TRADING SYMBOL: TSX: AW.UN
VANCOUVER, BC, Feb. 28,
2024 /CNW/ -
- Royalty income increased by 5.3% year-over-year and 5.1% in Q4
2023.
- Royalty Pool Same Store Sales Growth(i) was +2.7%
for the year and +2.1% for Q4 2023.
FOURTH QUARTER 2023 RESULTS
A&W Revenue Royalties
Income Fund (the "Fund") and A&W Food Services of Canada Inc.
("A&W Food Services") today reported the Fund's results for the
fourth quarter ended December 31,
2023 which are expected to be filed today on SEDAR+ at
www.sedarplus.ca. The Fund will hold a conference call to discuss
the results today, Wednesday, February 28,
2024 at 1:00 p.m. Pacific Time
(4:00 p.m. Eastern Time).
The call will be webcast live and may be accessed at
https://events.q4inc.com/attendee/274908459. Participants who wish
to ask questions or are unable to join via webcast may dial-in by
calling toll-free 1-888-259-6580 or 1-416-764-8624 and by using the
conference ID 74686768 or quoting "A&W Revenue Royalties" when
prompted by the operator. For those unable to participate in the
live call, a replay will be made available for one year at
https://events.q4inc.com/attendee/274908459.
"We are pleased with the continued Royalty Pool Same Store Sales
Growth(i) in the quarter resulting in 2.7% Royalty
Pool Same Store Sales Growth(i) for the year,
particularly in comparison to very strong quarterly performance in
2022, said Susan Senecal, President
and CEO of A&W Food Services. "Food Services believes that its
mission "Together, to excite Canada's most avid burger lovers, wherever
they are, with the best tasting burgers they crave, earning even
more of their visits and making A&W restaurants even more
successful" will help it to continue to grow and better position it
to withstand the risks associated with the current economic
conditions".
Royalty income for the fourth quarter of 2023 increased by 5.1%
in Q4 2023 and 5.3% year to date, as compared to the comparable
periods in 2022. The royalty income for Q4 2023 was $17,045,000 and is based on gross sales reported
by A&W restaurants in the Royalty Pool(i) of
$568,161,000, compared to royalty
income of $16,218,000 and gross sales
reported by A&W restaurants in the Royalty Pool(i)
of $540,598,000 for the fourth
quarter of 2022. Annual royalty income was $54,962,000 based on gross sales reported by
A&W restaurants in the Royalty Pool(i) of
$1,832,069,000, compared to royalty
income of $52,181,000 and gross sales
reported by A&W restaurants in the Royalty Pool(i)
of $1,739,377,000 for 2022.
The increase in royalty income for the quarter and year to date
period was driven by Royalty Pool Same Store Sales
Growth(i), which was +2.1% for the quarter and +2.7%
year to date, and the gross sales from the 22 net new restaurants
added to the Royalty Pool on January 5,
2023. The increase in the quarter was also impacted by there
being one additional day in the fourth quarter of 2023 as compared
to the fourth quarter of 2022. Royalty Pool Same Store Sales Growth
is based on an equal number of days in the quarter and year.
The Royalty Pool Same Store Sales Growth in both the quarter and
year to date period was primarily driven by growth in average check
size due to industry-wide inflation on goods, services and labour,
a rebound in sales at shopping center and urban locations and
innovative new menu items such as the A&W Brew
Bar™.
FINANCIAL RESULTS
|
(dollars in thousands
except per unit amounts)
|
Period
from
Sep 11, 2023 to
Dec 31, 2023
|
Period from
Sep 12, 2022 to
Dec 31, 2022
|
Period
from
Jan 1, 2023 to
Dec 31, 2023
|
Period from
Jan 1, 2022 to
Dec 31, 2022
|
|
Royalty Pool Same Store
Sales Growth(i)
|
2.1 %
|
4.3 %
|
2.7 %
|
7.4 %
|
|
Number of restaurants
in the Royalty Pool
|
1,037
|
1,015
|
1,037
|
1,015
|
|
Gross sales reported by
A&W restaurants in the
Royalty Pool(i)
|
$568,161
|
$540,598
|
$1,832,069
|
$1,739,377
|
|
Royalty
income
|
$17,045
|
$16,218
|
$54,962
|
$52,181
|
|
General and
administrative expenses
|
$452
|
$476
|
$961
|
$983
|
|
Term loan and other
interest (net)
|
$332
|
$530
|
$1,204
|
$2,113
|
|
Current income tax
provision
|
$2,914
|
$2,650
|
$10,170
|
$10,471
|
|
Distributable cash
generated(ii)
|
$13,347
|
$12,562
|
$42,627
|
$38,614
|
|
Number of equivalent
units(iii)
|
20,383,114
|
19,893,414
|
20,383,114
|
19,893,414
|
|
Distributable cash per
equivalent unit(iv)
|
$0.655
|
$0.631
|
$2.091
|
$1.941
|
|
Distributions and
dividends declared per
equivalent unit(iv)
|
$0.640
|
$0.635
|
$1.920
|
$1.875
|
|
Payout
ratio(iv)
|
89.9 %
|
90.3 %
|
91.8 %
|
96.6 %
|
|
Net cash generated from
operating activities
|
$12,555
|
$13,185
|
$34,183
|
$44,264
|
|
Net
income(v)
|
$11,161
|
$11,861
|
$40,663
|
$41,389
|
|
(i) "Royalty
Pool Same Store Sales Growth" and "Gross sales reported by A&W
restaurants in the Royalty Pool" are non-IFRS supplementary
financial measures. See the "Non-IFRS Measures" section of this
news release.
