Sportscene Group Maintains its Performance in the Second Quarter of Fiscal
2010
- The Company achieves quarterly net earnings of $1.1 million or $0.25 per share; - Net earnings for the first six months of fiscal 2010 total $2.6 million or $0.61 per share; - As at February 28, 2010, Sportscene posts cash and cash equivalents of $11.6 million and a total net debt of $0.2 million. </pre> <p/> <p><span class="xn-location">MONTREAL</span>, <span class="xn-chron">April 8</span> /CNW Telbec/ - In the second quarter of fiscal 2010, SPORTSCENE GROUP INC. ("Sportscene" or "the Company"; SPS.A/TSX Venture Exchange), operator of the LA CAGE AUX SPORTS chain of resto-bars, continued to attenuate the effects of a challenging economic context through proactive and responsible management of its operations. During the 13-week period ended <span class="xn-chron">February 28, 2010</span>, the Company posted net earnings of <span class="xn-money">$1.1 million</span> or <span class="xn-money">$0.25</span> per share (basic and diluted), compared with <span class="xn-money">$1.2 million</span> or <span class="xn-money">$0.29</span> per share (basic and diluted) in the same quarter of fiscal 2009. Management deems this result satisfactory considering the economic uncertainty that continues to affect consumer spending and, as a result, the customer traffic of La Cage aux Sports' network whose total sales declined by 7.8% to stand at <span class="xn-money">$27.6 million</span>. For their part, the Company's revenues decreased by 8.4% to <span class="xn-money">$18.3 million</span> due largely to the fact that the Company did not carry out any significant Cages construction or renovation work during the second quarter of the current fiscal year, whereas it had finalized the construction of a new franchised Cage in the same period of 2009. However, restaurant revenues remained stable. Operating income, or EBITDA(1), amounted to <span class="xn-money">$2.5 million</span>, compared with <span class="xn-money">$2.9 million</span> the previous year. This decrease is attributable to two main factors: (1) a lesser volume of activity than the previous year with respect to construction work and the organization of sports trips, while the Company nonetheless continued to assume the fixed costs related to these activities; and (2) the recognition, during the second quarter of the previous year, of non-recurring revenues as part of the renewal of some Cage franchise contracts, which were directly reflected in EBITDA.</p> <p>During the six-month period ended <span class="xn-chron">February 28, 2010</span>, Sportscene Group posted net earnings of <span class="xn-money">$2.6 million</span> or <span class="xn-money">$0.61</span> per share (basic and diluted) on revenues of <span class="xn-money">$39.4 million</span>, compared with net earnings of <span class="xn-money">$2.7 million</span> or <span class="xn-money">$0.64</span> per share (basic and diluted) on revenues of <span class="xn-money">$42.9 million</span> in the first half of the previous year. Consequently, the net profit margin as a percentage of revenues stood at 6.5% in 2010, versus 6.3% in 2009. Sportscene recorded EBITDA of <span class="xn-money">$5.8 million</span>, down from <span class="xn-money">$6.1 million</span> in 2009. However, the EBITDA margin improved from 14.2% last year to 14.7% this year. This performance is primarily attributable to the fact that restaurant operations posted a comparable operating profitability to 2009 despite a 5.7% decrease in La Cage aux Sports' total network sales, which amounted to <span class="xn-money">$56.2 million</span> compared with <span class="xn-money">$59.6 million</span> the previous year.</p> <p>President and Chief Executive Officer Jean Bédard indicated that most of the network's sales decrease is attributable to the economic climate. "Overall, the La Cage aux Sports banner has succeeded so far in weathering the economic slowdown and defending its competitive position through targeted and effective marketing initiatives. In addition, despite a decrease in Sportscene's revenues, the efforts made since the beginning of the recession to further focus on value-added activities and optimize operations enabled us to maintain preserve the profitability of La Cage aux Sports' network and Sportscene Group as a whole."</p> <p>Since the beginning of fiscal 2010, besides preserving its profit margins, Sportscene has respected its commitment to safeguard its financial health by maintaining its significant self-financing capacity and through rigorous management of its treasury and capital structure. In fact, operating activities for the first six months of the current fiscal year provided cash flows of <span class="xn-money">$5.7 million</span>. Thus, as at <span class="xn-chron">February 28, 2010</span>, Sportscene had short-term available cash of <span class="xn-money">$11.6 million</span> and total debt of <span class="xn-money">$11.8 million</span>, representing a total net debt of only <span class="xn-money">$0.2 million</span>. At the beginning of the third quarter, the Company used some of its available cash to repay the <span class="xn-money">$1.2 million</span> balance on its revolving credit.