- Non-cash impairment charge of $120.3
million related to property, plant and equipment, intangible
assets and goodwill
- Net loss attributable to shareholders of $99.1 million or ($4.01) per share
- System sales of $670.7
million, down 19% compared to Q2-19
- 2,757 restaurants closed during the quarter, resulting in
138,931 business days lost during the quarter; 1,470 were still
closed at quarter end, and 573 remain closed as of the date of this
press release, which represents less than 8% of the
network.
- Amended existing credit facility with more flexible
financial covenants for the next four quarters
- Management initiatives resulting in a reduction of recurring
controllable expenses of $10.1
million for Q2
- EBITDA of $18.2 million, down
47% compared to Q2-19
- Free cash flows of $28.9
million despite dramatic impact of COVID-19
- Repurchased and cancelled 364,774 shares for a total
consideration of $18.9 million
year-to-date
- Cash on hand of $49.9 million
as at May 31, 2020
Note that effective December 1,
2019, the Company implemented IFRS 16, Leases, but has not
restated comparatives for the 2019 reporting period, as permitted
under the specific transitional provisions in the standard. Please
refer to the section Changes in accounting policies in the
Management's Discussion and Analysis for further details.
MONTREAL, July 10, 2020 /CNW Telbec/ - MTY Food Group
Inc. ("MTY" or the "Company") (TSX: MTY), one of the largest
franchisors and the operator of multiple concepts of restaurants in
North America, reported today its
results for the second quarter ended May 31,
2020.
"Our second quarter presented important operational challenges
brought on by the COVID-19 pandemic, with the temporary closure of
2,757 locations at peak level and dramatically reduced sales for
many of the locations that remained in operation. While our
locations are now gradually re-opening, overall customer traffic
remains affected by various local regulations and changes in
consumer behavior resulting from work-from-home policies as well as
new habits created by shelter-in-place measures that were in effect
for a considerable amount of time. During the quarter, we were
successful in negotiating an amendment to our existing credit
facility that will provide more financial flexibility going forward
and reduces the uncertainty related to our capital structure. Very
early on in the COVID-19 pandemic, we took decisive actions,
implementing a range of measures destined to financially help our
franchisees who were facing an abrupt halt in their business.
As a result, we had to also implement drastic cost
reduction measures which resulted in the quarter's recurring
controllable expenses decreasing by more than $10 million. Although the level at which we
reduced our operations is not sustainable in the long run, we will
continue to aggressively manage our cash liquidity and adjust to
the volatile market conditions" stated Eric
Lefebvre, Chief Executive Officer of MTY.
"With the important decline in system sales, EBITDA decreased by
47% to $18.2 million. As an
indicator, MTY's network lost a total of 138,931 days of
operations. Papa Murphy's "take'n'bake" concept had very good
traction in the context of COVID-19 and its contribution to
consolidated EBITDA was significant. To assist our franchisees in
this crisis, we deferred the payment of royalties until
September 2020 for an amount of
$7.3 million. With the uncertainty
created by COVID-19 and the impact on impairment indicators, we
recorded a non-cash impairment charge of $120.3 million during the quarter.
"With cash on hand at the end of the quarter just shy of
$50.0 million, over $190.0 million available on our credit
facilities, and more flexibility provided by our amended financial
covenants, MTY remains in a solid financial position to execute its
recovery plan and eventually pursue its growth strategy. Over the
next few quarters, our primary focus is to re-open restaurants and
provide customers with a safe and friendly environment and optimize
the profitability of our restaurants despite the limits and
restrictions," concluded Mr. Lefebvre.
