Sportscene Group achieves satisfying results in fiscal 2010 despite a
difficult economic context
- Through a challenging period for the restaurant industry, Sportscene preserves it profit margins: EBITDA(1) margin of 14.0% (compared with 14.1% in 2009) and net margin of 5.5% (5.5% in 2009);
- Net earnings of $4.2 million or $1.01 per share, compared with $4.5 million or $1.07 per share a year earlier;
- Return on shareholders' equity of 15.3%;
- Total net debt of $0.2 million (0.7% of total invested capital) as at August 29, 2010, compared with $4.1 million (13.2% of invested capital) as at August 30, 2009.
MONTREAL, Nov. 19 /CNW Telbec/ - During the fiscal year ended August 29, 2010, SPORTSCENE GROUP INC. ("Sportscene" or "the Company" SPS.A / TSX Venture Exchange), operator of the LA CAGE AUX SPORTS chain of resto-bars, achieved a performance which management deems satisfactory considering the more difficult-than-expected economic conditions that prevailed.
La Cage aux Sports' total network sales totalled $110.3 million, compared with $114.7 million the previous year. This almost exclusively organic decrease of 3.8% can be explained by the economic uncertainty that continued to affect Quebec's restaurant industry by curtailing consumer spending. Nevertheless, Sportscene managed to mitigate the impact of the sluggish economy on the Cages' customer traffic by taking full advantage of the year's major sporting events, especially the hockey playoffs and the five boxing championships held by the subsidiary InterBox. Sportscene's consolidated revenues amounted to $76.6 million, compared with $81.3 million in 2009. This 5.7% decrease is mostly attributable to a less busy Cage construction and renovation schedule than the previous year, when Sportscene was implementing its new interior design concept. However, the decrease in revenues from restaurant operations, which accounted for 84.8% of consolidated revenues, was 2.4%.
Consolidated EBITDA (earnings before interest, amortization and income taxes (1)) decreased by 6.7% to $10.7 million during fiscal 2010, compared with $11.5 million in 2009. However, the EBITDA margin was relatively stable, standing at 14.1% in 2009 compared with 14.0% in 2010. Considering the difficult context that prevailed, Sportscene attributes this stability to its ongoing efforts to optimize operations, combined with the organizational changes implemented two years ago to focus most of its resources on the La Cage aux Sports banner. Sportscene closed fiscal 2010 with net earnings of $4.2 million or $1.01 per share (basic and diluted), compared with $4.5 million or $1.07 per share (basic and diluted) in 2009. The Company thereby achieved a 15.3% return on average shareholders' equity. The net profit margin as a percentage of revenues was stable, standing at 5.5% in both 2010 and 2009.
The year's operating activities provided cash flows of $8.1 million. Using this cash inflow, while maintaining a cautious approach to capital expenditures, the Company was able to reduce its total debt by $2.8 million and to increase its short-term available cash by $1.1 million, in addition to paying shareholders a dividend of $0.60 per share. The Company therefore ended fiscal 2010 with an even stronger balance sheet, posting short-term available cash of $9.7 million and total net debt of only $0.2 million.
Results for the Fourth Quarter of Fiscal 2010
For the 13-week period ended August 29, 2010, La Cage aux Sports' total network sales decreased by 9.8% to $22.4 million. In addition to the economic weakness, sales sustained the adverse impact of an exceptionally busy third quarter during the hockey playoffs. As is generally the case after this intense period, customers tend to curtail their outings in the months following the playoffs. In addition, a Cage was closed in June 2010 to be relocated in 2011. Sportscene's revenues decreased by 15.4% to $15.1 million, due primarily to the different construction/renovation and boxing championship schedules than during the same period of the previous year. However, restaurant revenues declined by 5.2%. Quarterly EBITDA (1) amounted to $1.4 million compared with $2.3 million in 2009, due to the organic decrease in total network sales and the different schedules of the other activities. Hence, Sportscene closed the quarter with net earnings of $0.06 million or $0.02 per share (basic and diluted), compared with $0.6 million or $0.14 per share (basic and diluted) in the same period of the previous year.