</p> <p/> <pre> Outlook ------- </pre> <p/> <p>Sportscene's management expects that it will take another few months for the effects of the gradual economic recovery to truly reflect on the restaurant industry. In the meantime, Sportscene will continue to concentrate its efforts on strengthening La Cage aux Sports' network and enhancing its profile, while also optimizing all its operating, marketing and investment activities. The Company will closely monitor its asset base, operations and management practices according to the value they bring to its customers and shareholders. In doing so, Sportscene will seek to fully capitalize on the favourable sports environment currently prevailing in <span class="xn-location">Quebec</span> in order to increase the Cages' customer traffic.</p> <p>"Bringing La Cage aux Sports back into growth mode will be our primary objective and challenge in the year ahead. To that end, we are currently working on certain expansion projects for fiscal 2011, including the introduction of alternative foodservices concepts. Considering the many initiatives taken over the past 18 months to generate more profits with the same sales dollar, La Cage aux Sports' and Sportscene Group's return to growth, once it materializes, should have a significant leverage effect on the Company's profitability and capacity to generate shareholder value," concluded Jean Bédard.</p> <p/> <pre> Profile ------- </pre> <p/> <p>In business since 1984, Sportscene Group Inc. operates Quebec's leading chain of sports-themed resto-bars: La Cage aux Sports. As of <span class="xn-chron">February 28, 2010</span>, the chain comprised 49 "Cages", 34 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 also provides on-site catering services at sporting and popular events. In addition, the Company manages real estate holdings, including a sports centre 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 Sport network, as well as the organization of sports-related activities, such as international-calibre boxing events, and group trips to sports destinations.</p> <p/> <pre> (1) EBITDA is not a measure consistent with Canadian generally accepted accounting principles. Sportscene uses this measure because it enables management to assess the Company's operational performance and it is a widely accepted financial indicator of a company's ability to service and incur debt. In Sportscene's statement of earnings, EBITDA corresponds to "Earnings before other items". (2) 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 statements of earnings and comprehensive income (amounts are expressed in thousands of dollars except for per-share amounts and number of shares) (unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- 13 weeks ended 26 weeks ended February March February March 28, 2010 1, 2009 28, 2010 1, 2009 (restated) (restated) ------------------------------------------------------------------------- $ $ $ $ Revenues 18,296 19,972 39,389 42,892 Cost of sales, selling, general and administrative expenses 15,770 17,112 33,580 36,783 ------------------------------------------------------------------------- Earnings before other items 2,526 2,860 5,809 6,109 ------------------------------------------------------------------------- Interest on long-term debt 93 129 184 260 Other interest expense 4 59 46 107 Amortization of deferred financing costs 1 2 1 2 Amortization of capital assets 858 879 1,739 1,719 Amortization of intangibles and other assets 79 121 159 260 Loss on disposal of assets 79 18 152 22 ------------------------------------------------------------------------- 1,114 1,208 2,281 2,370 ------------------------------------------------------------------------- Earnings before income taxes and non-controlling interest 1,412 1,652 3,528 3,739 Income taxes 406 449 1,017 1,065 ------------------------------------------------------------------------- Earnings before non- controlling interest 1,006 1,203 2,511 2,674 Non-controlling interest 44 8 62 23 ------------------------------------------------------------------------- Net earnings and comprehensive income 1,050 1,211 2,573 2,697 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings per share: Basic $ 0.25 $ 0.29 $ 0.61 $ 0.64 Diluted $ 0.25 $ 0.29 $ 0.61 $ 0.64 Weighted average number of Class A shares outstanding (in thousands): Basic 4,180 4,178 4,180 4,184 Diluted 4,182 4,178 4,182 4,184 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Consolidated statements of variations in shareholders' equity (amounts are expressed in thousands of dollars) (unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- 13 weeks ended 26 weeks ended February March February March 28, 2010 1, 2009 28, 2010 1, 2009 (restated) (restated) ------------------------------------------------------------------------- $ $ $ $ Share capital, beginning of period 3,557 3,478 3,555 3,499 Redemption of stock (1) - (1) (23) Retraction of notes receivable 3 2 5 4 ------------------------------------------------------------------------- Share capital, end of period 3,559 3,480 3,559 3,480 ------------------------------------------------------------------------- Contributed surplus, beginning of period 186 176 180 171 Stock-based compensation 4 5 10 11 ------------------------------------------------------------------------- 190 181 190 182 Less: Excess of the purchase price over the carrying amount of the Class A shares redeemed - - - (1) ------------------------------------------------------------------------- Contributed surplus, end of period 190 181 190 181 ------------------------------------------------------------------------- Retained earnings, beginning of period As previously reported 24,512 22,603 23,096 21,452 Adjustment related to the adoption of a new accounting policy - (122) (107) (128) ------------------------------------------------------------------------- Restated balance 24,512 22,481 22,989 21,324 Net earnings 