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By 2020 Sfinks will have nearly 200 restaurants

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Sfinks Polska – the company managing the Sphinx, Chłopskie Jadło and WOOK restaurant networks – by virtue of the decision of the Extraordinary Shareholders Meeting will issue 3.5 million series N shares as part of private subscription. The book-building will be held in the period between November 19th and 23rd this year. The company intends to raise PLN 12 million from the issue. The funds are to be spent on the development of the restaurant networks. The company will also gain additional PLN 10 million (net) on account of the planned refinancing of credits and the write-off of interest by PKO BP and ING Bank Śląski, as well as the extension of the payment schedule up to 7 years. Consequently, Sfinks will have the resources for investments and will be able to open, in the years 2015-2020, even 100 new restaurants with its own funds. At the same time, as a result of the performed capital injection, the company will reach positive equity level in the amount of PLN 6 million before the end of this year.

- Thanks to the recapitalization, credit consolidation, reduction of debt by 13 million in the form of interest write-offs and cumulative capital growth of approximately PLN 22 million we can achieve our priority, which is the development of the network. We have already developed a repeatable model that allows us to open restaurants with ROI at the level of 30% and sometimes even more. This is a basic assumption on which we base our development strategy for the next 5 years. On the basis of the presented forecasts, we estimate that this and next year we will expand the network at the speed of 16 restaurants a year, and in the following years we will be opening even 20 restaurants a year. The important thing is that we will be able to finance those restaurants from funds generated on an ongoing basis, without the need to further recapitalize the company – says Sylwester Cacek, the President of Sfinks Polska S.A.


- At the same time, thanks to the systematic payment of debts and to the positive equity level, we will be able to take advantage of opportunity regarding additional financing of investments from the debt while maintaining a safe debt-to-EBITDA ratio of 3.5. Thus, we have the potential to gain PLN 191 million by 2020, if we wanted to carry out acquisitions, for instance – adds Cacek.


Although the forecasts do not assume acquisitions, they are, as history has shown, one of the important elements of Sfinks's development strategy, provided that the acquisition allowed the company to build the second strategic network aside from Sphinx restaurants.


However, it is Sphinx that, according to the strategy, is supposed to be the main driving force of the company for the next years, enabling it to achieve the growth provided in the forecasts. Additionally the Chłopskie Jadło and WOOK networks are to be developed. The goal is to double the number of restaurants in each network within the next 5 years.


- We intend to continue working on the development of the Chłopskie Jadło network. It has a chance to become the second – after Sphinx – largest casual dining network in Poland. This potential is confirmed by its good sales results – after three quarters of 2015 the sales increased by nearly 13% y/y. In the case of WOOK we developed a target model of the restaurant. The growth of this network is not included in our forecasts because it is carried out by our subsidiary  – adds the President of Sfinks Polska.


The results may also benefit from the activities carried out by the management board, aimed at creating structures that make it possible to purchase properties intended for restaurant activities and to be acquired by Sfinks in the future which should protect the company against business cycles. The management board is already conducting talks with investment funds and has incorporated a limited partnership, the mission of which is to obtain financing to purchase properties where restaurants would be opened. Our strategic objective for the restaurants in own premises is to account for approximately 20% of the network.



- In the case of the limited partnership, despite the Sfinks's initial higher costs of running those restaurants related to the rent enabling the payment of the principal and interest installments, after the credit has been fully paid, Sfinks's profit and the profitability of the restaurants will increase rapidly due to the take over of premises as a form of dividend. According to our estimates, the profitability of the restaurants will be approximately 42%, because in owned, fully paid premises there is no need to pay the rent. At the same time, such structure is safe for all parties, including the entities financing the purchases of premises for the restaurants – explains Cacek.


- I think we will be able to present the first results of our work on this project next year and thanks to that we will open more restaurants that we are currently planning – adds Sylwester Cacek.


According to the 2014 strategy, Sfinks considered financing the networks' development from bond issue, but one of the crediting banks objected. So the company made efforts to obtain refinancing of the existing credits and was granted a credit by BOŚ for the repayment of debts at PKO BP and ING Bank Śląski in the amount of PLN 81.7 million. It also made an agreement with the existing banks-creditors as to the write-offs of all the interest in the case of early full repayment of the loans.


Due to the shares issue being carried out, the reduction of debt and the repayment schedule up to  7 years with a 12-month grace period concerning the repayment of capital, Sfinks also verified its financial forecasts for the years 2015-2020. According to the updated development strategy, Sfinks intends to generate unit sales revenues in the amount of PLN 367.6 million in 2020 as compared to PLN 175.9 million assumed in 2015 forecast. The company also expects the net profit to grow systematically from PLN 8.1 million in 2015 to PLN 24.9 million in 2020 while EBITDA is expected to increase in that period from PLN 20.1 million to PLN 54.2 million. At the same time, the company plans to decrease the debt-to-EBITDA ratio to 0.5 in 2020.


After 9 months of 2015 the company reached sales revenues of PLN 130.3 million as compared to PLN 122.5 million generated last year, which means an increase of 6% y/y. Also the gross unit profit increased four-fold – to PLN 7.1 million. Moreover, despite the taxation of the company's net results with the income tax of PLN 2.8 million, that profit increased by 149% y/y – to PLN 4.3 million after 9 months of this year. The unit EBITDA improved, in turn, by 44% y/y and after three quarters of this year amounted to PLN 15.8 million.