(Montreal) Investors in MTY Food Group will have to wait longer for announced restaurant opening plans to translate into revenue. The construction of a new establishment can stretch over a period four times longer than usual.
Posted at 3:53 p.m.
“Before, we had restaurants that opened within three to six months,” said Eric Lefebvre, CEO of the Montreal franchisor, during a conference call to discuss fourth quarter results. Now we’re talking about 18 to 24 months in some cases. It’s much longer. »
Supply chain disruptions make it harder for new establishments to open, he adds. Some pieces of gear just aren’t available on the market right now.
Mr. Lefebvre gave the example of one of his establishments which would be ready to open its doors as soon as the heating, ventilation and air conditioning system is ready to be installed. “He won’t be available for six months. »
However, the manager said he was “very happy” with the number of new franchisees joining the ranks of the company, which notably owns the Valentine, Thaϊ Express and Sushi Shop brands, and the number of existing franchisees who are thinking of opening a Other institution.
Despite the increase in temporary closures linked to the Omicron variant, the Montreal company pointed out that the number of establishments temporarily closed was decreasing. Seventy-one establishments were still temporarily closed as of February 16, or 11 less than on November 30.
At the end of the fourth quarter ended Nov. 30, the MTY network had 6,719 locations in operation, including 93 company-operated, 6,603 franchised and 23 joint venture. The geographic distribution of MTY’s locations remained relatively stable compared to the fourth quarter of 2020, with 54% in the United States, 39% in Canada and 7% internationally.
Enough money for acquisitions
The MTY Group has the financial means to make other acquisitions, underlined Mr. Lefebvre. The challenge is to find a good asset at a good price.
The company had $61.2 million in cash at the end of fiscal 2021. In the same fiscal year, it paid down $102.2 million of its long-term debt, which now stands at $360.7 million.
The ability to make acquisitions will be key to the stock’s performance over the next few years, believes Derek Lessard of TD Securities. “With earnings before interest, taxes, depreciation and amortization (EBITDA) expected to stagnate over the next two years, the main catalyst that could drive the stock higher is a resumption of acquisitions. »
Competition remains vigorous in the acquisition market, as large private equity funds are “in harvest mode,” Lefebvre said. “When you look at the prices paid by our competitors, we have no intention of embarking on this kind of acquisition where people pay above 20 times the EBITDA. »
Mr. Lessard believes, for his part, that acquisition opportunities will be more favorable starting in the second half of the year. “We believe that post-pandemic opportunities will emerge,” comments the financial analyst.
An increase in income
In the fourth quarter, MTY unveiled an increase in its profit and revenue, as the Montreal franchisor adapted to the pandemic reality compared to 20,202.
Net income attributable to owners rose to 24.87 million in the fourth quarter from 20.07 million in the same quarter a year earlier. Revenues, for their part, are up 8% to 962.5 million.
The results are still slightly below the analyst consensus, as reported by TD Securities. Mr. Lessard attributes this to unfavorable currency translation and the conversion of properties to Papa Murphy’s restaurant franchises, a brand in the United States. However, the analyst believes that this disappointment masks a good quarter for the recovery of activities in Canada.
In the morning, the action lost $2.15, or 3.87%, to $53.28 on the Toronto Stock Exchange.