Company Reports Tenth Consecutive Quarter of Same Restaurant Sales Growth
MONTREAL, Dec. 19, 2017 /CNW Telbec/ - Imvescor Restaurant
Group Inc. ("IRG" or the "Company") (TSX: IRG), a leading franchisor of restaurants with 262 locations in
Eastern Canada, reported financial results today for the 13 and 52 weeks ended October 29, 2017 ("Q4 2017" and "fiscal 2017"). This press release should be read in conjunction
with the Company's management discussion and analysis (the "MD&A") and consolidated financial statements for fiscal 2017
which are available on the Company's website at www.imvescor.ca/investor-relations and have been posted on SEDAR at www.sedar.com.
"We are very proud of our franchisees and brand teams as they delivered another strong quarter of Same Restaurant Sales growth
of 4.9%. This represents the 10th consecutive quarter and third consecutive fiscal year of positive Same Restaurant Sales
growth. Importantly, all brands were positive for both the quarter and the fiscal year," said Frank
Hennessey, President and Chief Executive Officer of IRG. "Our franchisees' commitment to continual improvement on IRG's
four pillars of food, service, value, and ambiance has played an integral role in the execution of our turnaround strategy the
past three years."
Q4 2017 Financial and Operational Highlights
(All comparable figures are to the fourth fiscal quarter 2016 ("Q4 2016") unless otherwise specified. Note that Q1
2017 had 13 weeks compared to 14 weeks in Q1 2016 and the fiscal year highlights include variances on a normalized basis,
removing the impact of the additional week in Q1 2016.)
- For Q4 2017, all five of the Company's brands achieved Same Restaurant Sales ("SRS") growth which resulted in overall SRS
growth of 4.9% over Q4 2016 SRS growth of 0.4%, representing the tenth consecutive quarter of positive overall SRS growth for
the Company. For fiscal 2017, SRS grew 3.4% over SRS growth of 1.4% in fiscal 2016, with all five brands positively
contributing, led by Toujours Mikes, Scores and Ben & Florentine. SRS growth was fueled by an increase in guest count.
- 16 restaurants participated in the Restaurant Rejuvenation Plan (the "RRP") in Q4 2017 and 34 in fiscal 2017. Since the
inception of the RRP, 67 restaurants have participated in the RRP.
- Q4 2017 System Sales increased 12.1%, primarily from the newly acquired Ben & Florentine brand and SRS growth of 4.9%,
partially offset by a 3.6% decrease due to net restaurant closures. For fiscal 2017, System Sales increased 6.9% on a
normalized basis.
- Q4 2017 Operating EBITDA increased 26.7% mostly from the contribution of the Ben & Florentine brand and revenues earned
on the renegotiation of supplier agreements, partially offset by fewer retail promotions offered by grocers compared to Q4
2016. Operating EBITDA increased 15.1% on a normalized basis for fiscal 2017.
- Despite the increase in Operating EBITDA, results from operating activities and net earnings for Q4 2017 decreased 22.8%
and 33.7%, respectively, as a result of an additional investment in the RRP of $0.8 million,
reorganization costs of $0.5 million and $0.4 million for the
re-measurement of the contingent consideration related to the Ben & Florentine acquisition. For fiscal 2017, results from
operating activities decreased 4.3% while net earnings increased 0.3% on a normalized basis over fiscal 2016.
- In Q4 2017, the Company continued to invest in its network – $1.1 million for the
construction and renovation of company-owned restaurants and $0.2 million for signage replacement
for the Toujours Mikes brand. For fiscal 2017, the Company has invested $3.2 million for the
purchase, construction and renovation of company-owned restaurants and $0.5 million for signage
replacement.
- Free Cash Flow decreased 3.1% from Q4 2016 and 24.9% on a normalized basis over fiscal 2016. The decrease is mainly
attributed to the increased investment in corporate restaurants and signage, partly offset by lower income taxes paid. Free
Cash Flow was also impacted by the timing of cash payments and receipts and changes in inventory levels which were impacted by
the acquisition of Ben & Florentine, the timing of payments received from suppliers and retailers, the construction and
renovation of company-owned restaurants, turnkey operations and the timing of payments related to retail promotional
activities, advertising campaigns, and sales taxes.
