Sportscene Group Increases its Net Earnings by 9.3% in the Third Quarter of Fiscal 2008, Accelerates its Expansion Projects and Declares a Second Dividend of $0.30 Per Share

    MONTREAL, July 10 /CNW Telbec/ - For SPORTSCENE GROUP INC. ("Sportscene"
or "the Company"; SPS.A/TSX Venture Exchange) the third quarter of fiscal 2008
not only yielded a strong financial performance, but was also particularly
productive in regard to the advancement of the various expansion projects
underway and the implementation of new growth initiatives. During the
three-month period ended May 25, 2008, La Cage aux Sports' total network sales
grew by 13.5% over the same period of 2007 to $33.4 million. Besides the
various Cage construction and expansion projects carried out in previous
quarters, this performance is largely attributable to a solid organic growth
in average same-Cage sales stemming, notably, from the excitement aroused by
the Montreal Canadiens' participation in the hockey playoffs. Coupled with the
development of Sportscene Group's other activities, including a world boxing
championship at the beginning of the third quarter, the restaurant operations'
excellent performance contributed to raise Sportscene Group's third-quarter
revenues by 19.7% to $21.1 million. Earnings before amortization, interest and
income taxes, or EBITDA(1), grew by 14.7% to $3.4 million. The growth in
operating profitability was driven by the solid performance of the restaurant
operations, of which EBITDA grew by more than 30% to $3.4 million to account
for all the third-quarter EBITDA. This performance is mainly attributable to
the gradual enhancement of the performance of the Cages inaugurated in 2006
and 2007 and to the continuous reinforcement of the Company's operational and
control practices, including the recent implementation of a kitchen process
optimization program. On account of the increase in amortization and interest
expenses arising from the network's expansion in recent quarters, Sportscene
closed the quarter with net earnings of $1.5 million or $0.36 per share (basic
and diluted), up 9.3% over the same quarter last year.
    This brings year-to-date net earnings for the first nine months of fiscal
2008 to $4.2 million or $1.01 per share (basic and diluted), up 7.3% over the
same period a year earlier. EBITDA(1) rose 8.6% to $9.1 million. Sportscene
Group's revenues grew by 4.0% to $58.4 million, due mainly to the 6% increase
in La Cage aux Sports' total network sales, which amounted to $93.6 million.
Due primarily to the strong organic growth recorded in the third quarter, the
opening of a joint venture in the fourth quarter of fiscal 2007 and a
corporate Cage in the first quarter of 2008 largely compensated for the
closure of a corporate Cage at the beginning of the current fiscal year.
Sportscene is finalizing its project to rebuild this Cage on a better-suited
site during fiscal 2009. Lastly, it should also be pointed out that Sportscene
Group's operating activities have generated cash flows of $6.8 million since
the beginning of fiscal 2008.

    Strategic Acquisition and Subsequent Creation of a Third Business Segment

    On March 31, 2008, Sportscene Group acquired a sports complex in the
Montreal region to prevail itself of a complementary source of revenues and
profits, primarily through the rental of space and hours of utilization of the
sports facilities. Subsequent to this acquisition, the Company decided to
create a third reportable segment, "Real estate holdings", which now includes
all of Sportscene's assets generating rental revenues, specifically the new
sports complex and Sportscene-owned buildings housing Cages aux Sports
outlets. Management's decision to create this new segment was partly motivated
by the expected increase in the Company's rental revenues in light of the
planned expansion of La Cage aux Sports' network and the acquisition of the
new sports complex, which alone should contribute additional rental revenues
of some $2 million annually. Furthermore, although the development and
management of real estate holdings are complementary to the Company's core
business, the return on assets criteria specific to such activities differ
from those of its other operations. "We see this third operating segment as a
promising avenue not only to consolidate the physical positioning of La Cage
aux Sports' banner and to reinvest part of our substantial cash flows, but
also to support our branding strategy in order to dominate the "Sports, Gang,
Fun" niche that is our field of excellence," President and Chief Executive
Officer Jean Bédard explained in this regard. He added that in upcoming
quarters, Sportscene will invest more than $2 million to upgrade the sports
complex's equipment and refit its indoor and outdoor areas, in order to
improve the quality of services offered to users, stimulate the demand and
thereby optimize the centre's utilization rate and profitability.

