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VANCOUVER, British Columbia, March 22, 2021 (GLOBE NEWSWIRE) -- The Keg Royalties Income Fund (the “Fund”) (TSX: KEG.UN) is pleased to announce its financial results for the three months ended December 31, 2020 (the “quarter”) and for the twelve months ended December 31, 2020 (“year”).
HIGHLIGHTS
- Royalty Pool sales down 50.2% to $77.1M for the quarter and down 44.8% to $344.1M for the year
- KRL system sales down 52.5% to $78.6M for the quarter and down 46.2% to $349.6M for the year
- Distributable cash down 15.5% to 21.6 cents/Fund unit for the quarter and 34.6% to 74.9 cents/Fund unit for the year
- Payout ratio was 69.3% for the quarter and 85.9% for the year
Royalty Pool sales reported by the 106 Keg restaurants in the Royalty Pool were $77,068,000 for the quarter, a decrease of $77,720,000 or 50.2% from the comparable quarter of the prior year. For the year, Royalty Pool sales were $344,081,000, a decrease of $279,667,000 or 44.8% from 2019. The decrease in Royalty Pool sales was primarily due to the loss of sales at all of the Keg restaurants in the Royalty Pool from government mandated temporary closures of restaurants during much of the year in response to the Covid-19 pandemic.
Royalty income decreased by $3,208,000 or 50.6% from $6,340,000 in the three months ended December 31, 2019 to $3,132,000 in the three months ended December 31, 2020. Royalty income decreased by $11,503,000 or 45.3% from $25,388,000 for the year ended December 31, 2019 to $13,885,000 for the year ended December 31, 2020.
Distributable cash available to pay distributions to public unitholders decreased by $449,000 from $2,905,000 (25.6 cents/Fund unit) to $2,456,000 (21.6 cents/Fund unit) for the quarter and decreased by $4,505,000 from $13,014,000 ($1.146/Fund unit) to $8,509,000 (74.9 cents/Fund unit) for the year. During the fourth quarter of 2020, distributions of $1,703,000 (15.0 cents/Fund unit) were paid to Fund unitholders, a decrease of $1,519,000 from the comparable quarter of the prior year. During 2020, distributions of $7,309,000 (64.4 cents/Fund unit) were paid to Fund unitholders, a decrease of $5,579,000 from the prior year. The decrease in distributions paid to Fund unitholders was entirely due to the reduction in monthly distributions from 9.46 cents/Fund unit to 3.5 cents/Fund unit, commencing with the April 2020 distribution, and the decrease in monthly distributions from 9.46 cents/Fund unit to 5.0 cents/Fund unit, commencing with the October 2020 distribution. The reduction in monthly distributions were made in direct response to the loss of sales from government mandated temporary closures due to the Covid-19 crisis as mentioned above. The payout ratio was 69.3% for the fourth quarter of 2020 and 85.9% for 2020.
The Fund remains financially well positioned with cash on hand of $3,009,000 and a positive working capital balance of $2,753,000 as at December 31, 2020.
“The financial results of the Fund for the fourth quarter and the year reflect the impact of the Covid-19 crisis on restaurant sales in general and on The Keg” said Kip Woodward, Chairman of The Fund. “The Trustees nevertheless remain pleased with the overall financial performance of the Fund particularly given the overall state of the economy, and despite the significant loss of sales from government mandated closures of many of KRL’s restaurants, for much of the year. We attribute this performance to the significant efforts of KRL’s operating talent to keep providing unparalleled service and the continued demand from guests despite the closures.”
“The Keg’s results for 2020 were of course very disappointing due entirely to a very unexpected and unprecedented worldwide pandemic. The Keg team worked tirelessly to minimize the disruption to our business caused by mandatory shutdowns and other operating restrictions imposed on restaurants as governments responded to the COVID-19 pandemic. I trust Unitholders will join me in expressing our sincere gratitude for their efforts.” said David Aisenstat, CEO of The Keg.
“Many shutdowns and operating restrictions have continued through the first quarter of 2021, but those obstacles fortunately appear to be lessening. Some provinces have allowed restaurants to remain open or reopen as they recognize the lack of restaurant-related outbreak statistics to support closures; we continue to thank them for allowing us to get our staff back to work and our guests back into our restaurants. Other provinces and cities remain slow to accept those facts, but it appears that even in those jurisdictions reopenings are in the works. We are eager to welcome our staff and especially our guests back into those locations to enjoy The Keg experience.” added Aisenstat.
