La Cage aux Sports Maintains its Leadership Through Expansion and Enhancement of its Banner

MONTREAL, July 12, 2012 /CNW Telbec/ - During the third quarter ended May 27, 2012, SPORTSCENE GROUP INC. ("Sportscene" or "the Company") (TSXV: SPS.A), continued to alleviate the effects of an unfavourable economic and sporting environment by banking on the recent expansion of LA CAGE AUX SPORTS' network, the enhancement of its menu offering and a dynamic promotional strategy. Since the beginning of the current fiscal year, these actions have together contributed to safeguard the competitive position and business volume of the La Cage aux Sports banner and to limit the impact of challenging market conditions on Sportscene Group's profitability and financial health.

For the nine-month period ended May 27, 2012, La Cage aux Sports' total network sales⁽¹⁾ grew slightly to stand at $84.4 million, compared with $83.6 million for the same period of the previous year. However, third-quarter network sales were down by 4.6% to $28.0 million, due primarily to a more difficult competitive environment. The decline in same-Cage sales was compensated by the opening of three new Cages during the first nine months of the current fiscal year.

For the nine-month period ended May 27, 2012, Sportscene's consolidated revenues totalled $65.2 million, up 4.6% over the previous year. Third-quarter revenues rose 2.0% to $22.4 million. For the same periods, EBITDA⁽¹⁾ amounted to $7.4 million and $2.7 million respectively, posting respective decreases of 13.3% and 17.0% over the same periods last year.

The Company cumulated net earnings attributable to shareholders of $2.7 million or $0.65 per share (basic and diluted) for the first nine months of fiscal 2012, compared with $3.6 million or $0.86 per share for the same period of the previous year. The third quarter produced net earnings attributable to shareholders of $1.1 million or $0.26 per share (basic and diluted), compared with $1.4 million and $0.34 per share in 2011.

Since the beginning of fiscal 2012, operating activities have provided cash flows of $6.2 million, contributing to preserve Sportscene's solid financial position.

Outlook

During the fourth quarter, Sportscene Group will inaugurate the network's 53^rd Cage, and the 4^th to open to the public since the beginning of fiscal 2012. In addition, beside the positive contribution of the recently opened Cages, management anticipates an improvement in same-Cage sales over the fourth quarter of 2011, due to the various initiatives implemented over the past year at the menu offering and marketing levels.

For the year to come, Sportscene Group is banking on an improvement in the Quebec sporting environment, although management believes that the restaurant industry will likely continue to be affected by the pressures exerted on customer traffic and selling prices. Considering this business context and given the significant investments made over the past two years in the expansion and internal development of the La Cage aux Sports banner, Sportscene will focus most of its efforts during the upcoming quarters on consolidating its core business.

Consequently, Sportscene Group's Board of Directors has decided to temporarily suspend the payment of dividends, until improved market conditions coupled with the positive impact of the numerous actions recently implemented enable the Company to reach performance levels consistent with its objectives.

"In upcoming quarters, we will focus on optimizing the various programs launched during the past year and on pursuing the ongoing updating of our capital and technological assets, so as to remain at the forefront of our market segment. Financially, while tightening the management of our operations, costs and liquidity, we will gradually repay the debt assumed over the past two years as part of our expansion program. Sportscene Group will thereby be in an even stronger position to take advantage of business opportunities that will arise in the short, medium and long term," indicated President and Chief Executive Officer Jean Bédard.

Profile

In business since 1984, Sportscene Group Inc. operates Quebec's leading chain of sports-themed resto-bars: La Cage aux Sports. As of today, this banner comprises 52 "Cages", 39 of which are wholly or jointly owned by the Company, and 13 are franchises. Enjoying a strong brand image, La Cage aux Sports' most distinctive feature is its "Sports, Gang, Fun" culture, showcased by an original decor, a festive ambience, the use of the latest telecommunications technologies and the hosting and organization of multiple contests and special events for its clientele. In addition, the Company manages real estate holdings, including a sports complex and several buildings housing La Cage aux Sports restaurants. Lastly, Sportscene has developed expertise in certain other complementary activities, such as the construction, fitting-out and renovation of Cages, technological development related to the expansion of the La Cage aux Sports network, as well as the organization of sports-related activities including international-calibre boxing events.

