Return of Hockey Helps Attenuate the Decline in La Cage aux Sports' Sales Recorded During the First Half of the Year

MONTREAL, April 18, 2013 /CNW Telbec/ - As was expected by the management of SPORTSCENE GROUP INC. ("Sportscene" or "the Company") (TSXV: SPS.A), the return of the National Hockey League's activities since late January 2013 has helped attenuate the decline in sales caused by the NHL lockout in the Company's results during the first half of fiscal 2013, which are being disclosed today.

Results for the 13 and 26-Week Periods Ended February 24, 2013

During the quarter ended February 24, 2013, La Cage aux Sports' total network sales(1) declined by 5.9% to stand at $26.6 million. They decreased by 7.5% for the first six months of the fiscal year, totalling $52.2 million. Hockey's return in late January 2013 and the contribution of the new Cages opened during the previous year partly offset the revenue shortfall attributable to the extended NHL lockout.

During the 13 and 26-week periods, Sportscene's revenues posted increases of 13.5% and 3.4% to reach $21.8 million and $44.3 million respectively. This performance is largely attributable to the acquisition, effective August 27, 2012, of a 50% interest in three Quartier DIX30 restaurants whose contribution to date has met management's expectations, and to increased sales of La Cage aux Sports branded frozen products in grocery stores.

For the 13-week period ended February 24, 2013, consolidated earnings before interest, amortization, other items and income taxes, or EBITDA(1), posted a slight decline of $0.1 million to stand at $2.1 million. EBITDA totalled $4.2 million for the 26-week period, down by $0.4 million from the previous year. These decreases are mostly attributable to a less favourable sporting environment than the previous year in the hockey and boxing fields.

Sportscene closed the second quarter with net earnings attributable to shareholders of $0.4 million or $0.11 per share (basic and diluted), compared with $0.6 million or $0.15 per share for the same quarter of the previous year. Year-to-date net earnings for the first six months of fiscal 2013 totalled $1.1 million or $0.26 per share, compared with $1.6 million or $0.39 per share last year.

These variations can be explained largely by the increase in amortization and financial expenses resulting from the expansion of the Company's operations in fiscal 2012 and since the beginning of fiscal 2013. It is to be noted however that the same expansion contributed to alleviate the impact of an unfavourable sporting environment on Sportscene's operating profitability.

Outlook

"While the first half of the year was quite difficult — although Sportscene continued to play its game well and remained profitable —, we look forward to the rest of fiscal 2013 with optimism," indicated Jean Bédard, President and Chief Executive Officer. "The excitement about hockey is as strong as ever among La Cage aux Sports customers and we expect the sports scene to be more active in the boxing and UFC fields as well. In particular, a major event will be held by our InterBox subsidiary during the third quarter: the Pascal-Bute boxing match on May 25th. Considering such major events and the impact of the strategic investments made over the past year, we expect results for the third quarter of the current fiscal year will be superior to those of the same period last year."

Grant of stock options to officers and directors

On April 18, 2013, under the Class A share purchase option plan ("the Plan") in effect at Sportscene, the Board of Directors approved the grant of 47,000 stock options to officers and directors at an exercise price of $7.50 per share, all under the terms and conditions of the Plan. These options will vest at a rate of 50% after two years, 25% after three years and the remaining 25% after four years. They will expire if they are not exercised within five years as of the grant date.

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", 41 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 hosting and organization of multiple contests and special events for its clientele. Sportscene also holds a 50% interest in three non-banner restaurants offering upscale foodservices in the Montreal area. In addition to its restaurant operations, the Company manages real estate holdings, including a sports complex and several buildings housing its restaurants. Furthermore, 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 consolidated financial statements, EBITDA corresponds to "Earnings before interest, amortization and income tax". 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 Comprehensive Income
(in thousands of Canadian dollars, except for earnings per share and number of outstanding shares)
(unaudited)
  13 weeks ended 26 weeks ended
  February 24, February 26, February 24, February 26,
  2013  2012  2013  2012
  $ $ $ $
Revenues 21,849 19,243 44,305 42,850
Cost of sales 7,464 5,818 14,248 12,354
Gross margin 14,385 13,425 30,057 30,496
         
Selling and administrative expenses, excluding amortization 12,312 11,244 25,863 25,862
Earnings before interest, amortization and income taxes 2,073 2,181 4,194 4,634
Amortization 1,225 1,044 2,412 2,021
Operating earnings 848 1,137 1,782 2,613
         
