SIR Royalty Income Fund Reports 2018 Third Quarter Results
SIR Royalty Income Fund Reports 2018 Third Quarter Results |
[12-November-2018] |
BURLINGTON, ON, Nov. 12, 2018 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) (the "Fund") today reported its financial results for the three-month ("Q3 2018") and nine-month ("YTD 2018") periods ended September 30, 2018. Percentage calculations are based on the numbers in the financial statements and may not correspond to rounded figures presented in this release. Q3 2018 Highlights
"Following two separate increases to the Fund's unitholder distributions since April 2018, monthly distributions are now 10.5% higher than they were at the start of the year," said Peter Fowler, CEO of SIR Corp. "This reflects strong revenue growth from the restaurants in our Royalty Pool, driven by our successful ongoing Jack Astor's® renovation program and the continued solid performance of our Scaddabush brand. Looking ahead, we will continue to focus on driving pooled revenue and same store sales growth through renovations of additional Jack Astor's restaurants. The Fund will also benefit from the addition of a new Scaddabush restaurant and Reds restaurant to the Royalty Pool in January 2019." Financial Results
Pooled Revenue increased 6.3% to $79.3 million in Q3 2018, compared to $74.6 million in Q3 2017. The increase resulted from overall SSSG(3) of 0.6% and the addition of three new Scaddabush restaurants to Royalty Pooled Restaurants on January 1, 2018. The increase in Pooled Revenue was partially offset by the closure of the Canyon Creek® restaurant in Etobicoke, Ontario in Q4 2017. Net earnings for Q3 2018 reflect the adoption of IFRS 9 on January 1, 2018. Under IFRS 9, the Fund is obligated to recognize the SIR Loan at fair value, with differences between the fair value and the carrying value being recorded in the statement of earnings. This resulted in a non-cash fair value adjustment to the statement of earnings in Q3 2018 that resulted in an increase in net earnings of $1.7 million. Accordingly, the Fund's net earnings were $4.5 million, or $0.50 per Fund unit (diluted), for Q3 2018 compared to $2.6 million, or $0.31 per Fund unit (based and diluted), in Q3 2017. Adjusted Net Earnings(1) for Q3 2018 were $2.8 million, or $0.34 per Fund unit. Distributable cash(2) for Q3 2018 totaled $2.9 million, or $0.34 per Fund unit (basic and diluted), and distributions to Unitholders totaled $2.6 million, representing a payout ratio(2) of 89.4%. Distributable cash(2) for Q3 2017 totaled $2.6 million, or $0.31 per Fund unit (basic and diluted), and distributions to Unitholders totaled $2.4 million, representing a payout ratio(2) of 92.0%. The decreased payout ratio(2) in Q3 2018 is primarily the result of an increase in distributable cash(2) compared to Q3 2017, partially offset by the Fund's increased monthly unitholder distributions. The monthly unitholder distributions have been increased by 10.5% during YTD 2018, with an increase from $0.095 per unit to $0.10 per unit effective for the Fund's monthly cash distribution paid in April 2018, and an increase from $0.10 per unit to $0.105 per unit effective for the Fund's monthly cash distribution paid in September 2018. Since the Fund's inception in October 2004, up to and including Q3 2018, the Fund has generated $106.6 million in cumulative distributable cash(2) and has paid cumulative cash distributions of $105.3 million, representing a cumulative payout ratio(2) (the ratio of cumulative cash distributions paid since inception to cumulative distributable cash(2) generated) of 98.7%. Distributable Cash(2)
Same Store Sales ("SSS") (3)
Jack Astor's, which accounted for approximately 73% of Pooled Revenue in Q3 2018, generated SSSG(3) of 1.3% in the quarter, reflecting the improved sales performance at certain locations that were renovated in 2016 and 2017. Beverage sales increased at certain renovated locations as SIR implemented an enhanced beverage program as part of its renovation program. Jack Astor's SSS(3) performance in Q3 2018 was also positively impacted by the launch of take-out and delivery services with SkipTheDishes, Canada's leading food delivery company, at the majority of Jack Astor's locations. During Q3 2018, SIR completed a renovation at the Jack Astor's location in Kanata, Ontario. This location was closed for a total of 10 days during the quarter, compared to the closure of one Jack Astor's restaurant in Q3 2017 for nine days. Canyon Creek had a decline in SSS(3) of 3.5% in Q3 2018. SIR's management is actively considering options to update the Canyon Creek portfolio to improve performance. Scaddabush SSS(3) performance for Q3 2018 includes four locations (Richmond Hill, Mississauga, and Scarborough, Ontario, and Yonge and Gerrard in downtown Toronto). The new Scaddabush locations in Oakville, Vaughan and Etobicoke, Ontario and on Front Street in downtown Toronto are excluded from the calculation of SSS(3) as they were not open for the entire comparable periods in 2018 and 2017. The 1.1% increase in SSS(3) for Scaddabush in Q3 2018 compares to Q3 2017 when Scaddabush generated exceptional SSSG(3) of 15.7%. The downtown Toronto Signature Restaurants had a decline in SSS(3) of 4.4% in Q3 2018, which was primarily attributable to lower sales