NoHo Partners Plc INTERIM REPORT 14 FEBRUARY 2019 at 8:00

NOHO PARTNERS INTERIM REPORT FOR 1 JANUARY-31 DECEMBER 2018

Net sales increased by 74% in a year of corporate acquisitions and great changes, but exceptionally large non-recurring items reduced profitability - profit guidance for 2019 specified

NET SALES AND INCOME

The Group's Income for October-December of 2018

Entire Group:

The Group's net sales were MEUR 98.4 (MEUR 54.4), growth of 80.9 per cent. EBITDA was MEUR 7.3 (MEUR 7.7), decrease of 6.1 per cent. Operating profit was MEUR 2.6 (MEUR 4.3), decrease of 39,0 per cent.

Restaurant business:

The net sales of the restaurant business segment were MEUR 67.6 (MEUR 34.4), growth of 96.8 per cent. EBITDA was MEUR 4.7 (MEUR 5.9), decrease of 19.8 per cent. Operating profit was MEUR 1.2 (MEUR 3.5), decrease of 67.6 per cent.

Labour hire business:

The net sales of the labour hire business segment were MEUR 34.2 (MEUR 23.4), growth of 46.1 per cent. EBITDA was MEUR 2.5 (MEUR 1.9), growth of 30.1 per cent. Operating profit was MEUR 1.5 (MEUR 0.8), growth of 90.2 per cent.

The Group's Income for January-December 2018

Entire Group:

The Group's net sales were MEUR 323.2 (MEUR 185.9), growth of 73.9 per cent. EBITDA was MEUR 28.4 (MEUR 22.4), growth of 26.8 per cent. Operating profit was MEUR 7.2 (MEUR 10.8), decrease of 33.2 per cent.

Restaurant business:

The net sales of the restaurant business segment were MEUR 209.7 (MEUR 122.2), growth of 71.7 per cent. EBITDA was MEUR 19.6 (MEUR 16.3), growth of 20.3 per cent. Operating profit was MEUR 2.2 (MEUR 6.9), decrease of 68.1 per cent.

Labour hire business:

The net sales of the labour hire business segment were MEUR 127.1 (MEUR 75.6), growth of 68.1 per cent. EBITDA was MEUR 8.8 (MEUR 6.6), growth of 32.6 per cent. Operating profit was MEUR 5.0 (MEUR 3.8), growth of 29.6 per cent.

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

SUMMARY

Between January and December, net sales increased by 73.9 per cent and EBITDA by 26.8 per cent, and operating profit decreased by 33.2 per cent from the corresponding period the previous year. In October-December, net sales increased by 80.9 per cent, EBITDA decreased by 6.1 per cent and operating profit decreased by 39,0 per cent from the corresponding period in the previous year.

The result of the 2018 financial period was encumbered by exceptionally large non-recurring items due to transactions. The factors affecting the result of the restaurant business in the review period included the integration costs of the Royal Ravintolat purchase, investments in international business as well as the sale, closure and concept reinvention of unprofitable business units. There were a total of approximately MEUR -2.1 of non-recurring items with a negative effect on the result, in addition to which there were approximately MEUR -2.8 of non-recurring items that affected the operating profit. The net sales effect of the discontinued restaurant units in the 2018 financial period was approximately MEUR 12, and negative EBITDA was approximately MEUR 2. The nearly MEUR 3.6 sales profit from the sale of SuperPark shares, which took place in April 2018, had a positive impact on the result of the review period.

In the 2018 financial period, the labour hire segment carried out significant corporate acquisitions and investments in order to list Smile Henkilöstöpalvelut Oyj on the Nasdaq Helsinki Ltd Stock Exchange. Costs connected to the cancelled IPO amounted to approximately MEUR 1.75, which included over EUR 800,000 of other operating expenses and over EUR 900,000 of finance costs. Expenses associated with corporate acquisitions that affected the EBITDA amounted to approximately EUR 400,000. In addition to these, the sales prices of corporate acquisitions carried out during the financial period were adjusted in financial income for approximately MEUR 1.2 and in finance costs for approximately EUR 100,000.

