BURLINGTON, ON, Nov. 7, 2013 /CNW/ - SIR Royalty Income Fund (TSX:
SRV.UN) (the "Fund") today reported its financial results for the
three-month ("Q3 2013") and nine-month ("YTD 2013") periods ended
September 30, 2013. All comparisons in the following summary of the
Fund's Q3 2013 financial results are to the corresponding period in the
prior fiscal year ("Q3 2012"). Percentage calculations are based on the
numbers in the financial statements and may not correspond to rounded
figures presented in this release.
Q3 2013 Summary
-
Net earnings for the Fund increased to $1.9 million, or $0.28 per Fund
unit, in Q3 2013, from $1.5 million, or $0.27 per Fund unit, in Q3
2012;
-
Pooled Revenue increased 9.9% to $59.4 million as the result of the four
additional Royalty Pooled Restaurants and Same Store Sales Growth
(SSSG)(1) over the corresponding period in the prior fiscal year;
-
SSSG(1) for Royalty Pooled Restaurants was 0.6% in Q3 2013;
-
Distributable cash(2) per Fund unit (basic and diluted) totalled $0.28, and cash distributed
to unitholders in the quarter totalled $0.28, representing a payout
ratio(2) of 100.3%;
-
During Q3 2013, SIR Corp. ("SIR") began testing a variant of the Alice
Fazooli's concept called Scaddabush at the Alice Fazooli's Square One
location in Mississauga, Ontario.
"SIR is committed to building value for Fund unitholders through
investment in our existing restaurants, a constant focus on exceeding
the expectations of our guests, and as market conditions permit,
opening new restaurants in targeted markets," said Peter Fowler,
President and CEO of SIR Corp. "To date in 2013, we have opened four
new restaurants in Ontario, including three new Jack Astor's in
Kitchener, Toronto and Pickering, and our new REDs Midtown Tavern at
the Aura Condominium in downtown Toronto, each of which will be added
to the Fund's Royalty Pooled Restaurants in January 2014. Our Signature
Group restaurants achieved 26.3% same store sales growth this quarter,
driven primarily by the strong performance of our recently renovated
and repositioned Reds Wine Tavern and The Loose Moose."
"We remain focused on initiatives to drive performance, including brand
innovation and new restaurant openings," continued Mr. Fowler. "During
the third quarter, we tested a new concept called Scaddabush Italian
Kitchen and Bar at our Square One, Mississauga Alice Fazooli's
location. Scaddabush offers our guests a new, refreshing take on
Italian dining, and guest response to-date has been very positive. We
are now planning the opening of our second Scaddabush Italian Kitchen
and Bar at the Aura Condominium, along with our new Signature brand
Duke's Refresher and Bar. We look forward to updating our unitholders
on these exciting new developments as we advance our plans."
Financial Results
($000s except restaurants and per Unit amounts)
(unaudited)
|
|
Three-month
period ended
Sept. 30, 2013
|
|
Three-month
period ended
Sept. 30, 2012
|
|
Nine-month
period ended
Sept. 30, 2013
|
|
Nine-month
period ended
Sept. 30, 2012
|
|
|
|
|
|
|
|
|
|
Royalty Pooled Restaurants
|
|
49
|
|
47
|
|
49
|
|
47
|
Pooled Revenue generated by SIR
|
|
59,353
|
|
54,017
|
|
176,907
|
|
161,427
|
|
|
|
|
|
|
|
|
|
Royalty income to Partnership - 6% of Pooled Revenue
|
|
3,561
|
|
3,241
|
|
10,614
|
|
9,686
|
Make-Whole Payment(4)
|
|
-
|
|
93
|
|
-
|
|
245
|
Partnership other income
|
|
11
|
|
9
|
|
31
|
|
29
|
Partnership expenses
|
|
(32)
|
|
(21)
|
|
(81)
|
|
(57)
|
Partnership earnings
|
|
3,540
|
|
3,322
|
|
10,564
|
|
9,903
|
SIR Corp.'s interest
(Class A, B, and C GP Units)
|
|
(1,591)
|
|
(1,987)
|
|
(5,011)
|
|
(5,922)
|
Partnership income allocated to Fund
|
|
1,949
|
|
1,335
|
|
5,553
|
|
3,981
|
Interest income
|
|
750
|
|
750
|
|
2,250
|
|
2,250
|
|
|
|
|
|
|
|
|
|
Total income of the Fund
|
|
2,699
|
|
2,085
|
|
7,803
|
|
6,231
|
General & administrative expenses
|
|
(94)
|
|
(82)
|
|
(318)
|
|
(289)
|
|
|
|
|
|
|
|
|
|
Net earnings before income taxes of the Fund
|
|
2,605
|
|
2,003
|
|
7,485
|
|
5,942
|
Income tax expense
|
|
(693)
|
|
(531)
|
|
(2,101)
|
|
(1,595)
|
|
|
|
|
|
|
|
|
|
Net earnings for the period
|
|
1,912
|
|
1,472
|
|
5,384
|
|
4,347
|
|
|
|
|
|
|
|
|
|
Earnings per Fund Unit
(basic and diluted)
|
|
$0.28
|
|
$0.27
|
|
$0.82
|
|
$0.81
|
|
|
|
|
|
|
|
Pooled Revenue increased 9.9% to $59.4 million in Q3 2013, up from $54.0
million in Q3 2012. As at September 30, 2013, there were 49
restaurants included in Royalty Pooled Restaurants, compared to 47
restaurants included in Royalty Pooled Restaurants as at September 30,
2012.
