BURLINGTON, ON, Aug. 12, 2013 /CNW/ - SIR Royalty Income Fund (TSX:
SRV.UN) (the "Fund") today reported its financial results for the
three-month ("Q2 2013") and six-month ("YTD 2013") periods ended June
30, 2013. All comparisons in the following summary of the Fund's Q2
2013 financial results are to the corresponding period in the prior
fiscal year ("Q2 2012"). Percentage calculations are based on the
numbers in the financial statements and may not correspond to rounded
figures presented in this release.
Q2 2013 Summary
-
Net earnings for the Fund increased to $2.0 million, or $0.30 per Fund
unit, in Q2 2013, from $1.5 million, or $0.28 per Fund unit, in Q2
2012;
-
Pooled Revenue increased 13.6% to $62.9 million;
-
Same Store Sales Growth (SSSG)(1) for Royalty Pooled Restaurants was 4.1% in Q2 2013;
-
Distributable cash(2) per Fund unit (basic and diluted) totalled $0.30, representing a payout
ratio(2) of 90.6%;
-
The Fund increased its monthly unitholder distributions from $0.088 per
unit to $0.095 per unit, representing an estimated annualized
distribution of $1.14 per unit. The increase became effective for the
Fund's distribution paid on June 28, 2013; and
-
During Q2 2013, SIR Corp. ("SIR") opened two new Jack Astor's
restaurants, one in North Toronto and one in Pickering, Ontario.
"We continue to strengthen the market presence of our core Jack Astor's
brand with the opening of two new locations in the quarter, including
one in North Toronto and one in Pickering, Ontario. To date in 2013, we
have opened three new Jack Astor's, completed a patio renovation at
Reds Wine Tavern, and completed renovations to the Loose Moose Tap &
Grill and one Jack Astor's. SIR's investments in repositioning Reds
Wine Tavern in Q3 2012 and renovations to the Loose Moose have
contributed to our Signature Group's 31.8% Same Store Sales Growth(1) in the quarter," said Peter Fowler, President and CEO of SIR Corp. "We
remain focused on improving the performance of both Alice Fazooli's and
Canyon Creek and we are pleased to report that we have moved forward
with our performance improvement plan for Alice Fazooli's. Our former
Square One Alice Fazooli's location in Mississauga has now been
transitioned to a variant on the concept called Scaddabush, which
offers our guests a new, refreshing take on Italian dining. Scaddabush
tested very well in our early stage consumer appraisals, and we look
forward to hearing our guests' in-person responses to this concept
innovation."
"SIR is committed to building value for our Fund unitholders through
innovation, a constant focus on strengthening our brands, and as market
conditions permit, new restaurant openings and renovations," continued
Mr. Fowler. "We expect to open three additional restaurants in 2013,
all located at street level within the new 78-storey Aura condominium
development at Yonge and Gerrard Streets in downtown Toronto."
Financial Results
($000s except restaurants and per Unit amounts)
(unaudited)
|
|
Three-month period ended June 30, 2013
|
Three-month
period ended June 30, 2012
|
Six-month period ended June 30, 2013
|
Six-month
period ended June 30, 2012
|
|
|
|
|
|
|
Royalty Pooled Restaurants
|
|
49
|
47
|
49
|
47
|
Pooled Revenue generated by SIR
|
|
62,855
|
55,333
|
117,554
|
107,410
|
|
|
|
|
|
|
Royalty income to Partnership - 6% of Pooled Revenue
|
|
3,771
|
3,320
|
7,053
|
6,445
|
Make-Whole Payment(4) |
|
-
|
91
|
-
|
152
|
Partnership other income
|
|
10
|
9
|
20
|
20
|
Partnership expenses
|
|
(21)
|
(25)
|
(49)
|
(36)
|
Partnership earnings
|
|
3,760
|
3,395
|
7,024
|
6,581
|
SIR Corp.'s interest
(Class A, B, and C GP Units)
|
|
(1,641)
|
(2,000)
|
(3,420)
|
(3,935)
|
Partnership income allocated to Fund
|
|
2,119
|
1,395
|
3,604
|
2,646
|
Interest income
|
|
750
|
750
|
1,500
|
1,500
|
|
|
|
|
|
|
Total income of the Fund
|
|
2,869
|
2,145
|
5,104
|
4,146
|
General & administrative expenses
|
|
(111)
|
(121)
|
(223)
|
(207)
|
|
|
|
|
|
|
Net earnings before income taxes of the Fund
|
|
2,758
|
2,024
|
4,881
|
3,939
|
Income tax expense
|
|
(747)
|
(550)
|
(1,409)
|
(1,064)
|
|
|
|
|
|
|
Net earnings for the period
|
|
2,011
|
1,474
|
3,472
|
2,875
|
Earnings per Fund Unit
(basic and diluted)
|
|
$0.30
|
$0.28
|
$0.54
|
$0.54
|
Pooled Revenue increased 13.6% to $62.9 million in Q2 2013, up from
$55.3 million in Q2 2012. As at June 30, 2013, there were 49
restaurants included in Royalty Pooled Restaurants, compared to 47
restaurants included in Royalty Pooled Restaurants as at June 30, 2012.
