During Fiscal Year 2009, Despite Challenging Business Conditions, Sportscene
Maintains its Operating Profitability Compared with the Previous Year and
Further Improves its Financial Position
- 3.2% growth in revenues;
- Slight increase in consolidated EBITDA(1);
- Net earnings of $4.5 million or $1.07 per share ($4.9 million or $1.19
per share excluding non-recurring items).
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<p><location>MONTREAL</location>, <chron>Nov. 19</chron> /CNW Telbec/ - During the fiscal year ended <chron>August 30, 2009</chron>, SPORTSCENE GROUP INC. ("Sportscene" or "the Company"; SPS.A/TSX Venture Exchange), operator of the LA CAGE AUX SPORTS chain of resto-bars, managed to mitigate the impact of a challenging business environment on its results, primarily through stronger focus on initiatives yielding greater added value, the ongoing optimization of its operational and administrative processes and the development of its related activities.</p>
<p>The Company's annual consolidated revenues amounted to <money>$81.3 million</money>, up from <money>$78.7 million</money> the previous year. This 3.2% growth is attributable to the increased contribution of activities other than restaurant operations, mainly the organization of world boxing championships, the operation of the sports complex acquired in <chron>March 2008</chron>, and the construction or renovation of franchised and joint venture Cages. However, restaurant revenues declined by 6.0% to <money>$66.7 million</money>, as a result of the economic slowdown that affected consumers' habits, along with a less favourable sports environment than the previous year. For the same reasons, La Cage aux Sports' total network sales decreased by 5.6% to <money>$114.7 million</money>, compared with <money>$121.5 million</money> the previous year. In addition to a more difficult business environment, the decline in total network sales can be explained by the fact that fiscal 2008 included one more week than fiscal 2009. Notwithstanding this additional week in 2008, total network sales posted a 4.1% decline.</p>
<p>Despite the additional week in fiscal 2008, consolidated EBITDA (earnings before amortization, interest and income taxes(1)) amounted to <money>$11.5 million</money> for fiscal 2009, compared with <money>$11.4 million</money> in 2008, as a result primarily of the increased contribution of activities other than restaurant operations. Regarding restaurant operations, the unfavourable impact of the organic decrease in La Cage aux Sports' total network sales was mitigated, among other factors, by the improvement in operating practices - especially kitchen processes - and the non-recurrence of certain costs recorded in 2008. Consequently, although the restaurant segment's EBITDA declined in dollars, its EBITDA margin as a percentage of revenues improved from 15.7% in 2008 to 15.9% in 2009. For the Company overall, however, the consolidated EBITDA margin decreased from 14.5% to 14.1%, due mainly to the smaller proportion of restaurant revenues in the consolidated revenue mix.</p>
<p>During fiscal 2009, Sportscene recorded non-recurring net losses totalling close to <money>$0.7 million</money>, of which a <money>$0.1 million</money> net loss on the disposal of capital assets in connection with the renovation of Cages, a <money>$0.2 million</money> impairment of long-term assets recognized in the fourth quarter, and a <money>$0.4 million</money> write-off (also recognized in the fourth quarter) of the goodwill of the division specializing in on-site foodservices and beer sales at events, following Sportscene's decision to discontinue part of its operations in order to focus on larger, more profitable events. In 2008, conversely, the Company had recorded net non-recurring gains of <money>$0.2 million</money> on the disposal of interests in some Cages.</p>
<p>Earnings before income taxes and non-controlling interest, or "EBT", amounted to <money>$6.1 million</money> in 2009, compared with <money>$7.0 million</money> in 2008. Excluding the non-recurring gains and losses recorded during the two comparative fiscal years, which translated into a net unfavourable variation of <money>$0.9 million</money> in 2009 results, EBT posted a slight decline of 1.3%, to stand at <money>$6.7 million</money> in 2009 compared with <money>$6.8 million</money> in 2008.</p>