Interests on long-term debt 190 143 369 271
Other interest expenses 39 37 99 60
Other losses (gains) 17 121 (156) 90
  246 301 312 421
Earnings before income tax 602 836 1,470 2,192
Income taxes 171  210 402 577
Net earnings and comprehensive income 431 626 1,068 1,615
         
Net earnings and comprehensive income attributable to:        
         
The Company's shareholders 435 634 1,079 1,626
Non-controlling interests (4) (8) (11) (11)
Net earnings and comprehensive income 431 626 1,068 1,615
         
Earnings per share (in $):        
    Basic $0.11 $0.15 $0.26 $0.39
    Diluted $0.11 $0.15 $0.26 $0.39
         
Weighted average number of outstanding Class A shares (in thousands):        
  Basic 4,165 4,165 4,165 4,165
  Diluted 4,165 4,165 4,165 4,165



Interim Condensed Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
  As at February 24, As at August 26,
  2013  2012
  (unaudited) (audited)
  $  $
Assets    
     
Current assets    
  Cash and cash equivalents 8,800 10,729
  Accounts receivable 5,416 3,743
  Income tax receivable 227 89
  Inventories 1,765 1,697
  Prepaid expenses 559 459
  Current portion of notes receivable 86 284
Total current assets 16,853 17,001
     
Notes receivable 1,440 1,481
Property, plant and equipment 39,985 36,302
Intangible assets 828 828
Deferred tax asset 2,538 2,214
Goodwill 3,870 3,101
Total assets 65,514 60,927
     
Liabilities and shareholders' equity    
     
Current liabilities    
  Accounts payable and accrued liabilities 8,743 8,941
  Deferred revenues and credits 1,554 871
  Current portion of long-term debt 3,040 2,648
Total current liabilities 13,337 12,460
     
Long-term debt 17,182 14,554
Deferred revenues and credits 1,613 1,617
Deferred tax liability 1,088 1,088
Total liabilities 33,220 29,719
     
Shareholders' equity    
     
  Share capital 3,551 3,551
  Stock-based compensation reserve 278 260
  Retained earnings 28,167 27,088
Shareholders' equity attributable to the Company's shareholders 31,996 30,899
Non-controlling interests 298 309
Total shareholders' equity 32,294 31,208
     
Total liabilities and shareholders' equity 65,514 60,927



Interim Condensed Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
(unaudited)
  13 weeks ended 26 weeks ended
  February 24, February 26, February 24,  February 26,
  2013 2012 2013 2012
  $ $ $ $
Operating activities        
  Net earnings 431 626 1,068 1,615
  Adjustments to reconcile net earnings to cash flows from operating activities        
    Loss on disposal of property, plant and equipment 29 85 49 115
    Gain on business combination achieved in stages - - (193) (3)
    Amortization of property, plant and equipment 1,207 1,023 2,375 1,976
    Amortization of intangible assets 18 21 37 45
    Stock-based compensation 9 11 18 16
    Financial expenses recognized in net earnings 229 180 468 331
    Interest paid (226) (178) (461) (333)
    Interest included in the cost of property, plant and equipment - 5 - 16
    Income tax expenses recognized in net earnings 171 210 402 577
    Income tax paid (192) (290) (793) (1,115)
  1,676 1,693 2,970 3,240
  Net change in non-cash working capital items, net of acquisitions and disposals of subsidiaries and joint ventures (711) 808 (1,306) 1,678
  965 2,501 1,664 4,918
Financing activities        
  Increase of long-term debt 2,110 1,620 3,110 2,421
  Repayment of long-term debt (961) (495) (1,808) (1,006)
  Dividends paid to non-controlling interests - - - (35)
  Dividends on Class A shares - (1,250) - (1,250)
  1,149 (125) 1,302 130
Investing activities        
  Acquisitions of subsidiaries and joint ventures, net of cash and cash equivalents acquired - (168) (521) (187)
  Change in notes receivable (11)  (212) (458) (370)
  Acquisitions of property, plant and equipment (2,176) (1,959) (3,899) (4,097)
  Proceeds from disposals of property, plant and equipment - 13 9 14
  Acquisitions of intangible assets (26) (5) (26) (223)
  (2,213) (2,331) (4,895) (4,863)
(Decrease) increase in cash and cash equivalents (99) 45 (1,929) 185
Cash and cash equivalents, beginning of period 8,899 9,593 10,729 9,453
Cash and cash equivalents, end of period 8,800 9,638 8,800 9,638

 

 

SOURCE: Sportscene Group Inc.

For further information:

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