After a Strong Start to the Year Marked by Growth and Profitability, Sportscene Group Implements Measures to Deal with the COVID-19 Crisis

MONTREAL, May 7, 2020 /CNW Telbec/ - Sportscene Group Inc. ("Sportscene" or "the Company") (TSXV: SPS.A) today announces its financial results for the second quarter of fiscal 2020 which ended on February 23, 2020, before the start of the crisis related to the COVID-19 pandemic.

Financial Highlights of the Second Quarter of Fiscal 2020

• 17.3% increase in consolidated revenues to $34.7 million;
• 34.3% improvement in net income, amounting to $0.7 million or $0.09 per share (basic and diluted);
• 67.1% increase in consolidated adjusted EBITDA⁽³⁾, to $4.1 million, and 21.5% when excluding the effect of the adoption of IFRS 16, to $3.0 million;
• 36.1% increase in operating cash flows, amounting to $4.9 million.

"Following on the momentum of the last three years, our second quarter financial results have performed very well. We recorded an increase in total restaurant sales, which supported profitability growth. In addition, grocery store sales of our La Cage and Moishes products now represent almost 15% of our consolidated revenues and this segment continues to grow," said Jean Bédard, President and CEO of Sportscene Group.

"Although our sales are significantly lower since the start of the pandemic, the recent diversification measures that we implemented are allowing us to serve a portion of our customers. As of today, one third of our restaurants are still offering delivery and takeout orders. With a strong balance sheet at the end of the second quarter and the recently deployed cash preservation measures, we are therefore in a position to maintain a certain financial health for the duration of the pandemic," mentioned Mr. Bédard.

Necessary Measures to Deal with the Effects of the COVID-19 Pandemic

"Over the last few years, we expanded our distribution networks and the arrival of the crisis will certainly accelerate the transformation of our business model. We are already working to adapt our restaurant offering to meet our consumers' changing reality and to develop new channels that will allow us to reach our customers beyond our dining rooms," added Mr. Bédard.

"In addition, we must continue to show solidarity and support our employees and the community. This is why we deployed several mitigation measures to reduce the impact of this unprecedented crisis. We are already working on preparing our operations so that we can be in a good position to restart all of our restaurant activities when the time comes," concluded Mr. Bédard.

Since the start of the COVID-19 pandemic, the Company put in place various cash preservation measures, including:

• Obtained capital payment holidays on most of its debt and extended terms until 2023;
• Drew down $5 million in cash from its available credit facility;
• Renegotiated payment terms with the majority of suppliers;
• Analyzed all available government programs and took the first steps to access them;
• Initiated discussions with lessors regarding rent payments;
• Temporarily suspended renovation and technological development activities;
• Important reduction of the total payroll;
• Temporarily suspended the remuneration of the President and of the Members of the Board of Directors.

Financial Performance for the 13-Week Period Ended February 23, 2020

During the second quarter of fiscal 2020, total restaurant sales⁽¹⁾ reached $38.5 million, representing a growth rate of 8.4% over the equivalent period of fiscal 2019. This performance is entirely attributable to an increase in average same-restaurant sales⁽²⁾ since a lower number of restaurants were in operation in comparison to the equivalent period of last year.

Consolidated revenues during the second quarter of fiscal 2020 increased by $5.1 million or 17.3%, to $34.7 million. This progression comes equally from the contribution of the increase in restaurant activities, which reached $25.2 million, up $2.4 million, and the growth of retail sales, which grew by $2.4 million to reach $5.5 million. Retail sales now account for 15.8% of consolidated sales, up from 10.4% of sales during the comparable period. This progression is attributable to efforts dedicated to growing this segment by expanding the range of products offered and distribution channels. Revenues from franchising activities remained stable and revenues from other activities slightly increased.

Sportscene's consolidated adjusted EBITDA⁽³⁾ increased by 67.1% to $4.1 million. Excluding the effect of the adoption of IFRS 16 – Leases ("IFRS 16")⁽⁵⁾, the comparable adjusted EBITDA⁽³⁾ stood at $3.0 million, representing an increase of 21.5% when compared to the equivalent period of 2019. The improvement in profitability results entirely from the growth of restaurant activities.

Sportscene ended the second quarter of 2020 with net earnings of $0.7 million or $0.09 per share (basic and diluted), representing an increase of $0.2 million or $0.02 per share (basic and diluted) from the corresponding period of last year when net earnings amounted to $0.5 million or $0.07 per share⁽⁴⁾ (basic and diluted).

Financial Performance for the 26-Week Period Ended February 23, 2020

During the first semester of fiscal 2020, total restaurant sales⁽¹⁾ grew by $7.2 million, or 10.4%, to reach $77.0 million, primarily resulting from an increase in average same-restaurant sales⁽²⁾.

