Company Reports Sixth Consecutive Quarter of
Same Restaurant Sales Growth & Second Consecutive Fiscal Year
of System Sales and Same Restaurant Sales Growth
MONTREAL, Dec. 20, 2016 /CNW/ - Imvescor Restaurant
Group Inc. ("IRG" or the "Company")
(TSX: IRG), a leading franchisor of restaurants operating 223
locations in Eastern Canada,
reported financial results today for the 13 and 53 weeks ended
October 30, 2016 ("Q4 2016"
and "fiscal 2016"). This press release should be read in
conjunction with the Company's management discussion and analysis
and financial statements for fiscal 2016 which are available on the
Company's website at www.imvescor.ca/investor-relations and have
been posted on SEDAR at www.sedar.com.
"Fiscal 2016 was a good year for Imvescor as we made steady
progress on our four pillar focus on improvement on food, service,
quality and ambience. In fiscal 2016, we accelerated our
rejuvenation plan and completed the renovation of 28 restaurants.
The result of our efforts was an increase in both System Sales and
Same Restaurant Sales of 4.3% and 1.4% respectively." said
Frank Hennessey, President and Chief
Executive Officer of Imvescor Restaurant Group Inc.
"Same Restaurant Sales increased in the fourth quarter of 2016
by 0.4% over strong growth of 2.4% in Q4 2015. While our
System Sales for Q4 2016 declined, this was the result of planned
restaurant closures due to renovations and a significant impact due
to a shift in comparable operating weeks from the previous year.
Since we announced our strategic plan in April 2015, we have made steady progress.
With today's announcement of the acquisition of Ben &
Florentine along with our steady focus on improving the four
pillars of our core business, we continue to feel optimistic about
the Company's long term prospects." commented Frank Hennessey.
Q4 and Fiscal 2016 Financial and Operational
Highlights
- Renovated 13 restaurants under the Restaurant Rejuvenation Plan
(the "RRP") in Q4 2016, compared to one in Q4 2015. For Fiscal
2016, 28 restaurants were renovated, for a total of 33 since
inception of the RRP.
- Repaid the balance of the credit facility of $12 million during fiscal 2016.
- Q4 2016 System Sales of $95.1
million were 0.9% lower than Q4 2015 and were impacted by a
shift in comparable weeks resulting in a higher sales week included
in the third quarter of fiscal 2016 compared to the fourth quarter
in fiscal 2015, negatively impacting System Sales by $1.6 million (1.7%). Normalized System Sales[1]
for fiscal 2016 increased 2.4% driven by new openings, SRS growth
of 1.4%, partially offset by the 2.5% fewer restaurant operating
weeks from fewer restaurants and planned temporary closures as part
of the RRP.
- Q4 2016 SRS grew 0.4% over SRS growth of 2.4% in Q4 2015,
representing six consecutive quarters of positive overall SRS
growth. Fiscal 2016 SRS growth was 1.4%, with all four brands
achieving positive SRS for the year. The positive impact of the
initiatives around the four pillars was partially offset by the
related temporary closures due to the renovations. Restaurants
temporarily closed for renovations as part of the RRP amounted to
28 equivalent restaurant operating weeks and a decrease of SRS by
$0.9 million (1.0%) for Q4 2016 and
52 equivalent restaurant operating weeks and a decrease of SRS by
$1.5 million (0.4%) for fiscal
2016.
- Q4 2016 revenue increased 3.6% to $11.5
million from increased retail revenues and supplier
coordination fees. Fiscal 2016 revenues increased 19.2% partly from
the Company temporarily taking over the operations of the
manufacturer of certain Toujours Mikes licensed retail products, as
well as the additional week of operations, System Sales growth and
increased retail promotional activities.
- Q4 2016 operating expenses increased 20.7% versus Q4 2015, of
which 12% was due to the impairment reversal recognized in Q4 2015
and 5% from the increased RRP expenses in Q4 2016. Fiscal 2016
operating expenses increased 24.8%, of which 18% was due to the
temporary manufacture of certain Toujours Mikes licensed retail
products, and 2% each from the additional week of operations, the
increased RRP expenses and the impairment reversal recognized in Q4
2015.
- Q4 2016 EBITDA of $4.1 million
decreased by 20.2% over Q4 2015 and stemmed mostly from the
impairment reversal on IRG rights recognized in Q4 2015 and
increased RRP expenses. Fiscal 2016 EBITDA increased by 5.3% over
fiscal 2015.
