La Cage aux Sports Maintains its Leadership Through Expansion and Enhancement of its Banner

MONTREAL, July 12, 2012 /CNW Telbec/ - During the third quarter ended May 27, 2012, SPORTSCENE GROUP INC. ("Sportscene" or "the Company") (TSXV: SPS.A), continued to alleviate the effects of an unfavourable economic and sporting environment by banking on the recent expansion of LA CAGE AUX SPORTS' network, the enhancement of its menu offering and a dynamic promotional strategy. Since the beginning of the current fiscal year, these actions have together contributed to safeguard the competitive position and business volume of the La Cage aux Sports banner and to limit the impact of challenging market conditions on Sportscene Group's profitability and financial health.

For the nine-month period ended May 27, 2012, La Cage aux Sports' total network sales(1) grew slightly to stand at $84.4 million, compared with $83.6 million for the same period of the previous year. However, third-quarter network sales were down by 4.6% to $28.0 million, due primarily to a more difficult competitive environment. The decline in same-Cage sales was compensated by the opening of three new Cages during the first nine months of the current fiscal year.

For the nine-month period ended May 27, 2012, Sportscene's consolidated revenues totalled $65.2 million, up 4.6% over the previous year. Third-quarter revenues rose 2.0% to $22.4 million. For the same periods, EBITDA(1) amounted to $7.4 million and $2.7 million respectively, posting respective decreases of 13.3% and 17.0% over the same periods last year.

The Company cumulated net earnings attributable to shareholders of $2.7 million or $0.65 per share (basic and diluted) for the first nine months of fiscal 2012, compared with $3.6 million or $0.86 per share for the same period of the previous year. The third quarter produced net earnings attributable to shareholders of $1.1 million or $0.26 per share (basic and diluted), compared with $1.4 million and $0.34 per share in 2011.

Since the beginning of fiscal 2012, operating activities have provided cash flows of $6.2 million, contributing to preserve Sportscene's solid financial position.

Outlook

During the fourth quarter, Sportscene Group will inaugurate the network's 53rd Cage, and the 4th to open to the public since the beginning of fiscal 2012. In addition, beside the positive contribution of the recently opened Cages, management anticipates an improvement in same-Cage sales over the fourth quarter of 2011, due to the various initiatives implemented over the past year at the menu offering and marketing levels.

For the year to come, Sportscene Group is banking on an improvement in the Quebec sporting environment, although management believes that the restaurant industry will likely continue to be affected by the pressures exerted on customer traffic and selling prices. Considering this business context and given the significant investments made over the past two years in the expansion and internal development of the La Cage aux Sports banner, Sportscene will focus most of its efforts during the upcoming quarters on consolidating its core business.

Consequently, Sportscene Group's Board of Directors has decided to temporarily suspend the payment of dividends, until improved market conditions coupled with the positive impact of the numerous actions recently implemented enable the Company to reach performance levels consistent with its objectives.

"In upcoming quarters, we will focus on optimizing the various programs launched during the past year and on pursuing the ongoing updating of our capital and technological assets, so as to remain at the forefront of our market segment. Financially, while tightening the management of our operations, costs and liquidity, we will gradually repay the debt assumed over the past two years as part of our expansion program. Sportscene Group will thereby be in an even stronger position to take advantage of business opportunities that will arise in the short, medium and long term," indicated President and Chief Executive Officer Jean Bédard.

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", 39 of which are wholly or jointly owned by the Company, and 13 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. In addition, the Company manages real estate holdings, including a sports complex and several buildings housing La Cage aux Sports restaurants. Lastly, 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 financial statements, EBITDA corresponds to "Operating earnings". 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 Net Earnings and Comprehensive Income
(in thousands of Canadian dollars, except for earnings per share and number of outstanding shares)
(unaudited)

 
  13 weeks ended 39 weeks ended

May 27,
2012
May 29,
 2011
May 27,
 2012
May 29,
 2011
  $  $  $ $
Revenues 22,378 21,936 65,228 62,356
Cost of sales 6,775 5,377 19,129 18,944
Employee benefits expense 6,020 5,620 17,716 15,781
Selling and administrative expenses  6,859 7,656 21,025 19,140
Operating earnings  2,724 3,283 7,358 8,491
Interest on long-term debt  148 103 419 281
Other interest expenses  39 17 99 79
Amortization of property, plant and equipment   1,033 935 3,009 2,688
Amortization of intangible assets  22 30 67 86
Other (gains) losses  41 205 131 337
  1,283 1,290 3,725 3,471
Earnings before income tax  1,441 1,993 3,633 5,020
Income tax  364 568 941 1,440
Net earnings and comprehensive income  1,077 1,425 2,692 3,580
           
Net earnings and comprehensive income attributable to:        
           
The Company's shareholders 1,086 1,407 2,712 3,603
Non-controlling interests (9) 18 (20) (23)
Net earnings and comprehensive income  1,077 1,425 2,692 3,580
           
Earnings per share (in $):        
  Basic 0.26 0.34 0.65 0.86
  Diluted 0.26 0.34 0.65 0.86
           
Weighted average number of outstanding        
Class A shares (in thousands):        
  Basic 4,165 4,168 4,165 4,168
  Diluted 4,165 4,172 4,165 4,172

Interim Condensed Consolidated Statements of Changes in Shareholders' Equity
(in thousands of Canadian dollars, except number of outstanding shares)
(unaudited)