The Fund's net earnings for Q2 2013 totalled $2.0 million, or $0.30 per
Fund Unit (basic and diluted), compared with $1.5 million, or $0.28 per
Fund Unit (basic and diluted) for Q2 2012.
Distributable cash(2) for Q2 2013 totalled $2.0 million or $0.30 per Fund Unit (basic and diluted), and distributions to
Unitholders totalled $1.8 million, representing a payout ratio(2) of 90.6% for the quarter. The Fund's payout ratio(2) is intended to average 100% per annum. The payout ratio(2) since the Fund's inception, up to and including Q2 2013, is 98.8%.
Distributable Cash(2)
The following table reconciles the relationship between cash provided by
operating activities and distributable cash(2):
|
|
|
|
|
(in thousands of dollars except per Unit amounts and payout ratio(2)) (unaudited)
|
Three-month period ended June 30, 2013
|
Three-month
period ended June 30, 2012
|
Six-month period ended June 30, 2013
|
Six-month
period ended June 30, 2012
|
Cash provided by operating activities
|
1,946
|
1,850
|
3,637
|
1,133
|
Add/(deduct):
|
|
|
|
|
|
Net change in non-cash working capital items
|
(112)
|
(659)
|
(224)
|
(859)
|
|
|
|
|
|
|
|
Net change in income tax payable
|
(237)
|
(2)
|
(262)
|
2,173
|
|
|
|
|
|
|
|
Net change in distribution receivable from the Partnership
|
430
|
296
|
440
|
450
|
Distributable cash(2) |
2,027
|
1,485
|
3,591
|
2,897
|
Cash distributed for the period
|
1,836
|
1,361
|
3,761(3)
|
2,694
|
Surplus/(shortfall) of distributable cash(2) |
191
|
124
|
(170)
|
203
|
Payout ratio(2)
|
90.6%
|
91.6%
|
104.8%(3)
|
93.0%
|
Distributable cash(2) per Fund Unit (basic and diluted)
|
$0.30
|
$0.28
|
$0.56
|
$0.54
|
Same Store Sales (SSS)(1)
SSSG(1) for Royalty Pooled Restaurants
|
Three-month period ended June 30, 2013
|
Three-month
period ended June 30, 2012
|
Six-month period ended June 30, 2013
|
Six-month
period ended June 30, 2012
|
|
|
|
|
|
Jack Astor's® |
3.9%
|
5.0%
|
1.7%
|
7.6%
|
Canyon Creek® |
(0.4%)
|
(2.6%)
|
(4.4%)
|
(0.5%)
|
Alice Fazooli's® |
(10.1%)
|
(5.7%)
|
(10.3%)
|
(2.6%)
|
Signature Restaurants
|
31.8%
|
(8.2%)
|
15.2%
|
(4.4%)
|
Overall SSSG(1) |
4.1%
|
2.2%
|
1.1%
|
4.7%
|
Jack Astor's, which accounted for approximately 77% of Pooled Revenue in
Q2 2013, generated Same Store Sales Growth (SSSG)(1) of 3.9% in Q2 2013. The Signature Restaurants generated SSSG(1) of 31.8% in Q2 2013, led by strong contributions from the repositioned
Reds Wine Tavern and the recently renovated Loose Moose Tap & Grill.
Canyon Creek and Alice Fazooli's reported declines in SSS(1) of 0.4% and 10.1%, respectively, in Q2 2013. SIR's Management is
committed to maximizing the performance of all of its restaurants and
is reviewing initiatives to enhance value at the Canyon Creek concept.
SIR recently initiated a program to evolve the Alice Fazooli's concept,
and is currently testing a variant of the concept called Scaddabush™ at
the former Alice Fazooli's Square One location in Mississauga, Ontario.
Scaddabush offers guests a new, refreshing take on Italian dining.