- Q4 2016 Operating EBITDA decreased 2.8% to $4.4 million versus $4.6
million in Q4 2015 mostly from increased operating
expenditures in the Franchising segment. Fiscal 2016 Operating
EBITDA increased 11.9% from fiscal 2015, primarily from the
increased System Sales and retail promotional activities in the
Franchising segment.
- Net earnings of $3.2 million for
Q4 2016 decreased 10.9% versus Q4 2015. For fiscal 2016, net
earnings of $11.6 million increased
14.0% over fiscal 2015, primarily due to increased EBITDA and lower
finance costs.
____________________
1 "Normalized System Sales" is defined as System
Sales less the sales from the additional week of operations in the
first quarter of fiscal 2016, and adjusted for the resulting shift
in the comparability of the weeks which impacts the second, third
and fourth quarters.
Highlights Subsequent to Quarter End
The Company announced today that it has entered into a binding
agreement to acquire Ben & Florentine, a leading franchisor in
the breakfast and lunch category with over 40 locations across
Quebec, Ontario and Manitoba. It will be an asset transaction with
total consideration of approximately $17.7
million payable at closing with an additional earn-out
payment of up to $7.3 million payable
in the first quarter of 2018 based upon the achievement of certain
financial results driven principally by the successful opening of
new restaurants. The acquisition of Ben & Florentine adds a
leading brand to IRG's portfolio. Management believes that the
acquisition presents several compelling strategic benefits:
- A growth oriented brand. Since opening its first restaurant in
2009, Ben & Florentine has demonstrated rapid growth to 12
locations by 2010, opening its first location in Ontario in 2012, and now boasts over 40
locations across Quebec,
Ontario and Manitoba with $35
million in system sales and significant growth
potential;
- Ability to generate economies of scale while leveraging IRG's
shared services and operating track record;
- Increases IRG's critical mass in Quebec, cementing the Company's strong
position;
- Single digit accretion to earnings per share while keeping debt
leverage at approximately 1x EBITDA.
Capital Allocation Strategy
On April 15, 2015, the Company
formally announced a strategic plan and approach to capital
allocation that charts a roadmap for the transformation and growth
of the Company for the three following years, including an
investment by the Company of up to $5.5M over that period of time to rejuvenate its
restaurant network under the RRP. To date, the Company has
renovated 33 restaurants, and expects to renovate over 125
restaurants in total under the RRP. The trading price of the common
shares of the Company has increased 73%, from $1.79 to $3.10.
Finally, the Company fully repaid its long-term debt over fiscal
2016.
On January 13, 2016, the Board
approved an increase of 12.5% in the Company's quarterly dividend
from $0.02 to $0.0225 per common share. The dividend policy has
been designed to allow sufficient flexibility to continue investing
in the Company's growth and its franchise network, while providing
returns to its shareholders. The Company also instituted a normal
course issuer bid, which allows for the repurchase and cancellation
of shares, which was approved by the Toronto Stock Exchange on
January 18, 2016.
In addition to continuing growing our business through a
combination of organic growth, including through the investment in
the RRP and other infrastructure areas, we are actively pursuing a
strategic acquisition strategy of brands that complements IRG's
existing brands and that could either consolidate our solid
position in Quebec or expand our
geographic footprint outside of Quebec, and broaden our customer base and
leverage our platform. We plan on using cash on hand and available
capital under our credit facility to finance the cash portion of
such acquisitions while using the common shares of the Company as
an attractive acquisition currency when appropriate. In evaluating
any potential acquisition candidates, the Company will take into
account whether such acquisition is accretive for the Company and
whether it provides an opportunity for substantive growth while
allowing the Company to leverage the fixed cost of its shared
services platform. There is no certainty that the Company will be
able to identify targets that will fit its objectives or that the
Company will be able to complete a transaction.
The Company carefully explores, as it has done from time to
time, any commercially reasonable strategic opportunity that could
maximize the value of the Company.
