SIR Royalty Income Fund Reports Strong Growth in Same Store Sales and Royalty Pooled Revenue in 2022 Third Quarter

BURLINGTON, ON, Nov. 10, 2022 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) (the "Fund") today reported its financial results for the third quarter ("Q3 2022") and the nine months ended September 30, 2022 ("YTD 2022").

"Our strong growth in Same Stores Sales and Royalty Pooled Revenue in the quarter reflects a return to a more normalized operating environment. The Fund's special cash distribution paid in July and the recent increase in the Fund's monthly distribution reflects our improved performance and outlook," said Peter Fowler, CEO of SIR Corp. "We have resumed our pre-pandemic commitment towards investing in our restaurants to continually elevate our brands and drive growth for the benefit of all our stakeholders. During the quarter, we completed a renovation at our Jack Astor's in London, Ontario, implementing a refreshing, more contemporary and immersive dining experience for guests. Subsequent to quarter end, we completed similar renovations at our Jack Astor's locations in Whitby and Barrie, Ontario."

Q3 2022 Summary

• Pooled Revenue increased 28.3% to $68.7 million, compared to $53.5 million for the three months ended September 30, 2021 ("Q3 2021").
• Royalty income in the SIR Royalty Limited Partnership (the "Partnership") increased to $4.1 million, from $3.2 million in Q3 2021.
• Equity income from the Partnership, which represents the Fund's pro rata share of the residual distributions of the Partnership, was $2.8 million, compared to $1.7 million in Q3 2021.
• The Royalty Pooled Restaurants generated same store sales growth ("SSSG")⁽¹⁾ of 30.9%.
• Net earnings of the Fund were $4.1 million, compared to $2.2 million in Q3 2021.
• Distributable cash⁽²⁾ totaled $3.1 million, or $0.37 (basic) and $0.36 (diluted) per Fund Unit, and cash distributed to unitholders totaled $3.4 million, representing a payout ratio⁽²⁾ of 109.1%. The Fund's target payout ratio⁽²⁾ is 100% per annum.
• SIR Corp. ("SIR") opened a new Scaddabush Italian Kitchen & Bar ("Scaddabush")® restaurant in Etobicoke, Ontario on August 1, 2022 at the former location of a Canyon Creek restaurant. This new restaurant is expected to be added to the Royalty Pooled restaurants effective January 1, 2023.
• SIR completed a renovation at its Jack Astor's® location in London, Ontario.
• On July 12, 2022, the Fund declared a special cash distribution of $0.135 per unit, which was paid to unitholders of record on July 29, 2022. The Fund's Trustees determined that the special distribution was appropriate, as the Fund had excess cash available to distribute due to the repayment of previously deferred royalties and interest owed by SIR.

Subsequent Event

• In October 2022, the Trustees of the Fund approved a $0.005 increase in the monthly cash distribution, resulting in an increase in the Fund's monthly cash distributions from $0.09 per Fund unit to $0.095 per Fund unit, effective for the distribution paid on October 31, 2022 to unitholders of record as at October 21, 2022.

Q3 2022 Financial Results Summary 

($000s except restaurants and per Unit amounts) (unaudited)		Three-month  period ended Sept. 30, 2022	Three-month  period ended Sept. 30, 2021	Nine-month period ended Sept. 30, 2022	Nine-month period ended Sept. 30, 2021
Royalty Pooled Restaurants		51	56	51	56
Pooled Revenue generated by SIR Corp.		68,667	53,529	175,817	90,585
Royalty income to Partnership – 6% of Pooled Revenue		4,120	3,212	10,549	5,367
Recovery (impairment) of financial and intangible assets		(32)	--	56,004	(34)
Partnership income allocated to Fund		2,786	1,672	8,241	2,084
Net earnings		4,108	2,199	36,608	2,608
Net Earnings per Fund Unit (basic)		$0.49	$0.26	$4.37	$0.31
Net Earnings per Fund Unit (diluted)		$0.46	$0.26	$3.90	$0.31

Pooled Revenue in Q3 2022 increased 28.3% to $68.7 million, compared to $53.5 million in Q3 2021. The higher Pooled Revenue in Q3 2022 reflects a 30.9% increase in Same Store Sales ("SSS")⁽¹⁾, which was primarily attributable to the absence of pandemic-related operating restrictions during the quarter. As of mid-March 2022, all of the operating restrictions impacting SIR's restaurants were lifted. During Q3 2021, bars and restaurants in the provinces where SIR operates experienced varying capacity and/or operating restrictions.  