|
|
(ii)
"Distributable cash generated" is a non-IFRS financial
measure. Refer to the table below for a reconciliation of this
measure to the most comparable IFRS measure and the "Non-IFRS
Measures" section of this news release.
|
|
(iii)
Equivalent units include units ("Units") and limited voting units
of the Fund (together with the Units, the "Trust Units") and common
shares of A&W Trade Marks Inc. ("Trade Marks") that are
exchangeable for Trust Units. The number of equivalent units in
2023 is calculated on a fully-diluted basis and includes the
109,332 limited partnership units (the "LP units") that are
exchangeable for 218,664 common shares of Trade Marks representing
the remaining consideration paid in December 2023 for the January
5, 2023 adjustment to the Royalty Pool. The number of equivalent
units in 2022 is calculated on a fully-diluted basis and includes
111,082 LP units, exchangeable for 222,164 common shares of Trade
Marks representing the remaining consideration paid in December
2022 for the January 5, 2022 adjustment to the Royalty
Pool.
|
|
(iv)
"Distributable cash per equivalent unit", "Distributions and
dividends declared per equivalent unit" and "Payout ratio" are
non-IFRS ratios. See the "Non-IFRS Measures" section of this news
release.
|
|
(v) Net
income includes unrealized gains and losses on interest rate swaps,
amortization of financing fees and deferred income taxes. These
non-cash items have no impact on the Fund's ability to pay
distributions to unitholders.
|
The following table provides a reconciliation of "Distributable
cash generated" to "Net cash generated from operating activities",
the most comparable IFRS measure, for the periods
indicated.
|
(dollars in
thousands)
|
Period
from
Sep 11, 2023 to
Dec 31, 2023
|
Period from
Sep 12, 2022 to
Dec 31, 2022
|
Period
from
Jan 1, 2023 to
Dec 31, 2023
|
Period from
Jan 1, 2022 to
Dec 31, 2022
|
|
Net cash generated from
operating activities
|
$12,555
|
$13,185
|
$34,183
|
$44,264
|
|
Interest
expense
|
(332)
|
(530)
|
(1,204)
|
(2,113)
|
|
Current income tax
provision
|
(2,914)
|
(2,650)
|
(10,170)
|
(10,471)
|
|
Net changes in items of
non-cash working capital
|
(632)
|
(774)
|
332
|
508
|
|
Interest
paid
|
670
|
1,332
|
1,298
|
2,763
|
|
Income tax
paid
|
4,000
|
1,999
|
18,188
|
3,663
|
|
Distributable cash
generated
|
$13,347
|
$12,562
|
$42,627
|
$38,614
|
Four monthly distributions totaling 64.0¢ per Unit were declared
in the fourth quarter of 2023 compared to four monthly
distributions totaling 63.5¢ per Unit in the fourth quarter of
2022. Twelve monthly distributions totaling $1.920 per Unit were declared in 2023 compared to
twelve monthly distributions totaling $1.875 per Unit in 2022.
The quarterly Payout ratio reported by the Fund is impacted by
seasonality of sales of the A&W restaurants and the timing of
current income taxes, which can vary by quarter, and the
distribution rate in effect at the time. The Payout
ratio(iv) for the fourth quarter of 2023 was 89.9%
compared to 90.3% for the fourth quarter of 2022. The Payout
ratio(iv) for 2023 was 91.8% compared to 96.6% for the
comparable period in 2022.
NON-IFRS MEASURES
This news release references the
following non-IFRS measures: "Gross sales reported by A&W
restaurants in the Royalty Pool", "Royalty Pool Same Store Sales
Growth", "Distributable cash generated", "Distributable cash per
equivalent unit", "Distributions and dividends declared per
equivalent unit" and "Payout ratio". The Fund believes that
disclosing these non-IFRS measures provides readers of this news
release with important information regarding the Fund's financial
performance and its ability to pay distributions to unitholders. By
considering these measures in combination with IFRS measures, the
Fund believes that readers are provided with additional and more
useful information about the Fund than readers would have if they
simply considered IFRS measures alone. The non-IFRS measures
reported by the Fund do not have a standardized meaning prescribed
by IFRS and the Fund's method of calculating these measures may
differ from those of other issuers or companies and may not be
comparable to similar measures used by other issuers or
companies.