2011 Game Plan
President and Chief Executive Officer Jean Bédard indicated that the Company has launched several projects during the past quarters to restore the growth of the La Cage aux Sports banner as of fiscal 2011, while further adapting its offering to consumers' current environment. "Our reading of the economic context and recent trends in the restaurant industry leads us to believe that the economic uncertainty of the last two years has brought about major changes in consumers' habits, the effects of which could last for months. At the same time, we are welcoming a new generation of customers with specific tastes and needs. Therefore, after having considerably developed and reinforced the "ambience" component of La Cage concept over the past few years, we will now focus on reviewing, adjusting and enhancing its "menu" component as to ensure that our food and drink offering, along with its quality/price value, meet the expectations of today's consumers. Meanwhile, we will also continue to capitalize on La Cage's "Sports, Gang, Fun" ambience by investing in the latest telecommunications technologies and by taking full advantage of the most popular sporting events among our customers, including boxing championships organized by our subsidiary InterBox."
Resuming the physical expansion of La Cage aux Sports' network is also on Sportscene Group's agenda for fiscal 2011, when three new Cages will be built, one of which was inaugurated in East Montreal in October 2010. Furthermore, one of the network's Cages will be relocated to a higher-quality site.
Profile
In business since 1984, Sportscene Group Inc. operates Quebec's leading chain of sports-themed resto-bars: La Cage aux Sports. As at November 18, 2010, this banner comprises 50 "Cages", 35 of which are wholly or jointly owned by the Company, and 15 are franchises. Enjoying a strong brand image, La Cage aux Sports serves some seven million guests each year. 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 organization of a host of contests and special events for customers. In addition, the Company manages real estate holdings, including a sports centre 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 Sport network, as well as the organization of sports-related activities including international-calibre boxing events.
(1) | EBITDA is not a measure consistent with Canadian generally accepted accounting principles. In Sportscene's statement of earnings, EBITDA corresponds to "Earnings before other items". |
(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. |
Consolidated statements of earnings and comprehensive income | ||||||
(amounts are expressed in thousands of dollars except for per-share amounts and number of shares) | ||||||
13 weeks ended | 52 weeks ended | |||||
August 29, | August 30, | August 29, | August 30, | |||
2010 | 2009 | 2010 | 2009 | |||
(restated) | (restated) | |||||
(unaudited) | (unaudited) | (audited) | (audited) | |||
$ | $ | $ | $ | |||
Revenues | 15,056 | 17,792 | 76,628 | 81,270 | ||
Cost of sales, selling, general and administratives expenses | 13,667 | 15,446 | 65,918 | 69,793 | ||
Earnings before other items | 1,389 | 2,346 | 10,710 | 11,477 | ||
Interest on long-term debt | 92 | 104 | 366 | 510 | ||
Other interest expense | 46 | 45 | 101 | 210 | ||
Amortization of deferred financing costs | 1 | 1 | 3 | 3 | ||
Amortization of capital assets | 873 | 855 | 3,658 | 3,467 | ||
Amortization of intangibles and other assets | 48 | 163 | 279 | 542 | ||
Loss on disposal of assets | 147 | 39 | 414 | 119 | ||
Impairment of long-lived assets | - | 153 | - | 153 | ||
