BURLINGTON, ON, Dec. 23 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) ("the Fund") today announced that SIR Corp. ("SIR"), the operating entity from which the Fund derives distribution income and interest income, has filed its financial results for the 12-week period ended November 23, 2008 ("first quarter").
SIR has advised the Fund that revenue for the first quarter of fiscal 2009 increased 12.8% to $45.1 million compared to $40.0 million in revenue for the same period a year ago, reflecting an increase in the number of restaurants to 45 as at the end of the first quarter in 2009 from 40 for the same period in 2008. However, total same store sales growth(1) ("SSSG") declined for the first time since the third quarter in 2005 with negative 0.5% for the first quarter in 2009.
SIR reported same store sales(1) ("SSS") for the first quarter of fiscal 2009 of $38.1 million compared to $38.3 million for the comparable period a year ago. Jack Astor's(R), SIR's flagship Concept Restaurant brand which generates approximately 64% of YTD Pooled Revenue saw a 2.0% growth in SSS(1) for the 12-week period ended November 23, 2008. However, the remaining Concept Restaurants and SIR's Signature Restaurants experienced SSS(1) declines during the first quarter in 2009 with Canyon Creek(R) at negative 5.5%, Alice Fazooli's(R) at negative 2.9%, and the downtown Toronto Signature Restaurants at negative 4.0%. Management believes that the decline in SSSG(1) was primarily attributable to the recent weaker economic conditions, and does not expect an improvement in these conditions in the near future. Jack Astor's, with its somewhat lower average cheque, has, to this point, experienced smaller declines in its business.
SSSG(1) 12-week period ended 12-week period ended November 23, 2008 November 18, 2007 (unaudited) (unaudited) ------------------------------------------------------------------------- Jack Astor's(R) 2.0% 3.1% Canyon Creek Chop House(R) (5.5%) 7.1% Alice Fazooli's(R) (2.9%) 6.0% Signature Restaurants (4.0%) 3.1% ------------------------------------------------------------------------- Overall SSSG (0.5%) 4.1%
SIR's net loss from operations was $1.9 million in the first quarter of fiscal 2009 compared to $1.1 million for the comparable period in fiscal 2008. This decline was due, in part, to declining SSS(1), and to a $0.5 million unrealized foreign exchange loss.
SIR's cash provided by operations increased by $2.2 million for the 12-week period ended November 23, 2008 compared to the 12-week period ended November 18, 2007. SIR used cash in investing activities of $4.7 million and $2.7 million for the first quarter of fiscal 2009 and the first quarter of fiscal 2008, respectively. The cash was used primarily for the purchase of property and equipment, and restaurant preopening costs. Fiscal 2009 purchases are mainly the result of the construction costs associated with two new Jack Astor's opened in Ontario during the first quarter. These new restaurants are located near the corner of Don Mills Road and Lawrence Avenue in Toronto; and at the corner of Yonge and Bloor Streets in Toronto.
SIR intends to slow its growth from its previously stated goal of reaching a total restaurant count of 68 restaurants by December 2010. SIR currently has 45 restaurants open in Canada and since October 2004, the Fund's Initial Public Offering, SIR has opened fourteen new restaurants to date. It has secured three additional sites, one with a planned opening in 2009 and two with planned openings in 2011. Given the current economic environment, SIR has determined the most prudent course of action is to reduce its growth plans and control its leverage. Additional sites will be considered, however growth is expected to be slowed for at least the next calendar year.
Management is carefully monitoring the effects on SIR's business of the recent deterioration in economic conditions and consumer confidence. SIR, like most other businesses, expects the current economic downturn could significantly negatively affect its sales and profit prospects in the near future. In anticipation of a continuing economic downturn, SIR is reviewing its opportunities with regard to cost savings and undertaking cash preservation strategies which include the previously announced slowing of growth plans. SIR expects to shift some of its marketing focus from media based concept marketing to individual restaurant marketing initiatives as one of these undertakings.