Capital Allocation
On January 13, 2016, the board of directors of the Company (the "Board") approved an increase of
12.5% in the Company's quarterly cash dividend payable under the Company's dividend policy from $0.02 to $0.0225 per common share. The dividend policy has been designed to allow
sufficient flexibility to continue investing in the Company's growth and its franchise network, while providing returns to its
shareholders. The Company also renewed its normal course issuer bid, which allows for the repurchase and cancellation of up to
3,024,297 common shares during the period commencing January 20, 2017 and ending no later than
January 19, 2018, representing approximately 5% of the 60,485,954 common shares outstanding as at
the close of market on January 9, 2017.
Dividend Declaration
Pursuant to its previously announced dividend policy, the Board today declared a dividend of $0.0225 per common share. The quarterly cash dividend will be paid on January 19,
2018 to shareholders of record as of the close of business on January 5, 2018.
The declaration and payment of any future dividend remains at the discretion of the Board and will depend on the Company's
current and anticipated cash requirements and surplus, capital expenditures requirements, regulatory restrictions, financial
results, future prospects, current and future contractual restrictions, such as restrictions under credit or other arrangements,
the satisfaction of solvency tests imposed by the Canada Business Corporations Act for the declaration of dividends and other
factors deemed relevant by the Board. Any dividend policy established by the Board, including the Company's current dividend
policy, can be changed at any time and is not binding on the Company. There can be no guarantee that the Company will maintain
its current dividend policy or any dividend policy or that any dividend will be declared or paid. Furthermore, the definitive
combination agreement with MTY Foods Group Inc. ("MTY") referred to under the Updates Subsequent to Quarter End section of this
press release, requires that the payment of any further dividend be approved by MTY.
Updates Subsequent to Quarter End
On December 12, 2017, the Company announced that it had entered into a definitive combination
agreement with MTY under which a wholly owned subsidiary of MTY will acquire all of the outstanding IRG common shares (the
"Shares") for $4.10 per IRG Share, representing a total consideration of approximately $248 million and a premium of 13.3% to IRG shareholders based on an unaffected 10-day volume weighted average
price of the common shares of IRG on October 26, 2017, subject to customary closing conditions
including receipt of regulatory and IRG shareholder approvals (the "Transaction"). Under the terms of the Transaction, IRG
shareholders will receive approximately $50 million in cash and the remainder in common shares of
MTY, equivalent to $0.8259 in cash and 0.0626 common share of MTY for each IRG Share held, such
that the aggregate consideration paid to IRG shareholders will consist of approximately 20% in cash and approximately 80% in MTY
common shares. In connection with the Transaction, approximately 3.8 million common shares of MTY will be issued based on a
reference price of $52.26 consisting of the 10-day volume weighted average price of the common
shares of MTY on December 8, 2017, will represent a pro forma ownership of approximately 15% of the
outstanding common shares of MTY upon closing of the Transaction. At which time, IRG will also have one nominee on MTY's Board of
Directors. The Transaction offers IRG's Canadian shareholders the opportunity to participate in the combined upside by rolling
over their common shares in a tax deferred manner. The combination of MTY and IRG will create a multi-brand industry leader with
a portfolio of over 5,700 stores under 75 brands and approximately $2.9 billion in System Sales
with significant runway for growth. Please see IRG's press release dated December 12, 2017
for details on the Transaction. There is no assurance the Transaction will be completed as described above or at all, or that the
anticipated closing date will materialize.
On January 31, 2018, Tania Clarke, Chief Financial Officer
("CFO"), will be leaving the Company to pursue another opportunity. The Board wants to thank Ms. Clarke for all of her efforts
these past three years in helping the Company pursue its goals.
On November 30, 2017, consistent with the Company's desire to focus on its core business of
restaurant franchising, the Company's wholly owned subsidiary, Groupe Commensal Inc., completed the sale of substantially all of
its assets related to the manufacturing of Commensal products for an aggregate sum of approximately $4.25
million, subject to customary purchase price adjustments. Commensal has been presented as a discontinued operation.
