Fiscal 2007: A Year of Growth and Strategic Developments for Sportscene Group and La Cage aux Sports



    
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    - La Cage aux Sports' total network sales rise 7.8% to $115 million.
    - The Company posts net earnings of $4.9 million or $1.18 per share
      ($1.17 diluted).
    - Sportscene invests an additional amount of more than $8 million to
      expand the network and consolidate La Cage aux Sports' banner
      leadership in the Quebec theme restaurant industry.
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    MONTREAL, Nov. 16 /CNW Telbec/ - SPORTSCENE GROUP INC. ("Sportscene" or
"the Company"; SPS.A/TSX Venture Exchange), operator of the LA CAGE AUX SPORTS
chain of resto-bars, announces its results for the fiscal year ended
August 26, 2007. La Cage aux Sports' total network sales rose 7.8% to
$115.0 million, compared with $106.6 million the previous year, mainly driven
by the contribution of five new Cages, three of which were built during fiscal
2007 and two in the second half of fiscal 2006. In addition, average same-Cage
sales posted a 1.2% increase despite a less favourable market conditions in
fiscal 2007 compared to fiscal 2006 (when several major sporting events had
taken place, including the Winter Olympic Games, the Montreal Canadiens'
participation in the hockey playoffs and the World Cup of Soccer), and despite
the implementation of the new non-smoking legislation which affected the
entire Quebec restaurant industry. "In such a context, we are all the more
pleased with the growth in average same-Cage sales, which attests to the
success of the expansion and differentiation strategies implemented in recent
years," said Jean Bédard, President and Chief Executive Officer. It can
notably be attributed to the fact that the new Cages we have built in the last
few years are not only more spacious, but are also established on excellent
sites. Several existing Cages have also been expanded. Moreover, we are also
reaping the benefits of the numerous initiatives related to our brand
differentiation strategy, including the recent upgrading of our broadcasting
platform. Finally, we were able to reduce the impact of the new non-smoking
legislation on our sales by intensifying our advertising and promotional
efforts at both the national and regional levels."
    Sportscene Group's net earnings for fiscal 2007 were comparable to those
of the previous year, that is $4.9 million or $1.18 per share ($1.17 diluted).
The Company thus managed to equal the exceptional performance achieved in
fiscal 2006 and to deliver a return of a more than 23% on average
shareholders' equity, despite of increased marketing costs to mitigate the
effects of a much less favourable business environment than the previous year,
and the pressure on profit margins by the addition of several new Cages whose
profitability must follow a normal optimization curve.
    Besides yielding satisfactory results, fiscal 2007 was a very busy and
constructive year for Sportscene Group, which introduced several strategic
initiatives with respect to every key area of its new development plan, in
order to accelerate the achievement of its objective of $140 million in total
network sales, reinforce its competitive edge and consolidate its No. 1
position in the Quebec theme restaurant industry. Among the highlights of the
past year, the Company invested more than $8 million to expand the network,
implement a telecommunications platform that is unique in the industry, and
develop complementary activities that will bring added value to Cage customers
while supporting La Cage aux Sports' branding strategy.
    In 2007, the Company added a new activity to its foodservices,
specifically on-site catering services and beer sales at sporting events and
popular festivals. "Besides providing an additional source of summertime
revenues, this initiative is consistent with our branding and marketing
strategy, one of the objectives of which is to enhance the Cage experience by
deploying our concept outside our premises and accompanying our customers
right into the bleachers and anywhere the action is," pointed out Jean Bédard.
In the same vein, the Company continues to develop and diversify the offering
of its subsidiary Sportsmen in Travel(R) and to create added value from its
participation in InterBox, which provides it with additional revenues and
expertise in the organization of boxing galas broadcast live and often
exclusively throughout the La Cage aux Sports network. Three
international-calibre athletes are now associated with InterBox, including new
world champion Lucian Bute.

    Solid Financial Position
    ------------------------

    Despite the significant investments of fiscal 2007, the Company's
substantial operating cash flows enabled it to maintain a solid balance sheet.
As at August 26, 2007, the Company had a total net debt to total invested
capital ratio of 16.1%. In light of Sportscene's strong financial position and
outlook for the coming quarters, the Board of Directors raised the dividend
paid to shareholders for a fifth consecutive year, from $0.50 per share in
2006 to $0.60 in 2007.

