Diversified Royalty Corp. (TSX: DIV and DIV.DB) (the
“Corporation” or “DIV”) is pleased to announce the preliminary
results for its royalty partners for the three months ended
December 31, 2021 (“Q4 2021”).
Mr. Lube Fourth Quarter Results
Mr. Lube Canada Limited Partnership (“Mr. Lube”)
generated same-store-sales-growth (“SSSG”) of 20.7% for the Mr.
Lube stores in the royalty pool for Q4 2021, compared to SSSG of
1.1% for the three months ended December 31, 2020 (“Q4 2020”). Mr.
Lube generated SSSG of 15.8% for the Mr. Lube stores in the royalty
pool for the twelve months ended December 31, 2021, compared to
SSSG of -4.4% for the twelve months ended December 31, 2020. Mr.
Lube generated SSSG of 21.5% and 10.4% for the Mr. Lube stores in
the royalty pool for the three months and year ended December 31,
2021, respectively, compared to the same periods in 2019. As
government restrictions put in place to fight the COVID-19 pandemic
relaxed in 2021 compared to 2020 and Canadians drove more, Mr. Lube
experienced favorable trends in its business.
DIV expects to report that aggregate royalty
income and management fees of $5.8 million were generated from Mr.
Lube in Q4 2021, an increase of 38% compared to Q4 2020. The
increase in royalty income and management fees was primarily due to
the increase in SSSG for Q4 2021, the addition of 13 new stores to
the Mr. Lube royalty pool and the 0.5% increase to the Mr. Lube
royalty rate on May 1, 2021.
Same-store-sales growth or SSSG is a non-IFRS
measure – see “Non-IFRS Measures” below.
AIR MILES® Fourth Quarter Results
Loyalty Ventures Inc. (“LoyaltyVentures”), the
parent company of LoyaltyOne Co. (“LoyaltyOne”), issued a news
release earlier today regarding the Q4 2021 and year ended December
31, 2021 performance of the AIR MILES® reward program announcing
that: (i) AIR MILES® reward miles issued decreased by 6.7% in Q4
2021 and 5.9% for the year ended December 31, 2021, due to the
non-renewal of two sponsors and their exit from the program in the
first quarter of 2021; (ii) AIR MILES® reward miles redeemed
increased by 27.8% in Q4 2021 and 12.1% for the year ended December
31, 2021, reflecting continued strength in the merchandise category
and positive momentum early in the quarter for travel bookings,
before the emergence of the Omicron variant in November 2021.
DIV expects to report that royalty income of
$1.8 million was generated from the AIR MILES® licenses in Q4 2021,
a decrease of $0.2 million (8.7%) compared to Q4 2020. For the year
ended December 31, 2021, DIV expects to report royalty income of
$6.6 million, a decrease of $0.5 million (6.5%) compared to the
year ended December 31, 2020. DIV’s royalty payment is derived from
several AIR MILES® metrics, with AIR MILES® reward miles issued
being the primary metric, and other metrics including AIR MILES®
reward miles redeemed, service revenue, commissions and promotional
items, all of which affect quarterly variability.
Sutton Fourth Quarter Results
DIV expects to report royalty income and
management fees of $1.1 million were generated from Sutton Group
Realty Services Ltd. (“Sutton”) in Q4 2021, compared to $1.0
million in Q4 2020. Since June 2020, DIV has been collecting 100%
of the fixed royalty and management fee payments from Sutton. The
fixed royalty payable by Sutton increases at a rate of 2.0% per
year, with the most recent increase effective July 1, 2021.
Oxford Learning Centres Fourth Quarter
Results
DIV expects to report that royalty income and
management fees of $1.0 million were generated from Oxford Learning
Centres, Inc. (“Oxford”) in Q4 2021, compared to $0.9 million in Q4
2020.
Oxford locations in the Oxford royalty pool
generated SSSG (on a constant currency basis) of 14.0% in Q4 2021,
compared to SSSG of -23% in Q4 2020. Oxford’s SSSG for the year
ended December 31, 2021 was 9.5%, compared to -26% for the period
from February 20, 2020, the acquisition date of the Oxford Rights,
to December 31, 2020. Oxford locations in the Oxford royalty pool
generated SSSG (on a constant currency basis) of -11.7% and -13.4%
for the three months and year ended December 31, 2021 compared to
the same periods in 2019 (on a pro forma basis, had the Oxford
transaction closed on January 1, 2019). In 2020, Oxford’s SSSG was
negatively impacted by the COVID-19 pandemic, which resulted in the
temporary suspension of in-centre services at a majority of its
locations predominantly in Ontario, its largest market. In 2021,
government-mandated COVID restrictions began to relax, and Oxford
saw a transition back to in-person tutoring for many locations.
However ongoing capacity constraints, predominantly in Ontario,
continue to limit in-person services.
