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VANCOUVER, British Columbia, Aug. 09, 2022 (GLOBE NEWSWIRE) -- The Keg Royalties Income Fund (the “Fund”) (TSX: KEG.UN) is pleased to announce its financial results for the three months ended June 30, 2022 (the “quarter”) and the six months ended June 30, 2022 (“YTD”).
HIGHLIGHTS
- Royalty Pool sales(1) up 197.4% to $176.4M for the quarter and up 148.7% to $318.1M YTD
- KRL system sales(1) up 197.3% to $176.4M for the quarter and up 148.7% to $318.1M YTD
- Distributable cash(1) up 199.6% to 29.8 cents/Fund unit for the quarter and up 181.2% to 51.9 cents/Fund unit YTD
- Payout ratio(2) was 95.2% for the quarter and 109.3% YTD
Royalty Pool sales reported by the 107 Keg restaurants in the Royalty Pool were $176,364,000 for the quarter, an increase of $117,066,000 or 197.4% from the comparable quarter of the prior year. Year-to-date, Royalty Pool sales were $318,070,000, an increase of $190,197,000 or 148.7%. The increase in Royalty Pool sales during the second quarter of 2022 was due to significantly more trading weeks of operation in the second quarter of 2022, as KRL’s restaurants were temporarily closed, by government health mandates related to the Covid-19 pandemic, for less time in the second quarter of 2022, than in the second quarter of 2021.
Royalty income increased by $4,683,000 or 197.4% from $2,372,000 in the three months ended June 30, 2022 to $7,055,000 in the three months ended June 30, 2021. Year-to-date, royalty income increased by $7,608,000 or 148.7% from $5,115,000 for the six months ended June 30, 2021 to $12,723,000 for the six months ended June 30, 2022.
Distributable cash available to pay distributions to public unitholders increased by $2,254,000 from $1,129,000 (9.9 cents/Fund unit) to $3,383,000 (29.8 cents/Fund unit) for the quarter, and increased by $3,800,000 from $2,097,000 (18.5 cents/Fund unit) to $5,897,000 (51.9 cents/Fund unit) year-to-date. During the second quarter of 2022, distributions of $3,222,000 (28.4 cents/Fund unit) were paid to Fund unitholders, an increase of $2,030,000 from the comparable quarter of the prior year. During the first six months of 2022, distributions of $6,444,000 (56.8 cents/Fund unit) were paid to Fund unitholders, an increase of $3,890,000 from the comparable period of the prior year. The increase in distributions to Fund unitholders during the comparable three and six-month periods, was entirely due to the return of monthly distributions to their pre-pandemic level 9.46 cents/Fund unit per month commencing in October of 2021. The payout ratio was 95.2% for the second quarter of 2022 and 109.3% year-to-date.
The Fund remains financially well positioned with cash on hand of $2,214,000 and a positive working capital balance of $3,042,000 as at June 30, 2022.
(1) This is a non-IFRS supplementary financial measure. Please refer to the “non-GAAP and other financial measures disclosure (NI 52-112)” section of this press release.
(2 )This is a non-IFRS ratio. Please refer to the “non-GAAP and other financial measures disclosure (NI 52-112)” section of this press release.
“We are very pleased with the sales results of KRL during the current quarter” said Kip Woodward, Chairman of the Fund. “The increase in Royalty Pool sales and related royalty income resulted in an improvement in the payout ratio to 95.2% in the second quarter, more in line with historical targets.”
“The second quarter of the current year represents the first period since the pandemic began where we have been able to operate fully opened Keg locations. The Royalty Pool sales for the current quarter reported are of course nearly double what they were in the second quarter of 2021, but it is even more impressive that the current Q2 results also exceeded the same quarter 2019 prior to the pandemic by 13.5%,” said David Aisenstat, Chair of The Keg. “Our loyal Keg guests are back, and more new guests are joining them. Our skilled Keggers are also back with us happily providing The Keg’s legendary guest experience in all of our locations. The quarters’ sales and our consistent feedback tells us we have successfully kept the many things people have loved about The Keg for over fifty years fully intact. That achievement was and remains our very focused goal - past, present and in the future,” added Aisenstat.
NON-GAAP AND OTHER FINANCIAL MEASURES DISCLOSURE ("NI 52-112")
NI 52-112 prescribes disclosure requirements that apply to certain Non-IFRS measures known as "specified financial measures". This press release makes reference to certain non-IFRS measures which provides important information regarding the Fund's financial performance and ability to pay distributions to unitholders. By considering these non-IFRS measures in combination with IFRS measures, the Fund believes that readers are provided with additional and more useful information about the Fund's financial performance as opposed to considering IFRS measures alone. The terms "Royalty Pool Sales", “System Sales”, "Distributable Cash Before SIFT Tax", "Distributable Cash" and "Payout Ratio" are non-IFRS measures and non-IFRS ratios. These non-IFRS measures reported by the Fund do not have standardized meanings as prescribed by IFRS, and the Fund's method of calculating these measures may differ and may not be comparable to similar measures reported by other issuers.
