The Keg Royalties Income Fund (the “Fund”) (TSX: KEG.UN) is pleased
to announce its financial results for the three months ended
December 31, 2024 (the “quarter”) and the twelve months ended
December 31, 2024 (“YTD”).
HIGHLIGHTS
- Royalty Pool
Sales(1) down 7.1% to $188.2M for the quarter and down 3.0% to
$719.5M YTD
- Keg Restaurants
Ltd. (“KRL”) Average Sales per Operating Week(1) up 0.4% to
$140,000 for the quarter and down 0.8% to $132,000 YTD
- KRL Same Store
Sales(1) up 2.6% for the quarter and down 0.7% YTD
- Distributable
Cash(1) up 9.9% to $0.262/Fund unit for the quarter and up 7.7% to
$1.248/Fund unit YTD
- Special cash distribution of
$0.04/Fund unit declared on December 23, 2024, and was and paid on
January 31, 2025
- Payout Ratio(2) was 123.8% for
the quarter and 94.2% YTD
Royalty Pool Sales reported by the 105 Keg
restaurants in the Royalty Pool were $188,167,000 for the fourth
quarter of 2024, a decrease of $14,350,000 or 7.1% from the
comparable quarter of the prior year. The decrease in Royalty Pool
Sales during the fourth quarter of 2024 was primarily due to the
extra week of sales reported by KRL in the fourth quarter of 2023.
Year-to-date, Royalty Pool Sales decreased by $22,157,000, or 3.0%
to $719,541,000 due to the combination of the extra week of sales
reported by KRL in the year ended December 31, 2023, and the slight
decrease in Same Store Sales of 0.7% for the comparable 52-week
periods.
Royalty income decreased by $574,000 or 7.1%
from $8,101,000 in the three months ended December 31, 2023 to
$7,527,000 in the three months ended December 31, 2024. For the
twelve months of 2024, royalty income decreased by $886,000 or 3.0%
from $29,668,000 for the twelve months ended December 31, 2023 to
$28,782,000 for the twelve months ended December 31, 2024.
Distributable Cash available to pay
distributions to public unitholders increased by $268,000 from
$2,703,000 ($0.238/Fund unit) to $2,971,000 ($0.262/Fund unit) for
the quarter, and increased by $1,016,000 from $13,154,000
($1.159/Fund unit) to $14,170,000 ($1.248/Fund unit) year-to-date.
During the fourth quarter of 2024, distributions of $3,677,000
($0.324/Fund unit) were declared to Fund unitholders, compared to
$4,130,000 ($0.364/Fund unit) in the fourth quarter of 2023. During
2024, distributions of $13,343,000 ($1.175/Fund unit) were declared
to Fund unitholders, compared to $13,797,000 ($1.215/Fund unit)
during the 2023 fiscal year. The decrease of $0.04/Fund unit in
distributions declared to Fund unitholders for both the three and
twelve month comparable periods, is entirely due to the difference
between the $0.08/Fund unit special distribution declared in
December of 2023, compared to the $0.04/Fund unit special
distribution declared in December of 2024, as a result of KRL's
53rd week of operation in 2023.
In any reporting period, the Fund’s
Distributable Cash is affected, both positively and negatively, by
any changes in non-cash Working Capital Before Classification of
Class C and Exchangeable Partnership Units as Current Liabilities
balances recognized in that reporting period. The increase in the
Fund’s Distributable Cash in the fourth quarter of 2024, was
primarily attributable to the positive effects of changes in
non-cash operating Working Capital Before Classification of Class C
and Exchangeable Partnership Units as Current Liabilities balances
during the fourth quarter of 2024. The increase in the Fund’s
Distributable Cash in the twelve months of 2024, was primarily
attributable to the positive effects of changes in non-cash
operating Working Capital Before Classification of Class C and
Exchangeable Partnership Units as Current Liabilities balances
during the twelve months of 2024, as the incremental operating cash
flow associated with KRL's 53rd week of operation in the 2023
fiscal year was not received by the Fund until January 2024. The
Fund’s year ended December 31, 2024 included this extra week of
operating cash flow, thereby increasing Distributable Cash and
decreasing the year-to-date Payout Ratio.
The Payout Ratio was 123.8% for the fourth quarter of 2024 and
94.2% for the year.