Mr. Mikes Fourth Quarter Results
The majority of Mr. Mikes Restaurants
Corporation (“Mr. Mikes”) restaurants have been open for
in-restaurant dining at a reduced capacity since mid-June 2021.
Overall, SSSG in Q4 2021 for the Mr. Mikes restaurants in the
royalty pool, including stores that were temporarily closed due to
the COVID-19 pandemic, was 9.3% compared to Q4 2020 and -26.4%
compared to Q4 2019. SSSG for the year ended December 31, 2021 for
the Mr. Mikes restaurants in the royalty pool was 6.2% compared to
the year ended December 31, 2020 and -28.4% compared to the year
ended December 31, 2019.
DIV expects to report that royalty income and
management fees of $1.0 million were generated from Mr. Mikes in Q4
2021, compared to $0.8 million in Q4 2020. DIV granted royalty and
management fee relief to Mr. Mikes in connection with the COVID-19
pandemic, collecting 81% of the contractual royalty amount for the
year ended December 31, 2021 and 46% for the year ended December
31, 2020. The management team at Mr. Mikes continues to expect a
protracted recovery.
DIV is in discussions with Mr. Mikes and its
lender regarding additional royalty and management fee relief for
Mr. Mikes, which DIV expects may be required until such time as all
government restrictions impacting the operation of Mr. Mikes
restaurants are lifted and the business stabilizes.
Nurse Next Door Fourth Quarter Results
DIV expects to report that the royalty
entitlement to DIV (the “DIV Royalty Entitlement”) from Nurse Next
Door Professional Homecare Services Inc. (“Nurse Next Door”) was
$1.2 million in Q4 2021. The DIV Royalty Entitlement from Nurse
Next Door grows at a fixed rate of 2.0% per annum during the term
of the license, with the most recent increase effective October 1,
2021. During the year ended December 31, 2021, Nurse Next Door
signed 113 (2020 – 28) new franchises primarily in major
metropolitan markets (34 in Canada, 60 in the US and 19 in
Australia). Nurse Next Door continues to make its fixed royalty
payment to DIV in full, which DIV expects will continue.
DIV Royalty Entitlement is a non-IFRS measure –
see “Non-IFRS Measures” below.
Fourth Quarter Commentary
Sean Morrison, President and Chief Executive
Officer of DIV stated, “Overall, we are happy with the performance
of our royalty partners as they work their way through the ongoing
impacts of COVID-19. As with any portfolio, there is variability of
financial performance within the group. Fortunately for DIV, our
largest royalty partner, Mr. Lube, is thriving having reported
20.7% SSSG for the fourth quarter without customer traffic having
recovered to pre-COVID levels. Our other variable royalty partners,
Air Miles and Oxford Learning, continue to be challenged by the
impacts of COVID-19, however, we believe Oxford is poised for a
strong recovery when COVID-19 related restrictions, primarily in
Ontario, are loosened. With respect to our fixed royalty partners,
Sutton and Nurse Next Door’s businesses continue to support their
fixed growth royalties while Mr. Mike’s business, which had
previously returned to virtually pre-COVID levels in the summer,
has been negatively impacted by ongoing capacity and other COVID-19
restrictions, such as vaccine passport mandates, and therefore will
continue to require royalty relief.”
About Diversified Royalty Corp.
DIV is a multi-royalty corporation, engaged in
the business of acquiring top-line royalties from well-managed
multi-location businesses and franchisors in North America. DIV’s
objective is to acquire predictable, growing royalty streams from a
diverse group of multi-location businesses and franchisors.
DIV currently owns the Mr. Lube, AIR MILES®,
Sutton, Mr. Mikes, Nurse Next Door and Oxford Learning Centres
trademarks. Mr. Lube is the leading quick lube service business in
Canada, with locations across Canada. AIR MILES® is Canada’s
largest coalition loyalty program with approximately two-thirds of
Canadian households actively participating in the AIR MILES®
Program. Sutton is among the leading residential real estate
brokerage franchisor businesses in Canada. Mr. Mikes currently
operates casual steakhouse restaurants primarily in western
Canadian communities. Nurse Next Door is one of North America’s
fastest growing home care providers with locations across Canada
and the United States as well as in Australia. Oxford Learning
Centres is one of Canada’s leading franchised supplemental
education services in Canada and the United States.
DIV intends to increase cash flow per share by
making accretive royalty purchases and through the growth of
purchased royalties. DIV expects to pay a predictable and stable
dividend to shareholders and increase the dividend as cash flow per
share increases allow.