“Where we are open and operating, the support of our loyal guests has been excellent; so has the devotion of our restaurant teams to offer the legendary Keg service, quality and ambience that all of us have enjoyed for close to fifty years. Please be assured that as we move into our fifty-first year, we will continue to be focused on the safe reopenings of our restaurants so our guests and staff will feel totally at ease as our lives hopefully return to what they were before the pandemic tragically intervened.” Mr. Aisenstat said in closing.
FINANCIAL HIGHLIGHTS
| ($000’s except per unit amounts) | Oct. 1 to Dec. 31, 2020 | Oct. 1 to Dec. 31, 2019 | Jan. 1 to Dec. 31, 2020 | Jan. 1 to Dec. 31, 2019 | |||||||||||
| Restaurants in the Royalty Pool | 106 | 105 | 106 | 105 | |||||||||||
| Royalty Pool sales (1) | $ | 77,068 | $ | 154,788 | $ | 344,081 | $ | 623,748 | |||||||
| Royalty income (2) | $ | 3,132 | $ | 6,340 | $ | 13,885 | $ | 25,388 | |||||||
| Interest income (3) | 1,074 | 1,085 | 4,283 | 4,306 | |||||||||||
| Total income | $ | 4,206 | $ | 7,425 | $ | 18,168 | $ | 29,694 | |||||||
| Administrative expenses (4) | (110 | ) | (101 | ) | (425 | ) | (385 | ) | |||||||
| Interest and financing expenses (5) | (98 | ) | (152 | ) | (440 | ) | (612 | ) | |||||||
| Operating income | $ | 3,998 | $ | 7,172 | $ | 17,303 | $ | 28,697 | |||||||
| Distributions to KRL (6) | (1,992 | ) | (2,777 | ) | (8,179 | ) | (11,099 | ) | |||||||
| Profit before fair value gain (loss) and income taxes | $ | 2,006 | $ | 4,395 | $ | 9,124 | $ | 17,598 | |||||||
| Fair value gain (loss) (7) | (24,101 | ) | 5,508 | 15,595 | 4,063 | ||||||||||
| Income tax recovery (expense) (8) | (543 | ) | (1,178 | ) | (2,463 | ) | (4,662 | ) | |||||||
| Profit (loss) and comprehensive income (loss) | $ | (22,638 | ) | $ | 8,725 | $ | 22,256 | $ | 16,999 | ||||||
| Distributable cash before SIFT tax (9) | $ | 2,983 | $ | 4,067 | $ | 10,906 | $ | 17,665 | |||||||
| Distributable cash (10) | $ | 2,456 | $ | 2,905 | $ | 8,509 | $ | 13,014 | |||||||
| Distributions to Fund unitholders (11) | $ | 1,703 | $ | 3,222 | $ | 7,309 | $ | 12,888 | |||||||
| Payout ratio (12) | 69.3% | 110.9% | 85.9% | 99.0% | |||||||||||
| Per Fund unit information (13) | | ||||||||||||||
| Profit before fair value gain (loss) and income taxes | $ | .177 | $ | .387 | $ | .804 | $ | 1.550 | |||||||
| Profit (loss) and comprehensive income (loss) | $ | (1.994 | ) | $ | .768 | $ | 1.960 | $ | 1.497 | ||||||
| Distributable cash before SIFT tax (9) | $ | .263 | $ | .358 | $ | .961 | $ | 1.556 | |||||||
| Distributable cash (10) | $ | .216 | $ | .256 | $ | .749 | $ | 1.146 | |||||||
| Distributions to Fund unitholders (11) | $ | .150 | $ | .284 | $ | .644 | $ | 1.135 | |||||||
Notes:
| (1) | Royalty Pool sales are the gross sales reported by Keg Restaurants included in the Royalty Pool in any period. As of December 31, 2020, the Royalty Pool includes 106 Keg restaurants, 51 of which are owned and operated by KRL and its subsidiaries, (41 in Canada and 10 in the United Sates), and 55 Keg restaurants which are owned and operated by Keg franchisees (all of which are in Canada). |
| (2) | The Fund, indirectly through The Keg Rights Limited Partnership (the “Partnership”), earns royalty income equal to 4% of gross sales of Keg restaurants in the Royalty Pool. |
| (3) | The Fund directly earns interest income on the $57.0 million Keg Loan, with interest income accruing at 7.5% per annum, payable monthly. |
| (4) | The Fund, indirectly through the Partnership, incurs administrative expenses and interest on the operating line of credit, to the extent utilized. |
| (5) | The Fund, indirectly through The Keg Holdings Trust (the “Trust”), incurs interest expense on the $14.0 million term loan and amortization of deferred financing charges. |
| (6) | Represents the distributions of the Partnership attributable to KRL during the respective periods on the Class A, entitled Class B, and Class D Partnership units (“Exchangeable units”) and Class C Partnership units held by KRL. The Exchangeable units are exchangeable into Fund units on a one-for-one basis. These distributions are presented as interest expense in the financial statements. |
| (7) | Fair value gain (loss) is the non-cash decrease or increase in the market value of the Exchangeable units held by KRL during the respective period. Exchangeable units are classified as a financial liability under IFRS. The Fund is required to determine the fair value of that liability at the end of each reporting period and adjust for any increase or decrease, taking into consideration the sale of any Exchangeable units and Additional Entitlements during the same period. |
