BURLINGTON, ON, June 22,
2022 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN)
(the "Fund") today announced that SIR Corp. ("SIR" or the
"Company"), the operating entity from which the Fund's equity
income is ultimately derived, has filed its financial results for
the 12-week and 36-week periods ended May 8,
2022 ("Q3 2022" and "YTD 2022", respectively). SIR's
unaudited interim consolidated financial statements and
management's discussion & analysis ("MD&A") for Q3 2022 /
YTD 2022 can be accessed via the Fund's profile on the SEDAR
website at www.sedar.com under "Other", or the SIR website at
www.sircorp.com/sir-royalty-income-fund/financial-reports.
Q3 2022 Business Update
- The state of the restaurant and bar industry trended positively
during Q3 2022 due to increased COVID-19 vaccination rates and the
easing of government-mandated operating restrictions. As of
mid-March 2022, all of the remaining
indoor dining operating restrictions in each of the provinces where
SIR operates were lifted.
- Food and beverage revenue from corporate restaurant operations
increased to $56.5 million in Q3
2022, compared to $16.3 million in
the 12-week period ended May 9, 2021
("Q3 2021").
- Consolidated Same Store Sales ("SSS")¹ increased 246.5% in Q3
2022.
- SIR began offering Renegade Chicken takeout and delivery
services again on a trial basis as of January 27, 2022. The services were initially
offered out of 21 Jack Astor's® locations in Ontario, with two additional Jack Astor's locations added to the trial as of
February 16, 2022. SIR agreed to pay
an amount equal to 6% of the revenues earned to the SIR Royalty
Limited Partnership (the "Partnership"). The trial was initially
scheduled to continue until March 31,
2022, at SIR's option. Effective March 29, 2022, SIR opted to extend the trial
until August 28, 2022, but reduce the
number of Jack Astor's locations
supporting the trial to eight locations. In exchange, SIR will
continue to pay 6% of the revenues arising therefrom to the
Partnership. The Trustees of the Fund are supportive of the
continuation of the trial.
- On March 31, 2022, SIR opened the
new Reds® Kitchen + Wine Bar Fallsview at the Fallsview Casino
Resort in Niagara Falls, Ontario.
The new Reds replaced a former Canyon Creek® restaurant at this
location, which had 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 will be treated
as a permanently closed restaurant and the new Reds Kitchen + Wine
Bar Fallsview will become a new Royalty Pooled Restaurant effective
January 1, 2023.
Subsequent Events
- The last remaining Canyon Creek restaurant, located in
Etobicoke, Ontario in close
proximity to Pearson International Airport, was permanently closed
effective May 23, 2022. SIR plans to
open a new Scaddabush® restaurant at this location in August 2022, which is expected to be added to the
Royalty Pooled Restaurants effective January
1, 2023.
- SIR made its final scheduled deferral payment of royalties
owing to the Partnership and interest on the SIR Loan owing to the
Fund on June 15, 2022.
Amendment to Credit Agreement
On June 16, 2022, SIR and its
Lender entered into the Ninth Amending Agreement ("Ninth
Amendment") to its Credit Agreement, and the Fund and the
Partnership entered into an acknowledgement agreement with the
Lender. The Ninth Amendment 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.
Results of Operations Summary
SIR has advised the Fund that food and beverage revenue from
corporate restaurant operations for Q3 2022 increased to
$56.5 million, compared to
$16.3 million in Q3 2021. Food and
beverage revenue from corporate restaurant operations for YTD 2022
increased to $133.8 million, compared
to $57.8 million in the 36-week
period ended May 9, 2021 ("YTD
2021"). The increases in Q3 2022 and YTD 2022 were primarily
attributable to same store sales growth ("SSSG")¹ due to a
decline in pandemic-related operating restrictions in the markets
in which SIR restaurants are located.
Same Store
Sales1 by Segment
|
12-Week
Period Ended
May 8,
2022
|
12-Week
Period Ended
May 9,
2021
|
Variance
|
36-Week
Period Ended
May 8,
2022
|
36-Week
Period Ended
May 9,
2021
|
Variance
|
|
(in thousands of
dollars) (unaudited)
|
Jack
Astor's®
|
41,691
|
13,075
|
218.9 %
|
98,327
|
45,098
|
118.0 %
|
Scaddabush®
|
10,365
|
3,068
|
237.8 %
|
25,662
|
10,666
|
140.6 %
|
Canyon
Creek®
|
510
|
-
|
N/A
|
1,262
|
117
|
978.6 %
|
Signature
Restaurants
|
3,724
|
103
|
3515.5 %
|
8,262
|
718
|
1050.7 %
|
Same Store
Sales1
|
56,290
|
16,246
|
246.5 %
|
133,513
|
56,599
|
135.9 %
|
SSS¹ performance includes all SIR restaurants, except for those
restaurants that were not open for the entire comparable periods in
Fiscal 2022 and Fiscal 2021, and the Abbey's Bakehouse retail
outlet as it is not a SIR restaurant. The following restaurants are
excluded from SSS¹ performance:
- the former (now closed) Canyon Creek locations in Mississauga, Scarborough, Vaughan and Niagara
Falls, Ontario; and
- the former (now closed) Reds Midtown Tavern, Scaddabush and
Dukes Refresher locations at Yonge and Gerrard in downtown
Toronto.
