-- Strong growth in Pooled Revenue and Same
Store Sales reflects gradual return to full operating capacity
during the quarter --
BURLINGTON, ON, May 12, 2022
/CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) (the "Fund") today
reported its financial results for the first quarter ended
March 31, 2022 ("Q1 2022").
"During March 2022, all of the
remaining government restrictions impacting our restaurant
operations were lifted. We are now at full operating capacity at
all locations, and we are pleased that guest volume is increasing
as we all collectively learn to live with COVID-19," said
Peter Fowler, CEO of SIR Corp. "Our
first quarter performance was impacted by the Omicron variant,
which resulted in a temporary increase in restrictions that
affected us early in the quarter. However, our business gained
momentum over the course of the period as restrictions were eased.
We welcome the return to a more normalized operating environment
and look forward to a busy patio season in the months ahead."
Q1 2022 Summary
- Pooled Revenue increased 152.0% to $39.1
million, compared to $15.5
million in the three months ended March 31, 2021 ("Q1 2021").
- Royalty income in the SIR Royalty Limited Partnership (the
"Partnership") increased to $2.3
million, from $0.9 million in
Q1 2021.
- Equity income (loss) from the Partnership, which represents the
Fund's pro rata share of the residual distributions of the
Partnership, was $1.9 million,
compared to $(0.1) million in Q1
2021.
- The Royalty Pooled Restaurants generated same store sales
growth ("SSSG")(1) of 154.1%.
- Distributable cash(2) totaled $3.0 million, or $0.36 (basic) and $0.34 (diluted) per Fund Unit, and cash
distributed to unitholders totaled $2.3
million, representing a payout ratio(2) of 76.0%.
The Fund's target payout ratio(2) is 100% per annum.
- Five closed restaurants were removed from the Royalty Pooled
Restaurants (the "Royalty Pool") effective January 1, 2022.
- On January 28, 2022, the Fund
announced that its independent Trustees provided approval to SIR
Corp. ("SIR") to operate Renegade Chicken take-out and delivery
services on a trial basis out of certain Jack Astor's locations in Ontario. SIR intends to extend the current
trial until August 28, 2022, in
exchange for continuing to pay 6% of the revenues arising therefrom
to the Partnership.
- On February 9, 2022, the Fund
announced that SIR is converting its Canyon Creek® location at
the Fallsview Casino Resort in Niagara
Falls, Ontario, into a new Reds®. The new Reds Kitchen
+ Wine Bar Fallsview opened on March 31,
2022. This former Canyon Creek location was a Royalty Pooled
Restaurant, but it has not been in operation since the onset of the
pandemic in mid-March 2020. In
accordance with the License and Royalty Agreement between SIR and
the Partnership, this former Canyon Creek location is treated as a
permanently closed restaurant, and the new Reds will become a
Royalty Pooled Restaurant effective January
1, 2023.
Subsequent Event
- SIR advised the Fund that the last remaining Canyon Creek
restaurant, located in Etobicoke,
Ontario near Toronto Pearson International Airport, will
permanently close effective May 23,
2022. SIR plans to open a new Scaddabush® restaurant at this
location in August 2022.
Q1 2022 Financial Results Summary
($000s except
restaurants and per Unit amounts)
(unaudited)
|
|
Three-month
period
ended
Mar. 31,
2022
|
Three-month
period
ended
Mar. 31,
2021
|
|
|
|
|
Royalty Pooled
Restaurants
|
|
50
|
56
|
Pooled Revenue
generated by
SIR Corp.
|
|
39,148
|
15,532
|
|
|
|
|
Royalty income to
Partnership –
6% of Pooled Revenue
|
|
2,348
|
932
|
Partnership income
(loss)
allocated to Fund
|
|
1,942
|
(86)
|
|
|
|
|
Net earnings
(loss)
|
|
1,055
|
(822)
|
Net Earnings (loss)
per Fund
Unit (basic)
|
|
$0.13
|
$(0.10)
|
Net Earnings (loss)
per Fund
Unit (diluted)
|
|
$0.13
|
$(0.10)
|
Pooled Revenue in Q1 2022 increased 152.0% to $39.1 million, compared to $15.5 million in Q1 2021. The higher Pooled
Revenue in Q1 2022 reflects a 154.1% increase in Same Store Sales
("SSS")(1), which was attributable to the easing of
pandemic-related operating restrictions during Q1 2022 in the
markets in which SIR restaurants are located.