    2008 Strategy and Outlook
    -------------------------

    The Company's financial growth and creation of shareholder value are
based on the achievement of three objectives: (1) increase revenues through
the addition of new Cages and activities complementary to its concept;
(2) maximize sales by business unit; and (3) optimize each unit's
profitability. To that end, and consistent with the new development plan
mapped out last year, its initiatives are mainly focused on seeking out and
achieving various types of expansion projects, leveraging its brand image
through targeted investments and differentiating marketing programs, and
continually enhancing the execution capabilities of its organization and
efficiency of its operations.
    In this regard, a new corporate Cage was inaugurated in the first quarter
of fiscal 2008 and the Company plans to open at least one more between now and
year-end. As Sportscene now benefits from an extended coverage of La Cage aux
Sports' traditional territory, management is on the lookout for opportunities
to implement adapted versions of its concept in other types of markets and
territories. Over the next year, Sportscene will implement a kitchen process
optimization program that will enable it, with minimal investments, to improve
the efficiency and costs of restaurant operations, while enhancing the
experience offered to customers and providing employees with a more pleasant
and motivating workplace. New features will also be added to the Cage menu
offering.
    We anticipate continued growth in total network sales and corporate
revenues in the coming quarters, driven primarily by the contribution of the
Cages opened over the past 12 months and the development of our complementary
activities. We should also benefit from a rather favourable sporting
environment, thanks notably to the Beijing Olympics, the Euro Cup of Soccer
and the excitement we are currently seeing on the boxing scene. We also expect
to maintain our profit margins given the performance optimization curve of the
new Cages - which normally extends over a two-year period - and the positive
impact of our operational efficiency initiatives. In the area of investment,
the highlight of the coming year will be the launch of a new network updating
phase, aimed at modernizing the Cage design while respecting our core
concept," concluded the President.

    Profile
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    In business since 1984, Sportscene Group Inc. operates Quebec's leading
chain of sports-themed resto-bars: La Cage aux Sports. The chain comprises
47 "Cages", 32 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 including the
broadcasting of sporting events on high-definition giant screens, and the
scheduling of a host of contests and special events for customers. In support
of its network expansion strategy and dynamic promotion of the La Cage aux
Sports trademark, Sportscene has developed special skill in the construction,
fitting-out and renovation of sites. The Company is also involved in certain
other complementary, sports-related activities, such as the organization and
closed-circuit broadcasting of international-calibre boxing events, the
organization of group trips to sports destinations and the provision of
on-site catering services at sporting and popular events. Employing a total of
over 2,300 people throughout the network and at head office, Sportscene has
built La Cage aux Sports' business and financial success on a three-tiered
strategy: a foodservice quality comparable to the best chains in its category,
first-class marketing focused on dynamic promotion of its trademark, and
operational management practices that rank among the most efficient in the
industry.


    TSX Venture Exchange does not accept responsibility for the adequacy or
    accuracy of this release. This news release contains forward-looking
    statements that reflect the current outlook of the Company regarding the
    future. Such statements are subject to certain risks, uncertainties and
    assumptions. Actual results and events may vary significantly.


    
    Consolidated Balance Sheets
    August 26, 2007 and August 27, 2006
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                                                      2007            2006
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    Assets
    Current assets:
      Cash and cash equivalents                $ 3,149 083     $ 3,972,705
      Restricted cash                              266,319         232,291
      Temporary investments                         40,000       1,551,768
      Accounts receivable                        5,001,823       4,224,587
      Inventories                                1,125,652       1,952,359
      Income taxes receivable                       26,250               -
      Prepaid expenses                             832,927         640,793
      Current portion of notes receivable           41,276          83,022
      -----------------------------------------------------------------------
      Total current assets                      10,483,330      12,657,525

    Notes receivable                               184,242         269,375
    Capital assets                              24,828,255      21,296,947
    Other assets                                   972,164         266,207
    Future income taxes                            768,315         587,188
    Goodwill                                     2,096,287       1,987,640
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    Total assets                              $ 39,332,593    $ 37,064,882
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    Liabilities and Shareholder's Equity
    Current liabilities:
      Accounts payable and
       accrued liabilities                    $  6,387,328    $  7,110,804
      Income taxes payable                               -         669,048
      Future income taxes                          113,779          95,286
      Deferred income and credits                  976,544       1,804,333
      Current portion of long-term debt          1,273,630       1,459,822
      -----------------------------------------------------------------------
      Total current liabilities                  8,751,281      11,139,293

    Long-term debt                               6,492,585       4,655,670
    Deferred income and credits                  1,096,729       1,100,388
    Future income taxes                            261,776         113,451
    Non controlling interest                       345,157         379,920
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    Total liabilities                           16,947,528      17,388,722

