Sportscene Group's Fiscal Year 2014: Growth in Financial Results and Strategic Investments in the La Cage aux Sports Network

MONTREAL, Nov. 20, 2014 /CNW Telbec/ - SPORTSCENE GROUP INC. ("Sportscene" or "the Company")(TSXV: SPS.A) today announced its financial results for the fiscal year ended August 31, 2014. La Cage aux Sports' total network sales⁽¹⁾ grew by 5.5% to total $113.0 million, due to the contribution of the new Cage showcasing La Cage aux Sports' updated interior design, a 1.7% growth in average same-Cage sales⁽²⁾, and the fact that fiscal 2014 included one additional week of operation compared with fiscal 2013.

The same factors, combined with higher sales of La Cage aux Sports branded products in grocery stores, contributed to an 11.2% rise in Sportscene's revenues, which totalled $74.9 million. Consolidated adjusted EBITDA⁽³⁾ grew by 2.8% to $7.8 million, mainly as a result of the growth in same-Cage sales and sales of branded products in grocery stores.

Sportscene closed the fiscal year 2014 with net earnings of $3.1 million or $0.74 per share (basic), up 8.7% over the previous year. Operating activities provided cash flows of $8.2 million, compared with $4.1 million in 2013, as at result of which the balance of cash and cash equivalents reached $8.5 million as at August 31, 2014. Lastly, during fiscal 2014, Sportscene declared and paid two dividends of $0.30 per Class A share each.

Key Achievements

On November 8, 2013, Sportscene inaugurated a latest-generation Cage aux Sports, adjacent to the Boucherville head office. Thanks to its spectacular layout, including the largest wall screen in Canada, unique ambience and many other innovations, the new Cage rapidly became a destination of choice for La Cage aux Sports' target customers. Given this flagship Cage's success, to date three other units have been converted according to the new design, which the Company will continue to implement at a rate of about one Cage per quarter.

Internally, the Company undertook a comprehensive overhaul of La Cage aux Sports' offering to enhance the experience offered to its customers and further distance its banner from the competition. "These efforts required significant investments in 2014, which will also be the case in 2015. We deem such investments necessary to lay the foundations of superior profitability over the medium and long term and to further differentiate our banner in the eyes of consumers," indicated President and Chief Executive Officer Jean Bédard.

Outlook

Management is optimistic, yet cautious as Sportscene Group enters fiscal 2015. The current sporting environment is favourable to its business, and the Company is building a busy schedule of events for the upcoming quarters. Moreover, the new flagship Cage has reached full speed and is now bringing an optimal contribution to consolidated results. However, the economy remains weak and continues to affect the Quebec restaurant industry's general performance, which tends to intensify competitive pressures on prices. This situation motivates the Company all the more to continue to invest in differentiating and enhancing La Cage aux Sports' offering, first in terms of food selection and quality, but also in regard to service, ambience and technology. "We are confident that the efforts made today will contribute to strengthen our positioning and profitability in the near future," added the President. 

Therefore, management expects that results for fiscal 2015 will be in line with those for 2014, as the Company should maintain a satisfying financial performance while further investing in the future of Sportscene and its banner. In addition, the Board of Directors will continue to assess, on a timely basis, the relevance of paying dividends, in light notably of market conditions as well as the Company's performance and financial position. 

Profile

In business since 1984, Sportscene Group Inc. operates Quebec's leading chain of sports-themed resto-bars: La Cage aux Sports. This banner comprises 51 "Cages", 40 of which are wholly or jointly owned by the Company, and 11 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 organization of national and international-calibre sporting events.

(1)	Total network sales are the aggregate sales achieved by all La Cage aux Sports franchised, partnership-owned and corporate restaurants.
(2)	Average same-Cage sales isolate the impact of restaurant openings and closures to assess the actual trend in restaurant sales.
(3)	In Sportscene's statement of comprehensive income, adjusted EBITDA corresponds to "Earnings before financial expenses, amortization, share of earnings of joint ventures and associates and income taxes", from which other gains are excluded.

For further information about results and changes in Sportscene Group's financial position, refer to the management's report and audited consolidated financial statements and accompanying notes for the fiscal year ended August 31, 2014, available on SEDAR. 

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 comprehensive income for the years ended August 31, 2014 and August 25, 2013 (in thousands of Canadian dollars, except for earnings per share and number of outstanding shares)
		August 31, 2014	August 25, 2013
		(53 weeks)	(52 weeks)
		$	$
			(Restated)
Revenues		74,931	67,355
Cost of sales		23,845	20,037
Selling and administrative expenses, excluding amortization		43,285	39,730
Other gains		(102)	(145)
Earnings before financial expenses, amortization, share of net earnings of joint ventures and associates and income tax		7,903	7,733
Amortization		3,800	3,569
Financial expenses		648	610
Share of net earnings of joint ventures and associates		(639)	(143)
		3,809	4,036
Earnings before income tax expenses		4,094	3,697
Income tax expenses		983	836
Net earnings and comprehensive income		3,111	2,861
Net earnings and comprehensive income attributable to :
The Company's shareholders		3,099	2,892
Non-controlling interests		12	(31)
Net earnings and comprehensive income		3,111	2,861
Earnings per share (in $):
	Basic	0.74	0.69
	Diluted	0.73	0.69
Weighted average number of outstanding Class A shares (in thousands):
	Basic	4,165	4,165
	Diluted	4,231	4,165