Consolidated revenues increased by $15.5 million, or 27.0%, to $73.1 million. This performance comes from all business sectors of the Company, with the highest contribution coming from restaurant activities, with revenues up by $8.2 million, or 18.9%. Revenues from retail activities grew by $5.4 million, or 107.1%, from the expansion of the range of products offered and distribution channels, and from the acquisition of Moishes which occurred during the second quarter of fiscal 2019. Revenues from franchising activities grew by $1.1 million, or 22.8%, from the renovation of restaurants held by franchisees, while revenues from other activities grew by $0.8 million, or 19.5%, resulting from catering activities.

Sportscene's cumulative consolidated adjusted EBITDA⁽³⁾ increased by 62.6% to $9.0 million. Excluding the effect of the adoption of IFRS 16⁽⁵⁾, the cumulative adjusted EBITDA⁽³⁾ stood at $6.7 million, representing an increase of 20.9% when compared to the equivalent period of fiscal 2019. This improvement in profitability results entirely from the growth of restaurant activities.

For the cumulative period, net earnings stood at $2.4 million or $0.29 per basic share ($0.28 diluted), representing an increase of $0.9 million or $0.10 per basic share ($0.09 per diluted share) from the first half of the last fiscal year when net earnings amounted to $1.6 million or $0.19 per share⁽⁴⁾ (basic and diluted).

Cash and Financial Strength

During the first semester, excluding the impact of the adoption of IFRS 16⁽⁵⁾, operating activities provided operating cash flows of $4.9 million, an increase compared with $3.6 million during the same period of last year and the total net debt to invested capital ratio stands at 32.6%. As at February 23, 2020, the Company had available liquidities of up to $16.3 million from its revolving credit facility.

After the end of the second quarter, the Company drew an additional $5.0 million on its credit facility to increase available cash as the Company was preparing to deal with any potential unexpected outcome resulting from this pandemic. As an additional measure in response to current events, the maturity of the credit facility was postponed to June 2023. Also, capital repayment holidays were obtained for a duration of six months for almost all of the financing agreements of the Company.

Suspension of Dividends for Fiscal 2020

The Board of Directors' practice in this matter is to assess, on a timely basis, the relevance of paying dividends in light of market conditions, the Company's financial position and working capital requirements, as well as the achievement of performance indicators in line with management's objectives.

Considering the recent developments affecting the restaurant industry and the Company's desire to preserve its cash, no dividend will be declared before the end of the current fiscal year.

Outlook and Objectives for Fiscal 2020

After successfully completing the repositioning of the La Cage – Brasserie sportive banner, the Company developed new expansion avenues, optimized its main banner to extract additional value and completed the modernization of most of its restaurants. These measures sustained significant revenue and profitability growth over the recent years.

The recent events affecting the restaurant industry and the entire population will have an impact on the Company's activities, projects, revenues, operating results, cash and debt levels. So far, this resulted notably in extreme volatility in the financial markets and in commodity prices, as well as a significant reduction in general economic activity, which in many cases led to prolonged business closures and severe supply chain disruptions. In fact, the pandemic is already affecting Sportscene's logistics and supply chains, which in turn could affect the Company. Although the outlook for the remainder of 2020 remains very difficult to predict, the Company has already implemented several measures allowing it to maintain a certain level of activity while adjusting its expenses to preserve cash. Depending on the duration of this epidemic and the additional measures that can be implemented, Sportscene's primary objective is to be in the best possible position to quickly restart its activities when conditions will allow it.

"We are currently working with the entire industry and government authorities to ensure the safe and sustainable recovery of the restaurant sector. Together, we will have to overcome several challenges, including the solidity of our supply chain, the need to have a clear reopening schedule, the deployment of new sanitary measures that do not affect the customer's experience and ensure that our businesses, entrepreneurs and employees that are affected are adequately supported," concluded Mr. Bédard.

Disclaimer

This press release contains forward-looking statements relating to the Company. Statements based on management's current expectations contain known and unknown inherent risks and uncertainties, including risks associated with public health issues such as those resulting from the COVID-19 pandemic. Actual results may vary from expectations. The reader is cautioned not to place undue reliance on forward-looking information. The Company does not undertake any obligation to update or revise any forward-looking statements as a result of new information, future events and other changes, except if required by applicable laws.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Profile

Sportscene Group Inc. is a pioneer and a leader in the ambiance restaurant niche in Quebec. Since 1984, it has been operating the restaurant chain La Cage – Brasserie sportive (« La Cage »), which differentiates itself by its sporting ambiance and food offering made from fresh, local products. Enjoying a strong brand image, the La Cage banner is present throughout the province and comprises 41 outlets at the date hereof. Sportscene is diversifying its restaurant activities through its operation of the Moishes steakhouse, of a breakfast restaurant L'Avenue, of an Asian cuisine restaurant P.F. Chang's and of its catering business for special events, thus becoming a significant player in Quebec's restaurant industry. Besides its restaurant operations, Sportscene is active in the sale of La Cage and Moishes branded products in grocery stores and of ready-to-eat meals.