at the Loose Moose due to lower event attendance at nearby sporting and entertainment venues in the quarter, along with increased competition, compared to Q3 2017. SSS(3) performance for the Signature Restaurants does not include the new Reds restaurant at the Square One shopping centre in Mississauga, Ontario ("Reds Square One") which opened during Q4 2017. Outlook On November 22, 2017, the Ontario government passed legislation that increased Ontario's general minimum wage on January 1, 2018 and was expected to raise it again on January 1, 2019, followed by annual increases at the rate of inflation. However, a new government was elected in Ontario on June 7, 2018. The new government introduced legislation on October 23, 2018 that cancels the expected minimum wage increase on January 1, 2019 and freezes the minimum wage at $14 an hour until 2020, at which point annual increases tied to the rate of inflation are expected to restart. SIR's Management continues to monitor proposed changes to the minimum wage, as these changes materially impact the cost of hourly labour in the majority of SIR's restaurants. In support of driving growth in Royalty Pooled Revenue and/or SSS(3):
The Fund's consolidated unaudited Financial Statements and MD&A, and the Partnership's Financial Statements, for the three and nine-month periods ended September 30, 2018, are available via the SEDAR website at www.sedar.com and SIR's website at www.sircorp.com. (1) Adjusted Net Earnings (Loss) is calculated by replacing the change in estimated fair value of the SIR Loan as reported in the statement of earnings with the interest received on the SIR Loan during the period and the corresponding deferred tax expense or recovery from the net earnings for the period. Adjusted Earnings per Fund unit represents the portion of net earnings adjusted for the change in estimated fair value of the SIR Loan and the deferred tax expense or recovery for the period allocated to each outstanding Fund unit. Adjusted Net Earnings (Loss) and Adjusted Earnings per Fund unit are non-GAAP financial measures and do not have a standardized meaning prescribed by IFRS. Management believes that in addition to net earnings (loss), Adjusted Net Earnings (Loss) and Adjusted Earnings per Fund unit are useful supplemental measures to evaluate the Fund's performance. The change in estimated fair value of the SIR Loan is a non-cash fair value transaction resulting from the adoption of IFRS 9 on January 1, 2018 and varies with changes in a discount rate that fluctuates based on current market interest rates adjusted for SIR's credit risk. The replacement of the non-cash change in estimated fair value of the SIR Loan with the interest received, and the corresponding deferred tax amount, 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 the Fund's performance. The Fund'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) for the period to Adjusted Net Earnings in the Fund's MD&A for the three-month and nine-month periods ended September 30, 2018. (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 MD&A for the quarter ended September 30, 2018, which can be accessed via the SEDAR website (www.sedar.com). (3) 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 fiscal 2018 and fiscal 2017. SSSG is the percentage increase in SSS over the prior comparable period. About SIR Corp. About SIR Royalty Income Fund Caution concerning forward-looking statements In formulating the forward-looking statements contained herein, Management has assumed that business and economic conditions affecting SIR's restaurants and the Fund will continue substantially in the ordinary course, including without limitation with respect to general industry conditions, competition, general levels of economic activity (including in downtown Toronto), regulations (including those regarding employees, food safety, tobacco and alcohol), weather, taxes, foreign exchange rates and interest rates, that there will be no pandemics or other material outbreaks of disease or safety issues affecting humans or animals or food products, and that there will be no unplanned material changes in its facilities, equipment, customer and employee relations, or credit arrangements. Recent changes in employment law, including announced increases in minimum wages, are factored into management's assumptions. These assumptions, although considered reasonable by Management at the time of preparation, may prove to be incorrect. In particular, Management has assumed that the tax effects on distributions will remain consistent with current regulations or pronouncements, and also in estimating the revenue for new restaurants, Management has assumed that they will operate consistent with other similar SIR restaurants and has assumed that SIR will remain compliant in the future with all of its financial covenants under the Credit Agreement and imposed by the lender. For more information concerning the Fund's risks and uncertainties, please refer to the March 14, 2018 Annual Information Form, for the period ended December 31, 2017, which is 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. SOURCE SIR Royalty Income Fund | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Company Codes: Toronto:SRV.UN |
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