<p>Sportscene closed fiscal 2009 with net earnings of <money>$4,481,000</money> or <money>$1.07</money> per share (basic and diluted), compared with net earnings of <money>$5,011,000</money> or <money>$1.20</money> per share (<money>$1.19</money> diluted) the previous year. For information purposes, excluding non-recurring gains and losses for the two comparative fiscal years, net of related taxes, net earnings would have amounted to <money>$4,959,000</money> or <money>$1.19</money> per share in 2009, compared with <money>$4,880,000</money> or <money>$1.16</money> per share in 2008. Thus, Sportscene maintained and even slightly increased its operating profitability despite the economic slowdown that prevailed throughout fiscal 2009, and although 2009 included one less week of operation than 2008.</p>
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Results for the Fourth Quarter Ended August 30, 2009
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<p>Sportscene's revenues decreased by 12.5% to <money>$17.8 million</money>, due largely to the fact that the fourth quarter of 2008 comprised 14 weeks compared with 13 in 2009, This mostly affected restaurant revenues, which also continued to suffer from the organic decrease in La Cage aux Sports' total network sales caused by the prevailing economic context. Total network sales amounted to <money>$24.8 million</money>, down 9.8% from the same quarter of 2008 (3.1% decrease excluding the additional week in 2008). Despite the revenue shortfall attributable to the 14th week in the fourth quarter of 2008, consolidated EBITDA increased slightly to stand at <money>$2.3 million</money>, whereas the EBITDA margin improved from 11.5% in 2008 to 13.2% in 2009. This improvement is primarily attributable to the restaurant segment, whose EBITDA margin increased from 11.6% in the fourth quarter of 2008 to 15.1% 2009, due to two main factors: (1) the recognition of restructuring costs of <money>$0.2 million</money> in the last quarter of 2008, as part of the reorganization of the Company's operations to further focus its efforts and resources toward the development of the La Cage aux Sports banner, while ensuring a more targeted and productive management of its complementary activities; and (2) the productivity and efficiency gains achieved as part of the global optimization of operating practices, especially kitchen practices, which mitigated the impact of the organic decrease in total network sales on the restaurant segment's profitability.</p>
<p>Sportscene closed the fourth quarter with net earnings of <money>$564,000</money> or <money>$0.14</money> per share (basic and diluted), compared with net earnings of <money>$772,000</money> or <money>$0.18</money> per share (basic and diluted) in the same quarter of 2008. For information purposes, excluding non-recurring gains and losses for the two comparative quarters (in the amount of <money>$0.6 million</money> in 2009 and immaterial in 2008), net of related taxes, net earnings would have amounted to <money>$882,000</money> or <money>$0.21</money> per share in the fourth quarter of 2009, compared with <money>$725,000</money> or <money>$0.17</money> per share in the quarter of 2008.</p>
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Balance Sheet Reinforcement
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<p>Cash flows from operating activities amounted to <money>$8.7 million</money> during fiscal 2009. Combined with the tightening of its cash management in light of the economic context, these contributed to raise cash and cash equivalents to <money>$8.5 million</money> as at <chron>August 30, 2009</chron>. At the same date, working capital reached <money>$3.6 million</money> for a current ratio of 1.38:1, compared with <money>$2.3 million</money> and a 1.18:1 ratio as at <chron>August 31, 2008</chron>. Also accounting for the increase in shareholders' equity, the total net debt to total invested capital ratio further improved, from 14.0% as at <chron>August 31, 2008</chron> to 13.2% as at <chron>August 30, 2009</chron>. Sportscene therefore remains in a solid financial position, not only to continue weathering the current economic context, but also to pursue targeted investments in the quality of its infrastructures and the upgrading of its technological platform.</p>
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Outlook
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<p>"Although an improvement in economic conditions can be expected in upcoming quarters, our business context remains challenging for the moment. However, we believe that Sportscene Group is well equipped to continue weathering the economic uncertainty still prevailing," said Jean Bédard, President and Chief Executive Officer of Sportscene Group. "For fiscal 2010, we will pursue a similar action plan as in 2009 which enabled us - during the worst of the economic slowdown - to deliver operating profits (excluding non-recurring items) comparable to those of the previous year and to close fiscal 2009 with an even stronger financial position. Our actions will continue to focus on the following key objectives: (1) maintain our profit margins through the ongoing optimization of our operational and administrative processes and a constant focus on the creation of added value for our customers and shareholders; (2) foster the organic growth of La Cage aux Sports' total network sales, through the quality of our marketing programs showcasing La Cage's "Sports, gang, fun" ambience and the consolidation of our leadership in multimedia technologies; and (3) preserve Sportscene's financial health by maintaining the Company's significant self-financing capacity through operating cash flows, rigorous cash management and effective coaching provided to network operators," concluded the President.</p>