Net earnings were $1.1 million, or
$0.13 (basic and diluted) per Fund
Unit, for Q1 2022 compared to a net loss of $0.8 million, or $0.10 (basic and diluted) per Fund Unit, for Q1
2021. The positive variances reflect the significant increase in
Pooled Revenue in Q1 2022.
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 ratio2)
|
Three-month
period
ended
Mar. 31,
2022
|
Three-month
period ended
Mar. 31,
2021
|
Cash provided (used) by
operating
activities
|
1,488
|
-
|
Add/(deduct):
Net change in non-cash
working
capital items
|
(135)
|
(95)
|
Net
change in income tax payable
|
957
|
(312)
|
Net change in distribution
receivable
from the Partnership
|
666
|
(86)
|
Distributable
cash/(shortfall)(2)
|
2,976
|
(493)
|
Cash distributed for
the period
|
2,261
|
-
|
Surplus/(shortfall) of
distributable cash(2)
|
715
|
(493)
|
Payout
ratio(2)
|
76.0%
|
0.0%
|
Distributable
cash/(shortfall)(2) per Fund Unit
(basic)
|
$0.36
|
($0.06)
|
Distributable
cash/(shortfall)(2) per Fund Unit
(diluted)
|
$0.34
|
($0.06)
|
Distributable cash(2) for Q1 2022 totaled
$3.0 million, or $0.36 (basic) and $0.34 (diluted) per Fund Unit, and distributions
to Unitholders totaled $2.3 million,
representing a payout ratio(2) of 76.0%. Distributable
cash(2) has increased due to the Partnership continuing
to receive royalty payments in addition to the Fund's receipt of
the monthly repayments of previously deferred interest on the SIR
loan.
Same Store Sales(1)
SSS(1) for Royalty
Pooled
Restaurants
|
Three-month
period ended
Mar. 31,
2022
|
Three-month
period ended
Mar. 31,
2021
|
|
|
|
Jack
Astor's®
|
139.3%
|
(63.1%)
|
Scaddabush®
|
149.2%
|
(67.5%)
|
Canyon
Creek®
|
N/A
|
(100.0%)
|
Signature Restaurants
|
N/A
|
(100.0%)
|
Overall
SSS(1)
|
154.1%
|
(67.9%)
|
Jack Astor's SSS(1)
performance for Q1 2022 includes 37 locations. Jack Astor's accounted for approximately 75.8%
of Pooled Revenue in Q1 2022 and had SSSG(1) of 139.3%.
The increase in SSS(1) is primarily due to the
easing of pandemic-related operating restrictions during Q1 2022.
Bar and restaurant operating restrictions and/or closures were in
effect throughout Q1 2021.
Scaddabush Italian Kitchen & Bar ("Scaddabush")
SSS(1) performance for Q1 2022 includes nine locations.
Scaddabush had SSSG(1) of 149.2% in Q1 2022, reflecting
the easing of pandemic-related operating restrictions.
Canyon Creek SSS(1) performance for Q1 2022 includes
one restaurant in Etobicoke,
Ontario. SIR suspended operations at this location on
March 16, 2020 and then re-opened it
during the second half of 2021. This restaurant will be permanently
closed effective May 23, 2022 and is
expected to reopen as a Scaddabush location in August 2022.
The Signature Restaurants SSS(1) performance for Q1
2022 includes three restaurants (Reds Wine Tavern, Reds Square One
and the Loose Moose Tap + Grill). The growth in SSS(1)
is due to the Signature Restaurants gradual return to full
operating capacity in Q1 2022 after being closed in Q1 2021.
Outlook
Since the onset of the pandemic in March
2020 through to mid-February
2022, restaurants and bars across Canada experienced a series of government
mandated operating capacity restrictions and/or full restaurant
closures. As of mid-February 2022,
the restaurant and bar industry has been trending positively due to
increased vaccination rates and the easing of government
restrictions. As of mid-March 2022,
this positive trend continued with the lifting of all remaining
operational restrictions. SIR's management continues to navigate
and monitor the current operating environment and overall consumer
behaviour.
