- Significant increase in pooled revenue as pandemic-related operating restrictions are eased -

BURLINGTON, ON, Aug. 12, 2021 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) (the Fund) today reported its financial results for the second quarter (Q2 2021) and six months (YTD 2021) ended June 30, 2021 and provided a business update.

Q2 2021 Summary

  • The operations of SIR Corp. (SIR) were adversely impacted by a series of restrictions in the various regions in which it operates that were introduced to mitigate the spread of COVID-19. However, the easing of operating restrictions during the quarter, most notably in Ontario during June 2021, resulted in increased Pooled Revenue in Q2 2021 compared to the second quarter ended June 30, 2020 (Q2 2020). Please refer to the Funds Management Discussion and Analysis (MD&A) for Q2 2021 for additional details on the timing and duration of various restrictions that impacted SIRs operations.

  • Restaurant closures and/or limited capacity re-openings of in-restaurant and patio dining are expected to continue to impact sales at SIR restaurants. The sales at SIR restaurants, Pooled Revenue and royalty income in the SIR Royalty Limited Partnership (the Partnership), along with the Funds equity income from the Partnership and cash available for distribution to unitholders of the Fund, continues to be significantly reduced compared to pre-pandemic fiscal periods.

  • In April 2021, SIR made a payment of $1.0 million for previously deferred royalties and/or interest payments on a loan owing by SIR to the Fund (the SIR Loan).

  • On May 31, 2021, SIR and its Lender entered into an eighth amending agreement to its Credit Agreement which, among other things, extended the maturity date of the credit facilities as well as certain waivers from July 6, 2021 to July 6, 2022. Additionally, SIRs Lender approved the resumption of current royalty payments on July 7, 2021 and a framework to enable SIR to catch up on deferred royalty payments by July 6, 2022. In addition, the Fund and the Partnership also entered into an acknowledgement and consent agreement with the Lender, and the Fund, the Partnership and SIR entered into a waiver and extension agreement. The expiration date of certain deferrals in these agreements was extended to July 6, 2022.

  • On June 14, 2021, the Fund, SIR Corp. and Lembit Janes announced a settlement agreement (the Settlement Agreement) that concluded a proxy contest. Under the terms of the Settlement Agreement, the size of the Funds Board of Trustees was fixed at seven members, and seven nominees were recommended for election: Stephen Dewis, Michael Fisher, Lembit Janes, Sandra Levy, Norm Mayr, William Rogers and Kim van Nieuwkoop. All seven nominees were elected as Trustees at the Funds annual general meeting on June 29, 2021.

Subsequent Events

  • On July 15, 2021, the Fund announced that its Trustees approved the resumption of monthly distributions effective July 30, 2021. The initial monthly distribution of $0.07 per Fund Unit was paid on July 30, 2021 to unitholders of record as at July 22, 2021.

  • On July 15, 2021, the Fund also announced the appointment of William Rogers as Chair of the Board of Trustees and named the members of its reconstituted Board committees.

Our operating environment improved significantly late in the second quarter due to the easing of COVID-19 restrictions, particularly in Ontario, said Peter Fowler, CEO of SIR Corp. While Pooled Revenue in the quarter more than doubled year-over-year as outdoor patio dining resumed in Ontario in June under the provinces reopening plan, it should be noted that it is still 72.9% below Pooled Revenue for the second quarter of 2019, prior to the pandemic. However, with indoor dining resuming in Ontario in July, our revenue levels have continued to build during the summer. The decision by the Funds Trustees to resume monthly distributions reflects these improved business conditions as COVID-19 vaccinations in Canada have increased significantly allowing the easing of operating restrictions. We are grateful for the support we received from stakeholders over the last 17 months, which has enabled us to achieve our goal of restarting distributions.

We continue to carefully monitor the spread of COVID-19 in all of our markets. Many experts have warned of a potential fourth wave of infections in Canada in the fall, which could lead to increased restrictions on restaurant dining. While we are optimistic that the worst of the pandemic is behind us, we remain prepared to respond rapidly to any potential changes in operating restrictions.

