Hesari is reporting this today:
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And amidst all this, NoHo has continued to deliver solid H1 results. Kirsikka and Madonna, mentioned in the article, belong to NoHo’s portfolio, don’t they? Relander noted that they performed well through the summer and autumn.
“Running a restaurant now requires particular precision and planning, as well as rapid response and adaptation to different situations,” Relander says.
This, too, sounds like it’s straight out of NoHo’s playbook.
The article also mentions that nearly a quarter of restaurants can no longer get raw materials on credit from wholesalers, while NoHo operates with negative working capital.
This is exactly where competitive advantage is built.
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Changes are coming to the ownership structure of the parent company of Naughty Brgr, a competitor of Friends & Brgrs. This would suggest that the burger company’s focus is shifting toward the event business, which, according to my interpretation, would be away from the traditional burger restaurant business.
https://www.inderes.fi/analyst-comments/burgerimiehet-heittivat-rush-factorylle-pelastusrenkaan
The background likely involves the parent company’s challenges with profitability, and the fact that the costs of brick-and-mortar restaurants have risen or remained stagnant while revenue has declined. Earlier this summer, owner Herlevi stated that rent levels were too high for the concept https://www.aamulehti.fi/ravintolat/art-2000010465875.html As a result, its own restaurants have been closed, and the company has focused on franchise restaurants (physical and cloud restaurants).
To a certain extent, this speaks to the competitiveness of NoHo’s Friends & Brgrs, as it has managed to grow its restaurant base and revenue at the same time that competing restaurants are leaving the market.
The situation will have to be monitored. Could the Naughty Brgr concept gain a new boost through an event focus?
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Last year’s Q3 operating profit adjusted for BBS arrangements was 10.6%. Now @Arttu_Heikura, you are only expecting a 9.0% adjusted operating profit margin, which is even lower than last year’s unadjusted 9.1% (including BBS arrangements). Consumers were already in bad shape in Q3 last year and the weather was also poor according to NoHo’s Q3 report last year, so why is there not enough faith in a better operating profit margin this year when the sunshine lasted well into the autumn?
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Hi,
And thanks for the question!
That lower operating profit margin stems exclusively from expectations for Finland. Q1 was very sluggish (6.8%) and Q2 wasn’t particularly impressive compared to the comparison period (9.1%). This is due to the weakness of the nightclub market. The profitability of international restaurants has risen significantly, and it is forecast to remain at a very good level of 8–9% for the remainder of the year.
We believe that Finland’s challenging nightclub market will not ease overnight. There is also the maintenance backlog (korjausvelka) of NoHo’s nightclubs, which was discussed in the Q2 earnings call and likely in our report. We forecast a margin of around 9% for Q3 and 10.5% for Q4. This also assumes that the pre-Christmas party season goes well, which is quite a bold call considering the current situation of consumers and businesses.
For one reason or another, that consumer weakness only started to show in NoHo’s figures at the beginning of this year. Because of this, the margins in the comparison period were still at a very good level. I’m not saying that a 9% margin is a bad level, either.
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Thanks for the answer, Arttu, and great points!!
To this I would add, however, that the Ice Hockey World Championships in the comparison period likely had a big impact on Q2, and thus one would think that Q3 wouldn’t be relatively as weak compared to the corresponding period last year as Q2 was. Also, April and the beginning of May were poor in terms of weather this year, which was covered in the news to some extent.
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If I recall correctly, the World Championships brought in about EUR 5 million in revenue during the comparison period, and assuming it came with a 20% EBITDA margin (the earnings impact was ~EUR 1 million), the adjusted operating margin for Q2’23 would have been in the 10.5–11% range. Weather certainly has some effect, but based on card data, the market has been crawling near zero or below it during 2024. In 2023, the restaurant market was still growing in Q1-Q3 and only turned downward in Q4.
But NoHo has surprised positively before! Following the retail sector, almost every shop has warned about a challenging end to the year, which I believe will also be reflected in NoHo’s Finnish restaurants.
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Chairman of the Board trusts the company, acquisition of 17,657 shares: NoHo Partners Oyj: Johdon liiketoimet (Laine) | Kauppalehti
It seems it was yesterday’s block trade.
The release doesn’t specify whether this addition is to Laine Capital’s holdings, but it’s likely the case.
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Restel isn’t doing well either
According to the financial statement data, the Restel Group recorded an operating loss of 3.3 million euros on revenue of 176.8 million euros last year. In 2022, revenue was 234.2 million euros and the operating loss was 9.0 million euros.
In five years, Restel has accumulated a total of 46.6 million euros in operating losses.
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Nordea card data from September. Consumers apparently still can’t decide whether to increase or decrease restaurant visits, given how varied the development has been. In the big picture, we are still in negative territory.