Q4 2017 Selected Financial Data
|
|
|
|
|
|
(in thousands of dollars, where applicable)
|
Q4
|
Fiscal
|
|
|
|
|
|
|
|
|
October 29,
2017
|
October 30,
2016
|
Δ%
|
October 29,
2017
|
October 30,
2016
|
Δ%
|
Number of weeks
|
13
|
13
|
|
52
|
53
|
|
|
|
|
|
|
|
|
System Sales (i)
|
$ 106,643
|
$ 95,116
|
12.1%
|
$ 407,247
|
$ 387,877
|
5.0%
|
SRS (i)
|
4.9%
|
0.4%
|
4.5%
|
3.4%
|
1.4%
|
2.0%
|
Restaurant operating weeks
|
3,354
|
2,847
|
17.8%
|
12,678
|
11,762
|
7.8%
|
Restaurant count
|
|
|
|
|
|
|
Total
|
|
|
|
262
|
223
|
17.5%
|
Company-owned
|
|
|
|
8
|
5
|
60.0%
|
Consolidated results:
|
|
|
|
|
|
|
Revenues
|
12,801
|
9,670
|
32.4%
|
50,005
|
45,546
|
9.8%
|
Operating expenses
|
9,695
|
5,648
|
71.7%
|
35,186
|
29,643
|
18.7%
|
Results from operating activities
|
3,106
|
4,022
|
-22.8%
|
14,819
|
15,903
|
-6.8%
|
EBITDA (i)
|
3,560
|
4,087
|
-12.9%
|
16,910
|
16,824
|
0.5%
|
Restaurant rejuvenation plan expense
|
1,173
|
347
|
238.0%
|
2,099
|
917
|
128.9%
|
Operating EBITDA (i)
|
5,407
|
4,266
|
26.7%
|
19,478
|
17,221
|
13.1%
|
% of System Sales
|
5.1%
|
4.5%
|
0.6%
|
4.8%
|
4.4%
|
0.4%
|
Profit from discontinued operations, net of tax
|
156
|
66
|
136.4%
|
756
|
252
|
200.0%
|
Net earnings and comprehensive income
|
2,096
|
3,163
|
-33.7%
|
11,242
|
11,400
|
-1.4%
|
Net earnings as a % of revenues
|
16.4%
|
32.7%
|
-16.3%
|
22.5%
|
25.0%
|
-2.5%
|
EPS:
|
|
|
|
|
|
|
Basic
|
0.04
|
0.06
|
-33.3%
|
0.19
|
0.21
|
-9.5%
|
Diluted
|
0.03
|
0.06
|
-50.0%
|
0.18
|
0.20
|
-10.0%
|
Cash flow:
|
|
|
|
|
|
|
Free Cash Flow (i)
|
4,683
|
4,833
|
-3.1%
|
10,260
|
13,911
|
-26.2%
|
Dividends paid
|
1,363
|
1,279
|
6.6%
|
5,450
|
5,034
|
8.3%
|
|
|
|
|
|
|
|
Cash
|
|
|
|
3,737
|
2,896
|
29.0%
|
Adjusted Working Capital (i)
|
|
|
|
551
|
7,210
|
-92.4%
|
Total debt
|
|
|
|
15,500
|
-
|
100.0%
|
|
|
|
|
|
|
|
(i)
|
System Sales and SRS are key performance metrics. EBITDA, Operating EBITDA,
Free Cash Flow, and Adjusted Working Capital are non-IFRS measures. Refer to the "Key Performance Metrics and Non-IFRS
Measures" section of this press release for the respective definition of such terms.
|
Conference Call Details
Frank Hennessey, President and Chief Executive Officer, and Tania M.
Clarke, Chief Financial Officer will host a conference call to discuss Q4 and fiscal 2017 results on Wednesday, December 20, 2017 at 8:30 am (ET). To access the conference call by
telephone, dial 1-888-231-8191 (Toll-Free), 514-807-9895 (Montreal) or 647-427-7450
(Toronto).
A live audio webcast of the conference call will be available at http://www.imvescor.ca/investor-relations. A recording of the
conference call will be archived for replay by telephone until Wednesday, December 27, 2017 at
midnight. To access the archived conference call, dial 1-855-859-2056 (Toll-Free), 514-807-9274 (Montreal) or 416-849-0833 (Toronto) and enter the reservation number
5966979.
