MTY Q1 Update

MTY had a good Q1 results. Revenue is up, EBITDA is up, margins are slightly up, but net income is down (large amortization charge). Their cash flow from operation doubled to $8,7m from $4m, fueled by recent acquisitions. The free cash flow is also increasing. That to me is one of the most important metric. That means more cash for acquisitions and the shareholders. Stanley Ma is doing a great job compounding that growth. MTY used part of their cash, $12 million, to pay down a line of credit and some debt. Also I didn’t know if you knew but they augmented their dividend last quarter The only downside was the net gain of one store (40-39). That’s terrible organic growth. Following the trend of most restaurants and retail store right now, their Same-Store-Sales growth -1.7%, blase largely on the weather. They get a pass this quarter because of the terrible weather, but they eventually need to stop the negative trend. Hopefully a strong beautiful summer will get people in stores. I’m also noticing more and more of their products on the shelves of grocery stores. I still haven’t tried them but they do look good (but not healthy). Other than that everything is on par. Patience is the key here.

Here is an interview with the CFO in the WSJ last month (paywall)
http://finance.yahoo.com/news/wall-street-transcript-interview-eric-151300049.html

Here are both documents from the SEDAR filing:
MTY – Financials Q1 2014

MTY – MD&A Q1 2014

Original investment research: MTY Food Group Inc. – A Restaurant Stock For The Wallet

Highlights of the first quarter of 2014:

  • EBITDA grows by 8% to reach $9.5 million fueled by the results of the newly acquired concepts, of which the positive impact was partially offset by non-recurring master franchise fees earned in 2013 as well as by higher charges related to store closures incurred in the first quarter of 2014
  • Cash flows from operations more than double as a result of lower income tax burden
  • Revenues increase 13%, with most of the growth coming from recurring revenue streams
  • Operating expenses grow 17%, as the company adjusts its structure for future growth and suffers from higher charges related to store closures
  • Same store sales growth declines by 1.7% during the first quarter, impacted by adverse weather in some regions of Canada, sluggish economies mainly in Quebec and Ontario and intense competitive pressures
  • System sales increase by 24% to reach $200.6 million during the quarter
  • The number of units at quarter end sits at 2,591, a net gain of 1 unit generated by 40 new store openings and 39 store closings
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