BURLINGTON, ON, Nov. 23, 2023 /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 16-week and 52-week periods ended August 27, 2023 (“Q4 2023” and “Fiscal 2023”, respectively). SIR’s audited consolidated financial statements and management’s discussion & analysis (“MD&A”) for Q4 2023 / Fiscal 2023 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.

• Food and beverage revenue from corporate restaurant operations increased 1.6% to $89.3 million, compared to $88.0 million for the 16-week period ended August 28, 2022 (“Q4 2022”).
• Consolidated Same Store Sales (“SSS”)¹ increased 0.4%.
• On June 6, 2023, SIR entered into a Tenth amending agreement (the “Tenth Amending Agreement”) to its credit agreement with its senior lender. The Tenth Amending Agreement extends the maturity date of the credit agreement, providing SIR with greater certainty and availability of funding.
• SIR completed renovations to the Reds® Square One in Mississauga, Ontario.

• On September 1, 2023, SIR opened a new Scaddabush Italian Kitchen & Bar (“Scaddabush”)® in Whitby, Ontario. This new restaurant is expected to be added to the Royalty Pooled Restaurants (the “Royalty Pool”) on January 1, 2024.
• SIR completed renovations to six Jack Astor’s® locations (in South London, Vaughan, Newmarket, Ottawa and Scarborough, Ontario and Dundas Square in Toronto).
• SIR’s insurer has denied any business interruption claims due to COVID-19 related operating restrictions or closures. However, SIR pursued a Business Interruption claim due to Civil Authority orders against its insurer by way of Notice of Application in the Ontario Superior Court. On January 10, 2023, the application was dismissed. SIR filed an appeal, which was heard on May 24, 2023 in the Ontario Court of Appeal (“ONCA”). The ONCA overturned the original decision and reviewed the application anew. On November 22, 2023, the application was dismissed.

SIR has advised the Fund that food and beverage revenue from corporate restaurant operations increased 1.6% to $89.3 million in Q4 2023, compared to $88.0 million in Q4 2022. Food and beverage revenue from corporate restaurant operations for Fiscal 2023 increased 22.6% to $271.7 million, compared to $221.7 million in the 52-week period ended August 28, 2022 (“Fiscal 2022”). The increase in Q4 2023 was primarily attributable to increased pricing and strong same store sales growth (“SSSG”)¹ for Scaddabush. The increase in Fiscal 2023 reflects increased pricing and strong system-wide SSSG¹, which was primarily attributable to the negative impact of pandemic-related operating restrictions on food and beverage revenue during the first three quarters of Fiscal 2022.

SSS¹ performance includes all SIR restaurants, except for those restaurants that were not open for the entire comparable periods in Fiscal 2023 and Fiscal 2022, and the Abbey’s Bakehouse® retail outlet as it is a seasonal restaurant.

Net income and comprehensive income was $21.4 million for Q4 2023, compared to $1.1 million for Q4 2022. Net loss and comprehensive loss was $20.2 million for Fiscal 2023, compared to $49.7 million for Fiscal 2022. The positive 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 income of $13.1 million and an expense of $36.1 million in Q4 2023 and Fiscal 2023, compared to expenses of $5.2 million in Q4 2022 and $65.4 million in Fiscal 2022. These non-cash changes in Q4 2023 and Fiscal 2023 are due to a decrease in the underlying unit price of the Fund compared to the end of the third quarter of Fiscal 2023, and an increase compared to the end of Fiscal 2022, respectively. SIR also did not receive any pandemic-related government subsidies during Fiscal 2023. In Fiscal 2022, the Company recognized significant amounts of government subsidies as a reduction to costs of corporate restaurant operations.

During Fiscal 2022, SIR recognized government assistance through the Canada Emergency Wage Subsidy (“CEWS”) and/or the Canada Recovery Hiring Program (“CRHP”) of $12.3 million. SIR also recognized government assistance through the Canada Emergency Rent Subsidy (“CERS”) of $2.1 million. SIR recognized a further $0.8 million in other subsidies during Fiscal 2022. Of these amounts, $14.7 million was recognized as a reduction to costs of corporate restaurant operations, and $0.5 million was recognized as a reduction to corporate costs. These programs ended on May 7, 2022.

Adjusted Net Earnings² were $8.3 million in Q4 2023, compared to $6.3 million in Q4 2022. Adjusted Net Earnings² for Fiscal 2023 were $15.9 million, compared to $15.8 million in Fiscal 2022.

As at August 27, 2023, SIR had cash and equivalents of $8.2 million, compared to $8.1 million as at August 28, 2022. As at August 27, 2023, SIR had drawn $22.2 million against the $42.2 million maximum principal borrowing under the Company’s credit facility.

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 rapid growth of take-out and delivery services in commercial foodservice. The recent amendment to SIR’s Credit Agreement with its Lender provides greater certainty and availability of funding, enabling SIR to continue to invest in restaurant renovations, new restaurants and other initiatives to drive growth. In consideration of the ongoing conditions mentioned above and the timing of new restaurant construction and renovations, the related restaurant opening schedules will be reviewed regularly by SIR and adjusted as necessary.

During Fiscal 2023, SIR completed renovations to seven Jack Astor’s locations and one Reds location. Subsequent to Fiscal 2023, SIR completed renovations to six additional Jack Astor’s locations. SIR plans to invest in similar restaurant renovations throughout Fiscal 2024.

SIR has commitments to lease four properties in Barrie, London and Guelph, Ontario and in the Don Mills neighbourhood in Toronto upon which it plans to build four new Scaddabush restaurants. There can be no assurance at this time that these planned new Scaddabush restaurants will be opened or will become part of the Royalty Pooled Restaurants.

The following table reconciles net earnings (loss) and comprehensive income (loss) for the 16-week and 52-week periods ended August 27, 2023 and August 28, 2022, respectively, to Adjusted Net Earnings²:

SIR Corp. (“SIR”) is a privately held Canadian corporation that owns a portfolio of 54 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® 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 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.

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 Q4 2023 and Fiscal 2023 provided in this news release.

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 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.

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 16, 2023 Annual Information Form, for the period ended December 31, 2022, and the Fund’s most recent interim filings, which are available under the Fund’s profile at www.sedarplus.ca.

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 16, 2023 for the period ended December 31, 2022. 

SOURCE SIR Royalty Income Fund

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