Write-off of goodwill | - | 395 | - | 395 | ||
Gain on business disposals | - | - | - | (10) | ||
1,207 | 1,755 | 4,821 | 5,389 | |||
Earnings before income taxes and non-controlling interest | 182 | 591 | 5,889 | 6,088 | ||
Income taxes | 167 | 49 | 1,780 | 1,649 | ||
Earnings before non-controlling interest | 15 | 542 | 4,109 | 4,439 | ||
Non-controlling interest | (48) | (27) | (109) | (53) | ||
Net earnings and comprehensive income | 63 | 569 | 4,218 | 4,492 | ||
Earnings per share: | ||||||
Basic | $0.02 | $0.14 | $1.01 | $1.07 | ||
Diluted | $0.02 | $0.14 | $1.01 | $1.07 | ||
Weighted average number of Class A | ||||||
shares outstanding (in thousands): | ||||||
Basic | 4,168 | 4,180 | 4,175 | 4,182 | ||
Diluted | 4,171 | 4,183 | 4,179 | 4,185 |
Consolidated statements of changes in shareholders' equity | |||||
(amounts are expressed in thousands of dollars) | |||||
13 weeks ended | 52 weeks ended | ||||
August 29, | August 30, | August 29, | August 30, | ||
2010 | 2009 | 2010 | 2009 | ||
(restated) | (restated) | ||||
(unaudited) | (unaudited) | (audited) | (audited) | ||
$ | $ | $ | $ | ||
Share capital, beginning of year | 3,552 | 3,543 | 3,555 | 3,499 | |
Issuance of stock | - | - | - | 14 | |
Redemption of stock | - | - | (10) | (23) | |
Transfer from contributed surplus | - | 10 | - | 10 | |
Retraction of notes receivable | 2 | 2 | 9 | 55 | |
Share capital, end of year | 3,554 | 3,555 | 3,554 | 3,555 | |
Contributed surplus, beginning of year | 195 | 187 | 180 | 171 | |
Stock-based compensation | 5 | 3 | 20 | 20 | |
200 | 190 | 200 | 191 | ||
Less: | |||||
Excess of the purchase price over the carrying | |||||
amount of the Class A shares redeemed | 1 | - | 1 | 1 | |
Transfer to share capital | - | 10 | - | 10 | |
Contributed surplus, end of year | 199 | 180 | 199 | 180 | |
Retained earnings, beginning of year | |||||
As previously reported | 25,755 | 23,786 | 23,096 | 21,452 | |
Adjustment related to the adoption of a new | |||||
accounting policy | 52 | (62) | (57) | (68) | |
Restated balance | 25,807 | 23,724 | 23,039 | 21,384 | |
Net earnings | 63 | 569 | 4,218 | 4,492 | |
Refundable taxes recovered | 4 | - | 4 | - | |
25,874 | 24,293 | 27,261 | 25,876 | ||
Less: | |||||
Excess of the purchase price over the carrying | |||||
amount of the Class A shares redeemed | - | - | 134 | 330 | |
Dividends on Class A shares | 1,251 | 1,254 | 2,504 | 2,507 | |
Retained earnings, end of year | 24,623 | 23,039 | 24,623 | 23,039 |
Consolidated balance sheets | ||||
(amounts are expressed in thousands of dollars) | ||||
(audited) | ||||
2010 | 2009 | |||
(restated) | ||||
$ | $ | |||
Assets | ||||
Current assets: | ||||
Cash and cash equivalents | 7,586 | 8,451 | ||
Restricted cash | 141 | 168 | ||
Temporary investments | 2,000 | - | ||
Accounts receivable | 3,536 | 3,064 | ||
Inventories | 1,291 | 970 | ||
Income taxes receivable | 28 | - | ||
Prepaid expenses | 446 | 533 | ||
Current portion of notes receivable | 75 | 34 | ||
Total current assets | 15,103 | 13,220 | ||
Notes receivable | 865 | 954 | ||
Capital assets | 28,773 | 31,038 | ||
Intangibles and other assets | 437 | 714 | ||
Future income taxes | 1,057 | 894 | ||
Goodwill | 2,332 | 2,224 | ||
Total assets | 48,567 | 49,044 | ||
Liabilities and shareholders' equity | ||||
Current liabilities: | ||||
Accounts payable and accrued liabilities | 6,651 | 6,292 | ||
Income taxes payable | - | 564 | ||
Future income taxes | 91 | 115 | ||
Deferred income and credits | 1,298 | 805 | ||
Current portion of long-term debt | 1,471 | 1,838 | ||
