SIR Royalty Income Fund Announces Filing of SIR Corp. Fiscal 2024 Second Quarter Results
BURLINGTON, ON, March 27, 2024 /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 24-week periods ended February 11, 2024 ("Q2 2024" and "YTD 2024", respectively). SIR's unaudited interim consolidated financial statements and management's discussion & analysis ("MD&A") for Q2 2024 / YTD 2024 can be accessed via the Fund's profile on the SEDAR+ website at www.sedarplus.ca under "Other", or the SIR website at www.sircorp.com/sir-royalty-income-fund/financial-reports.
Q2 2024 Business Update
Food and beverage revenue from corporate restaurant operations was $59.3 million compared to $60.0 million for the 12-week period ended February 12, 2023 ("Q2 2023").
Consolidated Same Store Sales ("SSS")¹ declined by 3.5%.
SIR completed a renovation to the Jack Astor's® location in Ancaster, Ontario to implement a refreshing, more contemporary and immersive guest-facing experience. The restaurant was closed for 13 days to complete the renovation.
On January 1, 2024, the new Scaddabush Italian Kitchen & Bar® ("Scaddabush") restaurant in Whitby, Ontario was added to the Royalty Pooled Restaurants.
SIR permanently closed the Scaddabush restaurant located in the Mimico neighbourhood of Etobicoke, Ontario, Reds® Wine Tavern in downtown Toronto, and Reds® Kitchen + Wine Bar Fallsview in Niagara Falls. These restaurants were removed from the Royalty Pooled Restaurants on January 1, 2024.
Subsequent Event
On February 27, 2024, SIR opened a new Scaddabush restaurant in the Don Mills neighbourhood of Toronto. This new Scaddabush restaurant is expected to be added to the Royalty Pooled Restaurants on January 1, 2025.
Results of Operations Summary
SIR has advised the Fund that food and beverage revenue from corporate restaurant operations was $59.3 million in Q2 2024, a decline of 1.2% compared to $60.0 million in Q2 2023. The slight decline was primarily attributable to decreased SSS1, which was due to lower guest counts and delivery sales at Jack Astor's and lower guest counts at the Signature Restaurants, partially offset by price increases across SIR's restaurant network and the continued same store sales growth of Scaddabush. During Q2 2024, one Jack Astor's restaurant was closed for 13 days to complete a renovation. During Q2 2023, two Jack Astor's locations were closed for a combined total of 14 days to complete renovations.
Same Store Sales(1) | 12-Week Period Ended February 11, 2024 | 12-week Period Ended February 12, 2023 | Variance | 24-Week Period Ended February 11, 2024 | 24-Week Period Ended February 12, 2023 | Variance |
Jack Astor's | 39,889 | 42,169 | (5.4 %) | 79,792 | 85,129 | (6.3 %) |
Scaddabush | 11,985 | 11,491 | 4.3 % | 23,867 | 22,545 | 5.9 % |
Signature Restaurants | 4,701 | 4,948 | (5.0 %) | 9,204 | 9,878 | (6.8 %) |
Same Store Sales(1) | 56,575 | 58,608 | (3.5 %) | 112,863 | 117,552 | (4.0 %) |
SSS¹ performance includes all SIR restaurants, except for those restaurants that were not open for the entire comparable periods in Fiscal 2024 and Fiscal 2023, and the Abbey's Bakehouse® retail outlet as it is a seasonal restaurant.
Net loss and comprehensive loss was $2.3 million for Q2 2024 compared to $21.2 million for Q2 2023. Net loss and comprehensive loss was $7.9 million for YTD 2024 compared to $39.5 million for the 24-week period ended February 12, 2023 ("YTD 2023"). The positive variances reflect changes in the amortized cost of the Ordinary LP Units and Class A Units of the SIR Royalty Limited Partnership that SIR holds. This resulted in expenses of $2.9 million in Q2 2024 and $8.8 million in YTD 2024, compared to expenses of $21.8 million in Q2 2023 and $42.5 million in YTD 2023. These non-cash changes in Q2 2024 and YTD 2024 are due to changes to the estimated cash flows derived from the Fund and an increase in the underlying unit price of the Fund compared to the end of Fiscal 2023.