|
|
|
|
|
Financial
Highlights
|
Q2-2020
|
Q2-2019
|
6 Months
2020
|
6 Months
2019
|
|
|
|
|
|
(in thousands of
$, except per share information and margin)
|
|
(not restated for
IFRS 16)
|
|
(not restated for
IFRS 16)
|
System
Sales(1)
|
670,700
|
832,300
|
1,670,200
|
1,520,100
|
Revenues
|
97,808
|
125,571
|
248,588
|
232,868
|
EBITDA(1)
|
18,213
|
34,145
|
59,250
|
62,521
|
EBITDA margin
(%)(1)
|
18.6%
|
27.2%
|
23.8%
|
26.8%
|
Income before
taxes
|
(118,299)
|
24,555
|
(94,159)
|
43,741
|
Net loss (income)
attributable to shareholders
|
(99,126)
|
19,337
|
(80,118)
|
34,085
|
Cash flows from
operations
|
19,207
|
21,077
|
50,187
|
47,834
|
Cash flows from
operations per diluted share (1)
|
0.78
|
0.84
|
2.02
|
1.90
|
Free cash
flows(1)
|
28,926
|
21,767
|
59,664
|
46,681
|
EPS basic
|
(4.01)
|
0.76
|
(3.23)
|
1.35
|
EPS
diluted
|
(4.01)
|
0.76
|
(3.23)
|
1.35
|
|
|
(1)
|
This is a non-IFRS
measure. Please refer to the "Non-IFRS Measures" section at the end
of this press release.
|
SECOND QUARTER RESULTS
Network:
- At the end of the period, MTY's network had 7,236 locations in
operation, of which 137 were corporate, 7,077 were franchised and
22 were in joint ventures. The geographical split of MTY's
locations remained steady with the previous quarter with 54% in
the United States, 39% in
Canada and 7% international.
- System sales were down 19% compared to the same period in 2019,
reaching $670.7 million. Excluding
the impact of recent acquisitions, the decrease compared to Q2-19
was 51% (39% in March, 67% in April and 48% in May).
- The decrease is attributable to COVID-19. At peak level, 2,757
locations were temporarily closed compared to 1,470 as of
May 31, 2020. As of July 9th, 2020, 573 locations remained
temporarily closed, which represents less than 8% of the total
network.
Financial:
- The Company's revenue decreased 22.1%, from $125.6 million to $97.8
million, due to the COVID-19 pandemic.
- EBITDA decreased 47% to $18.2
million, or 18.6% of sales, as compared to $34.1 million, or 27.1% of sales for the same
period last year. Excluding the favorable impact of IFRS 16, EBITDA
would have been $13.3 million.
- Cash flows from operations decreased 8.9% to reach $19.2 million during the quarter.
- Net loss attributable to shareholders was $99.1 million, or ($4.01) per share (($4.01) per diluted share), when compared to a
net income attributable to shareholders of $19.3 million, or $0.76 per share ($0.76 per diluted share), for the same period
last year.
LIQUIDITY AND CAPITAL RESOURCES
- In the second quarter of 2020, cash flows generated by
operating activities were $19.2
million, compared to $21.1
million for the same period in 2019. The decline was limited
by strict working capital management to preserve liquidities.
- Free cash flows for the quarter amounted to $28.9 million, up 33% compared to the same period
last year. The increase was the result of the refranchising of two
groups of Papa Murphy's corporate locations during the
quarter.
- In the second quarter of 2020, the Company used its cash mainly
to repurchase and cancel shares for $9.2
million. The payment of dividends to its shareholders was
suspended for the second quarter due to COVID-19.
- As at May 31, 2020, the Company
had $49.9 million of cash on hand,
and a long-term debt of $536.0
million in the form of holdbacks on acquisition and bank
facilities.
- During the quarter, the Company negotiated an amendment to its
credit agreement with its syndicate of lenders. The result was more
flexible covenants for the next four quarters with a return to
normal terms following this period, during which the Company will
be limited in its ability to pay dividends or buy back shares.
NEAR-TERM OUTLOOK
The Company is closely monitoring the global situation
surrounding COVID-19 and taking proactive steps to ensure the
well-being and safety of its employees, franchisees and customers,
and the continuity of its operations and businesses. Given the
dynamic nature of the situation, it is not possible to ascertain
what impact there may be on the Company's long-term financial
performance. MTY is taking the necessary steps to mitigate the
potential consequences that this situation may have on its
operations, franchisees, partners and service to our customers.
Please refer to section Highlights of Significant Events of our
Management Discussion and Analysis for further details on actions
taken in response to COVID-19.