(1)	The following items are not performance measures consistent with IFRS. In Sportscene's financial statements, EBITDA corresponds to "Operating earnings". Total network sales are the aggregate sales achieved by all La Cage aux Sports restaurants, including franchised, jointly-owned and corporate units.
(2)	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.

Interim Condensed Consolidated Statements of Net Earnings and Comprehensive Income
(in thousands of Canadian dollars, except for earnings per share and number of outstanding shares)
(unaudited)

		13 weeks ended		39 weeks ended
		May 27, 2012	May 29,  2011	May 27,  2012	May 29,  2011
		$	$	$	$
Revenues		22,378	21,936	65,228	62,356
Cost of sales		6,775	5,377	19,129	18,944
Employee benefits expense		6,020	5,620	17,716	15,781
Selling and administrative expenses		6,859	7,656	21,025	19,140
Operating earnings		2,724	3,283	7,358	8,491
Interest on long-term debt		148	103	419	281
Other interest expenses		39	17	99	79
Amortization of property, plant and equipment		1,033	935	3,009	2,688
Amortization of intangible assets		22	30	67	86
Other (gains) losses		41	205	131	337
		1,283	1,290	3,725	3,471
Earnings before income tax		1,441	1,993	3,633	5,020
Income tax		364	568	941	1,440
Net earnings and comprehensive income		1,077	1,425	2,692	3,580
Net earnings and comprehensive income attributable to:
The Company's shareholders		1,086	1,407	2,712	3,603
Non-controlling interests		(9)	18	(20)	(23)
Net earnings and comprehensive income		1,077	1,425	2,692	3,580
Earnings per share (in $):
	Basic	0.26	0.34	0.65	0.86
	Diluted	0.26	0.34	0.65	0.86
Weighted average number of outstanding
Class A shares (in thousands):
	Basic	4,165	4,168	4,165	4,168
	Diluted	4,165	4,172	4,165	4,172

Interim Condensed Consolidated Statements of Changes in Shareholders' Equity
(in thousands of Canadian dollars, except number of outstanding shares)
(unaudited)

		Shareholders' Equity attributable to the Company's shareholders
		Number of shares	Share capital	Stock-based compensation reserve	Retained earnings	Total	Non- controlling interests	Total Shareholders' equity
		(in thousands)	$	$	$	$	$	$
Balance on August 28, 2011		4,165	3,551	222	25,121	28,894	293	29,187
	Stock-based compensation	-	-	27	-	27	-	27
	Net earnings and comprehensive income	-	-	-	2,712	2,712	(20)	2,692
	Dividends declared to the company's shareholders	-	-	-	(1,250)	(1,250)	-	(1,250)
	Capital contributions by non-controlling interests	-	-	-	-	-	85	85
	Dividends declared by subsidiaries to non-controlling interests	-	-	-	-	-	(35)	(35)
	Balance on May 27, 2012	4,165	3,551	249	26,583	30,383	323	30,706
Balance on August 30, 2010		4,168	3,554	199	23,684	27,437	286	27,723
	Stock-based compensation	-	-	17	-	17	-	17
	Net earnings and comprehensive income	-	-	-	3,603	3,603	(23)	3,580
	Dividends paid to the company's shareholders	-	-	-	(1,251)	(1,251)	-	(1,251)
	Redemption of shares of a subsidiary owned by a non-controlling shareholder	-	-	-	-	-	(5)	(5)
	Capital transactions with non-controlling interests	-	-	-	(60)	(60)	39	(21)
Balance on May 29, 2011		4,168	3,554	216	25,976	29,746	297	30,043

Interim Condensed Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
(unaudited)