Forward Looking Statements
Certain statements contained in this news
release may constitute “forward-looking information” or “financial
outlook” within the meaning of applicable securities laws that
involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements to
be materially different from any future results, performance or
achievements expressed or implied by such forward-looking
information or financial outlook. The use of any of the words
“anticipate”, “continue”, “estimate”, “expect”, “intend”, “may”,
“will”, ”project”, “should”, “believe”, “confident”, “plan” and
“intend” and similar expressions are intended to identify
forward-looking information and financial outlook, although not all
forward-looking information and financial outlook contain these
identifying words. Specifically, forward-looking information and
financial outlook in this news release includes, but is not limited
to, statements made in relation to: the expected financial results
of Mr. Lube, Nurse Next Door, Sutton, Mr. Mikes and Oxford for Q4
2021 and the amount of royalty income expected to be reported by
DIV as having been generated from the AIR MILES licenses during
this period; ongoing capacity constraints, predominantly in
Ontario, continuing to limit in-person services for Oxford; Mr.
Mikes’ expectation that it will continue to experience a protracted
recovery; DIV’s expectation that Mr. Mikes may require additional
royalty relief until such time as all government restrictions
impacting the operation of Mr. Mikes restaurants are lifted and the
business stabilizes; DIV’s expectation that Nurse Next Door will
continue to make its fixed royalty payments in full; DIV’s belief
that Oxford is posed for a strong recovery when COVID-19 related
restrictions, primarily in Ontario, are loosened; DIV’s intention
to pay monthly dividends to shareholders; and DIV’s corporate
objectives. These statements involve known and unknown risks,
uncertainties and other factors that may cause actual results or
events, performance, or achievements of DIV to differ materially
from those anticipated or implied by such forward-looking
information and financial outlook. DIV believes that the
expectations reflected in the forward-looking information and
financial outlook included in this news release are reasonable but
no assurance can be given that these expectations will prove to be
correct. In particular, risks and uncertainties include: the
financial results of DIV and its royalty partners may not be
consistent with the preliminary results set forth herein; DIV’s
royalty partners may not make their respective royalty payments to
DIV, in whole or in part; DIV’s royalty partners may request
further royalty relief; COVID-19 may have a more significant
negative impact on DIV and its royalty partners (including their
respective franchisees) than currently expected and the businesses
of DIV’s royalty partners (and their respective franchisees) may
not fully recover following the relaxation of government
restrictions or post vaccinations; current improvement trends being
experienced by certain of DIV’s royalty partners (and their
respective franchisees) may not continue and may regress; royalty
partner locations that are temporarily closed may not reopen; the
rates of recovery for DIV’s royalty partners will be dependent
upon, among other things, the availability and effectiveness of
vaccines for the COVID-19 virus, government responses, rates of
economic recovery, precautionary measures taken by consumers and
the rate at which government restrictions will be lifted or
meaningfully relaxed; DIV may not be able to make monthly dividend
payments to the holders of its common shares; dividends are not
guaranteed and may be reduced, suspended or terminated at any time;
or DIV may not achieve any of its corporate objectives. Given these
uncertainties, readers are cautioned that forward-looking
information and financial outlook included in this news release are
not guarantees of future performance, and such forward-looking
information and financial outlook should not be unduly relied upon.
More information about the risks and uncertainties affecting DIV’s
business and the businesses of its royalty partners can be found in
the “Risk Factors” section of its Annual Information Form dated
March 11, 2021 and in DIV’s most recently filed management’s
discussion and analysis, copies of which are available under DIV’s
profile on SEDAR at www.sedar.com.
In formulating the forward-looking information
and financial outlook contained herein, management has assumed that
DIV will generate sufficient cash flows from its royalties to
service its debt and pay dividends to shareholders; lenders will
provide any necessary waivers required in order to allow DIV to
continue to pay dividends; the impacts of COVID-19 on DIV and its
royalty partners (including their respective franchisees) will be
consistent with DIV’s expectations and the expectations of
management of each of its Royalty Partners, both in extent and
duration; DIV and its royalty partners (including their respective
franchisees) will be able to reasonably manage the impacts of the
COVID-19 pandemic on their respective businesses; vaccination
programs will be successful and vaccines effective, and the
expected positive impacts thereof on DIV and the businesses of its
royalty partners (including their respective franchisees) will be
consistent with DIV’s expectations; the performance of DIV’s
royalty partners will be consistent with DIV’s and its royalty
partners’ respective expectations; recent positive trends for
certain of DIV’s royalty partners (including their respective
franchisees) will continue and not regress. These assumptions,
although considered reasonable by management at the time of
preparation, may prove to be incorrect.
To the extent any forward-looking information or
statements in this news release constitute a “financial outlook”
within the meaning of applicable securities laws, such information
is being provided to investors to ensure they receive timely
disclosure of material financial information with respect to the
financial performance of the Corporation and its royalty partners
prior to the completion of year end audits.
All of the forward-looking information and
financial outlook in this news release is qualified in its entirety
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, DIV. The forward-looking
information and financial outlook included in this news release is
presented as of the date of this news release and DIV assumes no
obligation to publicly update or revise such information to reflect
new events or circumstances, except as may be required by
applicable law.