Net earnings for Q3 2022 were $4.1 million, or $0.49 (basic) and $0.46 (diluted) per Fund Unit, compared to $2.2 million, or $0.26 (basic and diluted) per Fund Unit, for Q3 2021. The increase was primarily attributable to increased Pooled Revenue, as discussed above.

Same Store Sales⁽¹⁾

SSS^(1) for Royalty Pooled Restaurants	Three-month period ended Sept. 30, 2022	Three-month period ended  Sept. 30, 2021	Nine-month period ended Sept. 30, 2022	Nine-month period ended Sept. 30, 2021
Jack Astor's®	26.2 %	32.9 %	88.7 %	(1.7 %)
Scaddabush®	25.5 %	39.3 %	90.4 %	(5.2 %)
Canyon Creek®	--	--	--	--
Signature Restaurants	230.5 %	62.0 %	596.4 %	(69.1 %)
Overall SSS^(1)	30.9 %	34.9 %	97.1 %	(6.6 %)

Jack Astor's SSS⁽¹⁾ performance for Q3 2022 includes 37 locations. Jack Astor's accounted for approximately 75.3% of Pooled Revenue in Q3 2022 and had SSSG⁽¹⁾ of 26.2%. The increase in SSS⁽¹⁾ was primarily attributable to the absence of pandemic-related operating restrictions during the quarter. During Q3 2021, bars and restaurants in the provinces where SIR operates experienced varying capacity and/or operating restrictions. 

Scaddabush SSS⁽¹⁾ performance for Q3 2022 includes nine locations. Scaddabush had SSSG⁽¹⁾ of 25.5% in Q3 2022, reflecting the absence of pandemic-related operating restrictions, as discussed above.

The Signature Restaurants SSS⁽¹⁾ performance for Q3 2022 includes three restaurants (Reds® Wine Tavern, Reds Square One and the Loose Moose Tap + Grill®). These were effectively closed in Q1 2021 and Q2 2021; and while opened in Q3 2021, were affected by pandemic-related operating restrictions. The 230.5% SSSG⁽¹⁾ increase in Q3 2022 reflects the absence of pandemic-related operating restrictions, as discussed above.

Distributable Cash⁽²⁾

The following table reconciles the relationship between cash provided by operating activities and distributable cash⁽²⁾:

(in thousands of dollars except per unit amounts and payout ratio^2)	Three-month period ended Sept. 30, 2022	Three-month period ended Sept. 30, 2021	Nine-month period ended Sept. 30, 2022	Nine-month period ended Sept. 30, 2021
Cash provided by operating activities	4,179	2,620	8,324	2,869
Add/(deduct):       Net change in non-cash working capital items	(130)	(255)	(430)	(623)
Net change in income tax payable	137	(479)	(36)	(1,086)
Net change in distribution receivable from the Partnership	(1,078)	152	1,826	565
Distributable cash/(shortfall)^(2)	3,108	2,038	9,684	1,725
Cash distributed for the period	3,392	1,926	7,915	1,926
Surplus/(shortfall) of distributable cash^(2^)	(284)	112	1,769	(201)
Payout ratio^(2)	109.1 %	94.5 %	81.7 %	111.7 %
Distributable cash/(shortfall)^(2) per Fund Unit (basic)	$0.37	$0.24	$1.16	$0.21
Distributable cash/(shortfall)^(2) per Fund Unit (diluted)	$0.36	$0.24	$1.12	$0.21

Distributable cash⁽²⁾ for Q3 2022 totaled $3.1 million, or $0.37 (basic) and $0.36 (diluted) per Fund Unit, and distributions to Unitholders totaled $3.4 million, representing a payout ratio⁽²⁾ of 109.1%. Distributable cash⁽²⁾ increased in Q3 2022 due to the absence of pandemic-related operating restrictions compared to Q3 2021 when certain operating restrictions were in effect.