"Royalty Pool Sales" is a non-IFRS supplementary financial measure representing the total gross sales reported by Keg restaurants included in a specified Royalty Pool, for which the Fund receives a royalty of 4% on these reported gross sales in any period.
"System Sales" is a non-IFRS supplementary financial measure representing the gross sales of all corporate restaurants owned by KRL, and the gross sales reported to KRL by franchise restaurants without independent audit, in any period. The total system sales of KRL are of interest to readers as it best reflects KRL’s overall sales performance.
"Distributable Cash Before SIFT Tax" is a non-IFRS supplementary financial measure and is defined as the periodic cash flows from operating activities as reported in the IFRS 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" is a non-IFRS supplementary financial measure and is defined as 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.
"Payout Ratio" is a non-IFRS ratio and 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).
FINANCIAL HIGHLIGHTS
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| ($000's expect per unit amounts) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Restaurants in the Royalty Pool | 107 | 106 | 107 | 106 | ||||||||||||
| Royalty Pool sales (1) | $ | 176,364 | $ | 59,298 | $ | 318,070 | $ | 127,873 | ||||||||
| Royalty income (2) | $ | 7,055 | $ | 2,372 | $ | 12,723 | $ | 5,115 | ||||||||
| Interest income (3) | 1,068 | 1,066 | 2,122 | 2,120 | ||||||||||||
| Total income | $ | 8,123 | $ | 3,438 | $ | 14,845 | $ | 7,235 | ||||||||
| Administrative expenses (4) | (121 | ) | (117 | ) | (250 | ) | (222 | ) | ||||||||
| Interest and financing expenses (5) | (127 | ) | (99 | ) | (227 | ) | (196 | ) | ||||||||
| Operating income | $ | 7,875 | $ | 3,222 | $ | 14,368 | $ | 6,817 | ||||||||
| Distributions to KRL (6) | (3,238 | ) | (1,731 | ) | (6,043 | ) | (3,575 | ) | ||||||||
| Profit before fair value gain (loss) and income taxes | $ | 4,637 | $ | 1,491 | $ | 8,325 | $ | 3,242 | ||||||||
| Fair value gain (loss) (7) | 6,656 | (6,619 | ) | (4,214 | ) | (13,670 | ) | |||||||||
| Income tax recovery (expense) (8) | (1,251 | ) | (405 | ) | (2,246 | ) | (878 | ) | ||||||||
| Profit (loss) and comprehensive income (loss) | $ | 10,042 | $ | (5,533 | ) | $ | 1,865 | $ | (11,306 | ) | ||||||
| Distributable cash before SIFT tax (9) | $ | 4,618 | $ | 1,518 | $ | 8,113 | $ | 2,943 | ||||||||
| Distributable cash (10) | $ | 3,383 | $ | 1,129 | $ | 5,897 | $ | 2,097 | ||||||||
| Distributions to Fund unitholders (11) | $ | 3,222 | $ | 1,192 | $ | 6,444 | $ | 2,554 | ||||||||
| Payout ratio (12) | 95.2 | % | 105.6 | % | 109.3 | % | 121.8 | % | ||||||||
| Per Fund unit information (13) | ||||||||||||||||
| Profit before fair value gain (loss) and income taxes | $ | 0.408 | $ | 0.131 | $ | 0.733 | $ | 0.286 | ||||||||
| Profit (loss) and comprehensive income (loss) | $ | 0.884 | $ | (0.487 | ) | $ | 0.164 | $ | (0.996 | ) | ||||||
| Distributable cash before SIFT tax (9) | $ | 0.407 | $ | 0.134 | $ | 0.715 | $ | 0.259 | ||||||||
| Distributable cash (10) | $ | 0.298 | $ | 0.099 | $ | 0.519 | $ | 0.185 | ||||||||
| Distributions to Fund unitholders (11) | $ | 0.284 | $ | 0.105 | $ | 0.568 | $ | 0.225 | ||||||||
Notes:
(1) Royalty Pool sales are the gross sales reported by Keg Restaurants included in the Royalty Pool in any period. As of June 30, 2022, the Royalty Pool includes 107 Keg restaurants, 52 of which are owned and operated by KRL and its subsidiaries, (42 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 and six months ended June 30, 2022 were 11,353,500 (three and six months ended June 30, 2021 – 11,353,500).
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.