Adjusted Net Earnings² were $0.6 million in Q2 2024 compared to $0.7 million in Q2 2023. Adjusted Net Earnings² for YTD 2024 were $0.9 million compared to $3.0 million in YTD 2023. The declines are partially attributable to a $0.6 million reduction in earnings from corporate restaurant operations in Q2 2024 compared to Q2 2023, and a $1.9 million reduction in earnings from corporate restaurant operations in YTD 2024 compared to YTD 2023.
Liquidity and Capital Resources
As at February 11, 2024, SIR had cash and equivalents of $1.9 million compared to $8.2 million as at August 27, 2023. As at February 11, 2024, SIR had drawn $30.0 million against the $41.9 million maximum principal borrowing under the Company's credit facility.
Outlook
SIR continues to monitor consumer spending behavior in light of current evolving macroeconomic factors, including inflation and higher interest rates, and their potential impact on the Canadian economy and consumer confidence. Ongoing business impacts due to changes in the minimum wage, rising commodity costs and supply shortages have all been influential in the bar and restaurant industry's changes in pricing overall.
SIR continues to innovate and provide immersive new product and service offerings to increase dine-in guest visits to its restaurants and to capitalize on the growth of take-out and delivery services in commercial foodservice. The amendment to SIR's Credit Agreement with its Lender in June 2023 provides greater certainty and availability of funding, enabling SIR to continue to invest in restaurant renovations, new restaurants and other initiatives to drive growth.
During YTD 2024, SIR completed renovations to seven Jack Astor's restaurants, expanding the total number of renovated Jack Astor's locations to 16 since the beginning of Fiscal 2022. SIR also completed renovations to its Reds® Square One location in Mississauga, Ontario during the fourth quarter of Fiscal 2023. The Company is pleased with the success of these renovations and plans to invest in similar restaurant renovations throughout Fiscal 2024.
SIR has commitments to lease five properties in Barrie, London, Guelph and Oshawa, Ontario and at the intersection of Queen Street East and Broadview Avenue in Toronto, upon which it plans to build one new Jack Astor's restaurant, three new Scaddabush restaurants and one new Duke's Refresher® + Bar.
SIR is converting the former Reds Wine Tavern in downtown Toronto into a new, Italian-themed fine dining restaurant brand called Edna + Vita, which is currently under construction and is expected to open during SIR's Fiscal 2024 third quarter.
SIR is currently evaluating alternative uses for the recently closed Scaddabush (Mimico) and Reds Kitchen + Wine Bar Fallsview.
Reconciliation of Adjusted Net Earnings²
The following table reconciles net loss and comprehensive loss for the 12-week and 24-week periods ended February 11, 2024 and February 12, 2023, respectively, to Adjusted Net Earnings²:
12-Week February 11, 2024 | 12-Week Period Ended February 12, 2023 | 24-Week Period Ended February 11, 2024 | 24-Week Period Ended February 12, 2023 | |
(in thousands of dollars) (unaudited) | ||||
Net loss and comprehensive loss for the period | (2,265) | (21,166) | (7,872) | (39,525) |
Change in amortized cost of Ordinary LP Units and Class A LP Units of the Partnership | 2,868 | 21,840 | 8,808 | 42,548 |
Adjusted Net Earnings(2) | 603 | 674 | 936 | 3,023 |
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 11 locations. SIR also operates one-of-a-kind "Signature" brands including Reds® Square One 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 two additional Signature restaurants, including a Duke's Refresher® + Bar in downtown Toronto, and Abbey's Bakehouse®, a seasonal restaurant in Muskoka, Ontario, 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 a seasonal 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 reconciliation of net earnings (loss) to Adjusted Net Earnings (Loss) for Q2 2024 and YTD 2024 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 SIR Royalty Limited Partnership (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 war 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.
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 risks and uncertainties, please refer to the 'Risk Factors' in the Fund's March 14, 2024 Annual Information Form, for the period ended December 31, 2023, and the Fund's most recent interim filings, which are available under the Fund's profile at www.sedarplus.ca.
SOURCE SIR Royalty Income Fund
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