Corporate Developments
In Q2 2013, SIR opened two new Jack Astor's restaurants, one in North
Toronto (opened April 1, 2013) and one in Pickering, Ontario (opened
May 21, 2013). In Q1 2013, on March 4, 2013, SIR opened a new Jack
Astor's restaurant in Kitchener, Ontario. These three restaurants will
be added to Royalty Pooled Restaurants on January 1, 2014.
Outlook
SIR Management will continue to monitor economic conditions and consumer
confidence and has advised the Fund that it is considering new store
growth where appropriate. Based on its assessment of these conditions,
the timing of restaurant construction and opening schedules will be
reviewed regularly by SIR Management and adjusted as necessary.
Over the remainder of 2013, SIR expects to open three more restaurants
at street level in one of the largest condominium developments in
Canada, located at Yonge and Gerrard Streets in downtown Toronto. SIR
also currently expects to open two new Jack Astor's restaurants in
Ottawa, Ontario, one in 2014 and one in 2015.
The Fund's unaudited interim consolidated Financial Statements and
Management's Discussion & Analysis ("MD&A"), and the SIR Royalty
Limited Partnership's Financial Statements, for the three and six-month
periods ended June 30, 2013, are available via the SEDAR website at www.sedar.com and SIR's website at www.sircorp.com.
(1) Same store sales ("SSS") and same store sales growth ("SSSG") are
non-GAAP financial measures and do not have standardized meanings
prescribed by IFRS. However, the Fund believes that SSS and SSSG are
useful measures and provide investors with an indication of the change
in year-over-year sales. The Fund's method of calculating SSS and SSSG
may differ from those of other issuers and, accordingly, SSS and SSSG
may not be comparable to measures used by other issuers. SSS includes
revenue from all SIR Restaurants included in Pooled Revenue except for
those locations that were not open for the entire comparable periods in
fiscal 2013 and fiscal 2012.
(2) Distributable cash and payout ratio are non-GAAP financial measures
and do not have standardized meanings prescribed by IFRS. However, the
Fund believes that distributable cash and the payout ratio are useful
measures as they provide investors with an indication of cash available
for distribution. The Fund's method of calculating distributable cash
and the payout ratio may differ from that of other issuers and,
accordingly, distributable cash and the payout ratio may not be
comparable to measures used by other issuers. Investors are cautioned
that distributable cash and the payout ratio should not be construed as
an alternative to the statement of cash flows as a measure of liquidity
and cash flows of the Fund. The payout ratio is calculated as cash
distributed for the period as a percentage of the distributable cash
for the period. Distributable cash represents the amount of money
which the Fund expects to have available for distribution to
Unitholders of the Fund, and is calculated as cash provided by
operating activities of the Fund, adjusted for the net change in
non-cash working capital items including a reserve for income taxes
payable and the net change in the distribution receivable from the SIR
Royalty Limited Partnership. For a detailed explanation of how the
Fund's distributable cash is calculated, please refer to the Fund's
MD&A for the three and six-month periods ended June 30, 2013, which can
be accessed via the SEDAR website (www.sedar.com).
(3) Cash distributed to Unitholders for the six-month period ended June
30, 2013 includes the special year-end distribution of $0.05 per unit
or $0.3 million that was declared in December 2012 and paid on January
11, 2013. The payout ratio for the six-month period ended June 30, 2013
was significantly affected by the special year-end distribution.
(4) The Alice Fazooli's restaurant in Toronto and the Jack Astor's
restaurant in Kitchener, Ontario were closed on January 27, 2012 and
February 13, 2012, respectively. Under the terms of the License and
Royalty Agreement, SIR was required to pay a Make-Whole Payment for
these locations from their dates of closure until December 31, 2012.
About SIR Corp.
SIR Corp. (SIR) is a privately held Canadian corporation that owns and
operates a portfolio of 54 restaurants in Canada. SIR's Concept brands
include: Jack Astor's Bar and Grill®, with 37 locations; Alice
Fazooli's®, together with Scaddabush™, for a total of four locations;
and Canyon Creek Chop House®, with eight locations. SIR also operates
one-of-a-kind "Signature" brands in downtown Toronto, which comprise
the upscale Reds® Wine Tavern, Far Niente®/FOUR®/Petit Four®, and the
Loose Moose Tap & Grill®. All trademarks related to the Concept and
Signature brands noted above are used by SIR under a License and
Royalty Agreement with SIR Royalty Limited Partnership in consideration
for a Royalty, payable by SIR to the Partnership, equal to six percent
of the revenue of the 49 restaurants currently included in the Royalty
pool. SIR also owns and operates two seasonal Signature restaurants:
Abbey's Bakehouse™ and Duke's Refresher™. These two restaurants are not
currently part of Royalty Pooled Restaurants. For more information on
SIR or the SIR Royalty Income Fund, please visit www.sircorp.com.