Especially in the restaurant business, most of the profits are made at the end of the year due to the seasonal nature of the business.

PROSPECTS FOR 2019

PROFIT GUIDANCE (AS OF 14 FEBRUARY 2019):

NoHo Partners estimates that the Group's net sales and profitability will increase this year. The Group aims to achieve, after eliminations, a total net sales of approximately MEUR 390 and a profit margin of approximately 5.8 per cent (approximately MEUR 22.5) by the end of 2019. The restaurant segment aims to achieve net sales of approximately MEUR 250 and a profit margin of over 6 per cent (over MEUR 15). The labour hire segment aims to achieve net sales of approximately MEUR 150 and a profit margin of approximately 5 per cent (approximately MEUR 7.5).

The long-term goal of the Group is to achieve net sales of over MEUR 600 and a profit margin of approximately 7.5 per cent by the end of 2021. The restaurant segment aims to achieve net sales of approximately MEUR 350 and a profit margin of approximately 8 per cent. The labour hire segment aims to achieve net sales of approximately MEUR 300 and a profit margin of approximately 6.5 per cent. The Group will update the estimate for the financial period on an annual basis in conjunction with the publication of the result for the fourth quarter.

KEY FIGURES        
NoHo Partners Group in total        
(EUR thousand) 10-12/2018 10-12/2017 1-12/2018 1-12/2017
KEY FIGURES, entire Group        
Turnover 98,382 54,391 323,158 185,856
EBITDA 7,272 7,748 28,410 22,404
EBITDA, % 7.4% 14.2% 8.8% 12.1%
Operating profit 2,644 4,334 7,190 10,767
Operating profit, % 2.7% 8.0% 2.2% 5.8%
Review period result 2,571 1,485 4,231 5,492
To shareholders of the parent company 2,203 1,635 3,494 5,058
To minority shareholders 368 -150 737 434
Earnings per share (euros) to the 0,12 0,10 0,19 0,30
shareholders of the parent company     138,500 43,649
Interest-bearing net liabilities     184.3% 93.1%
Gearing ratio, %     24.6% 35.3%
Equity ratio, %     5.2% 10.7%
Return on investment, % (p.a.) 945 262 2,478 1,099
Restaurant business        
(EUR thousand) 10-12/2018 10-12/2017 1-12/2018 1-12/2017
Turnover 67,650 34,378 209,725 122,174
EBITDA 4,747 5,918 19,643 16,325
EBITDA, % 7.0% 17.2% 9.4% 13.4%
Operating profit 1,151 3,548 2,206 6,920
Operating profit, % 1.7% 10.3% 1.1% 5.7%
         
KEY FIGURES        
Material margin, % 75.5% 76.0% 73.9% 74.1%
Staff expenses, % 33.2% 27.8% 32.1% 28.0%
Labour hire business        
(EUR thousand) 10-12/2018 10-12/2017 1-12/2018 1-12/2017
Turnover 34,153 23,384 127,090 75,612
EBITDA 2,525 1,940 8,753 6,603
EBITDA, % 7.4% 8.3% 6.9% 8.7%
Operating profit 1,493 785 4,970 3,834
Operating profit, % 4.4% 3.4% 3.9% 5.1%
         
KEY FIGURES        
Staff expenses, % 81.7% 84.4% 82.4% 83.7%

Key figures for the labour hire segment with the reference data adjusted*

Labour hire business        
(EUR thousand) 10-12/2018 10-12/2017 1-12/2018 1-12/2017
Turnover 34,153 23,025 127,090 74,366
EBITDA 2,525 1,581 8,753 5,412
EBITDA, % 7.4% 6.9% 6.9% 7.3%
Operating profit 1,493 785 4,970 3,834
Operating profit, % 4.4% 3.4% 3.9% 5.2%
         
KEY FIGURES        
Staff expenses, % 81.7% 85.7% 82.4% 85.1%

*) The labour hire reference data for 2017 presented in the table has been adjusted to correspond to the application method of the IFRS 15 standard adopted in the labour hire segment in 2018.

