VANCOUVER, BRITISH COLUMBIA - (Marketwired - Aug. 12, 2015) -
On May 6, 2015, the Fund completed an acquisition of additional interest in Franchise Sales of Boston Pizza restaurants in Canada, which subsequently resulted in a 6.2% increase to monthly distributions to unitholders beginning with the April 2015 distribution.
Trustees declared July 2015 distribution to unitholders of 10.83 cents per Unit.
Boston Pizza Royalties Income Fund (the "Fund") (TSX:BPF.UN) and Boston Pizza International Inc. ("BPI") reported financial results today for the second quarter period from April 1, 2015 to June 30, 2015 (the "Period"). A copy of this press release, the condensed consolidated interim financial statements and related Management's Discussion and Analysis ("MD&A") of the Fund and BPI are available at www.sedar.com and www.bpincomefund.com. The Fund will host a conference call to discuss the results on August 12, 2015 at 8:30 am Pacific Time (11:30 am Eastern Time). The call can be accessed by dialling 1-800-319-4610 or 604-638-5340. A replay will be available until September 11, 2015 by dialling 1-855-669-9658 or 604-674-8052 and entering the pin code: 4452 followed by the # sign.
Same store sales growth ("SSSG"), a key driver of distribution growth for unitholders of the Fund, was positive 0.1% for the Period and positive 1.1% YTD compared with negative 0.1% and negative 0.8%, respectively, for the same periods in 2014. Franchise Sales, the basis upon which royalties and Distribution Income4 are paid to the Fund, exclude revenue from the sale of liquor, beer, wine and approved national promotions and discounts. On a Franchise Sales basis, SSSG was positive 0.5% for the Period and positive 1.2% YTD compared with negative 0.7% and negative 1.3%, respectively, for the same periods in 2014. The positive SSSG for the Period and YTD was principally due to higher take-out and delivery sales resulting from continued promotion of Boston Pizza's online ordering system, menu re-pricing and higher chicken wing sales from the successful "Wings Two-Four" campaign, partially offset by the impact of weaker general economic conditions in regions directly connected to the Canadian oil and gas industry. Franchise Sales of restaurants in the royalty pool were $202.9 million for the Period and $396.3 million YTD compared with $196.6 million and $383.0 million, respectively, for the same periods in 2014. The increases in Franchise Sales for the Period and YTD were primarily attributable to additional Franchise Sales from eight net new store openings during 2014 that were added to the Fund's royalty pool on January 1, 2015 and positive SSSG.
"During the second quarter of 2015, the Fund completed a significant transaction under which it effectively acquired an additional 1.5% of franchise revenues from BPI. This accretive acquisition benefitted Fund unitholders and resulted in an immediate distribution increase of 6.2%, marking the 17th time that distributions increased since the inception of the Fund in 2002," said Mark Pacinda, President and CEO of BPI. "Despite the impact of weaker economic conditions in regions connected to the oil and gas industry, Boston Pizza posted record franchise sales, double digit growth in distributable cash per unit and an impressive payout ratio of 93.4% for the second quarter."
The Fund's net and comprehensive income was $9.8 million for the Period compared with $2.4 million for the second quarter of 2014. The $7.4 million increase in net and comprehensive income for the Period was primarily due to a net $5.5 million change in fair value adjustments and the addition of $2.7 million in Distribution Income, partially offset by a $0.6 million increase in income taxes and a $0.4 million increase in interest expense. For a detailed discussion on the Fund's net and comprehensive income, please see the "Operating Results - Net and Comprehensive Income / Basic and Diluted Earnings" section in the Fund's MD&A for the Period. The Fund's net income under International Financial Reporting Standards ("IFRS") contains non-cash items, such as the fair value adjustments on financial instruments, that do not affect the Fund's business operations or its ability to pay distributions to unitholders. In the Fund's view, net income is not the only or most meaningful measurement of the Fund's ability to pay distributions. Consequently, the Fund reports the non-IFRS metrics of Distributable Cash and Payout Ratio to provide investors with more meaningful information regarding the amount of cash that the Fund has generated to pay distributions. Readers are cautioned that Distributable Cash and Payout Ratio are non-IFRS financial measures that do not have standardized meanings prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. Commencing with the Period, the Fund has modified how it calculates Payout Ratio. Prior to the Period, the Fund calculated Payout Ratio by dividing the aggregate distributions payable by the Fund in respect of the applicable period by the Distributable Cash generated in that period. Commencing with the Period, Payout Ratio is calculated by dividing the aggregate distributions paid by the Fund during a period by the Distributable Cash generated in that same period. The Fund has changed the manner in which Payout Ratio is calculated in order to better align the Payout Ratio as a financial measure of cash efficiency of the Fund by using actual cash distributions paid on Units during a period, rather than distributions payable in respect of a period, as a percentage of Distributable Cash generated during the same period. As a result, Payout Ratios set forth in this press release are not necessarily directly comparable with Payout Ratios set forth in prior press releases or MD&A of the Fund. Historical Payout Ratios referred to in this press release have been restated to conform to this change. For a reconciliation between cash flow from operating activities (the most directly comparable IFRS measure) and Distributable Cash see the "Financial Summary" section of this press release for the Period. For a detailed discussion on the Fund's Distributable Cash and Payout Ratio, please see the "Operating Results - Distributable Cash / Payout Ratio" section in the Fund's MD&A for the Period.
