Max’s Group Core Earnings at PhP154.1M in 2014

Makati—(PHStocks)—Max’s Group Inc. (PSE: MAXS) announced its pro-forma year-end numbers on Friday, covering the combined 12-month results of operations of both the Pancake Group and Max’s Entities for 2014. Pro-forma revenues were at PhP9.55 billion, with a core net income of PhP154.1 million, excluding onetime costs.

Factoring in the one-time costs and extraordinary expenses, Max’s Group declared a pro-forma full year consolidated net loss of PhP56 million.

MGI also disclosed the results of operations of the Pancake House Group for the full year 2014 and Max’s Entities from November to December 2014. Reported revenues were at PhP4.87 billion, with a core net income of PhP73.2 million. Taking into account the one-time costs, MGI disclosed a consolidated net loss of PhP66.2 million.

“We focused on investments in restaurant operations and on revamping key brands, which has always been our strategy for long-term growth,” said Dave Fuentebella, Chief Financial Officer of Max’s Group, Inc.

According to Fuentebella, Max’s Group, Inc. expenditures in 2014 included marketing costs, writeoff of doubtful accounts receivables, one-off fees, and expenses for kitchen upgrades, repairs and maintenance, along with the revamping of new and key branches of Pancake House, Teriyaki Boy and Dencio’s.

“We put in a lot of resources in making sure that all aspects of our business—from the kitchen to the store and menu layout, to the actual products and services of our various brands—are taken to the next level in terms of quality and performance,” said Robert F. Trota President and CEO of Max’s Group.

“Last year was a transformative and preparatory period for the company, anchored on a series of market-moving transactions, beginning with the acquisition of Pancake House Group, post-integration activities and capped off by a successful follow-on offering, all of which were consummated within a record span of ten months,” Fuentebella added.

“The results so far are in line with management’s expectations owing to planned and focused efforts to rationalize operations of two iconic food chains.”

Investing in operations to improve efficiencies

The Max’s Entities-Pancake House integration came with the challenges that are typical of transactions of this scale and magnitude. To address these, MGI immediately underwent a comprehensive revamping program to align its portfolio of brands and consolidate operations—which included enhancing top brands, reinvigorating, selling, converting or discontinuing underperformers and upgrading service platforms. This revamping program is currently underway.

Trota explained that for 2015, MGI expects to benefit from considerable cost savings as it plans to realize a significant portion of these efficiencies, creating more flexibility to reallocate resources and expand margins. Today, the company is implementing a blueprint for generating synergies within its base of operations across all brands primarily from supply chain, marketing, and support services.

In addition, the company has adopted category management for its procurement of raw materials to capitalize on negotiated prices and terms suppliers. A shared services model is likewise being rolled out to centralize back-end support for both local and international operations.

More restaurants to capitalize on consumer spending

“We are bullish about growth prospects moving forward as we see consumer buying power improving in the Philippines and across Asia in the next couple of years,” said Trota.

In 2014, MGI saw its net total number of stores grow to 540 from 513 the year before. While new stores were opened, a total of 33 non-performing stores were also closed. MGI noted that despite the closures, its store net total increased along with revenues.

For 2015, Max’s Group, Inc. is planning to roll out 80-90 stores across its brands both locally and internationally, with more than half already backed by signed agreements and firm locations to date.

“Operational integration is on track with the company’s overall development strategy, and we look forward to unlocking the potential of a larger group and to propelling our brands to the next phase of growth,” Trota said. “It’s all about taking these beloved brands to the next level and generating superior and lasting returns for our shareholders.”

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