Outlook

Since the onset of the pandemic in March 2020 through to mid-February 2022, restaurants and bars across Canada experienced a series of government mandated operating capacity restrictions and/or full restaurant closures. As of mid-February 2022, the restaurant and bar industry has been trending positively due to increased vaccination rates and the easing of government restrictions. As of mid-March 2022, all remaining operational restrictions in the provinces where SIR operates were lifted.

Subsequent to the end of Q3 2022, SIR completed renovations to its Jack Astor's locations in Whitby and Barrie, Ontario. SIR plans to invest in similar restaurant renovations in 2023.    

The new Reds Kitchen + Wine Bar Fallsview, which opened on March 31, 2022, is expected to be added to the Royalty Pooled Restaurants effective January 1, 2023.

The new Scaddabush restaurant located in Etobicoke, Ontario, which was opened on August 1, 2022, is expected to be added to the Royalty Pooled Restaurants effective January 1, 2023.

Non-IFRS Financial Measures

 (1) Same store sales ("SSS") and same store sales growth ("SSSG") are non-GAAP financial measures and do not have standardized meanings prescribed by IFRS. However, the Fund believes that SSS and SSSG are useful measures and provide investors with an indication of the change in year-over-year sales. The Fund's method of calculating SSS and SSSG may differ from those of other issuers and, accordingly, SSS and SSSG may not be comparable to measures used by other issuers. SSS includes revenue from all SIR Restaurants included in Pooled Revenue except for those locations that were not open for the entire comparable periods in 2022 and 2021. SSSG is the percentage increase in SSS over the prior year comparable period.

(2) Distributable cash and payout ratio are non-GAAP financial measures and do not have standardized meanings prescribed by IFRS. However, the Fund believes that distributable cash and the payout ratio are useful measures as they provide investors with an indication of cash available for distribution. The Fund's method of calculating distributable cash and the payout ratio may differ from that of other issuers and, accordingly, distributable cash and the payout ratio may not be comparable to measures used by other issuers. Investors are cautioned that distributable cash and the payout ratio should not be construed as an alternative to the statement of cash flows as a measure of liquidity and cash flows of the Fund. The payout ratio is calculated as cash distributed for the period as a percentage of the distributable cash for the period. Distributable cash represents the amount of money which the Fund expects to have available for distribution to Unitholders of the Fund, and is calculated as cash provided by operating activities of the Fund, adjusted for the net change in non-cash working capital items including a reserve for income taxes payable and the net change in the distribution receivable from the SIR Royalty Limited Partnership. For a detailed explanation of how the Fund's distributable cash is calculated, please refer to the Fund's Q3 2022 MD&A, which can be accessed via the SEDAR website (www.sedar.com). 

Q3 2022 Interim Filings

The Fund's unaudited interim consolidated Financial Statements and MD&A, and the Partnership's Financial Statements, for the three and nine-month periods ended September 30, 2022 are available via the SEDAR website at www.sedar.com and SIR's website at www.sircorp.com.

About SIR Corp.

SIR Corp. ("SIR") is a privately held Canadian corporation that owns a portfolio of 53 restaurants in Canada. SIR's Concept brands include Jack Astor's Bar and Grill®, with 37 locations, and Scaddabush Italian Kitchen & Bar®, with 10 locations. SIR also operates one-of-a-kind "Signature" brands including Reds® Wine Tavern, Reds® Square One, Reds® Kitchen + Wine Bar Fallsview and The Loose Moose®. All trademarks related to the Concept and Signature brands noted above are used by SIR under a License and Royalty Agreement with SIR Royalty Limited Partnership. SIR also owns one Duke's Refresher® & Bar location in downtown Toronto, and one seasonal Signature restaurant, Abbey's Bakehouse®, which are currently not in consideration to be part of the Royalty Pool. For more information on SIR Corp. or the SIR Royalty Income Fund, please visit www.sircorp.com.