CEO AKU VIKSTRÖM

2018 was the beginning of a new era

In January-December 2018, the net sales of our Group increased by almost 74 per cent and EBITDA by almost 27 per cent, and the operating profit decreased by over 33 per cent from the previous financial period. The result of the review period was affected by exceptionally large non-recurring items due to significant transactions and operational efficiency measures in Finland and abroad.

In many ways, the 2018 financial period was the beginning of a new era for our Group. In April, we expanded our restaurant business to the international market in Denmark and, in June, we became one of the biggest restaurant groups in the Nordic countries by merging with Royal Ravintolat. In November 2018, we announced our new name, NoHo Partners Plc (Nordic Hospitality Partners), our new strategy and our goals. We created a new company and identity that portrays our strengths and future goals better than ever.

The 2018 financial period was encumbered by exceptionally large non-recurring items due to the attempted initial public offering of Smile Henkilöstöpalvelut, restructuring of the restaurant portfolio, organisational rearrangement and transactions of international business. With target-oriented changes, there were a total of approximately MEUR -2.1 of non-recurring items affecting EBITDA and with a negative effect on the result of the 2018 financial period, in addition to which there were approximately MEUR -2.8 of non-recurring items that affected the operating profit. The result for the review period was also affected by, for example, Smile's IPO expenses of approximately MEUR 1.75. The sale of SuperPark Oy in the second quarter had a positive impact on the result for the financial period.

At the end of 2018, the restaurant business segment was organised according to the four business areas: food restaurants, nightclubs and pubs, fast casual and international restaurants. As expected, the fourth quarter was good in the food restaurants and fast casual segments, thanks to the continued rising trend of eating out. The nightclub and pub business fell slightly short of expectations compared to the corresponding period last year. Its Christmas season was more moderate than the previous year, where the people celebrated 100 years of Finnish independence and used the services of nightclubs and pubs in record-breaking numbers. In our other main market area, in Tampere, the extensive alterations in the city centre due to the tram project also partly reduced the consumption of our restaurant services. Our international restaurant business was encumbered by new transactions, starting costs and investments in organisational reinforcement. We believe that these actions will translate to profitable growth in the first half of 2019.

Determined start for new strategy and profit improvement programmes

We updated our new strategy of profitable growth in the fourth quarter of the year. Its key aims are profitable growth in Finnish growth centres and large events organically through new establishments and corporate acquisitions as well as digitally, international expansion to the Northern European market as well as profitable growth in labour hire services organically and through corporate acquisitions.

Our strategy of profitable growth is supported by the short and long-term profit improvement programmes. The short-term (2018-2019) profit improvement programmes include the integration of Royal Ravintolat, restructuring of the restaurant portfolio and the core business development programme, all of which have started out effectively.

The integration of Royal Ravintolat is proceeding according to schedule and is estimated to bring about at least MEUR 6 of synergy benefits for the Group by the end of 2019. The consolidation of management and administration (synergy value MEUR +1) was fully completed in the second half of 2018, as were the centralisation of purchase and procurement as well as negotiation of better purchase contracts (synergy value MEUR +1.5). The new, more flexible staffing structure and operating model will be introduced in the first quarter of 2019, and its results (synergy value MEUR +3.5) will start to show starting from the second quarter.