Q4 2016 and Fiscal 2016 Selected Financial Data
|
|
|
(in thousands of
dollars, where applicable)
|
Q4
|
FISCAL
|
|
|
|
|
|
|
|
|
October
30,
2016
|
October
25,
2015
|
Δ%
|
October
30,
2016
|
October
25,
2015
|
Δ%
|
Number of
weeks
|
13
|
13
|
|
53
|
52
|
|
System Sales
(i)
|
$ 95,116
|
$ 96,027
|
-0.9%
|
$ 387,877
|
$ 371,939
|
4.3%
|
SRS
(i)
|
0.4%
|
2.4%
|
-2.0%
|
1.4%
|
0.2%
|
1.2%
|
Restaurant operating
weeks
|
2,847
|
2,916
|
-2.4%
|
11,762
|
11,834
|
-0.6%
|
Restaurant
count
|
|
|
|
|
|
|
|
Total
|
|
|
|
223
|
227
|
-1.8%
|
|
Company-owned
|
|
|
|
5
|
4
|
25.0%
|
Consolidated
results:
|
|
|
|
|
|
|
Revenue
|
11,454
|
11,061
|
3.6%
|
53,020
|
44,478
|
19.2%
|
Operating
expenses
|
7,340
|
6,079
|
20.7%
|
36,766
|
29,458
|
24.8%
|
Results from
operating activities
|
4,114
|
4,982
|
-17.4%
|
16,254
|
15,020
|
8.2%
|
EBITDA
(i)
|
4,087
|
5,119
|
-20.2%
|
16,824
|
15,973
|
5.3%
|
EBITDA as a % of
Revenue
|
35.7%
|
46.3%
|
-10.6%
|
31.7%
|
35.9%
|
-4.2%
|
Restaurant
rejuvenation plan expense
|
347
|
15
|
2213.3%
|
917
|
187
|
390.4%
|
Operating EBITDA
(i)
|
4,423
|
4,550
|
-2.8%
|
17,829
|
15,935
|
11.9%
|
% of
Revenue
|
38.6%
|
41.1%
|
-2.5%
|
33.6%
|
35.8%
|
-2.2%
|
% of System
Sales
|
4.7%
|
4.7%
|
-%
|
4.6%
|
4.3%
|
0.3%
|
Net earnings and
comprehensive income
|
3,163
|
3,548
|
-10.9%
|
11,562
|
10,139
|
14.0%
|
Net earnings as a %
of Revenue
|
27.6%
|
32.1%
|
-4.5%
|
21.8%
|
22.8%
|
-1.0%
|
|
|
|
|
|
|
|
EPS:
|
|
|
|
|
|
|
|
Basic
|
0.06
|
0.07
|
-14.3%
|
0.21
|
0.21
|
- %
|
|
Diluted
|
0.06
|
0.07
|
-14.3%
|
0.20
|
0.19
|
5.3%
|
Cash
flow:
|
|
|
|
|
|
|
Free cash flow
(i)
|
4,833
|
5,343
|
-9.5%
|
13,911
|
11,178
|
24.4%
|
Free cash flow as a %
of Revenue
|
42.2%
|
48.3%
|
-6.1%
|
26.2%
|
25.1%
|
1.1%
|
Dividends
paid
|
1,279
|
1,035
|
23.6%
|
5,034
|
4,911
|
2.5%
|
|
|
|
|
|
|
|
Cash
|
|
|
|
2,896
|
3,624
|
-20.1%
|
Working capital
excluding gift cards liability
|
|
|
|
2,934
|
962
|
205.0%
|
Total debt
|
|
|
|
-
|
11,798
|
-100.0%
|
|
|
(i)
|
System Sales, SRS,
EBITDA, Operating EBITDA and Free cash flow are non-IFRS measures.
Refer to the "Non-IFRS Measures and Financial Metrics" section of
this press release for the definition.
|
Dividend Declaration
Pursuant to its previously announced dividend policy, the board
of directors of the Company (the "Board") today
declared a dividend of $0.0225 per
common share. The quarterly cash dividend will be paid on
January 20, 2017 to shareholders of
record as of the close of business on January 6, 2017.
The declaration and payment of any future dividend remains at
the discretion of the Board and will depend on the Company's
current and anticipated cash requirements and surplus, capital
expenditures requirements, regulatory restrictions, financial
results, future prospects, current and future contractual
restrictions, such as restrictions under credit or other
arrangements, the satisfaction of solvency tests imposed by the
Canada Business Corporations Act for the declaration of
dividends and other factors deemed relevant by the Board. Any
dividend policy established by the Board, including the Company's
current dividend policy can be changed at any time and is not
binding on the Company. There can be no guarantee that the Company
will maintain its current dividend policy or any dividend policy or
that any dividend will be declared or paid.
Conference Call Details
Frank Hennessey, President and
Chief Executive Officer, and Tania M.