| (8) | Income taxes include the Specified Investment Flow-through Trust tax (“SIFT tax”) expense, and either a non-cash deferred tax expense or deferred tax recovery. The deferred tax expense or recovery primarily results from differences in income recognition between the Fund’s accounting methods and enacted tax laws. It is also partially due to temporary differences between accounting and tax bases of the Keg Rights owned by the Partnership. |
| (9) | Distributable cash before SIFT tax is defined as the periodic cash flows from operating activities as reported in the IFRS condensed consolidated financial statements, including the effects of changes in non-cash working capital, plus SIFT tax paid (including current year instalments), less interest and financing fees paid on the term loan, less the Partnership distributions attributable to KRL through its ownership of Exchangeable units. Distributable cash before SIFT tax is a non-IFRS financial measure that does not have a standardized meaning prescribed by IFRS, and therefore may not be comparable to similar measures presented by other issuers. |
| (10) | Distributable cash is the amount of cash available for distribution to the Fund’s public unitholders and is calculated as distributable cash before SIFT tax, less current year SIFT tax expense. Distributable cash is a non-IFRS financial measure that does not have a standardized meaning prescribed by IFRS, and therefore may not be comparable to similar measures presented by other issuers. However, the Fund believes that distributable cash, both before and after SIFT tax, provides useful information regarding the amount of cash available for distribution to the Fund’s public unitholders. |
| (11) | Distributions to Fund unitholders include all regular monthly cash distributions paid to Fund unitholders during a period and any special distributions, either declared or paid, to Fund unitholders in the same period. |
| (12) | Payout ratio is computed as the ratio of aggregate cash distributions paid during the period plus any special distributions declared or paid during the same period (numerator) to the aggregate distributable cash of the period (denominator). |
| (13) | All per unit amounts are calculated based on the weighted average number of Fund units outstanding, which are those units held by public unitholders during the respective period. The weighted average number of Fund units outstanding for the three months ended December 31, 2020 were 11,353,500 (three months ended December 31, 2019 – 11,353,500), and for the twelve months ended December 31, 2020 were 11,353,000 (twelve months ended December 31, 2019 – 11,353,000). |
The Fund (TSX: KEG.UN) is a limited purpose, open-ended trust established under the laws of the Province of Ontario that, through The Keg Rights Limited Partnership, owns certain trademarks and other related intellectual property used by Keg Restaurants Ltd. (“KRL”). In exchange for use of those trademarks, KRL pays the Fund a royalty of 4% of gross sales of Keg restaurants included in the royalty pool.
Vancouver-based KRL is the leading operator and franchisor of steakhouse restaurants in Canada and has a substantial presence in select regional markets in the United States. KRL continues to operate The Keg restaurant system and expand that system through the addition of both corporate and franchised Keg steakhouses. KRL has been named one of the “50 Best Employers in Canada” for the past seventeen years by Aon Hewitt. For more information on our brand, visit www.kegsteakhouse.com.
This press release may contain certain "forward-looking" statements reflecting The Keg Royalties Income Fund's current expectations in the casual dining segment of the restaurant food industry. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including those relating to the Keg’s ability to continue to realize historical same store sales growth, changes in market and existing competition, new competitive developments, and potential downturns in economic conditions generally. Additional information on these and other potential factors that could affect the Fund's financial results are detailed in documents filed from time to time with the provincial securities commissions in Canada.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy, which may be made only by means of the prospectus, nor shall there be any sale of the Fund units in any state, province or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any state, province or jurisdiction. The Keg Royalties Income Fund units have not been, and will not be registered under the U.S. Securities Act of 1933, as amended and may not be offered or sold in the United States absent registration or an application for exemption from the registration requirement under U.S. securities laws.
The Trustees of the Fund have approved the contents of this press release.