The restructuring and revamping of our restaurant portfolio will enable us to focus on our core business and its profitable growth. In the second half of 2018, we closed 23 unprofitable restaurant units with significantly lower competitiveness due to their location, lease or competitive conditions. The closed units include Bella Roma, Colorado Bar & Grill and Tammergolf restaurant in Tampere, Beefking and Lietsunkulma in Lielahti, Wäinö in Hämeenlinna, Bella Roma in Lappeenranta, Enso in Helsinki, American Diners in Citykäytävä and Easton, Colorado Bar & Grill in Hernesaaren Ranta, Thai Papayas in Herttoniemi and Hernesaaren Ranta, Hieta, Royal Crowne Plaza, Svenska Klubben, Ooh la laa, Hanko Sushi in Ruokolahti, Pepe Lopez and Café Europa in Pori, Hunaja in Lappeenranta, Bar Soolo in Kotka and Sinisoihtu in Rauma. The combined operational net sales effect of all these units for the entire financial period is approximately MEUR 12, and their removal also eliminates approximately MEUR 2 of negative EBITDA.

The core business development programme seeks organic growth and allocates resources more strongly into the profitability of core business. The company's extensive brand portfolio and partner model enable the local and profitable reinvention of concepts as well as the creation of new business ideas. Examples include Sikke's (to be opened in place of Sandro in Eira), Hanko Sushi (opened in place of Thai Papaya in Lempäälä), Hanko Sushi (opened in place of Mura Sushi in Ruka), Pizzeria Luca (to be opened in place of Purpur in Tampere) and Taqueria el Rey (to be opened in place of Patrona in Helsinki). The company's commercial organisation has been strengthened, and the sales functions have been concentrated in Helsinki.

Smile Henkilöstöpalvelut still growing faster than the rest of the sector

2018 was another time of strong and profitable growth for our labour hire business. In 2014, when Smile Henkilöstöpalvelut joined the company, its net sales were approximately MEUR 6.8, whereas now, in the 2018 financial period, the net sales reached MEUR 127.1. The net sales of Smile Henkilöstöpalvelut increased almost 68 per cent from the previous year, EBITDA by almost 33 per cent and operating profit by almost 30 per cent. When the result is adjusted with costs connected to the IPO, the comparable EBITDA improved by approximately 45 per cent and the operating profit by approximately 51 per cent.

In 2018, Smile acquired several companies specialised in labour hire for industry, construction and logistics, such as Kymppi Service Oy, Jobio companies and Adicio Oy, which specialises in the import of foreign construction labour as well as Job Services Two Oy and Job Services Three Oy, which are focused on construction industry labour needs, in particular. In addition to the corporate acquisitions, organic growth, especially in the restaurant and hospitality sector (HoReCa), served as an engine for the strong growth.

Although the Smile IPO at the Nasdaq Helsinki Ltd Stock Exchange was cancelled in the fourth quarter, Smile achieved a comparable result and benefited from the process in many ways. The entire organisation was subjected to a critical review, which leaves the company's operations on stronger foundations than ever before. Towards the end of the year, Smile focused on enhancing and harmonising its internal processes. The company invested in brand work and new digital solutions, which are intended in future to make the recruitment process faster for the employees and employers. Smile also launched a direct recruitment service: Smile Rekry finds its clients experts and executives for sales, marketing, ICT and administrative positions. New sectors and services are constantly being mapped. Future growth potential is seen in the logistics sector, in particular.

2019 looks bright for Smile. The labour hire sector is believed to continue its growth, although the availability of labour is slowing the market slightly. The availability issue will be resolved, for example, through the foreign labour import services of Smile Import and active cooperation with educational institutes. The company wants to grow organically and, as in previous years, more quickly than the market. We aim to carry out corporate acquisitions and thus continue to consolidate the market. The company makes a good profit and cash flow, and good options are seen for financing its growth.

New strategy and financial goals to guide operations

We updated the new long-term financial goals in the fourth quarter of 2018. We aim to achieve net sales of over MEUR 600 and a profit margin of approximately 7.5 per cent by the end of 2021. By the end of the 2019 financial period, we will seek net sales of approximately MEUR 250 and a profit margin of over 6 per cent in the restaurant segment and net sales of approximately MEUR 150 and a profit margin of approximately 5 per cent in the labour hire segment. Relative to the strong cash flow of 2019, our debt ratio is good and our MEUR 139 net liabilities are controlled.

