the end of the year, and with a successful Christmas party season the Group's October-December 2017 result was rather good.

The turnover increased due to acquisitions, and especially in the last part of the year, the increased focus and investments in sales and marketing. The whole Group EBITDA and EBIT increased compared to last year in the last quarter.

Job Services One Oy (currently Smile Job Services Oy), which was acquired to the labour hire business, executed a stronger than expected result. This increased the purchase price of the company through the earn-out mechanism, leading to a significant non-recurring item of MEUR 1.7 in the financial expenses. EBITDA for the labour hire segment also includes capital transfer taxes of EUR 300,000 as non-recurring costs related to the acquisition of the businesses.

In terms of the level of profitability, Restamax's restaurant business and labour hire business are at the spearhead of their sectors. The relative profitability of the labor hire business is slightly lower than the restaurant business. As the labour hire business is growing relatively faster than the restaurant business, the overall group relative profitability is influenced due to this change.
 
Especially in the restaurant business, most of the profits are made in the second half of the year due to the seasonal nature of the business.

PROSPECTS FOR 2018

Profit guidance (as of 20 February 2018):

In accordance with its strategy, Restamax expects the Group's turnover to increase and profitability to remain on a good level in both segments in the 2018 financial year. The restaurant segment is expected to reach a turnover of approximately MEUR 140 and in labour hire a turnover of approximately MEUR 110 is expected, the total turnover being some MEUR 240 after eliminations.

Restamax's goal is to reach a turnover of approximately MEUR 400 by the end of 2020 after internal eliminations. The goal of the restaurant segment is to reach a turnover of approximately MEUR 200, and the goal of the labour hire segment is to reach a turnover of approximately MEUR 220 by the end of 2020.

KEY FIGURES

CEO JUHA HELMINEN

A record year for growth

We have a strong year of growth behind us. During January-December 2017, the turnover of our Group increased by almost 43 per cent, EBITDA by 15.5 per cent and operating profit by almost 20 per cent in comparison with the previous financial period. Once again we reached our long-term strategic goals and, during 2017 we already exceeded the turnover target of MEUR 180 that we set for 2018.

In 2017, we served up to 7 million customers and our restaurant portfolio grew from 110 to more than 130 restaurants. Although the second and third quarters of 2017 were challenging, which affected our EBITDA and EBIT margins, we were able to keep our key efficiency figures, such as our staff expenses and material margin, at a good level.

The final quarter of the year was quite successful and culminated in the busiest-ever Christmas party season. In October-December, we opened more than 10 new restaurants and, despite their opening costs, we succeeded in catching up with the results of the second and third quarters that were influenced by poor summer weather. We continued to strengthen our position in our familiar market areas, and opened restaurants in new cities, Vaasa and Rovaniemi. Increased focus and additional investment in sales, marketing and streamlining operating practices improved customer flow and increased average purchase. Smile Henkilöstöpalvelut Oy's rate of growth accelerated as a result of corporate acquisitions, and the company became a leading player in the field.

A busy Christmas party season creates confidence in the recovery of the restaurant industry

Although chilly summer weather halted the growth of restaurants seen early in the year, the situation brightened up towards the end of the year - the Christmas party season was the best for years for the whole restaurant industry. According to the Finnish Hospitality Association (MaRa), in the period January-November 2017 the turnover of the tourism and restaurant industries increased by 5.5 per cent. The economy strengthened during the autumn and, according to forecasts, the growth in Finnish GDP was about 3.2 per cent in 2017. Consumer confidence also strengthened towards the end of the year and, in January 2018, rose to the highest in its history.

The reform of the Alcohol Act, which partially entered into force in January 2018, is a much-needed boost for the industry, and will allow happy hour marketing, among other things. The Act, which will be fully implemented at the beginning of March 2018, will also make extended opening hours possible. We will utilize the reform in our operations, and we believe that it will both strengthen customer flows and increase the average size of customer purchases. The reform will also play a significant role both in our own restaurant operations and in the development of the whole sector.

Smile Henkilöstöpalvelut one of the major players in the sector

2017 was also a record year for our labour hire business. The turnover of Smile Henkilöstöpalvelut increased over 121 per cent from the previous year, EBITDA by almost 92 per cent and operating profit by 140 per cent. The growth in customer purchases has been positive, and the acquisition of new customers successful. The corporate acquisitions of Banssi Henkilöstöpalvelut, Job Services One and Active People carried out during the year spurred on the company's growth, which is clearly faster than that of the market. The growth of Job Services One, currently operating under the name of Smile Job Services Oy, clearly exceeded our expectations, and its positive result is booked as a non-recurring earn-out item of MEUR 1.7 in the financial expenses of the segment's review period. Capital transfer taxes resulting from corporate acquisitions (EUR 300,000) also affected the result. By the end of 2020, Smile will be targeting a turnover of MEUR 220.

During 2017, Smile strengthened its position particularly in the construction, industrial and logistics sectors. Smile's organic growth has been supported by strong investment in marketing and brand work. Implementing a new IT system and the integration of acquired companies into the business will be completed early in 2018, as a result of which operations will be harmonised and made more efficient than ever. At the end of 2017, Smile also established Smile Education Oy, which provides training services, in particular focusing on producing training and recruitment services for graduating students with the aim of improving the availability of manpower for customers. During 2018, Smile will invest in its corporate management culture, organisational expertise and the development of new digital services.