    Shareholders' equity:
      Share capital                              3,254,806       2,995,125
      Contributed surplus                          166,461         120,227
      Retained earnings                         18,963,798      16,560,808
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                                                22,385,065      19,676,160
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    Total liabilities and
     shareholders' equity                     $ 39,332,593    $ 37,064,882
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    Consolidated Statements of Earnings
    Years ended August 26, 2007 and August 27, 2006
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                                                      2007            2006
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    Revenues                                  $ 73,634,965    $ 64,694,920
    Cost of products sold, selling,
     general and  administrative expenses       63,126,687      54,402,105
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    Earnings before other items                 10,508,278      10,292,815
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    Interest on long-term debt                     446,840         359,195
    Other interest expense                         136,268          80,958
    Amortization of capital assets               2,820,049       2 975 063
    Amortization of other assets                   484,238         245,133
    Loss on disposal of assets                      60,648          32 708
    Gain on business disposals                     (78,290)        (99,988)
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                                                 3,869,753       3,593,069
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    Earnings before income taxes and
     non-controlling interest                    6,638,525       6,699,746
    Income taxes                                 1,723,304       1,831,773
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    Net earnings before
     non-controlling interest                 $  4,915,221    $  4,867,973
    Non-controlling interest                         9,545           6,261
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    Net earnings                              $  4,905,676    $  4,861,712
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    Earnings per share:
      Basic                                   $       1.18    $       1.18
      Diluted                                 $       1.17    $       1.17

    Weighted average number of Class A
     shares outstanding:
      Basic                                      4,160,099       4,104,802
      Diluted                                    4,189,998       4,161,279
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    Consolidated Statements of Retained Earnings
    Years ended August 26, 2007 and August 27, 2006
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                                                      2007            2006
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    Retained earnings, beginning of year      $ 16,560,808    $ 13,765,918

    Net earnings                                 4,905,676       4,861,712
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                                                21,466,484      18,627,630
    Dividends on Class A shares                  2,502,686       2,066,822
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    Retained earnings, end of year            $ 18,963,798    $ 16,560,808
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    Consolidated Statements of Cash Flows
    Years ended August 26, 2007 and August 27, 2006
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                                                      2007            2006
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    Cash flows from operating activities:
      Net earnings                            $  4,905,676    $  4,861,712
      Adjustments for:
        Gain on business disposals                 (78,290)        (99,988)
        Loss on disposal of assets                  60,648          32,708
        Amortization                             3,304,287       3,220,196
        Non-controlling interest                     9,545           6,261
        Stock-based compensation                    95,359          94,750
        Future income taxes                         11,929        (285,808)
        Other (gain) and loss                       (6,017)         21,699
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                                                 8,303,137       7,851,530
    Net change in non-cash balances related
     to operations, net of acquisitions
     and business disposals                     (2,628,836)       (905,581)
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                                                 5,674,301       6,945,949
    Cash flows from financing activities:
      Proceeds from issuance of long-term debt   2,330,667       1,188,896
      Repayment of long-term debt               (1,297,320)     (1,364,978)
      Dividends on Class A shares               (2,502,686)     (2,066,822)
      Dividends paid to non-controlling interest   (25,246)         (8,025)
      Proceeds from issuance of Class A shares     200,000         320,000
      Proceeds from issuance of equity shares
       of a subsidiary to non-controlling
       interest                                         29         200,000
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                                                (1,294,556)     (1,730,929)

    Cash flows from investing activities:
      Acquisition of businesses, net of
       cash acquired                              (563,703)       (375,864)
      Proceeds from business disposals,
       net of cash dispose                         104,839         233,618
      Increase of restricted cash                  (34,028)        (69,545)
      Disposal of temporary investments          1,511,768         948,232
      Issuance of notes receivable                  (5,000)       (198,543)
      Retraction of notes receivable
       and deposits                                178,263         406,906
      Addition to capital assets                (5,509,915)     (6,777,252)
      Increase in other assets                    (919,858)       (375,153)
      Proceeds from disposal of capital assets      34,267               -
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                                                (5,203,367)     (6,207,601)
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    Net decrease in cash and cash equivalents     (823,622)       (992,581)

    Cash and cash equivalents,
     beginning of year                           3,972,705       4,965,286
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    Cash and cash equivalents, end of year    $  3,149,083    $  3,972,705
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For further information:

For further information: Jean Bédard, Chairman of the Board, President
and Chief Executive Officer; Gilles Lacombe, Vice-President, Finance and
Administration, (450) 641-3011; Source: Sportscene Group Inc.


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