In the very short term, management's primary focus is to re-open
the restaurants that have been temporarily closed as a result of
the pandemic and to rebuild customer confidence by implementing
proper safety measures and adjust the way customers are
served. Even after the pandemic is over, customer consumption
patterns may shift temporarily or permanently from those
traditionally witnessed and MTY will have to adapt to new customer
behaviors. Although the Company does not foresee sales
comparability for at least the next two to three quarters as a
result of COVID-19, management believes the Company will be able to
regain customer confidence in the brands and restore the positive
momentum it saw in the first quarter of 2020. The Company's
focus, after the pandemic will still be on innovation, quality of
food and customer service in each of the outlets and maximizing the
value offered to customers.
The restaurant industry will remain more than ever challenging
in the future as customer consumption patterns changes and
management believes that the focus on the food offering,
innovation, consistency and store design will give MTY restaurants
a stronger position to face challenges. Given this difficult
competitive context in which more restaurants compete for a finite
amount of consumer dollars, each concept needs to preserve and
improve the relevance of its offerings to consumers.
For further details please refer to the Management's Discussion
and Analysis.
CONFERENCE CALL
MTY Group will hold a conference call to discuss these
results on July 10, 2020, at
8:30 AM Eastern Time. Interested
parties can join the call by dialing 1-647-788-4922 (Toronto or overseas) or 1-877-223-4471
(elsewhere in North America).
Parties unable to call in at this time may access a recording by
calling 1–800-585-8367 and entering the passcode 9599226. This
recording will be available on Friday, July
10, 2020 as of 11:30 AM Eastern
Time until 11:59 PM Eastern Time on Friday, July 17, 2020.
ABOUT MTY FOOD GROUP INC.
MTY Group franchises and operates quick-service and casual
dining restaurants under over 80 different banners in Canada, the United
States and internationally. Based in Montreal, MTY is a family whose heart beats to
the rhythm of its brands, the very soul of its multi-branded
strategy. For over 40 years, it has been increasing its presence by
delivering new concepts in quick-service restaurants and making
acquisitions and strategic alliances that have allowed it to reach
new heights year after year. By combining new trends with
operational know-how, the brands forming the MTY Group now touch
the lives of millions of people every year. With 7,236 locations,
the many flavours of the MTY Group have the key to responding to
the different tastes and needs of consumers today and tomorrow.
NON-IFRS FINANCIAL MEASURES
EBITDA (revenues less operating expenses (excludes income tax,
interest, depreciation and amortization and all other income
(charges)) plus share of net profit of a joint venture accounted
for using the equity method), same-store sales growth, system
sales, operating cash flow before variation in non-cash working
capital items, income taxes and interest paid are widely accepted
financial indicators but are not a measurement determined in
accordance with International Financial Reporting Standards
("IFRS") and may not be comparable to those presented by other
companies. The Company uses these measures to evaluate the
performance of the business as they reflect its ongoing operations.
Refer to the section "Compliance with International Financial
Reporting Standards" in the Company's MD&A.
FORWARD-LOOKING STATEMENTS
Certain information in this News Release may constitute
"forward-looking" information that involves known and unknown
risks, uncertainties, future expectations and other factors which
may cause the actual results, performance or achievements of the
Company or industry results, to be materially different from any
future results, performance or achievements expressed or implied by
such forward-looking information. This includes statements
regarding the impacts that the novel COVID-19 pandemic may have on
our future operations as found in this release. When used in this
News Release, this information may include words such as
"anticipate", "estimate", "may", "will", "expect", "believe",
"plan" and other terminology. This information reflects current
expectations regarding future events and operating performance and
speaks only as of the date of this News Release. Except as required
by law, we assume no obligation to update or revise forward-looking
information to reflect new events or circumstances. Additional
information is available in the Company's Management Discussion and
Analysis, which can be found on SEDAR at www.sedar.com.
Note to readers: Management's Discussion and
Analysis, the consolidated financial statements and notes thereto
for the second quarter ended May 31,
2020 are available on the SEDAR website at www.sedar.com and
on the Company's website at www.mtygroup.com.
SOURCE MTY Food Group Inc.