Clarke, Chief Financial Officer will host a conference call
to discuss Q4 and fiscal 2016 results today at 8:30 am E.S.T. To access the conference call by
telephone, dial 1-888-231-8191 (Toll-Free), 514-807-9895
(Montreal) or 647-427-7450
(Toronto).
A live audio webcast of the conference call will be available at
www.imvescor.ca/investor-relations/. A recording of the conference
call will be archived for replay by telephone until Tuesday, December 27, 2016 at midnight. To access
the archived conference call, dial 1-855-859-2056 (Toll-Free),
514-807-9274 (Montreal) or
416-849-0833 (Toronto) and enter
the reservation number 26204905.
About Imvescor Restaurant Group Inc. Imvescor
Restaurant Group Inc. is a dynamic and innovative organization in
the family and casual dining restaurant industry. The Company is a
franchise and licensing business that operates restaurants in
Eastern Canada under four banners:
Bâton Rouge®, operating in Québec, Ontario and Nova
Scotia in the casual dining segment, Pizza
Delight®, operating primarily in Atlantic Canada, in the family/mid-scale
segment, and Scores® and Toujours Mikes, operating primarily in
Québec in the family and casual dining segments and the take-out
and delivery segments. The Company also licenses to third parties
the right to manufacture and sell prepared food products under the
Bâton Rouge®, Pizza Delight®, Scores® and Toujours Mikes
brands and, through its wholly-owned subsidiary, Groupe Commensal
Inc., manufactures and sells vegetarian branded food products in
grocery stores and retail outlets under the Commensal®
brand.
Non-IFRS Measures and Financial Metrics: The
information contained in this press release includes some figures
that are not performance measures consistent with International
Financial Reporting Standards ("IFRS"). Because they do not
have a standardized meaning prescribed by IFRS, they may not be
comparable with similar measures presented by other
issuers.
"Operating EBITDA" is defined as EBITDA adjusted for the
following items: impairment or impairment reversal of non-current
assets, impairment or impairment reversal of IRG rights, gain or
losses on sale of property, plant and equipment, change in onerous
contract provisions, costs of special committee, shareholder
proposal costs, impairment of goodwill, bargain purchase gains,
reorganization costs, restaurant rejuvenation plan, gain or loss on
derivative financial liability and earnings or loss from
discontinued operations. The definition of Operating EBITDA can
change from time to time to account for unusual items or items not
considered to be consistent with the Company's normal recurring
operations.
"EBITDA" is defined as earnings or loss before interest income,
interest expense, depreciation and amortization and income tax
expense.
The Company uses EBITDA and Operating EBITDA because those
measures enable management to assess the Company's operational
performance and are financial indicators of the Company's ability
to service and incur debt. Those measures should not be considered
by an investor as an alternative to earnings, an indicator of
operating performance or cash flows, or as a measure of
liquidity. Refer to the Reconciliations of Non-IFRS Measures
section of this MD&A for more details.
"Free cash flow" is calculated as cash flows from operating
activities less cash used for the purchase of property, plant and
equipment and intangible assets.
"System Sales" is the aggregate sales achieved by all "Bâton
Rouge", "Pizza Delight", "Scores" and "Toujours Mikes" restaurants,
whether they are company-owned restaurants or franchised
restaurants. This performance measure indicates the Company's
overall growth and reflects the direct impact of restaurant
openings and closures, and temporary closures for renovations under
the restaurant rejuvenation plan (the "RRP").
"Same Restaurant Sales" or "SRS" is a metric used in the
restaurant industry to compare sales earned in established
locations over a certain period of time, such as a fiscal quarter,
for the current period against sales in the same period in the
previous year. SRS growth helps explain what portion of sales
growth can be attributed to growth in established locations. The
Company defines SRS as sales generated by restaurants that have
been open for at least one year compared to the sales from the same
group of restaurants in the comparable period. The Company
believes this is a meaningful measure of operating performance.