The Fund remains financially well positioned
with cash on hand of $2,065,000 and a positive Working Capital
Before Classification of Class C and Exchangeable Partnership Units
as Current Liabilities balance of $2,627,000 as at December 31,
2024.
(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 financial results
of the Fund in the fourth quarter of 2024, despite the continued
challenges facing the full-service restaurant category” said Kip
Woodward, Chairman of the Fund. “Management continues their solid
focus on operating efficiencies and delivering the best guest
dining experience during these times of softening economic
conditions. We are heartened by our long-term guest loyalty which
we always endeavor to earn.”
“We are pleased with KRL’s sales performance
during the fourth quarter of 2024. Same store sales increased 2.6%
versus the comparable quarter of 2023. Our guests continue to trust
that they will receive a great experience each time they visit one
of our locations” said Nick Dean, President of KRL. “Throughout
2024, management focused on empowering our exceptionally talented
team of Keggers to deliver our promise of superior hospitality and
product quality for our guests. With this strategy firmly in place,
we expect guest demand for The Keg will continue to improve well
into 2025”, he concluded.
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 “System Sales”, "Royalty Pool", "Royalty
Pool Sales", "Same Store Sales", "Distributable Cash Before SIFT
Tax", "Distributable Cash", "Payout Ratio", “Operating Weeks”,
“Average Sales per Operating Week” and “Working Capital Before
Classification of Class C and Exchangeable Partnership Units as
Current Liabilities” 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.
"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.
"Royalty Pool" is a non-IFRS
supplementary financial measure representing a specific pool of Keg
restaurants for which System Sales is calculated, obligating KRL to
make monthly royalty payments to the Partnership equal to 4% of
these gross sales.
"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.
"Same Store Sales" is a
non-IFRS supplementary financial measure representing the overall
increase or decrease in gross sales from a group of Keg restaurants
(those restaurants that operated during the entire period of both
the current and prior years), compared to gross sales for the same
group of restaurants for the same period of the prior year.
"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 Before
Classification of Class C and Exchangeable Partnership Units as
Current Liabilities, plus the Specified Investment Flow-through
Trust tax ("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).
"Operating Weeks" is a non-IFRS
supplementary financial measure representing the number of weeks a
restaurant is open for in-store dining, without significant
capacity restrictions, during a respective period.
"Average Sales per Operating
Week" is a non-IFRS supplementary financial measure and is
defined as the sales generated by an average restaurant during
those operating weeks when restaurants were fully open for in-store
dining, during a respective period. This metric is calculated by
dividing total System Sales for any financial period by the total
Operating Weeks open during the same financial period.
"Working Capital Before Classification
of Class C and Exchangeable Partnership Units as Current
Liabilities" is a non-IFRS supplementary financial measure
and is defined as the Fund's current assets less current
liabilities before Class C and Exchangeable Partnership units. The
Fund believes this metric provides useful information to readers as
Working Capital Before Classification of Class C and Exchangeable
Partnership Units as Current Liabilities represents the Fund’s
current working capital amounts expected to be settled for cash
within the next twelve months.