About Imvescor Restaurant Group Inc. Imvescor Restaurant Group Inc. is a dynamic and innovative organization in the
family and casual dining restaurant industry. The Company is a franchise and licensing business that operates restaurants in
Eastern Canada under five banners: Bâton Rouge®, operating in Québec, Ontario and Nova Scotia in the casual dining segment, Pizza
Delight®, operating primarily in Atlantic Canada, in the family/mid-scale segment,
Scores® and Toujours Mikes, operating primarily in Québec in the family and casual dining segments and the take-out and/or
delivery segments, and Ben & Florentine®, operating primarily in Québec, with individual stores in Ontario and Manitoba, in the breakfast and lunch industry. The Company also
licenses to third parties the right to manufacture and sell prepared food products under the Bâton Rouge®, Pizza
Delight®, Scores® and Toujours Mikes brands.
This press release refers to trademarks, such as Pizza Delight®, Toujours Mikes, Scores®, Bâton Rouge® and Ben &
Florentine®, which are protected under applicable intellectual property laws and are the property of the Company or of one of its
subsidiaries. Solely for convenience, such trademarks and tradenames referred to in this press release may appear without the ®
or ™ symbol, but such references are not intended to indicate, in any way, that the owner of any such trademarks will not assert,
to the fullest extent under applicable law, its rights to these trademarks and tradenames.
Key Performance Metrics and Non-IFRS Measures: The information contained in this press release includes some measures
that are not performance measures consistent with International Financial Reporting Standards ("IFRS"). The key
performance metrics and non-IFRS measures include measures that are not recognized measures under IFRS and do not have a
standardized meaning prescribed by IFRS. Because the measures included in the key performance metrics and the non-IFRS measures
do not have standardized meanings prescribed by IFRS, they may not be comparable with similar measures presented by other
issuers.
Key Performance Metrics
"System Sales" is the aggregate sales achieved by all "Pizza Delight", "Toujours Mikes", "Scores", "Bâton Rouge" and "Ben
& Florentine" restaurants, whether they are company-owned restaurants or franchised restaurants. System Sales include
sales from existing locations as well as new restaurants. This performance measure indicates the Company's overall growth and
reflects the direct impact of restaurant openings and closures. The Company's franchisee and supplier royalty revenues vary
directly with the level of System Sales in its franchisee restaurant network.
"Net New Restaurants" represents the aggregate number of restaurant openings net of restaurant closures.
"Normalized System Sales" is defined as System Sales less the sales from the additional week of operations in the first
quarter of fiscal 2016.
"Same Restaurant Sales" or "SRS" or "SRS growth" is a metric used in the restaurant industry to compare sales earned in
established locations over a certain period of time, such as a fiscal quarter, for a given period against sales in the same
period in the previous fiscal year. SRS growth provides the portion of System Sales growth that is from established locations
rather than from the opening of Net New Restaurants. The Company defines SRS as sales generated by company-owned and franchised
restaurants that have been open for at least one year compared to the sales from the same group of restaurants in the comparable
period.
Non-IFRS Measures
The Company uses non-IFRS measures to complement IFRS measures, to provide investors with supplemental information of its
operating performance and to provide further understanding of the Company's results of operations from management's perspective.
The Company also believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in
the evaluation of issuers. Non-IFRS measures should not be considered in isolation nor as a substitute for an analysis of the
Company's financial information reported under IFRS. The definition and rationale for the use of each non-IFRS measure used by
the Company in this press release is as follows:
"EBITDA" is defined as earnings or loss before interest income, interest expense, depreciation and amortization and income tax
expense. The Company believes this measure is used by investors to compare and value companies in the Company's industry. The
Company uses EBITDA because the measure enables management to assess the Company's operational performance and is a financial
indicator of the Company's ability to service and incur debt. The most comparable IFRS financial measure is results from
operating activities. Refer to the "Reconciliations of Non-IFRS Measures" section of the MD&A for more details.
