Diversified Royalty Corp. (TSX: DIV and DIV.DB) (the
“Corporation” or “DIV”) is pleased to announce preliminary results
for Mr. Lube, AIR MILES®, Sutton and Mr. Mikes for the three months
ended September 30, 2019 (“Q3 2019”).
Mr. Lube Third Quarter Results
Mr. Lube Canada Limited Partnership (“Mr. Lube”)
generated same-store-sales-growth (“SSSG”) of 5.9% for the Mr. Lube
stores in the royalty pool for Q3 2019, compared to SSSG of 1.6%
for the three months ended September 30, 2018 (“Q3 2018”). Mr. Lube
generated SSSG of 4.8% for the nine months ended September 30, 2019
compared to SSSG of 3.0% for the nine months ended September 30,
2018. Mr. Lube’s SSSG was driven by continued growth in all aspects
of the business, including oil services, tire sales and service
across Canada.
DIV expects to report that aggregate royalty
income and management fees of $4.1 million were generated from Mr.
Lube in Q3 2019, an increase of $0.3 million from Q3 2018. The
growth in royalty income was driven by the addition of four Mr.
Lube locations to the Mr. Lube royalty pool on May 1, 2019,
positive SSSG, the increase in the Mr. Lube royalty rate on May 1,
2018, and the net addition of one Mr. Lube location to the Mr. Lube
royalty pool on May 1, 2018.
AIR MILES® Third Quarter Results
Alliance Data Systems Inc. (“ADS”) issued a news
release earlier today announcing that AIR MILES® reward miles
issued decreased by 1% in Q3 2019 primarily due to decreased
promotional activity. ADS also disclosed that AIR MILES® reward
miles redeemed were flat in Q3 2019.
DIV expects to report that royalty income of
$1.9 million was generated from the AIR MILES® licenses in Q3 2019,
an increase of 1.5% compared to Q3 2018. DIV’s royalty payment is
derived from several AIR MILES metrics, including AIR MILES reward
miles issued, AIR MILES reward miles redeemed, service revenue,
commissions and promotional items, which affect quarterly
variability.
Sutton Third Quarter Results
DIV expects to report that royalty income and
management fees of $1.0 million were generated from Sutton Group
Realty Services Ltd. (“Sutton”) in Q3 2019, representing a 2.0%
increase over Q3 2018.
Mr. Mikes Third Quarter Results
DIV expects to report that royalty income and
management fees of $1.0 million were generated from Mr. Mikes
Restaurants Corporation (“Mr. Mikes”) in Q3 2019. The royalty
income from Mr. Mikes grows at a fixed rate of 2.0% per annum until
March 31, 2023 and thereafter fluctuates based on the SSSG of the
Mr. Mikes locations in the Royalty Pool.
Third Quarter Commentary
Sean Morrison, President and Chief Executive
Officer of DIV stated, “Mr. Lube continues to deliver strong
operating results, and has opened five new Mr. Lube locations in
2019. Sutton and Mr. Mikes are performing as expected, and we are
encouraged by the positive trends in the AIR MILES® royalty. DIV’s
weighted average portfolio SSSG for Q3 2019 was 3.9%.”
Mr. Morrison continued, “With available cash of
over $45 million, we remain focused on pursuing accretive royalty
transactions.”
The financial information contained in this news
release is preliminary, is based upon the estimates and assumptions
of the respective management of DIV, Mr. Lube, Sutton, and Mr.
Mikes as applicable, has not yet been approved by their respective
Audit Committees or Boards of Directors, and has not been subject
to a review by their respective auditors. The final Q3 2019
financial results could differ materially from the above
preliminary financial information.
About Diversified Royalty Corp.
DIV is a multi-royalty corporation, engaged in
the business of acquiring top-line royalties from well-managed
multi-location businesses and franchisors in North America. DIV’s
objective is to acquire predictable, growing royalty streams from a
diverse group of multi-location businesses and franchisors.
DIV currently owns the Sutton, Mr. Lube, AIR
MILES® and Mr. Mikes trademarks in Canada. Sutton is among the
leading residential real estate brokerage franchisor businesses in
Canada with over 200 offices across Canada. Mr. Lube is the leading
quick lube service business in Canada with 182 locations across
Canada and over $235 million of annual system sales. AIR MILES® is
Canada’s largest coalition loyalty program with over 200 leading
brand-name sponsors; approximately two-thirds of Canadian
households actively participate in the AIR MILES® Program. Mr.
Mikes operates 43 casual steakhouse restaurants primarily in
western Canadian communities with over $85 million of annual system
sales.
DIV expects to increase cash flow per share by
making accretive royalty purchases and through the growth of
purchased royalties. DIV expects to pay a predictable and stable
dividend to shareholders and increase the dividend as cash flow per
share increases allow.