At the core of our profitable growth is international expansion - in 2019, we will focus on profitable growth in Denmark and expansion to a new market in Northern Europe in accordance with our strategy. After a year of many changes, we have started the journey towards our new goals. In the long term, the core of profitable growth includes investing in sales and marketing with digital solutions, selected big and profitable new projects as well as garnishing an international growth platform.

Aku Vikström, CEO

DIVIDEND

On 31 December 2018, NoHo Partners Plc's distributable assets were EUR 73,177,641.92, of which the share from the profit for the financial period is EUR 4,092,561.33. There have been no significant changes to the company's financial situation since the end of the financial period.

NoHo Partners Plc's Board of Directors proposes to the Annual General Meeting to be held on 24 April 2019 that EUR 0.34 (EUR 0.33) per share, a total of EUR 6,423,397.98 (18,892,347 shares), be paid as the dividend for the financial period ended on 31 December 2018 based on the adopted balance sheet.

CASH FLOW, INVESTMENTS AND FINANCING

The Group's operating net cash flow in January-December 2018 was MEUR 18.7 (MEUR 17.8). Growth investments made during the past review period included the opening of Hanko Sushi restaurants in Lempäälä and Ruka, the concept reinvention of restaurant Henkka in Tampere and the changing of the Group name to NoHo Partners Plc.

The Group's interest-bearing net liabilities at the end of December 2018 were MEUR 138.5 (MEUR 43.6). The net finance costs in January-December 2018 were MEUR 2.5 (MEUR 1.1). Equity ratio was 24.6% (35.3%) and gearing ratio was 184.3% (93.1%).

NOHO PARTNERS PLC'S FINANCIAL REPORTING IN 2019

NoHo Partners Group's 2018 annual report will be published during week 13. The interim reports for 2019 will be published as follows:

January-March on Tuesday 07/05/2019 at 8:00am January-June on Tuesday 06/08/2019 at 8:00am January-September on Tuesday 05/11/2019 at 8:00am

NoHo Partners Plc's Annual General Meeting will be held in Tampere on Wednesday 24/04/2019. The invitation to the general meeting will be published during week 13.

PRESS CONFERENCE FOR MEDIA AND ANALYSTS AT 9:30 AM

There will be a press conference for media and analysts today, Thursday 14 February 2019, starting 9:30 am at Pörssiklubi at Fabianinkatu 14 A, 4 th floor, 00100 Helsinki. NoHo Partners Plc's CEO Aku Vikström and Smile Henkilöstöpalvelut Oyj's CEO Sami Asikainen will present the result for the review period and speak about topical issues and future prospects. The presentation material and a video recording will become available on the company website later today. The full NoHo Partners interim report for January-December 2018 is appended to this release in PDF format. The interim report is also available on the company's website at www.noho.fi . NOHO PARTNERS PLC Board of Directors APPENDIX: NoHo Partners Plc Interim Report 2018 Additional information: Aku Vikström, CEO, tel +358 44 011 1989 Jarno Suominen, CFO, tel +358 40 721 5655 Distribution: NASDAQ Helsinki Major media www.noho.fi NoHo Partners 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 over 200 restaurants in Finland and Denmark. Well-known restaurant concepts of the company include Elite, Savoy, Teatteri, Yes Yes Yes, Stefan's Steakhouse, Palace, Löyly, Hanko Sushi and Cock's & Cows. In 2018, NoHo Partners Plc's net sales were MEUR 323.2 and EBITDA MEUR 28.4. Depending on the season, the Group employs approximately 4,000 people when converted into full-time workers. NoHo Partners Plc's subsidiary Smile Henkilöstöpalvelut Oyj employed approximately 10,000 people during the 2018 financial period.

NoHo Partners corporate website: www.noho.fi NoHo Partners consumer websites: www.ravintola.fi and www.royalravintolat.fi Smile Henkilöstöpalvelut: www.smilepalvelut.fi

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