During Q1 2022, SIR converted its Canyon Creek location at the
Fallsview Casino Resort in Niagara Falls,
Ontario, into a new Reds. The new Reds Kitchen + Wine Bar
Fallsview opened on March 31, 2022.
The new Reds Kitchen + Wine Bar Fallsview is expected to become a
new Royalty Pooled Restaurant effective January 1, 2023.
SIR advised the Fund that the last remaining Canyon Creek
restaurant, located in Etobicoke,
Ontario near the Toronto Pearson International Airport, will
permanently close effective May 23,
2022. A new Scaddabush restaurant is expected to open at
this location in August 2022 and it
is expected to be added to the Royalty Pool on January 1, 2023.
Given the uncertainty surrounding the pandemic and the potential
of future government mandated operating capacity restrictions
and/or restaurant closures and the related impact to SIR, which the
Fund is dependent on for cash flow, the Fund's ability to continue
as a going concern for the next 12 to 18 months involves
significant judgement. Please refer to "Going Concern" disclosure
in Note 1 to the Fund's consolidated financial statements for the
year ended December 31, 2021, as well
as page 16 of Fund's Q1 2022 Management Discussion & Analysis
("MD&A") for further information.
(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 2022 and 2021. SSSG is the percentage increase in SSS
over the prior year comparable period.
(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
Q1 2022 MD&A, which can be accessed via the SEDAR website
(www.sedar.com).
Q1 2022 Interim Filings
The Fund's unaudited interim consolidated Financial Statements
and MD&A, and the Partnership's Financial Statements, for the
Q1 2022 are available via the SEDAR website at
www.sedar.com and SIR's website at www.sircorp.com.
About SIR Corp.
SIR Corp. ("SIR") is a privately held
Canadian corporation that owns a portfolio of 53 restaurants in
Canada. SIR's Concept brands
include: Jack Astor's Bar and
Grill®, with 37 locations; Scaddabush Italian Kitchen & Bar®
with nine locations; and Canyon Creek®, with one location. SIR also
operates one-of-a-kind "Signature" brands including Reds® Wine
Tavern, Reds® Square One, Reds® Kitchen + Wine
Bar Fallsview 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. SIR also owns one Duke's Refresher® & Bar location
in downtown Toronto, and one
seasonal Signature restaurant, Abbey's Bakehouse®, which are
currently not in consideration to be 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", "should", "would", 'could", "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 the 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: the impact of the
COVID-19 pandemic; market conditions at the time of this filing;
competition; changes in demographic trends; weather; changing
consumer preferences and discretionary spending patterns; changes
in consumer confidence; changes in national and local business and
economic conditions; pandemics or other material outbreaks of
disease or safety issues affecting humans or animals or food
products; the ability to maintain staffing levels; the impact
of inflation, including on input prices and wages; the impact of
the crisis in the Ukraine; changes
in tariffs and international trade; changes in foreign exchange and
interest rates; 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, including the cost and/or
availability of labour as it relates to changes in minimum wage
rates or other changes to labour legislation and forced closures of
or other limits placed on restaurants and bars; laws
affecting the sale and use of alcohol (including availability and
enforcement); changes in cannabis laws; changes in environmental
laws; privacy matters; accounting policies and practices; changes
in tax laws; 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. There can be no assurance that SIR
will remain compliant in the future with all of its financial
covenants under the Credit Agreement and imposed by the lender.
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
disclose or 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, SIR Management has assumed that it will be successful in
dealing with the effects of the COVID-19 pandemic and that business
and economic conditions affecting SIR's restaurants and the Fund
will return to normalcy within the medium term.
All of the forward-looking statements made herein 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.
For more information concerning the Fund's risks and
uncertainties, please refer to the March 22,
2022 Annual Information Form, for the period ended
December 31, 2021, and the Fund's
Management Discussion & Analysis for Q1 2022, which are
available under the Fund's profile at www.sedar.com.
SOURCE SIR Royalty Income Fund