About SIR Royalty Income Fund
The Fund is a trust governed by the laws of the province of Ontario that
receives distribution income from its investment in the SIR Royalty
Limited Partnership and interest income from the SIR Loan. The Fund
intends to pay distributions to unitholders on a monthly basis.
Caution concerning forward-looking statements
Certain statements contained in this report, or incorporated herein by
reference, including the information set forth as to the future
financial or operating performance of the Fund or SIR, that are not
current or historical factual statements may constitute forward-looking
information within the meaning of applicable securities laws
("forward-looking statements"). Statements concerning the objectives,
goals, strategies, intentions, plans, beliefs, expectations and
estimates, and the business, operations, financial performance and
condition of the Fund, the SIR Holdings Trust (the "Trust"), the
Partnership, SIR, the SIR Restaurants or industry results, are
forward-looking statements. The words "may", "will", "would", "expect",
"believe", "plan", "anticipate", "intend", "estimate" and other similar
terminology and the negative of such expressions are intended to
identify forward-looking statements, although not all forward-looking
statements contain these identifying words. Forward-looking statements
involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance or achievements of Fund, the
Trust, the Partnership, SIR, the SIR Restaurants or industry results,
to differ materially from the anticipated results, performance,
achievements or developments expressed or implied by such
forward-looking statements. These statements reflect Management's
current expectations, estimates and projections regarding future events
and operating performance and speak only as of the date of this
document. Readers should not place undue importance on forward-looking
statements and should not rely upon this information as of any other
date. Risks related to forward-looking statements include, among other
things, challenges presented by a number of factors, including:
competition; changes in demographic trends; changing consumer
preferences and discretionary spending patterns; changes in consumer
confidence; changes in national and local business and economic
conditions; changes in availability of credit; legal proceedings and
challenges to intellectual property rights; dependence of the Fund on
the financial condition of SIR; legislation and governmental
regulation; accounting policies and practices; and the results of
operations and financial condition of SIR. The foregoing list of
factors is not exhaustive. Many of these issues can affect the Fund's
or SIR's actual results and could cause their actual results to differ
materially from those expressed or implied in any forward-looking
statements made by, or on behalf of, the Fund or SIR. Given these
uncertainties, readers are cautioned that forward-looking statements
are not guarantees of future performance, and should not place undue
reliance on them. The Fund and SIR expressly disclaim any obligation or
undertaking to publicly release any updates or revisions to any forward
looking statements. Forward-looking statements are based on
Management's current plans, estimates, projections, beliefs and
opinions, and the Fund and SIR do not undertake any obligation to
update forward-looking statements should assumptions related to these
plans, estimates, projections, beliefs and opinions change, except as
expressly required by applicable securities laws.
In formulating the forward-looking statements contained herein,
Management has assumed that business and economic conditions affecting
SIR's restaurants and the Fund will continue substantially in the
ordinary course, including without limitation with respect to general
industry conditions, competition, general levels of economic activity
(including in downtown Toronto), regulations (including those regarding
employees, food safety, tobacco and alcohol), weather, taxes, foreign
exchange rates and interest rates, that there will be no pandemics or
other material outbreaks of disease or safety issues affecting humans
or animals or food products, and that there will be no unplanned
material changes in its facilities, equipment, customer and employee
relations, or credit arrangements. These assumptions, although
considered reasonable by Management at the time of preparation, may
prove to be incorrect. In particular, Management has assumed that the
tax effects on distributions will remain consistent with current
regulations or pronouncements, and also in estimating the revenue for
new restaurants, Management has assumed that they will operate
consistent with other similar SIR restaurants. For more information
concerning the Fund's risks and uncertainties, please refer to the
March 28, 2013 Annual Information Form, for the period ended December
31, 2012, which is available under the Fund's profile at www.sedar.com.
All of the forward-looking statements made in this report are qualified
by these cautionary statements and other cautionary statements or
factors contained herein, and there can be no assurance that the actual
results or developments will be realized or, even if substantially
realized, that they will have the expected consequences to, or effects
on, the Fund or SIR.
SOURCE: SIR Royalty Income Fund