The Fund's Distributable Cash was $6.4 million or $0.347 per unit of the Fund ("Unit") for the Period compared with $4.9 million or $0.313 per Unit for the same period in 2014. This represents an increase to Distributable Cash and Distributable Cash per Unit of 30.7% and 10.9%, respectively. These increases are primarily attributed to the Fund completing the Transaction (defined below) and receiving Distribution Income of $2.7 million during the Period, partially offset by an initial change in working capital5 of $0.9 million. The Fund's Distributable Cash was $10.9 million or $0.639 per Unit YTD compared with $9.1 million or $0.585 per Unit year-to-date in 2014. The increase in Distributable Cash of $1.8 million or 19.9% is primarily attributable to the Fund completing the Transaction and receiving Distribution Income, partially offset by the initial working capital change referenced above. The increase in Distributable Cash per Unit of 9.2%, is primarily attributable to the accretive effects of the Transaction, partially offset by the initial working capital change. The percentage increase in Distributable Cash for the Period and YTD was larger than the percentage increase in Distributable Cash per Unit for the Period and YTD due to the combined effect of the Fund receiving Distribution Income, the Fund issuing 5,047,613 Units on May 6, 2015 and the initial working capital change resulting from the completion of the Transaction. No debt was incurred at any point during the Period to fund distributions.
The Fund's Payout Ratio was 93.4% for the Period and 98.8% YTD compared with 97.7% and 104.8% in the same periods, respectively, one year ago. The Fund's Payout Ratio for the Period and YTD decreased compared with the same periods one year ago due to the increases in Distributable Cash, as discussed above, being greater than the increase in distributions paid during the Period. The increase in distributions paid during the Period was due to the Fund increasing the monthly distribution from 10.20 cents to 10.83 cents effective with the April 2015 distribution that was paid on May 29, 2015 and the Fund issuing 5,047,613 Units on May 6, 2015 in connection with the Transaction. The Fund strives to provide unitholders with regular monthly distributions, and as a result, the Fund will generally experience seasonal fluctuations in its Payout Ratio. The Fund's Payout Ratio is likely to be higher in the first and fourth quarters each year compared with the second and third quarters each year since Boston Pizza restaurants generally experience higher Franchise Sales during the summer months when restaurants open their patios and benefit from increased tourist traffic. Higher Franchise Sales generally results in increases in Distributable Cash. On a trailing 12-month basis, the Fund's Payout Ratio was 97.0% as at June 30, 2015. A key feature of the Fund is that it is a "top line" structure, in which BPI and Boston Pizza Canada Limited Partnership ("BP Canada LP") pay the Fund an amount based on Franchise Sales from restaurants in the Fund's royalty pool. Accordingly, Fund unitholders are not directly exposed to changes in the operating costs or profitability of BPI, BP Canada LP or individual Boston Pizza restaurants. Given this structure, and that the Fund has no current mandate to retain capital for other purposes, it is expected that the Fund will maintain a Payout Ratio close to 100% over time as the trustees of the Fund continue to distribute all available cash in order to maximize returns to unitholders.
On May 6, 2015, the Fund, indirectly through Boston Pizza Holdings Limited Partnership, completed an investment in BP Canada LP to effectively increase the Fund's interest in Franchise Sales of Boston Pizza restaurants in the royalty pool by 1.5%, from 4.0% to 5.5% (the "Transaction"). BP Canada LP is a limited partnership controlled and operated by BPI and is now the exclusive franchisor of Boston Pizza restaurants in Canada. Please refer to the Fund's Information Circular dated March 27, 2015 and the Final Short Form Prospectus dated April 7, 2015, copies of which are available on SEDAR at www.sedar.com, for a more detailed description of the Transaction.