About SIR Royalty Income Fund

The Fund is a trust governed by the laws of the province of Ontario that receives distribution income from its investment in the SIR Royalty Limited Partnership and interest income from the SIR Loan. The Fund intends to pay distributions to unitholders on a monthly basis.

Caution concerning forward-looking statements

Certain statements contained in this report, or incorporated herein by reference, including the information set forth as to the future financial or operating performance of the Fund or SIR, that are not current or historical factual statements may constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Statements concerning the objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of the Fund, the SIR Holdings Trust (the "Trust"), the Partnership, SIR, the SIR Restaurants or industry results, are forward-looking statements. The words "may", "will", "should", "would", 'could", "expect", "believe", "plan", "anticipate", "intend", "estimate" and other similar terminology and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Fund, the Trust, the Partnership, SIR, the SIR Restaurants or industry results, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. These statements reflect Management's current expectations, estimates and projections regarding future events and operating performance and speak only as of the date of this document. Readers should not place undue importance on forward-looking statements and should not rely upon this information as of any other date. Risks related to forward-looking statements include, among other things, challenges presented by a number of factors, including: the impact of the COVID-19 pandemic; market conditions at the time of this filing; competition; changes in demographic trends; weather; changing consumer preferences and discretionary spending patterns; changes in consumer confidence; changes in national and local business and economic conditions; pandemics or other material outbreaks of disease or safety issues affecting humans or animals or food products; the ability to maintain staffing levels;  the impact of inflation, including on input prices and wages; the impact of the crisis in the Ukraine; changes in tariffs and international trade; changes in foreign exchange and interest rates; changes in availability of credit; legal proceedings and challenges to intellectual property rights; dependence of the Fund on the financial condition of SIR; legislation and governmental regulation, including the cost and/or availability of labour as it relates to changes in minimum wage rates or other changes to labour legislation and forced closures of or other limits placed on  restaurants and bars; laws affecting the sale and use of alcohol (including availability and enforcement); changes in cannabis laws; changes in environmental laws; privacy matters; accounting policies and practices; changes in tax laws; and the results of operations and financial condition of SIR. The foregoing list of factors is not exhaustive. Many of these issues can affect the Fund's or SIR's actual results and could cause their actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, the Fund or SIR.  There can be no assurance that SIR will remain compliant in the future with all of its financial covenants under the Credit Agreement and imposed by the lender. Given these uncertainties, readers are cautioned that forward-looking statements are not guarantees of future performance and should not place undue reliance on them. The Fund and SIR expressly disclaim any obligation or undertaking to publicly disclose or release any updates or revisions to any forward-looking statements. Forward-looking statements are based on Management's current plans, estimates, projections, beliefs and opinions, and the Fund and SIR do not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change, except as expressly required by applicable securities laws.

In formulating the forward-looking statements contained herein, SIR Management has assumed that it will be successful in dealing with the effects of the COVID-19 pandemic and that business and economic conditions affecting SIR's restaurants and the Fund will return to normalcy within the medium term.

All of the forward-looking statements made herein are qualified 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, the Fund or SIR.

For more information concerning the Fund's risks and uncertainties, please refer to the March 22, 2022 Annual Information Form, for the period ended December 31, 2021, and the Fund's Q3 2022 Management Discussion & Analysis, which are available under the Fund's profile at www.sedar.com.

SOURCE SIR Royalty Income Fund

Jeff Good, Chief Financial Officer, Tel: [phone]; Bruce Wigle, Bay Street Communications, Tel: [phone]