    Ongoing Expansion and Modernization of La Cage aux Sports Network

    In the fourth quarter, the Company will open a second cage in Rimouski, a
franchise, which will become La Cage aux Sports' 48th outlet. Management
pointed out that the next two years should also give rise to sustained network
expansion as the Company plans to open approximately six additional Cages,
including three during fiscal 2009. In fact, it will shortly begin the
construction work on the 49th Cage, a franchise located in Alma. "Several
other quality sites have been identified in Montreal, Quebec City and the
regions, bringing us closer to our objective of raising La Cage aux Sports'
total network sales to $140 million by 2011," Jean Bédard added. Furthermore,
the Cage design updating project is progressing as planned. A first corporate
outlet has already undergone a substantial renovation introducing new
decorative features meeting our target customers' tastes, while respecting La
Cage aux Sports' basic concept and personality. Considering this initiative's
positive reception, Sportscene will gradually proceed to renovate other
outlets, especially in urban centres.

    Outlook: Focus on Targeted and Profitable Growth

    As management expects that Sportscene's performance for the fourth
quarter of fiscal 2008 will be comparable to that of the same period in 2007,
the Company should end the current fiscal year with satisfactory growth in its
financial results. In subsequent quarters and years, consistent with its
strategic plan, the Company will continue to foster its revenue growth by
adding new business units - either other Cages or complementary activities -
and maximizing each unit's sales, while optimizing their profitability.
    For instance, given the success of the kitchen process optimization
program implemented this year, the Company will shortly launch a similar
initiative to enhance the efficiency and profitability of the services offered
to the Cages' customers.
    Subsequent to the recent expansion-by-acquisition of its summertime
catering services and beer sales at popular events (which notably enabled it
to serve the Montreal Grand Prix site last June), Sportscene is in a position
to adopt a more selective strategy in this field, focusing on the most
profitable events and the best opportunities to enhance its brand image. In
the future, the Company will also adopt a more targeted approach to its boxing
activities, which will henceforth be concentrated primarily on the
organization of world championships. "Given the number and quality of our
growth projects and the Company's excellent balance sheet, we believe that the
future holds exciting developments for Sportscene Group and La Cage aux
Sports' teams, along with increased financial results and value creation for
our shareholders," the President concluded.

    Payment of a Second Dividend of $0.30 Per Share for Fiscal 2008

    On July 10, 2008, considering the Company's solid financial results,
healthy balance sheet and positive outlook, Sportscene Group's Board of
Directors declared a second dividend for fiscal 2007, in the amount of
$0.30 per share. It will be paid on August 14, 2008 to shareholders of record
as at July 24, 2008. This payment will bring the total dividend for fiscal
2008 to $0.60 per share, being the same amount as the previous year.


    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

    (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

    Consolidated Statements of Earnings and Comprehensive income
    (amounts are expressed in thousands of dollars, except for per-share
    amounts) (unaudited)

                                   13 weeks ended:         39 weeks ended:
                                  May 25,     May 27,     May 25,     May 27,
                                    2008        2007        2008        2007
                                       $           $           $           $
    Revenues                      21,087      17,623      58,404      56,162
    Cost of products sold,
     selling, general and
     administrative expenses      17,681      14,654      49,302      47,777
    Earnings before other items    3,406       2,969       9,102       8,385

    Interest on long-term debt       136         108         383         322
    Other interest                    55          50         131         121
    Amortization of capital assets   816         661       2,371       2,046
    Amortization of other assets     139          90         380         322
    Loss on disposal of assets         9           2          30          48
    Gain on business disposals         -           -        (246)        (78)
    Earnings before income taxes
     and non controlling interest  2,251       2,058       6,053       5,604
    Income taxes                     724         661       1,801       1,636
    Net earnings before
     non-controlling interest      1,527       1,397       4,252       3,968
    Non-controlling interest           7           6          13          18
    Net earnings and comprehensive
     income for the period         1,520       1,391       4,239       3,950
    Earnings per share:
      - Basic                       0.36        0.33        1.01        0.95
      - Diluted                     0.36        0.33        1.01        0.94

    Weighted average number
     of Class A shares outstanding
     (in thousands):
      - Basic                      4,188       4,156       4,188       4,156
      - Diluted                    4,195       4,186       4,195       4,186

    Consolidated Statements of Retained Earnings
    (amounts are expressed in thousands of dollars (unaudited)