Q2 2021 Financial Results Summary

($000s except restaurants

and per Unit amounts)



period ended

June 30, 2021


period ended

June 30, 2020

period ended

June 30, 2021

period ended
June 30, 2020

Royalty Pooled Restaurants





Pooled Revenue generated by SIR Corp.





Royalty income to Partnership – 6% of Pooled Revenue





Other Income





Total Royalty income to Partnership





Partnership other income





Impairment of Intangible Assets





Partnership expenses





Partnership earnings (loss)





SIR Corp.s interest
(Class A, B, and C GP Units)





SIRs interest

(impairment of intangible assets)





Partnership income (loss) allocated to Fund





Impairment of financial assets





Change in estimated fair value of the SIR Loan









General & administrative expenses





Net earnings (loss) before income taxes of the Fund





Income tax expense





Net earnings (loss) for the period





Net Earnings (loss) per Fund Unit (basic)





Net Earnings (loss) per Fund Unit (diluted)





Pooled Revenue in Q2 2021 increased significantly to $21.0 million, compared to $9.6 million in Q2 2020. The higher Pooled Revenue in Q2 2021 reflects a 122.9% increase in Same Store Sales (SSS)(1), which was primarily attributable to the re-opening of outdoor patio dining in Ontario in June 2021.

Net earnings were $1.2 million, or $0.15 per Fund unit (basic) and $0.13 per Fund unit (diluted) in Q2 2021, compared to $1.9 million, or $0.22 per Fund unit (basic) and $0.19 per Fund unit (diluted) in Q2 2020. Adjusted net earnings(2) for Q2 2021 were $0.7 million, or $0.08 per Fund unit, compared to adjusted net earnings(2) of $0.1 million, or $0.02 per Fund unit, in Q2 2020.


Restaurant closures and/or limited capacity re-openings of in-restaurant and outdoor patio dining due to the COVID-19 pandemic are expected to continue to impact sales at SIR restaurants. The sales at SIR restaurants, Pooled Revenue and royalty income in the Partnership, along with the Funds equity income from the Partnership and cash available for distribution to unitholders of the Fund, continues to be significantly reduced compared to pre-pandemic fiscal periods.

SIR has been deemed eligible for the Canada Emergency Wage Subsidy (CEWS) program. As a result, SIR has received a subsidy from the federal government to partially offset certain of its wage costs starting in mid-March 2020. SIR expects to continue to remain eligible for the program through to at least its current expected end date of October 23, 2021.

SIR has advised the Fund that its ability to meet its obligations for the next 12 to 18 months is dependent on its ability to obtain increased and extended financing through further amendments to its Credit Agreement and the availability of credit under the current Credit Agreement or other financing sources and/or additional government assistance to aid businesses.

SIRs ability to meet its obligations for the next 12 to 18 months also depends on, among other factors: potential future prohibitive operating restrictions, the speed at which SIR is able to return to full operating capacity in the near future, Canadian economic conditions after bars and restaurants are able to fully re-open, SIRs ability to negotiate longer term extended credit terms from its suppliers, including negotiating deferrals of rent obligations over the terms of its leases, and SIRs ability to negotiate a further extension to its current credit agreement with its senior lender, which is scheduled to mature on July 6, 2022. There can be no assurance that SIR can complete such arrangements, remain in compliance with such agreements, or receive additional waivers in the future.

SIRs insurer has denied any business interruption claims due to pandemic related operating restrictions or closures. However, SIR continues to pursue a Business Interruption claim due to Civil Authority orders against its insurer by way of Notice of Application in the Ontario Superior Court, which was heard on May 19, 2021 and June 2, 2021 and will continue to be heard on September 13, 2021. This claim includes a rider provision to SIRs property policy which is in favour of the Fund and covers income reduction for lost royalties for a maximum of 180 days. There can be no assurance this action will be successful.