Consumption meter: consumption has caught up to last year’s level (nordea.com)
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Unless I’m completely mistaken, management is loading up—specifically the new Deputy CEO. It’s a bit confusing that all the announcements came out at the same time, as if they were share-based incentives: NoHo Partners Oyj: Johdon liiketoimet (Koivula) | Kauppalehti
Detailed transaction information
(1): Volume: 8189 Unit price: 7.25 EUR
(2): Volume: 12500 Unit price: 7.25 EUR
Aggregated transaction information (2):
Volume: 20689 Average price: 7.25 EUR
The Sales Director is being cautious: NoHo Partners Oyj: Johdon liiketoimet (Virlander) | Kauppalehti
Nature of the transaction: ACQUISITION
Detailed transaction information
(1): Volume: 100 Unit price: 7.22 EUR
(2): Volume: 399 Unit price: 7.24 EUR
(3): Volume: 14 Unit price: 7.22 EUR
(4): Volume: 100 Unit price: 7.22 EUR
(5): Volume: 87 Unit price: 7.22 EUR
Aggregated transaction information (5):
Volume: 700 Average price: 7.2314 EUR
It seems Paul Meli was just reorganizing his holdings under a holding company: NoHo Partners Oyj: Johdon liiketoimet (Paul Meli Holdings Oy) | Kauppalehti
and NoHo Partners Oyj: Johdon liiketoimet (Meli) | Kauppalehti
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NoHo has acquired more restaurants in Tampere:
The restaurants of H5 Ravintolat Oy include H5 Bar&Cellar, Pub Kujakolli, restaurant Härlem, restaurant Pons, The Red Lion Pub, restaurant Tuoppi, and Beerhouse Opaali. Additionally, the acquisition includes the sports bar Kultainen Ilves, which is responsible for the alcohol service operations at the Tammela football stadium. The combined turnover of the restaurants is over 8 million euros per year. In connection with the transaction, the restaurant Patarouva, owned by NoHo, will become part of H5 Ravintolat.
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Arttu’s comments:
Starting to have a pretty large market share in Tampere.
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Didn’t find it in the thread, but let’s post more news about challenges in the restaurant industry; HOK-Elanto is a fairly big player in its area.
HOK-Elanto Liiketoiminta Oy will start change negotiations in the restaurant sector on September 30, 2024. The change negotiations concern a total of 505 people working in HOK-Elanto’s restaurants, including shift supervisors and employees.
According to the employer’s preliminary estimate, the plan could, if implemented, lead to the conversion of current employment contracts to part-time, dismissal, or unilateral changes to a material condition of the employment relationship for up to 140 people covered by the negotiations. If the plan is implemented, the employer’s goal is to offer additional work within the HOK-Elanto Group. These negotiations have no impact on the number of restaurants.
If the plan is implemented, the employer’s goal is to offer additional work within the HOK-Elanto Group. These negotiations have no impact on the number of restaurants.
The intention is not to close restaurants, but there are challenges with profitability.
In the current situation, HOK-Elanto’s restaurant sector also faces the challenge of an exceptionally high proportion of full-time employees out of the total staff. The change negotiations aim to achieve a better match between person-hours and current restaurant demand in HOK-Elanto’s restaurant sector.
Meaning the hours in the contracts are too high relative to how much they want to keep the restaurants open or how much staffing is deemed necessary.
Adding an edit:
It wasn’t quite such a straightforward matter after all. Walkout today at 6 PM.
HOK-Elanto restaurant employees in the middle of change negotiations have decided on tough industrial action.
Cooks, waiters, and shift managers are walking out this Friday evening from restaurants familiar to Finns. The walkout began in all HOK-Elanto restaurants at 6:00 PM.
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Well, next Tuesday, November 5th, we’ll be better informed about how the Q3 quarter has gone. At least in his current calculations, Arttu expects a significant earnings improvement compared to the comparison period in terms of the bottom line. Do I remember correctly that there were significant write-downs at Eezy in Q3 last year!?
The upcoming pre-Christmas party season will be much more interesting, of course. I think the company stated at some point during the autumn that the booking situation was good, but I wonder how it will turn out!? Unemployment is rising and change negotiations have increased, which is one specific risk for NoHo’s business. Companies’ willingness to organize grand pre-Christmas parties may be a bit questionable if they are laying off staff at the same time.
The environment of falling interest rates at least favors the company, as debt levels are high. All in all, however, it is very difficult to assess whether we will get positive or negative news in the earnings release.
A small disclaimer is probably in order: I just put in a small bid below the current price level of €7.30, and I already own shares in the company.
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Yep, the reported result for the comparison period was weighed down by Eezy’s write-downs and one-off items resulting from the BBS arrangement. Otherwise, profitability (10.6% of revenue) and EPS were at very good levels.
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Fresh analysis on NoHo from Nordea. They are trimming estimates slightly but slightly raising the fair value range (€10.8-13.7)
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The Kaivohuone case is really baffling. If the cost problems were known AND the fact that the city wants to get rid of the building couldn’t have come out of the blue either, then why on earth buy the whole restaurant? What could the train of thought have been?
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I suppose the idea was to buy the entire Night People Group portfolio, as it would hardly have been possible to negotiate restaurant by restaurant; in the same deal, Apollo Live Club and Maxine also transferred to NoHo’s possession.
Indeed, you’re right @III21, it was more about Night People’s Helsinki nightclub portfolio.
One might also add that the deal as a whole wasn’t necessarily very well-timed, given the sluggishness of the nightclub business, but on the other hand, it was surely reflected in the price and better times are yet to come.
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