Total current liabilities | 9,511 | 9,614 | ||
Long-term debt | 8,456 | 10,845 | ||
Deferred income and credits | 1,422 | 889 | ||
Future income taxes | 515 | 496 | ||
Non-controlling interest | 287 | 426 | ||
Total liabilities | 20,191 | 22,270 | ||
Shareholders' equity | ||||
Share capital | 3,554 | 3,555 | ||
Contributed surplus | 199 | 180 | ||
Retained earnings | 24,623 | 23,039 | ||
28,376 | 26,774 | |||
Total liabilities and shareholders' equity | 48,567 | 49,044 |
Consolidated statements of cash flows | ||||||
(amounts are expressed in thousands of dollars) | ||||||
13 weeks ended | 52 weeks ended | |||||
August 29, | August 30, | August 29, | August 30, | |||
2010 | 2009 | 2010 | 2009 | |||
(restated) | (restated) | |||||
(unaudited) | (unaudited) | (audited) | (audited) | |||
$ | $ | $ | $ | |||
Cash flows from operating activities: | ||||||
Net earnings | 63 | 569 | 4,218 | 4,492 | ||
Non-cash items: | ||||||
Gain on business disposals | - | - | - | (10) | ||
Loss on disposals of assets | 147 | 39 | 414 | 119 | ||
Write-off on goodwill | - | 395 | - | 395 | ||
Impairment of notes receivable | - | 57 | - | 57 | ||
Impairment of intangibles and other assets | - | 96 | - | 96 | ||
Amortization of deferred financing costs | 1 | 1 | 3 | 3 | ||
Amortization of capital assets | 873 | 855 | 3,658 | 3,466 | ||
Amortization of intangibles and other assets | 43 | 163 | 279 | 542 | ||
Non-controlling interest | (48) | (27) | (110) | (53) | ||
Stock-based compensation | 5 | 3 | 20 | 20 | ||
Future income taxes | (118) | (304) | (164) | (589) | ||
966 | 1,847 | 8,318 | 8,538 | |||
Net change in non-cash balances related to operations, net of acquisitions and business disposals | (643) | 2,325 | (172) | 146 | ||
323 | 4,172 | 8,146 | 8,684 | |||
Cash flows from financing activities: | ||||||
Proceeds from issuance of long-term debt | - | 169 | 177 | 2,487 | ||
Repayment of long-term debt | (1,504) | (500) | (3,279) | (2,263) | ||
Increase in deferred financing costs | (1) | - | (3) | (12) | ||
Dividends on Class A shares | (1,251) | (1,254) | (2,504) | (2,507) | ||
Dividends paid to non-controlling interest | - | - | (29) | - | ||
Proceeds from issuance of Class A shares | - | - | - | 14 | ||
Redemption of Class A shares | - | - | (145) | (354) | ||
Redemption of a subsidiary's equity shares held by a non-controlling interest | - | (10) | - | (10) | ||
Refundable taxes recovered | 4 | - | 4 | - | ||
(2,752) | (1,595) | (5,779) | (2,645) | |||
Cash flows from investing activities: | ||||||
Acquisition of businesses, net of cash and cash equivalents acquired | (6) | (40) | (209) | (615) | ||
Proceeds from business disposals, net of cash and cash equivalents disposed | - | - | 3 | 22 | ||
Change in restricted cash | (61) | (82) | 27 | 91 | ||
Disposals (acquisition) of temporary investments | 1,000 | - | (2,000) | 100 | ||
Issuance of notes receivable | (39) | (54) | (431) | (432) | ||
Retraction of notes receivable | - | - | 375 | 438 | ||
Acquisitions of capital assets | (850) | (1,008) | (1,666) | (4,052) | ||
Proceeds from disposal of capital assets | 20 | 2 | 673 | 62 | ||
Increase in intangibles and other assets | - | - | (4) | (69) | ||
64 | (1,182) | (3,232) | (4,455) | |||
(Decrease) increase in cash and cash equivalents | (2,365) | 1,395 | (865) | 1,584 | ||
Cash and cash equivalents, beginning of year | 9,951 | 7,056 | 8,451 | 6,867 | ||
Cash and cash equivalents, end of year | 7,586 | 8,451 | 7,586 | 8,451 |
For further information:
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 |
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