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Profile
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<p>In business since 1984, Sportscene Group Inc. operates Quebec's leading chain of sports-themed resto-bars: La Cage aux Sports. The chain comprises, at the date thereof, 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>
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<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)
-------------------------------------------------------------------------
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13 weeks 14 weeks 52 weeks 53 weeks
Ended Ended
August 30 August 31 August 30 August 31
2009 2008 2009 2008
-------------------------------------------------------------------------
(unaudited)(unaudited) (audited) (audited)
$ $ $ $
Revenues 17,792 20,341 81,270 78,745
Cost of sales, selling,
general and administrative
expenses 15,446 18,011 69,782 67,313
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Earnings before other items 2,346 2,330 11,488 11,432
-------------------------------------------------------------------------
Interest on long-term debt 104 192 510 575
Other interest expense 45 48 210 178
Amortization of deferred
financing costs 1 - 3 -
Amortization of capital assets 854 882 3,466 3,255
Amortization of intangibles
and other assets 170 229 570 607
Loss on disposal of assets 39 36 119 66
Impairment of long-lived assets 153 - 153 -
Write-off of goodwill 394 - 394 -
Gain on business disposals - - (10) (246)
-------------------------------------------------------------------------
1,760 1,387 5,415 4,435
-------------------------------------------------------------------------
Earnings before income taxes
and non-controlling interest 586 943 6,073 6,997
Income taxes 47 201 1,644 1,999
-------------------------------------------------------------------------
Earnings before non-controlling
interest 539 742 4,429 4,998
Non-controlling interest (25) (30) (52) (13)
-------------------------------------------------------------------------
Net earnings and comprehensive
income 564 772 4,481 5,011
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Earnings per share:
Basic $0.14 $0.18 $1.07 $1.20
Diluted $0.14 $0.18 $1.07 $1.19
Weighted average number of
Class A shares outstanding
(in thousands):
Basic 4,180 4,205 4,182 4,193
Diluted 4,183 4,213 4,185 4,200
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Consolidated statements of variations in shareholders' equity
(amounts are expressed in thousands of dollars)
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13 weeks 14 weeks 52 weeks 53 weeks
Ended Ended
August 30 August 31 August 30 August 31
2009 2008 2009 2008
-------------------------------------------------------------------------
(unaudited)(unaudited) (audited) (audited)
$ $ $ $
Share capital, beginning
of period 3,543 3,498 3,499 3,255
Issuance of stock - - 14 182
Redemption of stock - - (23) -
Transfer from contributed
surplus 10 - 10 45
Retraction of notes receivable 2 1 55 17
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Share capital, end of period 3,555 3,499 3,555 3,499
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Contributed surplus, beginning
of period 187 157 171 166
Stock-based compensation 3 14 20 50
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190 171 191 216
Less:
Excess of the purchase price
over the carrying amount of
the Class A shares redeemed - - 1 -
Transfer to share capital 10 - 10 45
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Contributed surplus, end of
period 180 171 180 171
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Retained earnings, beginning
of period 23,786 21,941 21,452 18,964
Net earnings 564 772 4,481 5,011
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24,350 22,713 25,933 23,975
Less:
Excess of the purchase price
over the carrying amount of
the Class A shares redeemed - - 330 -
Dividends on Class A shares 1,254 1,261 2,507 2,523
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Retained earnings, end of
period 23,096 21,452 23,096 21,452
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Consolidated balance sheets