Net loss and comprehensive loss was $1.6
million for Q3 2022, compared to a net loss and
comprehensive loss of $19.4 million
for Q3 2021. Net loss and comprehensive loss was $50.8 million for YTD 2022, compared to a net
loss and comprehensive loss of $33.4
million for YTD 2021. The variances reflect changes in the
amortized cost of the Ordinary LP Units and Class A Units of the
Partnership that SIR holds. This resulted in expenses of
$9.4 million and $60.2 million in Q3 2022 and YTD 2022,
respectively, compared to expenses of $14.4
million and $25.3 million in
Q3 2021 and YTD 2021, respectively. These non-cash changes in Q3
2022 and YTD 2022 are due to increases in the underlying unit price
of the Fund compared to the end of the second quarter of Fiscal
2022 and the end of the fourth quarter of Fiscal 2021,
respectively.
Adjusted Net Earnings² were $7.8
million in Q3 2022, compared to an Adjusted Net Loss² of
$5.0 million in Q3 2021. Adjusted Net
Earnings² for YTD 2022 were $9.5
million, compared to an Adjusted Net Loss² of $8.1 million in YTD 2021.
Liquidity and Capital Resources
As at May 8, 2022, SIR had cash
and equivalents of $3.1 million,
compared to $9.6 million as at
August 29, 2021. As at May 8, 2022, SIR had drawn $27.6 million against the $47.7 million maximum borrowing under the
Company's credit facility.
Outlook
SIR expects to drive future sales growth through a combination
of measured new restaurant growth and investments in its existing
restaurants over the long term.
The easing of restaurant and bar operating restrictions by
provincial governments across Canada is supporting improved sales
performance at SIR restaurants. However, the potential risk of
future restaurant closures and/or operating restrictions, could
adversely impact future sales at SIR restaurants. SIR's management
continues to navigate and monitor the current operating environment
and overall consumer behaviour.
Reconciliation of Adjusted Net Earnings²
The following table reconciles net earnings (loss) and
comprehensive income (loss) for the 12-week and 36-week
periods ended May 8, 2022 and
May 9, 2021, respectively, to
Adjusted Net Earnings (Loss)²:
|
12-Week
Period Ended
May 8,
2022
|
12-Week
Period Ended
May 9,
2021
|
36-Week
Period Ended
May 8,
2022
|
36-Week
Period Ended
May 9,
2021
|
|
(in thousands of
dollars) (unaudited)
|
Net loss and
comprehensive loss for the period
|
(1,581)
|
(19,353)
|
(50,752)
|
(33,396)
|
Change in amortized
cost of Ordinary LP Units and Class A
LP Units of the Partnership
|
9,398
|
14,383
|
60,215
|
25,288
|
Adjusted Net
Earnings (Loss)2
|
7,817
|
(4,970)
|
9,463
|
(8,108)
|
About SIR Corp.
SIR Corp. ("SIR") is a privately held Canadian corporation
that owns a portfolio of 52 restaurants in Canada. SIR's Concept brands include:
Jack Astor's Bar and Grill®, with 37
locations; and Scaddabush Italian Kitchen & Bar® with nine
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
locations 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.
(1) Same store sales ("SSS") and same store sales growth
("SSSG") are non-GAAP financial measures and do not have
standardized meanings prescribed by International Financial
Reporting Standards ("IFRS"). However, SIR believes that SSS and
SSSG are useful measures and provide investors with an indication
of the change in year-over-year sales. SIR'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. SSSG is the percentage increase in SSS over the
prior comparable period. SSS includes revenue from all SIR
restaurants except for those restaurants that were not open for the
entire comparable period and Abbey's Bakehouse in Muskoka,
Ontario as it is not a SIR
Restaurant. When a SIR Restaurant is closed, the revenue for the
closed restaurant is excluded from the calculation of SSS and SSSG
for both the quarter in which the restaurant is closed and the
current year-to-date.
(2) Adjusted Net Earnings (Loss) is calculated by removing
the change in amortized cost of the Ordinary LP Units and Class A
LP Units of the Partnership from the net earnings (loss) for the
period. Adjusted Net Earnings (Loss) is a non-GAAP financial
measure and does not have a standardized meaning prescribed by
IFRS. Management believes that in addition to net earnings (loss),
Adjusted Net Earnings (Loss) is a useful supplemental measure to
evaluate SIR's performance. Changes in the amortized cost of the
Ordinary LP Units and Class A LP Units of the Partnership is a
non-cash transaction and varies with changes in the market price of
the Fund units. The exclusion of the change in amortized cost of
the Ordinary LP Units and Class A LP Units of the Partnership
eliminates this non-cash impact. Management cautions investors that
Adjusted Net Earnings (Loss) should not replace net earnings or
loss or cash flows from operating, investing and financing
activities (as determined in accordance with IFRS), as an indicator
of SIR's performance. SIR's method of calculating Adjusted Net
Earnings (Loss) may differ from the methods used by other issuers.
Please refer to the reconciliations of net earnings (loss) to
Adjusted Net Earnings (Loss) for Q3 2022 and YTD 2022 provided in
this news release.
Caution concerning forward-looking information
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 short to medium term. For more
information concerning risks and uncertainties, please refer to the
Fund's March 22, 2022 Annual
Information Form, for the period ended December 31, 2021, and the Fund's most recent
interim filings, which are available under the Fund's profile at
www.sedar.com.
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.
See 'Risk Factors' in the Fund's Annual Information Form dated
March 22, 2022 for the period ended
December 31, 2021.
SOURCE SIR Royalty Income Fund