Consolidated statements of financial position as at August 31, 2014, as August 25, 2013 and August 27, 2012   (in thousands of Canadian dollars)
		August 31,	August 25,	August 27,
		2014	2013	2012
		$	$	$
			(Restated)	(Restated)
Assets
Current assets
	Cash and cash equivalents	8,528	7,825	9,308
	Accounts receivable	3,722	4,170	3,371
	Income tax receivable	568	423	309
	Inventories	2,041	1,486	1,394
	Prepaid expenses	336	401	302
	Current portion of notes receivable	-	25	289
Total current assets		15,195	14,330	14,973
Notes receivable and other assets		1,514	1,137	1,701
Property, plant and equipment		36,050	30,221	29,706
Intangible assets		715	647	695
Deferred tax asset		1,783	2,018	1,627
Investments in joint ventures and associates		4,137	6,279	4,730
Goodwill		2,792	2,792	2,406
Total assets		62,186	57,424	55,83
Liabilities and shareholders' equity
Current liabilities
	Accounts payable and accrued liabilities	7,560	6,817	7,979
	Income tax payable	216	80	176
	Deferred revenues and credits	872	1,292	818
	Current portion of long-term debt	2,052	2,109	1,904
Total current liabilities		10,700	10,298	10,877
Long-term debt		14,531	10,748	11,505
Deferred revenues and credits		1,078	1,273	1,490
Deferred tax liability		1,168	973	758
Total liabilities		27,477	23,292	24,630
Shareholder's equity
	Share capital	3,551	3,551	3,551
	Stock-based compensation reserve	368	299	260
	Retained earnings	30,506	29,980	27,088
Shareholders' equity attributable to the Company's		34,425	33,830	30,899
Non-controlling interests		284	302	309
Total shareholders' equity		34,709	34,132	31,208
Total liabilities and shareholders' equity		62,186	57,424	55,838

Consolidated statements of cash flows for the years ended August 31, 2014 and August 25, 2013   (in thousands of Canadian dollars)
				2014	2013
				(53 weeks)	(52 weeks)
				$	$
					(Restated)
Operating activities
	Net earnings and comprehensive income			3,111	2,861
		Adjustments to reconcile net earnings to cash flows from operating activities:
			Loss on disposal of property, plant and equipment	82	54
			Loss on impairment of non-current assets	-	88
			Gain on business combination	-	(287)
			Gain on disposal of short-term investments	(22)	-
			Gain on sale of investments in a joint venture	(162)	-
			Amortization of property, plant and equipment	3,758	3,518
			Amortization of intangible assets	42	51
			Share of net earnings of joint ventures and associates	(639)	(143)
			Dividends received from joint ventures and associates	905	165
			Stock-based compensation	69	39
			Financial expenses recognized in net earnings	648	610
			Interest paid	(645)	(597)
			Income tax expenses recognized in net earnings	983	836
			Income tax paid	(558)	(1,116)
				7,572	6,079
		Net change in non-cash working capital items, net of acquisitions and disposals of subsidiaries and joint ventures		604	(1,999)
				8,176	4,080
Financing activities
		Increase of long-term debt		1,988	1,000
		Repayment of long-term debt		(2,470)	(2,047)
		Dividends on Class A shares		(2,499)	-
		Shares redeemed from non-controlling shareholders		(5)	-
		Dividends paid to non-controlling interests		(5)	-
				(2,991)	(1,047)

Consolidated statements of cash flows (continued) for the years ended August 31, 2014 and August 25, 2013   (in thousands of Canadian dollars)
		2014	2013
		(53 weeks)	(52 weeks)
		$	$
			(Restated)
Investing activities
	Business combination and acquisition of assets, net of cash and cash equivalent acquired	(881)	(719)
	Disposal of an investment in a joint venture	1,400	-
	Investments in joint ventures and associates	-	(1,225)
	Issuance of notes receivable	(1,101)	(817)
	Retraction of notes receivable	764	220
	Acquisitions of property, plant and equipment	(4,594)	(1,993)
	Proceeds from disposal of property, plant and equipment	40	18
	Acquisitions of intangible assets	(110)	-
		(4,482)	(4,516)
Increase (decrease) in cash and cash equivalents		703	(1,483)
Cash and cash equivalents, beginning of year		7,825	9,308
Cash and cash equivalents, end of year		8,528	7,825

SOURCE: Sportscene Group Inc.

Jean Bédard, Chairman of the Board, President and Chief Executive Officer; Josée Pépin, Vice-President, Finance; 450-641-3011