The Fund's net earnings for Q3 2013 totalled $1.9 million, or $0.28 per
Fund Unit (basic and diluted), compared with $1.5 million, or $0.27 per
Fund Unit (basic and diluted) for Q3 2012.
Distributable cash(2) for Q3 2013 totalled $1.9 million or $0.28 per Fund Unit (basic and diluted), and distributions to
Unitholders totalled $1.9 million, representing a payout ratio(2) of 100.3% 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 Q3 2013, is 98.9%.
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
Sept. 30, 2013
|
|
Three-month
period ended
Sept. 30, 2012
|
|
Nine-month
period ended
Sept. 30, 2013
|
|
Nine-month
period ended
Sept. 30, 2012
|
Cash provided by operating activities
|
|
|
2,676
|
|
1,313
|
|
6,312
|
|
2,446
|
Add/(deduct):
|
|
|
|
|
|
|
|
|
|
|
Net change in non-cash working capital items
|
|
|
(96)
|
|
(83)
|
|
(320)
|
|
(943)
|
|
Net change in income tax payable
|
|
|
(679)
|
|
16
|
|
(941)
|
|
2,189
|
|
Net change in distribution receivable from the Partnership
|
|
|
24
|
|
237
|
|
465
|
|
687
|
Distributable cash(2)
|
|
|
1,925
|
|
1,483
|
|
5,516
|
|
4,379
|
Cash distributed for the period
|
|
|
1,931
|
|
1,414
|
|
5,692(3)
|
|
4,109
|
Surplus/(shortfall) of distributable cash(2)
|
|
|
(6)
|
|
69
|
|
(176)
|
|
270
|
Payout ratio(2)
|
|
|
100.3%
|
|
95.4%
|
|
103.2%(3)
|
|
93.8%
|
Distributable cash(2) per Fund Unit
(basic and diluted)
|
|
|
$0.28
|
|
$0.28
|
|
$0.84
|
|
$0.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Sales (SSS)(1)
|
|
|
|
|
|
|
|
|
SSSG(1) for Royalty
Pooled Restaurants
|
|
Three-month
period ended
Sept. 30, 2013
|
|
Three-month
period ended
Sept. 30, 2012
|
|
Nine-month
period ended
Sept. 30, 2013
|
|
Nine-month
period ended
Sept. 30, 2012
|
|
|
|
|
|
|
|
|
|
Jack Astor's®
|
|
(0.3%)
|
|
4.2%
|
|
1.0%
|
|
6.4%
|
Canyon Creek®
|
|
(1.1%)
|
|
1.5%
|
|
(3.4%)
|
|
0.1%
|
Alice Fazooli's®/ScaddabushTM
|
|
(7.4%)
|
|
(6.0%)
|
|
(9.4%)
|
|
(3.7%)
|
Signature Restaurants
|
|
26.3%
|
|
(12.4%)
|
|
18.2%
|
|
(6.7%)
|
Overall SSSG(1)
|
|
0.6%
|
|
2.1%
|
|
0.9%
|
|
3.8%
|
|
|
|
|
|
|
|
|
Jack Astor's, which accounted for approximately 78% of Pooled Revenue in
Q3 2013, reported a Same Store Sales decline (SSS)(1) of 0.3% in Q3 2013. The Signature Restaurants generated SSSG(1) of 26.3% in Q3 2013, led by strong contributions from the fully
renovated and repositioned Reds Wine Tavern and the recently renovated
Loose Moose Tap & Grill. Canyon Creek and Alice Fazooli's reported
declines in SSS(1) of 1.1% and 7.4%, respectively, in Q3 2013. During Q3, SIR closed the
Alice Fazooli's Square One location in Mississauga, Ontario for
renovations lasting 9 days and re-opened the restaurant as Scaddabush.
Scaddabush offers guests a new, refreshing take on Italian dining.
SIR's Management is committed to enhancing the performance of all
Concept and Signature restaurant brands and will continue to build
value for Fund unitholders through new restaurant openings and
renovations, as market conditions permit.
Corporate Developments
Year-to-date in 2013, SIR has opened four new restaurants in Ontario.
In Q1 2013, SIR opened a new Jack Astor's in Kitchener; in Q2 2013, SIR
opened two new Jack Astor's, one in north Toronto and one in
Pickering. Subsequent to Q3 2013, SIR opened a new Signature
restaurant, REDS Midtown Tavern, at the site of the new Aura
condominium development in Toronto. These four new 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.
SIR has plans to build five new restaurants, one of which, Duke's
Refresher, is expected to open in late 2013. The new Duke's Refresher
will be located at the site of the Aura condominium development at
Yonge and Gerrard in Toronto, Ontario. The remaining four new
restaurants are planned to open in 2014 and 2015 and include three new
Jack Astor's and one new Scaddabush. One of the new Jack Astor's
restaurants is planned for St. John's, Newfoundland, a market SIR
believes has significant upside due to its rapid economic growth,
coupled with its attractive location in the heart of the waterfront.
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
nine-month periods ended September 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 nine-month periods ended September 30, 2013,
which can be accessed via the SEDAR website (www.sedar.com).
(3) Cash distributed to Unitholders for the nine-month period ended
September 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 nine-month period ended
September 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 is a privately held Canadian corporation that owns and operates a
portfolio of 55 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, Reds® Midtown Tavern, Far
Niente®/FOUR®/Petit Four®, and The Loose Moose®. 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 Bake House™ and Duke's Refresher™, that are not
currently part of the Royalty pool. For more information on SIR Corp.
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