		As at May 27, 2012	As at August 28,   2011
		$	$
Assets
Current assets
	Cash and cash equivalents	9,390	9,453
	Accounts receivable	6,400	4,498
	Income tax receivable	380	-
	Inventories	1,769	1,349
	Prepaid expenses	379	313
	Current portion of notes receivable	98	37
Total current assets		18,416	15,650
Notes receivable		1,066	893
Property, plant and equipment		35,688	32,112
Goodwill		2,876	2,696
Intangible assets		920	759
Deferred tax asset		1,556	1,525
Total assets		60,522	53,635
Liabilities and shareholders' equity
Current liabilities
	Accounts payable and accrued liabilities	9,969	7,704
	Income tax payable	-	32
	Deferred revenues and credits	1,219	1,190
	Current portion of long-term debt	2,434	1,953
Total current liabilities		13,622	10,879
Long-term debt		13,730	11,196
Deferred revenues and credits		1,906	1,815
Deferred tax liability		558	558
Total liabilities		29,816	24,448
Shareholders' equity
	Share capital	3,551	3,551
	Stock-based compensation reserve	249	222
	Retained earnings	26,583	25,121
Shareholders' equity attributable to the Company's shareholders		30,383	28,894
Non-controlling interests		323	293
Total shareholders' equity		30,706	29,187
Total liabilities and shareholders' equity		60,522	53,635

Interim Condensed Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
(unaudited)

			13 weeks ended		39 weeks ended
			May 27, 2012	May 29, 2011	May 27, 2012	May 29, 2011
			$	$	$	$
Operating activities:
	Net earnings		1,077	1,425	2,692	3,580
	Adjustments to reconcile net earnings to cash flows from operating activities:
		Loss on disposal of property, plant and equipment	27	168	142	227
		Loss on disposal of interests in joint ventures	-	-	-	26
		Loss on business combination achieved in stages	22	-	19	-
		Amortization of property, plant and equipment	1,033	935	3,009	2,688
		Amortization of intangible assets	22	30	67	86
		Stock-based compensation	11	6	27	17
		Interest expenses recognized in net earnings	187	120	518	360
		Interest paid	(181)	(102)	(514)	(287)
		Interest included in the cost of property, plant and equipment	-	15	16	25
		Income tax expenses recognized in net earnings	364	568	941	1,440
		Income tax paid	(266)	(581)	(1,381)	(1,309)
			2,296	2,584	5,536	6,853
	Net change in non-cash working capital items, net of acquisitions and disposals of subsidiaries and joint ventures		(1,012)	100	666	633
			1,284	2,684	6,202	7,486
Financing activities:
	Increase of long-term debt		1,338	1,385	3,759	1,535
	Repayment of long-term debt		(531)	(366)	(1,537)	(1,141)
	Dividends paid to non-controlling interests		-	-	(35)	-
	Redemption of shares of a subsidiary owned by a non-controlling shareholder		-	-	-	(5)
	Dividends on Class A shares		-	-	(1,250)	(1,251)
			807	1,019	937	(862)
			13 weeks ended		39 weeks ended
			May 27, 2012	May 29, 2011	May 27,  2012	May 29, 2011
			$	$	$	$
Investing activities:
	Acquisitions of subsidiaries and joint ventures, net of cash and cash equivalents acquired		(607)	-	(794)	(73)
	Proceeds from disposals of joint ventures, net of disposal of cash and cash equivalents		-	-	-	204
	Change in notes receivable		(287)	314	(657)	(219)
	Retraction of investments		-	500	-	2,000
	Acquisitions of property, plant and equipment		(1,464)	(1,628)	(5,561)	(4,245)
	Proceeds from disposals of property, plant and equipment		23	6	37	14
	Acquisitions of intangible assets		(4)	(37)	(227)	(156)
			(2,339)	(845)	(7,202)	(2,475)
(Decrease) increase in cash and cash equivalents			(248)	2,858	(63)	4,149
Cash and cash equivalents, beginning of the period			9,638	9,018	9,453	7,727
Cash and cash equivalents, end of period			9,390	11,876	9,390	11,876

 

Source: Sportscene Group Inc.

Contact:  
Jean Bédard, Chairman of the Board, President and Chief Executive Officer
Josée Pépin, Manager, Accounting and Disclosure
450-641-3011