During the last five years, SIR has made significant investments in both new and existing restaurants. All but two of SIR's 45 restaurants have either been newly constructed or renovated within the past five years. This leaves SIR well positioned with modern and relevant concepts, which Management believes will help position SIR to work through the current economic downturn.
SIR's 2009 first quarter filings, which include its unaudited consolidated financial statements and management's discussion & analysis, can be accessed via the Fund's profile on the SEDAR web site at www.sedar.com under "Other".
About SIR Corp.
SIR is a privately held Canadian corporation that owns and operates a portfolio of 45 restaurants in Canada. SIR's concept brands include: Jack Astor's Bar and Grill(R), with 29 locations; Alice Fazooli's(R), with five locations; and Canyon Creek Chop House(R), with eight locations. SIR also operates one-of-a-kind "signature" brands in downtown Toronto, which comprise the upscale reds(R), Far Niente(R)/FOUR(TM)/Petit Four(TM), and the Loose Moose Tap & Grill(R). All trademarks related to the concept and signature brands noted above are used by SIR under a license agreement with SIR Royalty Limited Partnership in consideration for a Royalty, payable by SIR to the Partnership, equal to six percent of the revenue of the 39 restaurants currently included in 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 ---------------------------------------------
Statements in this release, 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 securities laws. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Fund, the Trust, the Partnership, SIR, the SIR Restaurants, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this document, such statements may include, among other language, such words as "may", "will", "expect", "believe", "plan", "anticipate", "intend", "estimate" and other similar terminology. 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. These forward-looking statements involve a number of risks and uncertainties. The following are some of the factors that could cause actual results to differ materially from those expressed in or underlying such forward-looking statements: competition; changes in demographic trends; changing consumer preferences and discretionary spending patterns; changes in consumer confidence; changes in national and local business and economic conditions; 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; accounting policies and practices; 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. 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 release any updates or revisions to any forward-looking statements contained herein to reflect any change in expectations, estimates and projections with regard thereto or any changes in events, conditions or circumstances on which any statement is based, except as expressly required by law.
In formulating the forward-looking statements contained herein, Management has assumed that business conditions affecting SIR's restaurants and the Fund will continue substantially in the ordinary course, including without limitation with respect to general industry conditions, regulations (including those regarding employees, food safety, tobacco and alcohol), weather, taxes, foreign exchange rates and interest rates, that there will be no pandemics or other material outbreaks of disease or safety issues affecting humans or animals or food products, and that there will be no unplanned material changes in its facilities, equipment, customer and employee relations, or credit arrangements. Management is not anticipating an improvement, in the near future, in economic conditions (particularly as it relates to the recent unprecedented deterioration of the economic environment and consumer confidence, which could significantly negatively affect sales and profit prospects in the near future). Management is not anticipating an improvement, in the near future, in the availability of credit (particularly as it relates to the recent disruption of world credit markets, which could significantly negatively affect sales and profit prospects in the near future). These assumptions, although considered reasonable by Management at the time of preparation, may prove to be incorrect. In particular, in estimating the revenues for the three new Jack Astor's restaurants, added to the Royalty pool on January 1, 2008, Management has assumed that they will operate consistent with other Jack Astor's restaurants. For more information concerning the Fund's risks and uncertainties, please refer to the October 2004 final prospectus, and/or its March 31, 2008 Annual Information Form, all of which are available under the Fund's profile at www.sedar.com.
(1) Same store sales and same store sales growth exclude revenue from restaurants which are not included in the Royalty pool, and exclude revenue from restaurants opened or closed during the current or prior fiscal year and therefore not open for the full period in both years. Same store sales growth is the percentage increase in SSS over the prior comparable period. SSS and SSSG are non-GAAP measures that do not have standardized meanings prescribed by GAAP. However, SIR believes that SSS and SSSG are useful measures and provide investors with an indication of the change in year-over-year sales. SIR'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.