(amounts are expressed in thousands of dollars)
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2009 2008
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(audited) (audited)
$ $
Assets
Current assets:
Cash and cash equivalents 8,451 6,867
Restricted cash 168 260
Temporary investment - 100
Accounts receivable 3,064 5,169
Inventories 970 1,766
Prepaid expenses 533 679
Current portion of notes receivable 34 36
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Total current assets 13,220 14,877
Notes receivable 954 959
Capital assets 31,038 29,265
Intangibles and other assets 796 1,381
Future income taxes 869 380
Goodwill 2,224 2,363
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Total assets 49,101 49,225
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Liabilities and Shareholders' Equity
Current liabilities :
Accounts payable and accrued liabilities 6,292 9,337
Income taxes payable 564 29
Future income taxes 115 116
Deferred income and credits 805 1,307
Current portion of long-term debt 1,838 1,791
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Total current liabilities 9,614 12,580
Long-term debt 10,845 9,510
Deferred income and credits 889 927
Future income taxes 496 569
Non-controlling interest 426 517
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Total liabilities 22,270 24,103
Shareholders' equity:
Share capital 3,555 3,499
Contributed surplus 180 171
Retained earnings 23,096 21,452
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26,831 25,122
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Total liabilities and shareholders' equity 49,101 49,225
Consolidated statements of cash flows
(amounts are expressed in thousands of dollars)
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13 weeks 14 weeks 52 weeks 53 weeks
Ended Ended
August 30 August 31 August 30 August 31
2009 2008 2009 2008
-------------------------------------------------------------------------
(unaudited)(unaudited) (audited) (audited)
$ $ $ $
Cash flows from operating
activities:
Net earnings 564 772 4,481 5,011
Non-cash items:
Gain on business disposals - - (10) (246)
Loss on disposal of assets 39 36 119 66
Write-off of goodwill 394 - 394 -
Impairment of notes
receivable 57 - 57 -
Impairment of intangibles
and other assets 96 - 96 -
Amortization of deferred
financing costs 1 - 3 -
Amortization of capital
assets 854 882 3,466 3,255
Amortization of intangibles
and other assets 170 229 570 607
Non-controlling interest (25) (26) (52) (13)
Stock-based compensation 3 14 20 50
Future income taxes (318) 130 (594) 53
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1,835 2,037 8,550 8,783
Net change in non-cash balances
related to operations, net of
acquisitions and business
disposals 2,337 1,890 146 2,020
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4,172 3,927 8,696 10,803
Cash flows from financing
activities:
Proceeds from issuance of
long-term debt 169 485 2,487 2,549
Repayment of long-term debt (500) (475) (2,263) (1,484)
Increase in deferred financing
costs - - (12) -
Dividends on Class A shares (1,254) (1,261) (2,507) (2,523)
Dividends paid to
non-controlling interest - (15) - (15)
Proceeds from issuance of
Class A shares - - 14 182
Redemption of Class A shares - - (354) -
Redemption of a subsidiary's
equity shares held by
non-controlling interest (10) - (10) -
Proceeds from issuance of
equity shares of a subsidiary
to non-controlling interest - - - 174
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(1,595) (1,266) (2,645) (1,117)
Cash flows from investing
activities:
Acquisition of businesses,
net of cash and cash
equivalents acquired (40) - (615) (2,049)
Proceeds from business
disposals, net of cash
and cash equivalents
disposed - - 22 187
Change in restricted cash (82) (104) 91 7
Disposal (acquisition) on
temporary investments - - 100 (60)
Issuance of notes receivable (54) (441) (432) (585)
Retraction of notes
receivable - - 438 166
Acquisitions of capital
assets (1,008) (1,585) (4,052) (3,206)
Proceeds from disposal of
capital assets 2 47 62 70
Increase in intangibles and
other assets - (211) (81) (498)
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(1,182) (2,294) (4,467) (5,968)
Net increase in cash and
cash equivalents 1,395 367 1,584 3,718
Cash and cash equivalents,
beginning of period 7,056 6,500 6,867 3,149
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Cash and cash equivalents,
end of period 8,451 6,867 8,451 6,867
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For further information: Jean Bédard, Chairman of the Board, President and Chief Executive Officer, (450) 641-3011; Gilles Lacombe, Vice-President, Finance and Administration, (450) 641-3011; Source: Sportscene Group Inc.
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