As a result of an increase in demand for financial and labour hire services, the market looks very positive. In 2017, labour hire was Finland's strongest growing sector - the number of employees increased by more than 10 per cent over the previous year. In January-November 2017, the labour hire sector in Finland achieved a turnover of MEUR 1,163.6, 18 per cent up on the previous year, and turnover in labour hire services climbed to more than MEUR 978.5, an increase of 23 per cent over the previous year.

Expanding beyond Finland and new targets

In 2017, we enjoyed the strong confidence of investors and the market. The development of our share price was stronger than ever before, rising from the year end 2016 level of approximately EUR 6 to above EUR 8. Kauppalehti ranked Restamax as the 14th most profitable listed company, based on its gross yield of 49.1 per cent.

During 2018, we will expand our restaurant business abroad. Our main focus area will be Northern Europe where the restaurant market is fragmented, we see enormous potential in it. There are three models for our expansion: corporate acquisitions, exporting our own concepts and a hybrid of the two. We are currently in active negotiations in several countries outside the borders of Finland.

At the end of 2017, we published new long-term financial goals and strategy. Our goal is to reach a turnover of approximately MEUR 400 by the end of 2020. Active work to reach these goals has begun. In January 2018, we announced that we would be revamping our organisation and management. We will invest more strongly in the management of business units, the boosting of acquisitions and in the satisfaction of our customers and staff. We will, for example, expand the opportunities for training provided by Restamax Academy for our staff. Sales, marketing and market knowledge will be given increasing value in our operations, and for this we will strengthen our Executive Team during the spring with a Chief Commercial Officer (CCO).

Juha Helminen, CEO

DIVIDEND

Restamax Plc's distributable assets on 31 December 2017 were EUR 54,569,557.59, EUR 6,529,099.62 of which was the share of profit for the financial period. There have been no significant changes to the company's financial situation since the end of the financial period.

Restamax Plc's Board of Directors proposes to the Annual General Meeting to be held on 25 April 2018 that EUR 0.33 (0.30) per share, a total of EUR 5,484,474.60 (16,619,620 shares), be paid as dividend for the financial period ended on 31 December 2017 based on the adopted balance sheet.

CASH FLOW, INVESTMENTS AND FINANCING

The Group's operating net cash flow in January-December 2017 was MEUR 17.8 (MEUR 13.5).

Growth-related investments made during the review period included the openings of Guru's Kitchen & Bar, Colorado Bar & Grill, the Purpur restaurant and Pyynikki Brewhouse in Tampere, Stefan's Steakhouse and the Teatro nightclub in Vaasa, Classic American Diner and Wayne's Coffee in Helsinki, the Colorado Express and Villisika restaurants in Ruka, Stefan's Steakhouse in Levi, Classic American Diner in Rovaniemi, the Hunaja nightclub in Lappeenranta, and the acquisition by Smile Henkilöstöpalvelut of the restaurant labour hire business of Active People Oy.

The Group's interest-bearing net liabilities at the end of December were MEUR 43.7 (MEUR 30.4). The net financial expenses in January-December were MEUR 2.8 (EUR 952,800). Equity ratio was 35.3 per cent (45.2 per cent) and gearing ratio was 93.1 per cent (69.1 per cent).

RESTAMAX PLC'S FINANCIAL REPORTING IN 2018

Restamax Group's 2017 annual report will be published during week 13. The interim reports for 2018 will be published as follows:

January-March on Tuesday 8/5/2018 8:00 am
January-June on Tuesday 7/8/2018 8:00 am
January-September on Tuesday 6/11/2018 at 8:00 am

Restamax Plc's Annual General Meeting will be held in Tampere on Wednesday 25/04/2018. The invitation to the general meeting will be published during week 13.

The full Restamax interim report for January-December 2017 is appended to this release in PDF format. The interim report is also available on the company's website at www.restamax.fi.

RESTAMAX PLC

Board of Directors

APPENDIX: Restamax Plc Interim Report 2017

Additional information:
Juha Helminen, CEO, Restamax Plc, tel. +358 40 535 5560
Jarno Suominen, CFO, Restamax Plc, tel. +358 40 721 5655 

Distribution:
NASDAQ Helsinki
Major media
www.restamax.fi

Restamax Plc is a Finnish group established in 1996, specialising in restaurant services and labour hire. 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 more than 130 restaurants, nightclubs and entertainment centres all over Finland. Well-known restaurant concepts of the Group include Stefan's Steakhouse, Viihdemaailma Ilona, Classic American Diner and Colorado Bar & Grill. In 2017, Restamax Plc's turnover was MEUR 185.9 and EBITDA MEUR 22.4. Depending on the season, the Group employs some 2,250 persons, converted into full-time employees. Restamax subsidiary Smile Henkilöstöpalvelut Oy employs approximately 9,000 people on a monthly basis.

Restamax company website: www.restamax.fi, Restamax consumer website: www.ravintola.fi, Smile Henkilöstöpalvelut: www.smilepalvelut.fi