1,050 1,211 2,573 2,697 Less: Excess of the purchase price over the carrying amount of the Class A shares redeemed (21) (1) (21) (330) Dividends on Class A shares (1,254) (1,253) (1,254) (1,253) ------------------------------------------------------------------------- Retained earnings, end of period 24,287 22,438 24,287 22,438 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Consolidated balance sheets (amounts are expressed in thousands of dollars) (unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- As at As at February 28, August 30, 2010 2009 (restated) ------------------------------------------------------------------------- $ $ Assets Current assets: Cash and cash equivalents 8,537 8,451 Restricted cash 16 168 Temporary investments 3,000 - Accounts receivable 3,668 3,064 Inventories 979 970 Prepaid expenses 630 533 Current portion of notes receivable 76 34 ------------------------------------------------------------------------- Total current assets 16,906 13,220 Notes receivable 943 954 Capital assets 29,593 31,038 Intangibles and other assets 555 714 Future income taxes 841 844 Goodwill 2,327 2,224 ------------------------------------------------------------------------- Total assets 51,165 48,994 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities and shareholders' equity Current liabilities: Accounts payable and accrued liabilities 7,514 6,292 Income taxes payable 65 564 Future income taxes 115 115 Deferred income and credits 1,368 805 Current portion of long-term debt 1,886 1,838 ------------------------------------------------------------------------- Total current liabilities 10,948 9,614 Long-term debt 9,859 10,845 Deferred income and credits 1,492 889 Future income taxes 496 496 Non-controlling interest 334 426 ------------------------------------------------------------------------- Total liabilities 23,129 22,270 Shareholders' equity: Share capital 3,559 3,555 Contributed surplus 190 180 Retained earnings 24,287 22,989 ------------------------------------------------------------------------- 28,036 26,724 ------------------------------------------------------------------------- Total liabilities and shareholders' equity 51,165 48,994 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Consolidated statements of cash flows (amounts are expressed in thousands of dollars) (unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- 13 weeks ended 26 weeks ended February March February March 28, 2010 1, 2009 28, 2010 1, 2009 (restated) (restated) ------------------------------------------------------------------------- $ $ $ $ Cash flows from operating activities: Net earnings 1,050 1,211 2,573 2,697 Non-cash items: Loss on disposal of assets 79 18 152 22 Amortization of deferred financing costs 1 2 1 2 Amortization of capital assets 858 879 1,739 1,719 Amortization of intangibles and other assets 79 121 159 260 Non-controlling interest (44) (8) (62) (23) Stock-based compensation 4 5 10 11 Future income taxes (52) (109) 6 (91) ------------------------------------------------------------------------- 1,975 2,119 4,578 4,597 Net change in non-cash balance related to operations, net of business acquisitions and disposals 1,838 848 1,126 (2,061) ------------------------------------------------------------------------- 3,813 2,967 5,704 2,536 ------------------------------------------------------------------------- Cash flows from financing activities: Proceeds from issuance of long-term debt 177 1,578 177 2,318 Repayment of long-term debt (851) (425) (1,315) (1,317) Deferred financing costs - (8) (2) (8) Redemption of Class A shares (22) (1) (22) (354) Dividends on Class A shares (1,254) (1,253) (1,254) (1,253) Dividends paid to non-controlling interest - - (30) - ------------------------------------------------------------------------- (1,950) (109) (2,446) (614) ------------------------------------------------------------------------- Consolidated statements of cash flows (amounts are expressed in thousands of dollars) (unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- 13 weeks ended 26 weeks ended February March February March 28, 2010 1, 2009 28, 2010 1, 2009 (restated) (restated) ------------------------------------------------------------------------- $ $ $ $ Cash flows from investing activities: Acquisition of businesses, net of cash and cash equivalents acquired - (4) (203) (542) Proceeds from business disposals, net of cash and cash equivalents disposed - - 3 - Change in restricted cash 87 183 152 226 Change in temporary investments (1,000) - (3,000) 100 Change in notes receivable (81) 170 (141) 160 Additions to capital assets (468) (1,692) (635) (2,751) Proceeds from disposal of capital assets 650 7 652 7 Increase in intangibles and other assets - - - (72) ------------------------------------------------------------------------- (812) (1,336) (3,172) (2,872) ------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 1,051 1,522 86 (950) Cash and cash equivalents, beginning of period 7,486 4,395 8,451 6,867 ------------------------------------------------------------------------- Cash and cash equivalents, end of period 8,537 5,917 8,537 5,917 ------------------------------------------------------------------------- -------------------------------------------------------------------------
For further information: For further information: Jean Bédard, Chairman of the Board, President and Chief Officer; Gilles Lacombe, Vice-President, Finance and Administration, (450) 641-3011; Source: Sportscene Group Inc.
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