"Operating EBITDA" is defined as EBITDA adjusted for the following items: impairment or impairment reversal of non-current
assets, impairment or impairment reversal of IRG rights, gains or losses on sale of property, plant and equipment, change in
onerous contract provisions, change in fair value of contingent consideration, costs of special committee, shareholder proposal
costs, impairment of goodwill, bargain purchase gains, reorganization costs, Restaurant Rejuvenation Plan expenses, acquisition
and disposition costs, gains or losses on derivative financial liability and earnings or losses from discontinued operations. The
Company excludes these items because they affect the comparability of the Company's financial results from period to period and
could potentially distort the analysis of trends in the performance of its business. Excluding these items does not imply they
are non-recurring. The definition of Operating EBITDA can change from time to time to account for unusual items or items not
considered to be consistent with the Company's normal recurring operations. The Company uses this measure and believes it is
useful to investors because it can facilitate period-to-period comparisons as it excludes items which, amongst other things, do
not necessarily arise as part of the Company's day-to-day operations or are not reflective of the Company's underlying business
operations. The most comparable IFRS financial measure is results from operating activities. Refer to the "Reconciliations of
Non-IFRS Measures" section of the MD&A for more details.
"Free Cash Flow" is calculated as cash flows from operating activities less cash used for the purchase of property, plant and
equipment and intangible assets. The Company believes this measure is used by investors to value businesses and their underlying
assets and to evaluate their financial strength and performance. The Company uses Free Cash Flow because it enables management to
assess the Company's ability to generate cash and profits. The most comparable IFRS financial measure is cash flows from
operating activities and investing activities. Refer to the "Reconciliations of Non-IFRS Measures" section of the MD&A for
more details.
"Adjusted Revenues" is calculated as revenues less restaurant construction sales related to the Company's turnkey operations
and sale of manufactured goods related to the manufacture of certain Toujours Mikes licensed retail products on a temporary
basis. The Company believes this measure is useful to investors since it facilitates period-to-period comparability by excluding
the new revenue stream earned on the transfer of turnkey franchised restaurants and revenues earned in the first three quarters
of fiscal 2016 from the temporary manufacturing of certain Toujours Mikes licensed retail products. The most comparable IFRS
financial measure is revenues. Refer to the "Reconciliations of Non-IFRS Measures" section of the MD&A for more details.
"Adjusted Working Capital" is calculated as current assets less current liabilities excluding the gift card liability and the
current portion of long term debt. The Company believes this measure is used by investors to assess the Company's ability to pay
its liabilities as they come due by excluding liabilities that are classified as current but not expected to be repaid in the
next 12 months. The most comparable IFRS financial measure is current assets less current liabilities. Refer to the "Liquidity
and Capital Resources" section of the MD&A for more details.
These non-IFRS measures should not be considered by an investor as alternatives to earnings, indicators of operating
performance or cash flows, or as measures of liquidity. Refer to the "Reconciliations of Non-IFRS Measures section of the
MD&A" for more details.
Cautionary Note Regarding Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of applicable securities laws, including but not
limited to, IRG's business objectives, estimates, outlook, strategies and priorities and all other statements other than
statements of historical facts. Forward-looking statements may include estimates, intentions, plans, expectations, opinions,
forecasts, projections, guidance or other statements that are not statements of fact. Forward-looking statements are often, but
not always, identified by the use of words such as "may", "should", "would", "will", "expect", "plan", "anticipate", "believe",
"estimate", "predict", "potential, "targeting", "intend", "could", "might", "continue", "outlook" or the negative of these terms
or other comparable terminology. All such forward-looking statements are made pursuant to the "safe harbour" provisions of
applicable securities laws.
Forward-looking statements involve known and unknown risks, uncertainties and other factors outside of the Company's control.