Non-IFRS Measures

The following measures used by the Company are not measures consistent with International Financial Reporting Standards ("IFRS"):

1. Total restaurant sales correspond to sales made by all restaurants operating under the Company's various banners whether corporate, joint venture or franchised.
2. Average same-restaurant sales isolate the effect of restaurant openings and closures in order to assess the real evolution of restaurant sales.
3. Consolidated adjusted EBITDA corresponds to "Earnings before financial expenses, amortization, share of net income of joint ventures and income tax", from which other (gains) losses are excluded and to which is added the share of earnings before financial expenses, amortization and income tax of joint ventures.
4. Earnings per share and the weighted average number of shares reflect, on a retroactive basis, the two-for-one stock split effected on February 8, 2019.
5. For comparative purposes with the financial information for fiscal year 2019, the figures presented excluding the impact of IFRS 16 have been calculated as if the Company was still applying IAS 17 for fiscal 2020 and that it had not adopted IFRS 16.

Reconciliation of Non-IFRS Financial Measures
(in thousands of $)
(unaudited)
	13-Week Periods Ended		26-Week Periods Ended
	February 23, 2020	February 24, 2019	February 23, 2020	February 24, 2019
Restaurant revenues – La Cage^(1)	22,691	19,667	46,420	38,478
Restaurant revenues – Other banners^(1)	2,518	3,112	5,369	5,085
Sales generated by franchises and joint ventures	13,287	12,742	25,202	26,201
Total restaurant sales	38,496	35,521	76,991	69,764
Income before financial expenses, amortization, net income of joint ventures and income taxes	3,531	2,178	8,742	4,871
Other losses (gains)	173	(128)	(310)	(129)
Earnings before financial expenses, amortization and income taxes of joint ventures^(2)	392	401	606	816
Consolidated adjusted EBITDA	4,096	2,451	9,038	5,558
Impact of IFRS 16	(1,118)	-	(2,321)	-
Consolidated adjusted EBITDA excluding the impact of IFRS 16	2,978	2,451	6,717	5,558

^(1)	Restaurant revenue figures are disclosed in Note 5 "Revenues" accompanying the interim condensed consolidated financial statements.
^(2)	For further details, see Note 11 "Investments in joint ventures" accompanying the interim condensed consolidated financial statements.

For further information regarding the results and financial position of Sportscene Group Inc., refer to the interim management report as well as the interim condensed consolidated financial statements and accompanying notes for the 13 and 26-week periods ended February 23, 2020, which are available on SEDAR.

Interim Condensed Consolidated Statements of Comprehensive Income
(in thousands of Canadian dollars, except for earnings per share and number of outstanding shares)
(unaudited)
	13-Week Periods Ended		26-Week Periods Ended
	February 23, 2020	February 24, 2019	February 23, 2020	February 24, 2019
	$	$	$	$
Revenues	34,678	29,551	73,051	57,538
Cost of sales	12,533	9,574	26,818	18,221
Selling and administrative expenses, excluding amortization	18,441	17,927	37,801	34,575
Other losses (gains)^(1)	173	(128)	(310)	(129)
Earnings before financial expenses, amortization, net income of joint ventures and income tax	3,531	2,178	8,742	4,871
Amortization	2,432	1,469	4,845	2,859
Financial expenses	505	265	1,048	485
Net income of joint ventures	(358)	(244)	(410)	(477)
	2,579	1,490	5,483	2,867
Income before income tax expenses	952	688	3,259	2,004
Income tax expenses	220	143	819	432
Net income and comprehensive income	732	545	2,440	1,572
Net income and comprehensive income attributable to:
The Company's shareholders	741	562	2,444	1,639
Non-controlling interests	(9)	(17)	(4)	(67)
Net income and comprehensive income	732	545	2,440	1,572
Earnings per share (in dollars):
Basic	0.09	0.07	0.29	0.19
Diluted	0.09	0.07	0.28	0.19
Weighted average number of outstanding Class A shares (in thousands):
Basic^(2)	8,548	8,545	8,548	8,538
Diluted^(2)	8,763	8,575	8,763	8,568

^(1)	Other losses (gains) include gains on business combinations and gains/losses on the disposal and impairment of property, plant and equipment. For further details, see Note 7 accompanying the interim condensed consolidated financial statements.
^(2)	The weighted average number of Class A shares (basic and dilutive) reflects the retrospective application of the two-for-one stock split effected on February 8, 2019, as disclosed in Note 14 (a) accompanying the interim condensed consolidated financial statements.

SOURCE Sportscene Group Inc.

Jean Bédard, Chairman of the Board, President and Chief Executive Officer; François-Xavier Pilon, Vice-President, Finance, 450-641-3011