Max’s Group, Inc. (MGI), the largest casual dining restaurant group in the Philippines, is reporting its operating results for both the second quarter and first half of 2022.
The Group’s re-engineered economic model, designed to accelerate profit recovery even under ongoing market constraints, proved its viability yet again with all-time-high margins exceeding pre-pandemic levels. Second quarter net income outpaced not only its same period performance last year by a factor of four at P239.5 million, as compared to the P55.4 million recorded in 2021 (+332%), but likewise surpassed its bottom line at P240 million as compared to P228 million of the same in the second quarter of 2019.
Margins for the first half and second quarter reflect historic highs as compared to pre-pandemic 2019. For the second quarter, the Group posted earnings before interest, depreciation and amortization (EBITDA) of 22% and net income of 9% which are up by 280 and 230 basis points versus 2019. Despite a softer January due to Omicron, margins have held up with record-high EBITDA and net income margins at 20% and 6% in the first half of the year.
This profitability exceeded even the healthy 56% upswing in systemwide sales (“SWS”)—comprised of sales generated by both company-owned and franchised stores—with P4.54 billion captured across the total network of both local and international stores, versus 2Q 2021 levels of P2.91 billion. Revenues likewise grew by +58% for the period, up by over one billion pesos to P2.82 billion from just P1.78 billion in the same quarter of the prior year.
This profit surge in the second quarter was backed up by ongoing supply chain efficiencies, where the Group’s consolidated billion-peso commissary continues to provide end-to-end upside across procurement of raw materials, manufacturing, and logistics, all of which contributed to tight controls in the Company’s cost of sales. Even amidst headwinds in commodity pricing inflicted across the period, the P1.05 billion gross profit for the quarter nearly doubled the P555 million from the comparable period and is at par with its 2019 figures at P1.05 billion. Gross profit margins for the second quarter and first half of 2022 were at 37.2% and 34.7%, respectively, beating 2019’s second quarter of 28.4% and second quarter of 27.7%
“We committed to our stakeholders throughout the ongoing global health crisis that we would deliver a business model tuned to be as pandemic-proof as possible,” stated MGI Chief Executive Officer Robert F. Trota.
“Regardless of any volatility in our various markets across the world, we have been disciplined in optimizing both demand for our deep, diverse portfolio of brands, and the efficiency in which we are able to convert revenue into profit. Our second quarter results prove yet again that our architecture works, even in sub-optimal operating conditions.”
Gross profit for 1H 2022 amounted to P1.73 billion, a 67% increase from P1.04 billion in the same period last year. Gross profit margin also significantly increased to 35% from just 29% the year prior.
For the first half of 2022, MGI’s net income of P281.1 million organically grew by 18x as compared to the same period last year. In 2021, the Group’s net income was at P392.0 million, which included a one-off gain of P377.0 million from the sale of a subsidiary whose primary asset is land.
Systemwide sales amounted to P8.09 billion in the first half of 2022, a 41% growth from the same period last year, despite strict lockdown measures in January due to the Omicron surge. Relaxation of dine-in restrictions from February onwards caused a significant boost in sales of dine-in brands Max’s Restaurant and Pancake House, supporting the performance of other core brands Yellow Cab Pizza Co. and Krispy Kreme, whose resilience in both delivery and take-out keyed the Group’s performance earlier on in the pandemic.
Consolidated revenues of the Group for 1H 2022 amounted to P4.98 billion a 38% growth from P3.62 billion in the same period last year. Local market sales jumped 45% in 1H 2022 versus the same period last year as consumer confidence, mobility, and economics continue to revive. Meanwhile, the international business reported a solid 27% growth despite labor challenges in the North America market, with new agreements in place to further expand global reach in other markets.
“We are cautiously pleased with the results of the Group throughout 2022 thus far,” noted MGI President Ariel P. Fermin. “Even with a very muted January that set a challenging tone for the start of the year, the business revolution we orchestrated throughout the pandemic continues to bear fruit in how our organization runs, how our brands perform, how our economic model delivers profit. At an organic level—we are particularly proud of how, in the tail-end of 1H 2022, our contribution margin, operating income margin, EBITDA margin, and net income margin before tax even outperform 2019 levels. It is clear to us that even as we continue to make headway in fully recovering our former sales and revenue levels, our optimized profit flowthrough makes us an attractive, reliable choice for our shareholders, our business partners, and our employees.”
As of 30 June 2022, the Company’s store network totaled 14 territories, with 597 Philippine sites and 63 stores situated across various locations in North America, the Middle East, and Asia.