Non-IFRS Financial Measures
Management believes that disclosing certain
non-IFRS financial measures provides readers with important
information regarding the Corporation’s financial performance and
its ability to pay dividends and the performance of its royalty
partners. By considering these measures in combination with the
most closely comparable IFRS measure, management believes that
investors are provided with additional and more useful information
about the Corporation and its royalty partners than investors would
have if they simply considered IFRS measures alone. The non-IFRS
financial measures do not have standardized meanings prescribed by
IFRS and therefore are unlikely to be comparable to similar
measures presented by other issuers. Investors are cautioned that
non-IFRS measures should not be construed as a substitute or an
alternative to cash flows from operating activities as determined
in accordance with IFRS.
“DIV Royalty Entitlement”, and “Same Store Sales
Growth” or “SSSG” are used as non-IFRS measures in this news
release. The DIV Royalty Entitlement is being reported to allow
readers to assess the performance of DIV’s royalty arrangements
with Nurse Next Door on a basis consistent with the royalties
received from DIV’s other royalty partners. Under IFRS, DIV is
required to record its investment in the Nurse Next Door trademarks
and other intellectual property as a financial instrument and the
income earned from this investment as finance income, which does
not allow for a direct comparison of the income received from this
investment to the royalties received from DIV’s other royalty
partners, which attract different treatment under IFRS. The most
closely comparable IFRS measure to DIV Royalty Entitlement is
“distributions received from NND LP”; however, DIV Royalty
Entitlement should not be considered a substitute for IFRS
measures. DIV Royalty Entitlement is calculated as distributions
received from NND LP, before any deduction for expenses incurred by
NND Holdings Limited Partnership (“NND LP”), which expenses include
legal, audit, tax and advisory services. Note that distributions
received from NND LP is derived from the royalty paid by Nurse Next
Door to the Corporation’s indirect subsidiary NND Royalties Limited
Partnership. A reconciliation of the DIV Royalty Entitlement to
distributions received from NND LP for Q4 2021 (unaudited) is
included below. References to “same store sales growth” or “SSSG”
in this news release are to the percentage increase in store sales
over the prior comparable period that were open in both the current
and prior periods, excluding stores that were permanently closed.
Same store sales growth is a non-IFRS financial measure and does
not have a standardized meaning prescribed by IFRS and is not
comparable or reconcilable to any IFRS measure included in the
Corporation’s financial statements. However, the Corporation
believes that same store sales growth is a useful measure as it
provides investors with an indication of the change in
year-over-year sales of Mr. Lube locations, Mr. Mikes restaurants
and Oxford locations. The Corporation’s method of calculating same
store sales growth may differ from those of other issuers or
companies and, accordingly, same store sales growth may not be
comparable to similar measures used by other issuers or companies.
In addition, see the “Description of Non-IFRS and Additional IFRS
Measures” in DIV’s most recently filed management’s discussion and
analysis, a copy of which is available on SEDAR at
www.sedar.com.
The following table reconciles DIV Royalty
Entitlement to the most directly comparable IFRS measures disclosed
in the financial statements.(Unaudited)
|
|
Three months ended December 31, |
|
Years ended December 31, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
Distributions received from NND LP |
|
$ |
1,238 |
|
|
$ |
1,219 |
|
|
$ |
4,906 |
|
|
$ |
4,588 |
|
Plus: NND LP expenses |
|
|
4 |
|
|
|
8 |
|
|
|
19 |
|
|
|
248 |
|
DIV Royalty Entitlement |
|
$ |
1,242 |
|
|
$ |
1,227 |
|
|
$ |
4,925 |
|
|
$ |
4,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Party Information
This news release includes information obtained
from third party company filings and reports and other publicly
available sources as well as financial statements and other reports
provided to DIV by its Royalty Partners. Although DIV believes
these sources to be generally reliable, such information cannot be
verified with complete certainty. Accordingly, the accuracy and
completeness of this information is not guaranteed. DIV has not
independently verified any of the information from third party
sources referred to in this news release nor ascertained the
underlying assumptions relied upon by such sources.
THE TORONTO STOCK EXCHANGE HAS NOT
REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR THE
ACCURACY OF THIS RELEASE.
Additional Information
Additional information relating to the
Corporation and other public filings, is available on SEDAR at
www.sedar.com.
Contact:Sean Morrison, President and Chief
Executive OfficerDiversified Royalty Corp. (236) 521-8470
Greg Gutmanis, Chief Financial Officer and VP
Acquisitions Diversified Royalty Corp. (236) 521-8471
Diversified Royalty (TSX:DIV.DB)
Historical Stock Chart
From Sep 2024 to Oct 2024
Diversified Royalty (TSX:DIV.DB)
Historical Stock Chart
From Oct 2023 to Oct 2024