Review by the CEO
Sustainable and profitable growth in challenging market
Q1-Q3 2024, 5 November 2024
We achieved a good result in the third quarter of 2024 despite the continued challenging market situation. Our EBIT margin was 9.3%, which supports our full-year target level. In a difficult market environment, profitability in Finland was above 10%. The profitability of the international business was more than 7%, even if in Switzerland the third quarter is seasonally the weakest in our restaurant business. As the figures for again this quarter show, our diverse restaurant portfolio and operational excellence will help us build sustainable and profitable growth even in a weaker economic cycle.
The challenges in the Finnish restaurant market continued in the third quarter, but according to external economic forecasts, we believe that the economy has now bottomed out. Consumer purchasing power will recover as interest rates decrease, and it is estimated to be slowly reflected in the consumption of restaurant services during 2025. This is also supported by the good reservation situation in the pre-Christmas period with regard to events and corporate customers. During the review period, the pressures on consumer purchasing power were particularly evident in the entertainment market, where the decrease in turnover due to weak consumer demand affected profitability in Finland. During the strategy period, we expect the restaurant market to grow, and the Finnish market in particular has a lot of potential. The weaker market situation will bring opportunities for profitable growth through acquisitions and resulting synergy benefits.
The expansion of Better Burger Society, which operates in the growing European premium burger market, progressed in line with the strategy when two new Friends&Brgrs restaurants were opened in Finland during the review period. In the last quarter of the year, we will open one new unit in Finland and two in Switzerland. The business of the Danish packaging material supplier Triple Trading, acquired as part of international investment activities, continued to grow and the first group-level synergies will actualize in the first half of 2025.
Since the end of the review period, we have signed a new financing agreement for the entire Group. Its lighter amortisation program will free up capital for growth investments and paying increasing dividend. With the new financing agreement and falling reference interest rates, the company’s cost of financing will decrease significantly in the coming years. The financing agreement also makes it possible to achieve the long-term target set for debt, according to which the company’s objective is to lower the ratio of net debt to operational EBITDA, adjusted for IFRS16 lease liabilities, to approximately two. In our Capital Markets Day held in May, we announced the goals for the strategy period until 2027, and we are now starting to build the company towards its next phase.
In October, we strengthened our market share in Finland by acquiring a majority of the H5 Ravintolat Oy, which includes eight restaurants in Tampere. The acquired restaurants have proven the profitability of their business operations and are an excellent addition to our restaurant portfolio in Finland.
I have been part of the company’s unique growth story for almost two decades, and we will move to the next strategy period together with a broader Executive Team. The structure of the Executive Team confirmed in early September supports the company’s ambitious growth targets and operational development. We are starting from a good position as we head towards the busiest season of the year.
Jarno Suominen
CEO, NoHo Partners