 
  Shareholders' Equity attributable to the Company's shareholders


Number of
shares
Share
capital
Stock-based
compensation
reserve

Retained
earnings
Total Non-
controlling
interests
Total
Shareholders'
equity
  (in thousands) $ $ $ $ $ $
Balance on August 28, 2011 4,165 3,551 222 25,121 28,894 293 29,187
  Stock-based compensation - - 27 - 27 - 27
  Net earnings and comprehensive income - - - 2,712 2,712 (20) 2,692
  Dividends declared to the company's shareholders - - - (1,250) (1,250) - (1,250)
  Capital contributions by non-controlling interests - - - - - 85 85
  Dividends declared by subsidiaries to non-controlling interests - - - - - (35) (35)
  Balance on May 27, 2012 4,165 3,551 249 26,583 30,383 323 30,706
               
Balance on August 30, 2010 4,168 3,554 199 23,684 27,437 286 27,723
  Stock-based compensation - - 17 - 17 - 17
  Net earnings and comprehensive income - - - 3,603 3,603 (23) 3,580
  Dividends paid to the company's shareholders - - - (1,251) (1,251) - (1,251)
  Redemption of shares of a subsidiary owned by a non-controlling shareholder - - - - - (5) (5)
  Capital transactions with non-controlling interests - - - (60) (60) 39 (21)
Balance on May 29, 2011 4,168 3,554 216 25,976  29,746 297 30,043

Interim Condensed Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
(unaudited)

 

As at May 27,
2012
As at August 28,
  2011
  $   $
Assets    
       
Current assets    
  Cash and cash equivalents 9,390 9,453
  Accounts receivable 6,400 4,498
  Income tax receivable 380 -
  Inventories 1,769 1,349
  Prepaid expenses 379 313
  Current portion of notes receivable 98 37
Total current assets 18,416 15,650
     
Notes receivable 1,066 893
Property, plant and equipment 35,688 32,112
Goodwill 2,876 2,696
Intangible assets 920 759
Deferred tax asset 1,556 1,525
Total assets 60,522 53,635
     
Liabilities and shareholders' equity    
     
Current liabilities    
  Accounts payable and accrued liabilities 9,969  7,704
  Income tax payable -  32
  Deferred revenues and credits 1,219 1,190
  Current portion of long-term debt 2,434 1,953
Total current liabilities 13,622 10,879
     
Long-term debt 13,730 11,196
Deferred revenues and credits 1,906 1,815
Deferred tax liability 558  558
Total liabilities 29,816 24,448
     
Shareholders' equity    
  Share capital 3,551 3,551
  Stock-based compensation reserve 249 222
  Retained earnings 26,583 25,121
Shareholders' equity attributable to the Company's shareholders 30,383 28,894
Non-controlling interests 323 293
Total shareholders' equity  30,706 29,187
     
Total liabilities and shareholders' equity  60,522 53,635

Interim Condensed Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
(unaudited)

 
  13 weeks ended 39 weeks ended

May 27,
2012
May 29,
2011
May 27,
2012
May 29,
2011
  $ $ $ $
Operating activities:        
  Net earnings  1,077 1,425 2,692 3,580
  Adjustments to reconcile net earnings to cash flows from operating activities:        
    Loss on disposal of property, plant and equipment 27 168 142 227
    Loss on disposal of interests in joint ventures - - - 26
    Loss on business combination achieved in stages 22 - 19 -
    Amortization of property, plant and equipment 1,033 935 3,009 2,688
    Amortization of intangible assets 22 30 67 86
    Stock-based compensation 11 6 27 17
    Interest expenses recognized in net earnings 187 120 518 360
    Interest paid (181) (102) (514) (287)
    Interest included in the cost of property, plant and equipment - 15 16 25
    Income tax expenses recognized in net earnings 364 568 941 1,440
    Income tax paid (266) (581) (1,381) (1,309)
  2,296 2,584 5,536 6,853
  Net change in non-cash working capital items, net of acquisitions and disposals
of subsidiaries and joint ventures
(1,012) 100 666 633
  1,284 2,684 6,202 7,486
Financing activities:        
  Increase of long-term debt 1,338  1,385 3,759 1,535
  Repayment of long-term debt (531) (366) (1,537) (1,141)
  Dividends paid to non-controlling interests - - (35) -
  Redemption of shares of a subsidiary owned by a non-controlling shareholder - - - (5)
  Dividends on Class A shares - - (1,250) (1,251)
  807 1,019 937 (862)
         
  13 weeks ended 39 weeks ended

May 27,
2012
May 29,
2011
May 27,
 2012
May 29,
2011
  $ $ $ $
Investing activities:        
  Acquisitions of subsidiaries and joint ventures, net of cash and cash equivalents acquired (607) - (794) (73)
  Proceeds from disposals of joint ventures, net of disposal of cash and cash equivalents - - - 204
  Change in notes receivable (287) 314 (657) (219)
  Retraction of investments - 500 - 2,000
  Acquisitions of property, plant and equipment (1,464) (1,628) (5,561) (4,245)
  Proceeds from disposals of property, plant and equipment 23 6 37 14
  Acquisitions of intangible assets (4) (37) (227) (156)
  (2,339) (845) (7,202) (2,475)
(Decrease) increase in cash and cash equivalents  (248) 2,858 (63) 4,149
Cash and cash equivalents, beginning of the period 9,638 9,018 9,453 7,727
Cash and cash equivalents, end of period 9,390 11,876 9,390 11,876

 

SOURCE SPORTSCENE GROUP INC.

For further information:

Source: Sportscene Group Inc.

Contact:  
Jean Bédard, Chairman of the Board, President and Chief Executive Officer
Josée Pépin, Manager, Accounting and Disclosure
450-641-3011

Organization Profile

SPORTSCENE GROUP INC.

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