MTY Food Group, the Canadian restaurant franchisor, raised its quarterly dividend by 35% to C$0.50 a share after ending a strategic review, despite lower third-quarter earnings and weaker sales at established restaurants.
Net income attributable to shareholders fell 11.2% to C$24.8 million in the 13 weeks ended August 30, from C$27.9 million a year earlier, while earnings per diluted share declined to C$1.08 from C$1.22.
Revenue dropped 7.1% to C$277.7 million, while normalized adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), a measure of operating performance, fell to C$60.8 million from C$74 million.
System sales across the restaurant network remained steady at C$1.46 billion, but same-store sales declined 1.9%, reflecting weaker performance in the US and international markets.
Digital sales rose 2% to C$279.2 million, accounting for 19.8% of MTY Food Group's system sales, up from 19.3% a year earlier
Same-store sales fell 2.7% in the US and 9.1% internationally, while Canada recorded a 0.2% decline.
MTY closed 146 locations and opened 72 during the quarter, resulting in a net reduction of 74 restaurants, including 50 company-operated locations targeted in a previously announced restructuring.
The company ended its strategic review by deciding to focus on improving efficiency, simplifying operations and returning capital to shareholders rather than pursuing a sale or another major transaction.
Its plans include restoring its share buyback program, evaluating a substantial share repurchase offer, optimizing its brand portfolio and shifting towards an asset-light franchising model.
The increased dividend will be paid on November 13 to shareholders registered by November 3.
MTY generated C$28.5 million in free cash flow after lease payments during the quarter, up from C$25.8 million a year earlier, while repaying C$14 million of long-term debt.
The company plans further corporate restaurant closures in the fourth quarter as it seeks to reduce losses and concentrate resources on stronger-performing locations.