FINANCIAL HIGHLIGHTS
|
|
|
Three months ended |
|
Twelve months ended |
|
|
|
|
December 31, |
|
|
|
December 31, |
|
|
|
December 31, |
|
|
|
December 31, |
|
| ($000's
expect per unit amounts) |
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
| Restaurants in the
Royalty Pool |
|
|
105 |
|
|
|
107 |
|
|
|
105 |
|
|
|
107 |
|
| Royalty Pool
Sales |
|
$ |
188,167 |
|
|
$ |
202,517 |
|
|
$ |
719,541 |
|
|
$ |
741,698 |
|
| Royalty income (1) |
|
$ |
7,527 |
|
|
$ |
8,101 |
|
|
$ |
28,782 |
|
|
$ |
29,668 |
|
| Interest income (2) |
|
|
1,091 |
|
|
|
1,106 |
|
|
|
4,361 |
|
|
|
4,383 |
|
| Total
income |
|
$ |
8,618 |
|
|
$ |
9,207 |
|
|
$ |
33,143 |
|
|
$ |
34,051 |
|
| Administrative expenses
(3) |
|
|
(122 |
) |
|
|
(106 |
) |
|
|
(468 |
) |
|
|
(480 |
) |
| Interest and financing
expenses (4) |
|
|
(224 |
) |
|
|
(268 |
) |
|
|
(1,002 |
) |
|
|
(1,028 |
) |
| Operating
income |
|
$ |
8,272 |
|
|
$ |
8,833 |
|
|
$ |
31,673 |
|
|
$ |
32,543 |
|
| Distributions to KRL (5) |
|
|
(3,398 |
) |
|
|
(3,572 |
) |
|
|
(13,134 |
) |
|
|
(13,414 |
) |
| Profit before fair
value gain (loss) and income taxes |
|
$ |
4,874 |
|
|
$ |
5,261 |
|
|
$ |
18,539 |
|
|
$ |
19,129 |
|
| Fair value gain (loss)
(6) |
|
|
1,526 |
|
|
|
(2,616 |
) |
|
|
(5,123 |
) |
|
|
11,119 |
|
| Income tax recovery (expense)
(7) |
|
|
(1,337 |
) |
|
|
(1,439 |
) |
|
|
(4,992 |
) |
|
|
(5,091 |
) |
| Profit (loss) and
comprehensive income (loss) |
|
$ |
5,063 |
|
|
$ |
1,206 |
|
|
$ |
8,424 |
|
|
$ |
25,157 |
|
| Distributable Cash
Before SIFT Tax |
|
$ |
4,287 |
|
|
$ |
4,107 |
|
|
$ |
19,137 |
|
|
$ |
18,260 |
|
| Distributable
Cash |
|
$ |
2,971 |
|
|
$ |
2,703 |
|
|
$ |
14,170 |
|
|
$ |
13,154 |
|
| Distributions to Fund
unitholders (8) |
|
$ |
3,677 |
|
|
$ |
4,130 |
|
|
$ |
13,343 |
|
|
$ |
13,797 |
|
| Payout
Ratio |
|
|
123.8 |
% |
|
|
152.8 |
% |
|
|
94.2 |
% |
|
|
104.9 |
% |
| |
|
|
|
|
|
|
|
|
| Per Fund unit information
(9) |
|
|
|
|
|
|
|
|
| Profit before fair value gain
(loss) and income taxes |
|
$ |
0.429 |
|
|
$ |
0.463 |
|
|
$ |
1.633 |
|
|
$ |
1.685 |
|
| Profit (loss) and
comprehensive income (loss) |
|
$ |
0.446 |
|
|
$ |
0.106 |
|
|
$ |
0.742 |
|
|
$ |
2.216 |
|
| Distributable Cash
Before SIFT Tax |
|
$ |
0.378 |
|
|
$ |
0.362 |
|
|
$ |
1.686 |
|
|
$ |
1.608 |
|
| Distributable
Cash |
|
$ |
0.262 |
|
|
$ |
0.238 |
|
|
$ |
1.248 |
|
|
$ |
1.159 |
|
| Distributions to Fund
unitholders (8) |
|
$ |
0.324 |
|
|
$ |
0.364 |
|
|
$ |
1.175 |
|
|
$ |
1.215 |
|
| |
|
|
|
|
|
|
|
|
|
Notes: |
|
(1) |
|
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. |
| (2) |
|
The Fund directly earns interest income on the $57.0 million loan
to KRL (the “Keg Loan”), with interest income accruing at 7.5% per
annum, payable monthly. |
| (3) |
|
The Fund, indirectly through the Partnership, incurs administrative
expenses and interest on the operating line of credit, to the
extent utilized. |
| (4) |
|
The Fund, indirectly through The Keg Holdings Trust (“KHT”), incurs
interest expense on the $14.0 million term loan and amortization of
deferred financing charges. |
| (5) |
|
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. |
| (6) |
|
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. |
| (7) |
|
Income taxes include the 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. |
| (8) |
|
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. |
| (9) |
|
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 twelve
months ended December 31, 2024 were 11,353,500 (three and twelve
months ended December 31, 2023 – 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.
With approximately 10,000 employees, over 100
restaurants and annual System Sales exceeding $700 million,
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 the number one restaurant company to work for in
Canada in the latest edition of Forbes "Canada's Best Employers
2025" survey.
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.
For further information, contact:
Investor Relations
Tel: (604) 276-0242
investorrelations@kegrestaurants.com
https://www.thekeg.com/en/keg-income-fund
