-- Strong growth in Pooled Revenue and Same
Store Sales following the removal of pandemic-related operating
restrictions --
BURLINGTON, ON, Aug. 11,
2022 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN)
(the "Fund") today reported its financial results for the second
quarter ("Q2 2022") and six months ("YTD 2022") ended June 30, 2022.
"The second quarter was the first full quarter in which we
operated without government-mandated restrictions since the onset
of the pandemic in March 2020. With a
return to a more normalized operating environment, our guest volume
increased significantly and we generated strong year-over-year
growth in Pooled Revenue and Same Store Sales. This positive
momentum has carried into the third quarter, as we are experiencing
a busy summer patio season," said Peter
Fowler, CEO of SIR Corp. "The Fund recently paid a special
distribution to unitholders, reflecting the excess cash available
to the Fund as SIR Corp. fulfilled its last remaining deferred
interest and royalty payment obligations in mid-June. Our team has
done a tremendous job in navigating the pandemic-related challenges
we have faced to date, and we greatly appreciate the support from
our Fund unitholders and the Fund Trustees."
Q2 2022 Summary
- Pooled Revenue increased 233.7% to $68.0
million, compared to $20.4
million in the three months ended June 30, 2021 ("Q2 2021").
- Royalty income in the SIR Royalty Limited Partnership (the
"Partnership") increased to $4.1
million, from $1.2 million in
Q2 2021.
- Equity income from the Partnership, which represents the Fund's
pro rata share of the residual distributions of the Partnership,
was $3.5 million, compared to
$0.5 million in Q2 2021.
- The Royalty Pooled Restaurants generated same store sales
growth ("SSSG")(1) of 232.7%.
- Net earnings of the Fund were $31.4
million, compared to $1.2
million in Q2 2021. As SIR continues to recover from the
effects of the pandemic and as a result of sustained and continued
improvements to the revenue associated with the SIR Rights that
were previously impaired, the Partnership recognized an impairment
reversal on the SIR Rights intangible asset of $54.2 million in Q2 2022, resulting in an
impairment recovery on the Fund's investment in the Partnership of
$29.1 million in Q2 2022.
- Distributable cash(2) totaled $3.6 million, or $0.43 (basic) and $0.42 (diluted) per Fund Unit, and cash
distributed to unitholders totaled $2.3
million, representing a payout ratio(2) of 62.8%.
The Fund's target payout ratio(2) is 100% per annum.
- The last remaining Canyon Creek® restaurant, located in
Etobicoke, Ontario near Toronto
Pearson International Airport, permanently closed effective
May 23, 2022. SIR plans to open a new
Scaddabush Italian Kitchen & Bar ("Scaddabush")® restaurant at
this location in August 2022. This
new restaurant is expected to be added to the Royalty Pooled
restaurants effective January 1,
2023.
- On June 15, 2022, SIR Corp.
("SIR") made its final scheduled payments of previously deferred
restaurant royalties to the Partnership and interest on a loan
owing to the Fund (the "SIR Loan"), enabling SIR to extinguish all
liabilities related to these deferred amounts.
- On June 16, 2022, the Fund
announced that SIR completed a ninth amending agreement (the "Ninth
Amending Agreement") to its credit agreement with its senior
lender. The Ninth Amending Agreement, among other things, extends
the maturity date of the credit agreement from July 6,
2022 to July 6, 2023, with no change in pricing, and the
financial covenants related to the credit agreement revert to the
original pre-pandemic financial covenants.
Subsequent Event
- On July 12, 2022, the Fund
declared a special cash distribution of $0.135 per unit, which was paid to unitholders of
record on July 29, 2022. The Fund's
Trustees determined that the special distribution was appropriate,
as the Fund had excess cash available to distribute due to the
repayment of previously deferred royalties and interest owed by
SIR.
Q2 2022 Financial Results Summary
($000s except
restaurants and per Unit amounts)
(unaudited)
|
|
Three-month
period ended
June 30, 2022
|
Three-month
period ended
June 30, 2021
|
Six-month
period ended
June 30, 2022
|
Six-month
period ended
June 30, 2021
|
|
|
|
|
|
|
Royalty Pooled
Restaurants
|
|
51
|
56
|
51
|
56
|
Pooled Revenue
generated by
SIR Corp.
|
|
68,016
|
20,381
|
107,133
|
35,913
|
|
|
|
|
|
|
Royalty income to
Partnership –
6% of Pooled Revenue
|
|
4,081
|
1,223
|
6,428
|
2,155
|
Recovery (impairment)
of
financial and intangible assets
|
|
55,289
|
203
|
56,036
|
(34)
|
Partnership income
allocated
to Fund
|
|
3,513
|
498
|
5,455
|
412
|
|
|
|
|
|
|
Net
earnings
|
|
31,444
|
1,232
|
32,500
|
410
|
|
|
|
|
|
|
Net Earnings per
Fund Unit
(basic)
|
|
$3.75
|
$0.15
|
$3.88
|
$0.05
|
Net Earnings per
Fund Unit
(diluted)
|
|
$3.30
|
$0.13
|
$3.44
|
$0.05
|
Pooled Revenue in Q2 2022 increased 233.7% to $68.0 million, compared to $20.4 million in Q2 2021. The higher Pooled
Revenue in Q2 2022 reflects a 232.7% increase in Same Store Sales
("SSS")(1), which was attributable to the easing of
pandemic-related operating restrictions during the first quarter of
2022 ("Q1 2022") across all provinces in which SIR restaurants are
located. As of mid-March 2022, all of
the operating restrictions impacting SIR's restaurants were
lifted.