Refer to the "Financial Results" section of this news release
for a reconciliation of Distributable cash generated to Net cash
generated from operating activities, the most comparable IFRS
measure and the "Non-IFRS Measures" section of the Fund's
management discussion and analysis ("MD&A") for the year ended
December 31, 2023, for further
details on how these measures are calculated and used to assess the
Fund's performance which are expected to be filed on SEDAR+ at
www.sedarplus.ca on February 28,
2024.
ABOUT THE FUND
The Fund is a limited purpose trust
established to invest in Trade Marks, which through its interest in
the A&W Trade Marks Limited Partnership (the "Partnership"),
owns the A&W trade-marks used in the A&W quick service
restaurant business in Canada. The
A&W trade-marks comprise some of the best-known brand names in
the Canadian foodservice industry. In return for licensing A&W
Food Services to use its trade-marks, Trade Marks (through the
Partnership) is entitled to royalties equal to 3% of the gross
sales reported by A&W restaurants in the Royalty
Pool.
The Royalty Pool is adjusted annually to reflect gross sales
from new A&W restaurants, net of the gross sales of any A&W
restaurants that have permanently closed. Additional LP units are
issued to A&W Food Services to reflect the annual adjustment.
A&W Food Services' additional LP units are exchanged for
additional common shares of Trade Marks which are exchangeable for
Trust Units. The 22nd annual adjustment to the Royalty
Pool took place on January 5, 2024 at
which time the number of restaurants in the Royalty Pool increased
from 1,037 to 1,047.
Trade Marks' dividends to A&W Food Services and the Fund,
and the Fund's distributions to unitholders are based on top-line
revenues of the A&W restaurants in the Royalty Pool, less
interest, general and administrative expenses and current income
taxes of Trade Marks.
ABOUT A&W FOOD SERVICES
A&W is the second
largest quick-service hamburger restaurant chain in Canada. Operating coast-to-coast, A&W
restaurants feature famous trade-marked menu items such as The
Burger Family®, Chubby Chicken® and A&W
Root Beer®.
|
® trademark of A&W Trade Marks
Limited Partnership, used under license.
|
Follow A&W on Facebook (www.facebook.com/AWCanada) and
Twitter @AWCanada or visit www.awincomefund.ca.
FORWARD-LOOKING INFORMATION
Certain statements in this
press release may contain forward-looking information within the
meaning of applicable securities laws in Canada ("forward-looking information"). The
words "anticipates", "believes", "budgets", "could", "estimates",
"expects", "forecasts", "intends", "may", "might", "plans",
"projects", "schedule", "should", "will", "would" and similar
expressions are often intended to identify forward-looking
information, although not all forward-looking information contains
these identifying words. Specific forward-looking statements
include statements with respect to: timing for filing the Fund's
results for the year ended December 31,
2023 on SEDAR+; the replay of the call being made available;
timing for holding the conference call; and A&W restaurants
earning return visits and becoming even more successful. The
forward-looking information is based on assumptions that management
considered reasonable at the time it was prepared, which
assumptions include: restaurant performance will continue to
improve; the Fund will receive sufficient revenue in the future (in
the form of royalty payments from A&W Food Services) to
maintain monthly distributions; the projections for the A&W
business and the Fund provided by A&W Food Services are
accurate; no material changes will occur in the quick service
restaurant burger market including as a result of changes in
consumer taste, changes in economic conditions or unemployment, or
a disease outbreak. The forward-looking information is subject to
risks, uncertainties and other factors that could cause actual
results to differ materially from the results anticipated by the
forward-looking information. Those risks and uncertainties include,
among other things, risks related to: A&W Food Services may
become liable for the lease obligations of certain of its
franchisees, if such franchisees default on their leases, and such
obligations may be significant and A&W Food Services may be
unsuccessful in seeking recovery from such franchisees, all of
which may adversely affect A&W Food Services' investments,
results of operations and financial condition; A&W Food
Services' projections may be inaccurate, and do not represent a
financial forecast and actual results may differ materially from
those anticipated by the projections; monthly distributions are not
guaranteed and may be reduced, suspended or terminated at any time;
the current sales improvement trends of the A&W restaurants in
the Royalty Pool may not continue and may slow or regress; supply
interruptions or staff shortages; and changes in economic
conditions, including economic recession or changes in the rate of
inflation or deflation, employment rates and household debt,
seasonality of sales, political uncertainty, interest rates,
currency exchange rates or derivative and commodity prices.
Additional factors which could cause results to differ from current
expectations are described in the Fund's most recent MD&A under
the heading "Risks and Uncertainties" and the Fund's Annual
Information Form under the heading "Risk Factors", available on
SEDAR+ at www.sedarplus.ca. The forward-looking information
contained in this news release represents the Fund's expectations
as of the date of this news release, and are subject to change
after this date. The Fund assumes no obligation to update or revise
any forward-looking information, except as required by applicable
law.
SOURCE A&W Revenue Royalties Income Fund