On August 11, 2015 the trustees of the Fund approved a cash distribution to unitholders of 10.83 cents per Unit for July 2015. The distribution will be payable to unitholders of record at the close of business on August 21, 2015 and will be paid on August 31, 2015. The Fund periodically reviews distribution levels based on its policy of stable and sustainable distribution flow to unitholders. Including the July 2015 distribution, which will be paid in August 2015, the Fund will have paid out 156 consecutive monthly distributions totalling $206.6 million or $15.85 per Unit since the Fund's initial public offering in 2002.
The tables below set out selected information from the Fund's condensed consolidated interim financial statements together with other data and should be read in conjunction with the condensed consolidated interim financial statements and MD&A of the Fund for the three month and six month periods ended June 30, 2015 and 2014.
FINANCIAL HIGHLIGHTS
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SUMMARY OF QUARTERLY RESULTS
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Boston Pizza is well positioned for future growth and should continue to strengthen its position as the number one casual dining brand in Canada by continuing to achieve positive SSSG and opening new Boston Pizza locations across Canada.
The two principal factors that affect SSSG are changes in customer traffic and changes in average guest cheque. BPI's and BP Canada LP's strategies to drive higher guest traffic include attracting a wide variety of guests into the restaurant, sports bar and take-out/delivery parts of each location, offering a compelling value proposition to its guests and leveraging a larger marketing budget versus the previous year along with a revised calendar of national and local store promotions. Increased average cheque levels are expected to be achieved through a combination of culinary innovation and annual menu re-pricing. In addition, the franchise agreement governing each Boston Pizza restaurant requires a complete store renovation every seven years. Restaurants typically close for two to three weeks to complete the renovation and experience an incremental sales increase in the year following the re-opening.
Boston Pizza remains well positioned for future expansion as evidenced by the two net new Boston Pizza restaurant that have opened to date in 2015 and four new locations currently under construction with more planned for later in 2015. BPI's management believes that Boston Pizza will continue to strengthen its position as the number one casual dining brand in Canada by pursuing further restaurant development opportunities across the country.
Certain information in this press release constitutes "forward-looking information" that involves known and unknown risks, uncertainties, future expectations and other factors which may cause the actual results, performance or achievements of the Fund, Boston Pizza Holdings Trust, Boston Pizza Royalties Limited Partnership, Boston Pizza Holdings Limited Partnership, BP Canada LP, Boston Pizza Holdings GP Inc., Boston Pizza GP Inc., BPI, Boston Pizza restaurants, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Fund or management of BPI expects or anticipates will or may occur in the future, including such things as, seasonal fluctuations in the Payout Ratio, the Payout Ratio is likely to be higher in the first and fourth quarters, higher Franchise Sales generally result in increases in Distributable Cash, a Payout Ratio close to 100% will be maintained, trustees of the Fund will continue to distribute all available cash in order to maximize returns to unitholders, Boston Pizza being well positioned for future growth, the strengthening of Boston Pizza's position as the number one casual dining brand in Canada, the achievement of positive SSSG, opening of new restaurants, increases in average guest cheques levels, incremental sales increasing after store renovations, plans to pursue restaurant development opportunities and other such matters are forward-looking information. When used in this press release, forward-looking information may include words such as "anticipate", "estimate", "may", "will", "expect", "believe", "plan", "should", "continue" and other similar terminology. The material factors and assumptions used to develop the forward-looking information contained in this press release include the following: future results being similar to historical results, expectation related to future general economic conditions, business plans, receipt of franchise fees and other amounts, franchisees access to financing, pace of commercial real estate development, protection of intellectual property rights of Boston Pizza Royalties Limited Partnership and absence of changes of laws. Risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievement expressed or implied by the forward-looking information contained herein, relate to (among others) competition, demographic trends, consumer preferences and discretionary spending patterns, business and economic conditions, legislation and regulation, Distributable Cash and reliance on operating revenues, accounting policies and practices, the results of operations and financial condition of BPI, BP Canada LP and the Fund, as well as those factors discussed under the heading "Risks and Uncertainties" in the most recent Annual Information Form of the Fund. This information reflects current expectations regarding future events and operating performance and speaks only as of the date of this press release. Except as required by law, the Fund and BPI assume no obligation to update previously disclosed forward-looking information. For a complete list of the risks associated with forward-looking information and our business, please refer to the "Risks and Uncertainties" and "Note Regarding Forward-Looking Information" sections included in the Fund's MD&A for the Period available at www.sedar.com and www.bpincomefund.com.
The trustees of the Fund approved the contents of this press release.
SOURCE Boston Pizza
Jordan Holm
Senior Vice President of Investor Relations
T: 604-303-6083
E: investorrelations@bostonpizza.com
www.bpincomefund.com
Boston’s is both a family-friendly casual dining restaurant and an energetic sports bar, all under one roof.