Net earnings for Q2 2022 were $31.4
million, or $3.75 (basic) and
$3.30 (diluted) per Fund Unit,
compared to $1.2 million, or
$0.15 (basic) and $0.13 (diluted) per Fund Unit, for Q2 2021. The
increases are attributable to the significant increase in Pooled
Revenue and the reversal of the previous impairments to the Fund's
investment in the Partnership and other financial assets of
$29.6 million in Q2 2022, which had
an approximate impact on the net earnings per Fund Unit of
$3.45 (basic) and $2.99 (diluted) for the quarter.
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
June 30, 2022
|
Three-month
period ended
June 30, 2021
|
Six-month
period ended
June 30, 2022
|
Six-month
period ended
June 30, 2021
|
Cash provided by
operating activities
|
2,657
|
250
|
4,145
|
249
|
Add/(deduct):
Net change in non-cash
working
capital items
|
(166)
|
(272)
|
(301)
|
(367)
|
Net
change in income tax payable
|
(1,130)
|
(295)
|
(173)
|
(608)
|
Net change in distribution
receivable
from the Partnership
|
2,238
|
498
|
2,904
|
412
|
Distributable
cash/(shortfall)(2)
|
3,599
|
181
|
6,575
|
(314)
|
Cash distributed for
the period
|
2,261
|
-
|
4,523
|
-
|
Surplus/(shortfall) of
distributable cash(2)
|
1,338
|
181
|
2,052
|
(314)
|
Payout
ratio(2)
|
62.8 %
|
0.0 %
|
68.8 %
|
0.0 %
|
Distributable
cash/(shortfall)(2) per
Fund Unit (basic)
|
$0.43
|
$0.02
|
$0.78
|
($0.04)
|
Distributable
cash/(shortfall)(2) per
Fund Unit (diluted)
|
$0.42
|
$0.02
|
$0.76
|
($0.04)
|
Distributable cash(2) for Q2 2022 totaled
$3.6 million, or $0.43 (basic) and $0.42 (diluted) per Fund Unit, and distributions
to Unitholders totaled $2.3 million,
representing a payout ratio(2) of 62.8%. Distributable
cash(2) increased in Q2 2022 due to the easing of
pandemic-related operating restrictions compared to Q2 2021, and
the payment of previously deferred interest owed by SIR.
Same Store Sales(1)
SSS(1) for Royalty
Pooled
Restaurants
|
Three-month
period ended
June 30, 2022
|
Three-month
period ended
June 30, 2021
|
Six-month
period ended
June 30, 2022
|
Six-month
period ended
June 30, 2021
|
|
|
|
|
|
Jack
Astor's®
|
216.1 %
|
121.9 %
|
182.6 %
|
(28.0 %)
|
Scaddabush®
|
211.2 %
|
116.1 %
|
184.7 %
|
(35.9 %)
|
Canyon
Creek®
|
-
|
-
|
-
|
(96.2 %)
|
Signature
Restaurants
|
2515.5 %
|
2500.0 %
|
3551.3 %
|
(95.9 %)
|
Overall
SSS(1)
|
232.7 %
|
123.0 %
|
197.7 %
|
(35.5 %)
|
Jack Astor's SSS(1)
performance for Q2 2022 includes 37 locations. Jack Astor's accounted for approximately 75.2%
of Pooled Revenue in Q2 2022 and had SSSG(1) of 216.1%.
The increase in SSS(1) was 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 and into Q2 2021 until June 2021, when outdoor patios and dining rooms
were re-opened.
Scaddabush SSS(1) performance for Q2 2022 includes
nine locations. Scaddabush had SSSG(1) of 211.2% in Q2
2022, reflecting the easing of pandemic-related operating
restrictions.
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 for
the majority of Q2 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,
all remaining operational restrictions in the provinces where SIR
operates were lifted. SIR's management continues to navigate and
monitor the current operating environment and overall consumer
behaviour.
The new Reds Kitchen + Wine Bar Fallsview, which opened on
March 31, 2022, is expected to be
added to the Royalty Pooled Restaurants effective January 1, 2023.
A new Scaddabush restaurant located in Etobicoke, Ontario near the Toronto Pearson
International Airport was opened on August
1, 2022, and is expected to be added to the Royalty Pooled
Restaurants effective January 1,
2023.
(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 Q2
2022 MD&A, which can be accessed via the SEDAR website
(www.sedar.com).
|
Q2 2022 Interim Filings
The Fund's unaudited interim consolidated Financial Statements
and MD&A, and the Partnership's Financial Statements, for the
three and six-month periods ended June 30,
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, and Scaddabush Italian Kitchen & Bar®, with
10 locations. 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 Q2
2022 Management Discussion & Analysis, which are available
under the Fund's profile at www.sedar.com.
SOURCE SIR Royalty Income Fund