A number of factors could cause the actual results of the Company to differ materially from the results discussed in the
forward-looking statements, including, but not limited to: risks associated with the acquisition of Ben & Florentine, risks
associated with quality control, food borne illnesses and health concerns, the Company's reliance on suppliers and availability
and quality of raw materials, the Company's ability to retain certain key personnel, the Company's ability to respond to various
competitive factors affecting its operations, franchise development and growth of the retail licensing opportunities, changes in
consumer preferences, the Company's retail products dependence on the strength of the Company's restaurant brands, the protection
of the Company's intellectual property and brand, the success of the RRP, the Company's dependence on its franchisees' ability to
generate revenues and pay franchise fees and other amounts to the Company, changes in the Company's relationships with its
franchisees, the Company's ability to open new restaurants, the closure of restaurants, the impact of an increase in
company-owned restaurants, the Company's ability to renew leases and limit lease exposure, negative publicity and its impact on
the Company's reputation, compliance with regulations governing confidentiality and privacy of guest information, potential
litigation and other complaints, compliance with government regulations, the Company's dependence on third parties, changes in
laws concerning employees, changes in the Company's relationships with its employees, the Company's ability to ensure workplace
health and safety, franchise regulations, compliance with regulations governing alcoholic beverages, environmental risks and
regulations, public safety issues, the Company's dependence on technology, underreporting of sales by franchisees, inherent risks
associated with internal control over financial reporting, the indebtedness of the Company and the restrictive covenants to which
it is subject, the impact of sales tax upon System Sales, payment of dividends, the impact of seasonality and other factors on
quarterly operating results, uninsured losses or claims that the Company believes are not economically reasonable to insure,
changes in commodity prices and other factors referenced in the Company's Annual Information Form and the Company's other
continuous disclosure filings which are available on SEDAR at www.sedar.com. These factors are not intended to represent an exhaustive list of the factors that could adversely
affect the Company and its results but should, however, be considered carefully.
Risks and uncertainties inherent in the nature of the Transaction include without limitation the failure to receive all
required approvals and consents including regulatory, Toronto Stock Exchange, shareholder and any other approvals or to otherwise
fulfill all of the conditions precedent to the Transaction, in a timely manner, or at all; significant transaction costs or
unknown liabilities; failure to realize the expected benefits of the Transaction; and general economic conditions. Failure to
receive all required approvals and consents including regulatory, Toronto Stock Exchange, shareholder and any other approvals or
to otherwise fulfill all of the conditions precedent to the Transaction may result in the Transaction not being completed on the
proposed terms, or at all. There can be no assurance that the anticipated strategic benefits and operational, competitive and
cost synergies resulting from the Transaction will be realized. Furthermore, the failure of IRG to comply with the terms of the
Agreement may, in certain circumstances, result in IRG being required to pay a fee to MTY, the result of which could have a
material adverse effect on IRG's financial position and results of operations and its ability to fund growth prospects and
current operations.
Further, although the forward-looking statements contained herein are based on information currently available to the
Company's management and on the current intentions, plans, expectations, estimates, opinions, forecasts, projections and other
assumptions made by the Company's management in light of its experience and perception of historical trends, current conditions
and expected future developments (such as the Company's future growth, results of operations, performance and opportunities as
well as the future of the economic environment in which it operates), as well as other factors that the Company's management
believes are appropriate and reasonable in the circumstances and on the date of this press release, there can be no assurance
that such intentions, plans, expectations, estimates, opinions, forecasts, projections and other assumptions will prove to be
correct or that actual results will not differ materially from those anticipated in such forward-looking statements. Unless
otherwise noted or the context indicates, forward-looking statements in this press release speak only as of the date of this
press release.
Forward-looking statements are provided herein for the purpose of assisting the Company's security holders, investors and
others in understanding its current strategic priorities, expectations and plans, as well as its financial position and results
of operations as at and for the periods ended on the date presented. Readers are cautioned, however, that such information may
not be appropriate for other purposes and should not place undue reliance on the forward-looking statements contained in this
press release. The Company assumes no obligation to update or revise such forward-looking statements to reflect new information,
future events or otherwise, except as required by applicable securities laws. Except as otherwise indicated, forward-looking
statements do not reflect the potential impact of any non-recurring or other special items or of any transactions that may be
announced or that may occur after the date of this press release. The financial impact of these transactions and non-recurring
and other special items can be complex and depends on the facts particular to each of them. The Company therefore cannot describe
the expected impact in a meaningful way or in the same way it presents known risks affecting its business. The Company's
forward-looking statements are expressly qualified in their entirety by this cautionary statement.
SOURCE Imvescor Restaurant Group Inc.
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