                                    13 weeks ended:         39 weeks ended:
                                  May 25,     May 27,     May 25,     May 27,
                                    2008        2007        2008        2007
                                       $           $           $           $
    Retained earnings, beginning
     of the period                20,421      17,869      18,964      16,561
    Net earnings for the period    1,520       1,391       4,239       3,950
     Dividends on Class A shares       -           -       1,262       1,251
    Retained earnings,
     end of period                21,941      19,260      21,941      19,260

    Consolidated Balance Sheets
    (amounts are expressed in thousands of dollars)

                                                           As at       As at
                                                          May 25,  August 26,
                                                            2008        2007
                                                               $           $
                                                      (unaudited)   (audited)

    Current assets:
      Cash and cash equivalents                            6,500       3,149
      Restricted cash                                        155         266
      Temporary investments                                  100          40
      Accounts receivable                                  5,460       5,002
      Inventories                                          1,586       1,126
      Income taxes receivable                                  -          26
      Prepaid expenses                                       977         834
      Current portion of notes receivable                     45          41
      Total current assets                                14,823      10,484

    Notes receivable                                         174         184
    Capital assets                                        29,141      24,828
    Other assets                                           1,031         973
    Future income taxes                                      768         768
    Goodwill                                               2,121       2,096
    Total assets                                          48,058      39,333

    Liabilities and Shareholders' Equity
    Current liabilities:
      Bank loan                                               15           -
      Accounts payable and accrued liabilities             6,853       6,387
      Income taxes payable                                   478           -
      Future income taxes                                    114         114
      Deferred revenues and credits                        1,165         976
      Current portion of long-term debt                    1,792       1,274
      Total current liabilities                           10,417       8,751

    Long-term debt                                         9,800       6,493
    Deferred revenues and credits                          1,057       1,097
    Future income taxes                                      630         262
    Non-controlling interest                                 558         345
    Total liabillities                                    22,462      16,948

    Shareholders' equity:
      Share capital                                        3,498       3,255
      Contributed surplus                                    157         166
      Retained earnings                                   21,941      18,964
    Total shareholders' equity                            25,596      22,385
    Total liabilities and shareholders' equity            48,058      39,333

    Consolidated Statements of Cash Flows
    (amounts are expressed in thousands of dollars) (unaudited)

                                    13 weeks ended:         39 weeks ended:
                                  May 25,     May 27,     May 25,     May 27,
                                    2008        2007        2008        2007
                                       $           $           $           $

    Operating activities:

    Net earnings                   1,520       1,391       4,239       3,950
    Non-cash items:
      Gain on business disposals       -           -        (246)        (78)
      Loss on disposal of assets       9           2          30          48
      Amortization of capital
       assets                        816         661       2,371       2,046
      Amortization of other assets   139          90         380         322
      Non-controlling interest         7           6          13          18
      Stock-based compensation        14          23          36          71
      Future income taxes             (5)         15         (77)          3
                                   2,500       2,188       6,746       6,380

    Net change in non-cash
     balances related to
     operations, net of
     acquisitions and business
     disposals                     2,086         469          58      (3,049)
                                   4,586       2,657       6,804       3,331
    Financing activities:

      Net change in bank loan       (393)          -          15           -
      Proceeds from the issue
       of long-term debt           2,244         392       3,264       1,375
      Repayment of long-term debt   (295)       (353)     (1,009)       (930)
      Issue of common shares           -           -         182         200
      Proceeds from issuance of
       equity shares of a
       subsidiary to non-
       controlling interest            -           -         174           -
      Dividends on class A shares      -           -      (1,262)     (1,251)
      Dividends paid to non-
      controlling interest             -           1           -         (25)
                                   1,556          40       1,364        (631)

    Investing activities:

      Acquisition of businesses,
       net of cash acquired       (1,635)         (8)     (1,992)         (8)
      Proceeds from business
       disposals, net of cash
       disposal                        -           -         187         105
      Change of restricted cash     (101)          -         111           -
      Disposal (acquisition) of
       temporary investments        (100)          -         (60)      1,512
      Change in notes receivable      (2)         22          22         121
      Additions to capital assets   (729)     (1,636)     (2,821)     (4,087)
      Increase in other assets       (70)       (566)       (287)       (743)
      Proceeds from disposal of
       capital assets                  6          11          23          36
                                  (2,631)     (2,177)     (4,817)     (3,064)
    Increase (decrease) in cash
     and cash equivalents          3,511         520       3,351        (364)
    Cash and cash equivalents,
     beginning of year             2,989       3,321       3,149       4,205
    Cash and cash equivalents,
     end of year                   6,500       3,841       6,500       3,841

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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