Cautionary Note Regarding Forward-Looking Statements
This press release contains "forward-looking statements" within
the meaning of applicable securities laws, including but not
limited to, the Company's business objectives, estimates, outlook,
strategies and priorities and all other statements other than
statements of historical facts. Forward-looking statements may
include estimates, intentions, plans, expectations, opinions,
forecasts, projections, guidance or other statements that are not
statements of fact. Forward-looking statements are often, but not
always, identified by the use of words such as "may", "should",
"would", "will", "expect", "plan", "anticipate", "believe",
"estimate", "predict", "potential, "targeting", "intend", "could",
"might", "continue", "outlook" or the negative of these terms or
other comparable terminology. All such forward-looking statements
are made pursuant to the "safe harbour" provisions of applicable
securities laws.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors outside of the Company's control. A
number of factors could cause the actual results of the Company to
differ materially from the results discussed in the forward-looking
statements, including, but not limited to: risks associated with
quality control, food borne illnesses and health concerns, the
Company's ability to respond to various competitive factors
affecting its operations, the success of the restaurant
rejuvenation plan, the Company's dependence on royalty stream,
franchise development and growth of the retail licensing
opportunities, changes in consumer preferences, adverse changes to
economic conditions, the Company's retail products dependence on
the strength of the Company's restaurant brands, the protection of
the Company's intellectual property, the Company's reliance on
suppliers and availability and quality of raw materials, the
Company's ability to retain certain key personnel, the Company's
ability to identify potential strategic acquisition candidates
and/or to complete a transaction, changes in the Company's
relationships with its franchisees, the Company's ability to open
new restaurants, the closure of restaurants, the impact of an
increase in Company-owned restaurants, the Company's ability to
renew leases and limit lease exposure, the risks associated with
negative publicity and its impact on the Company's reputation,
compliance with regulations governing confidentiality of guest
information, potential litigation and other complaints, compliance
with government regulations, the Company's dependence on third
parties, changes in laws concerning employees, changes in the
Company's relationships with its employees, the Company's ability
to ensure workplace safety, risks associated with franchise
regulations, compliance with regulations governing alcoholic
beverages, environmental risks and regulations, public safety
issues, the Company's dependence on technology, risks of
underreporting of sales by franchisees, inherent risks associated
with internal control over financing reporting, the indebtedness of
the Company and the restrictive covenants to which it is subject,
the impact of sales tax upon System Sales, the risk associated with
the Company's dividend policy, the impact of seasonality and other
factors on quarterly operating results, the risk of uninsured
losses, changes in commodity prices and other factors referenced in
the Company's Annual Information Form and the Company's other
continuous disclosure filings which are available on SEDAR at
www.sedar.com. These factors are not intended to represent an
exhaustive list of the factors that could adversely affect the
Company and its results but should, however, be considered
carefully.
Further, although the forward-looking statements contained
herein are based on information currently available to the
Company's management and on the current assumptions, intentions,
plans, expectations, estimates, opinions, forecasts, projections
and other assumptions made by the Company's management in light of
its experience and perception of historical trends, current
conditions and expected future developments (such as the Company's
future growth, results of operations, performance and opportunities
as well as the future of the economic environment in which it
operates), as well as other factors that the Company's management
believes are appropriate and reasonable in the circumstances and on
the date of this press release, there can be no assurance that such
assumptions, intentions, plans, expectations, estimates, opinions,
forecasts, projections and other assumptions will prove to be
correct or that actual results will not differ materially from
those anticipated in such forward-looking statements.
In particular, the forward-looking statements in this press
release include statements relating to IRG's expectations with
respect to the completion of the Ben & Florentine acquisition
and the timing thereof, IRG's ability to achieve the expected
benefit of the Ben & Florentine acquisition, the anticipated
impact of the Ben & Florentine acquisition on IRG business and
IRG outlook for the financial and operating performance of the Ben
& Florentine division.
Forward-looking statements are provided herein for the purpose
of assisting the Company's security holders in understanding its
current strategic priorities, expectations and plans, as well as
its financial position and results of operations as at and for the
periods ended on the date presented. Readers are cautioned,
however, that such information may not be appropriate for other
purposes and should not place undue reliance on the forward-looking
statements contained in this press release. The Company assumes no
obligation to update or revise such forward-looking statements to
reflect new information, future events or otherwise, except as
required by applicable securities laws. Except as otherwise
indicated, forward-looking statements do not reflect the potential
impact of any non-recurring or other special items or of any
transactions that may be announced or that may occur after the date
of this press release. The financial impact of these transactions
and non-recurring and other special items can be complex and
depends on the facts particular to each of them. The Company
therefore cannot describe the expected impact in a meaningful way
or in the same way it presents known risks affecting the business.
The Company's forward-looking statements are expressly qualified in
their entirety by this cautionary statement.
SOURCE Imvescor Restaurant Group Inc.