Forward-Looking Statements
Certain statements contained in this news
release may constitute “forward-looking information” or “financial
outlook” within the meaning of applicable securities laws that
involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements to
be materially different from any future results, performance or
achievements expressed or implied by such forward-looking
information or financial outlook. The use of any of the words
“anticipate”, “continue”, “estimate”, “expect”, “intend”, “may”,
“will”, ”project”, “should”, “believe”, “confident”, “plan” and
“intends” and similar expressions are intended to identify
forward-looking information and financial outlook, although not all
forward-looking information and financial outlook contain these
identifying words. Specifically, forward-looking information and
financial outlook in this news release include, but are not limited
to, statements made in relation to: the expected financial results
of Mr. Lube, Sutton and Mr. Mikes for the three and nine months
ended September 30, 2019, as applicable, and the amount of royalty
income expected to be reported by DIV as having been generated from
the AIR MILES® licenses during such periods; DIV pursuing accretive
royalty transactions; DIV’s ability to pay a predictable and stable
dividend to shareholders; and DIV’s corporate objectives. These
statements involve known and unknown risks, uncertainties and other
factors that may cause actual results or events, performance, or
achievements of DIV to differ materially from those anticipated or
implied by such forward-looking information and financial outlook.
DIV believes that the expectations reflected in the forward-looking
information and financial outlook included in this news release are
reasonable but no assurance can be given that these expectations
will prove to be correct. In particular there can be no assurance
that: the final financial results of Mr. Lube, Sutton and Mr. Mikes
will be consistent with the preliminary results; LoyaltyOne’s
performance in 2019 may not be consistent with current
expectations]; an increase in AIR MILES® reward miles issued or
redeemed will guarantee an increase in royalty income earned by
DIV, as the royalty payments made to DIV under the AIR MILES®
licences are derived from several AIR MILES® metrics and not solely
based on the number of AIR MILES® reward miles issued or redeemed;
DIV will be successful in identifying or completing any royalty
acquisition opportunities, and if completed that such acquisitions
will be accretive; DIV will be able to make monthly dividend
payments to the holders of its common shares; or DIV will achieve
any of its corporate objectives. Given these uncertainties, readers
are cautioned that forward-looking information and financial
outlook included in this news release are not guarantees of future
performance, and such forward-looking information and financial
outlook should not be unduly relied upon. More information
about the risks and uncertainties affecting DIV’s business and the
businesses of its royalty partners can be found in the “Risk
Factors” section of its Annual Information Form dated March 11,
2019, and the “Risk Factors” section of its management’s discussion
and analysis for the three and nine months ended September 30, 2019
that are available under DIV’s profile on SEDAR at
www.sedar.com.
In formulating the forward-looking information
and financial outlook contained herein, management has assumed that
business and economic conditions affecting DIV and its royalty
partners will continue substantially in the ordinary course,
including without limitation with respect to general industry
conditions, general levels of economic activity and regulations.
These assumptions, although considered reasonable by management at
the time of preparation, may prove to be incorrect.
To the extent any forward-looking information or
statements in this news release constitute a “financial outlook”
within the meaning of applicable securities laws, such information
is being provided to investors to ensure they receive timely
disclosure of material financial information with respect to the
financial performance of the Corporation and its royalty partners
prior to the completion of year end audits.
All of the forward-looking information and
financial outlook in this news release is 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 contemplated thereby will be realized or,
even if substantially realized, that they will have the expected
consequences to, or effects on, DIV contemplated thereby. The
forward-looking information and financial outlook included in this
news release is made as of the date of this news release and DIV
assumes no obligation to publicly update or revise such information
to reflect new events or circumstances, except as may be required
by applicable law.
Non-IFRS Financial Measures
Management believes that disclosing certain
non-IFRS financial measures provides readers with important
information regarding the Corporation’s financial performance and
its ability to pay dividends. By considering these measures in
combination with the most closely comparable IFRS measure,
management believes that investors are provided with additional and
more useful information about the Corporation than investors would
have if they simply considered IFRS measures alone. The non-IFRS
financial measures do not have standardized meanings prescribed by
IFRS and therefore are unlikely to be comparable to similar
measures presented by other issuers. Investors are cautioned that
non-IFRS measures should not be construed as a substitute or an
alternative to cash flows from operating activities as determined
in accordance with IFRS.
“Same Store Sales Growth” or “SSSG” is used as a
non-IFRS measure in this news release. Further details with respect
to this non-IFRS measure will be included in the Corporation’s
management’s discussion and analysis for the three and nine months
ended September 30, 2019 once filed.
The weighted average portfolio SSSG is
calculated based on the SSSG for Mr. Lube for Q3 2019, the 2.0%
contractual royalty rate increase for each of Sutton and Mr. Mikes,
and the percentage increase in royalty income from AIR MILES, in
each case, weighted in proportion to the respective royalty income
generated from such royalty partner as compared to DIV’s gross
royalty income generated from all of its royalty partners.
Third Party Information
This news release includes information obtained
from third party company filings and reports and other publicly
available sources. Although DIV believes these sources to be
generally reliable, such information cannot be verified with
complete certainty. Accordingly, the accuracy and completeness of
this information is not guaranteed. DIV has not independently
verified any of the information from third party sources referred
to in this news release nor ascertained the underlying assumptions
relied upon by such sources.
THE TORONTO STOCK EXCHANGE HAS NOT
REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR THE
ACCURACY OF THIS RELEASE.
Additional Information
Additional information relating to the
Corporation and other public filings, is available on SEDAR at
www.sedar.com.
Contact:Sean Morrison, President and Chief
Executive OfficerDiversified Royalty Corp. (604) 235-3146
Greg Gutmanis, Chief Financial Officer and VP
Acquisitions Diversified Royalty Corp. (604) 235-3146
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