MONCTON, N.B., March 17 /CNW Telbec/ - Imvescor Restaurant Group Inc. (or "IRG" or the "Company") (TSX: IRG), formerly PDM Royalties Income Fund (or "PDM") reported financial results today for the three months ending January 31, 2010. The results are for the first full quarter that IRG has operated as a publicly traded corporation and are not comparable with results for PDM for the same period in the previous year.
"Imvescor Restaurant Group has completed the transition from a royalty income fund to a publicly traded corporation," said Ron Magruder, President and Chief Executive Officer. "Management's attention is now exclusively focused on operating and growing the business, profitably. Sales compared to the previous year showed steady improvement from November to January. While our net earnings of $0.018 per share reflect the seasonality of our business, they also include several non-recurring expenses, such as restructuring charges and a write-down on the value of one restaurant. Excluding these one-time expenses, our underlying business met our expectations for the quarter. Consumer confidence is slowly improving."
Information on Basis of Comparison
Under the Plan of Arrangement approved by unit holders of PDM on September 4, 2009, PDM absorbed (by way of amalgamation) the privately held Imvescor Inc. and other private entities. The surviving entity is now a corporation rather than an income trust. The name was changed to Imvescor Restaurant Group Inc. and began operations as a corporation on October 10, 2009.
The new corporation, IRG, is a publicly traded company and is therefore required to compare its financial results with its predecessor entity, PDM. However, PDM had a completely different legal and operating structure from IRG today. As an income trust, PDM was structured to receive and distribute royalties. It had virtually none of the overhead expenses that are typical of an operating company like IRG. As an operating company, the financial results of IRG are therefore not directly comparable with PDM and the presentation of results as required for proper disclosure does not in this case provide the normal comparisons that would enable readers to easily understand the year-over-year business activities.
This situation will endure until IRG has cycled a full fiscal year. Normal year-over-year comparisons will begin in the first quarter of 2011, at which time there will be a historical basis of comparison. IRG will focus on key elements of its business which include system sales, same store sales, number of restaurants, cash flow, debt repayment, earnings per share and dividends.
First Quarter 2010 Financial Results
IRG derives its revenues primarily from royalties based on system sales from each of its four brands - Pizza Delight(R), Mikes(R), Scores(R) and Baton Rouge(R) - as well as from franchise fees and the operation of Company-owned restaurants.
Total system sales for the restaurants in the royalty pool for the first quarter ended January 31, 2010 were $106.8 million, a 5.1% increase over system sales for the same three months the previous year. The increase is mainly attributable to one additional week in the quarter (14 weeks versus 13 weeks for the same period last year), as well as the stronger performance of two new stores opened during the quarter, compared to three underperforming stores that were closed.
IRG recorded total revenues of $11.9 million during the quarter, including $10.4 million from royalties, advertising fees and other related revenue, and $1.5 million (net of cost of goods sold) from corporate store sales. There is no meaningful comparison for the previous year, as PDM was structured as a royalty income fund during that period.
Same store sales ("SSS") were -2.4% during the quarter. SSS at Pizza Delight grew +0.1%; Mikes SSS were -3.4%; Scores SSS were -3.1%; and Baton Rouge SSS were -2.2% for the quarter.
When calculating the SSS for the various periods it should be noted that the current quarter ended January 31, 2010 includes 14 weeks sales compared to the same 14 week period in the previous year. These comparable periods may not cover the same dates as reflected in the financial statements as they are provided in an effort to give the reader more meaningful comparisons of actual performance.
Operating expenses for the quarter were $9.9 million versus $42,000 expense at PDM last year. The operating expense numbers are a good example of how first quarter results are not easily comparable with first quarter results last year, as PDM received only royalty income last year and did not incur similar operating company expenses.
Net earnings for the Company for the first quarter ending January 31, 2010 were $167,000 or $0.018 per fully diluted share compared to $1.4 million or $0.184 per fund unit for the same period last year. The change is mainly related to increased interest charges plus certain one-time expenses amounting to approximately $500,000, including restructuring charges and a write-down in the carrying value of a corporate restaurant. During the first quarter, IRG also incurred and expensed a large portion of its production costs for marketing activities for the entire fiscal 2010 year.
IRG's cash position increased marginally to $6.1 million at the end of the first quarter. During the quarter, Imvescor made principal payments on long-term debt totalling $718,000, thereby increasing shareholder equity by approximately $0.076 per share.
IRG opened 1 new Mikes and 1 new Scores during the quarter, and closed 1 Pizza Delight and 2 Mikes (one of which should be reopened in the third quarter.) During the quarter, the Company renovated three Pizza Delights and four Mikes restaurants.
"The economy continues to provide a challenging backdrop to the restaurant industry, but we are in a good position to benefit from changing consumer habits. Three of our four brands are well positioned in the current economic environment, as families look for restaurant choices that are friendly to the family budget," noted Mr. Magruder.
The Company will continue to focus on renovations and new store openings to increase revenues. As of the date of this news release, IRG has opened four new stores in fiscal 2010, including two in the first quarter and two in the second quarter to date. Over the remainder of the fiscal year, IRG plans to open six additional restaurants. Over the next three years, IRG plans on aggressively renovating its existing restaurants to adopt its new concepts. IRG also intends to continue its focus on growing existing restaurant sales and expanding the number of franchised restaurants in Ontario, Quebec, Atlantic Canada and Western Canada.
The Company will also continue to find efficiencies to increase overall profitability and cash flow.
"IRG remains focused on growing our system and our same store sales. We paid our first quarterly dividend in February, 2010. We now have a stronger operating structure, improved cash flow and a solid growth plan. We are confident in our brands and in our ability to expand our franchise system and grow profitably in the months and years ahead to deliver increased shareholder value," concluded Mr. Magruder.
About Imvescor Restaurant Group Inc.
Headquartered in Moncton, New Brunswick, IRG owns franchised and corporate stores throughout Canada, under four brands: Pizza Delight(R) operates primarily in Atlantic Canada, where it dominates the family/mid-scale segment. Mikes(R) and Scores(R) restaurants operate primarily in Quebec in the family and casual dining segments and the take-out and delivery segments. Baton Rouge(R) operates in the Province of Quebec and Ontario in the casual dining segment.
Certain information regarding IRG contained herein may constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. The Company cautions that actual performance will be affected by a number of factors, many of which are beyond the Company's control, and that future events and results may vary substantially from what the Company currently foresees. The Company assumes no obligation to update such forward-looking statements, except as required by applicable securities laws. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement.
SOURCE Imvescor Restaurant Group Inc.
For further information: For further information: Brigitte Viel, Cohn & Wolfe Public Relations, (514) 845-2257 ext 243; William R. Lane, CMA, Executive Vice-President & Chief Financial Officer, Imvescor Restaurant Group, (506) 853-8412, http://www.imvescor.ca