Given the uncertainty surrounding the pandemic and the government mandated shutdowns or capacity restrictions and the related impact to SIR, which the Fund is dependent on for cash flow, the Funds ability to continue as a going concern for the next 12 to 18 months involves significant judgment. The consolidated interim consolidated financial statements of the Fund have been prepared using International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS) applicable to a going concern, which contemplates the realization of assets and the settlement of liabilities during the normal course of operations for the foreseeable future. Please refer to Note 1 of the Funds financial results for Q2 2021 for the Funds complete going concern disclosure.

Q2 2021 Interim Filings

The Funds unaudited interim consolidated Financial Statements and MD&A, and the Partnerships Financial Statements, for the three and six-month periods ended June 30, 2021 are available via the SEDAR website at www.sedar.com and SIRs website at www.sircorp.com.

(1) Same store sales (SSS) and same store sales growth (SSSG) are non-GAAP financial measures and do not have standardized meanings prescribed by IFRS. However, the Fund believes that SSS and SSSG are useful measures and provide investors with an indication of the change in year-over-year sales. The Funds method of calculating SSS and SSSG may differ from those of other issuers and, accordingly, SSS and SSSG may not be comparable to measures used by other issuers. SSS includes revenue from all SIR Restaurants included in Pooled Revenue except for those locations that were not open for the entire comparable periods in Q2 2021 and Q2 2020. SSSG is the percentage increase in SSS over the prior comparable period.

(2) References to Adjusted Net Earnings (Loss) are to the Funds net earnings (loss) plus or minus the impairment on financial assets and the investment in the Partnership and replacing the change in estimated fair value of the SIR Loan as reported in the statement of earnings with the interest received on the SIR Loan during the period and the corresponding deferred tax expense or recovery from the net earnings for the period. Adjusted Net Earnings (Loss) per Fund unit represents the portion of net earnings adjusted for any impairment adjustment on financial assets and the investment in the Partnership and the change in estimated fair value of the SIR Loan and the deferred tax expense or recovery for the period allocated to each outstanding Fund unit. Adjusted Net Earnings (Loss) and Adjusted Net Earnings (Loss) per Fund unit are non-GAAP financial measures and do not have a standardized meaning prescribed by IFRS. Management believes that in addition to net earnings (loss), Adjusted Net Earnings (Loss) and Adjusted Earnings per Fund unit are useful supplemental measures to evaluate the Funds performance. The change in estimated fair value of the SIR Loan is a non-cash fair value transaction resulting from IFRS 9 and varies with changes in a discount rate that fluctuates based on current market interest rates adjusted for SIRs credit risk. The replacement of the non-cash change in estimated fair value of the SIR Loan with the interest received, and the corresponding deferred tax amount, eliminates this non-cash impact. Management cautions investors that Adjusted Net Earnings (Loss) should not replace net earnings or loss or cash flows from operating, investing and financing activities (as determined in accordance with IFRS), as an indicator of the Funds performance. The Funds method of calculating Adjusted Net Earnings (Loss) may differ from the methods used by other issuers. Please refer to the reconciliations of net earnings (loss) for the period to Adjusted Net Earnings (Loss) in the Funds Q2 2021 MD&A.

About SIR Corp.

SIR Corp. (SIR) is a privately held Canadian corporation that owns a portfolio of 53 restaurants in Canada. SIRs Concept brands include: Jack Astors Bar and Grill®, with 37 locations; Scaddabush Italian Kitchen & Bar® with nine locations; and Canyon Creek®, with two locations. SIR also operates one-of-a-kind Signature brands including Reds® Wine Tavern, Reds® Square One and The Loose Moose®. All trademarks related to the Concept and Signature brands noted above are used by SIR under a License and Royalty Agreement with SIR Royalty Limited Partnership. SIR also owns one Dukes Refresher® & Bar location in downtown Toronto, and one seasonal Signature restaurant, Abbeys Bakehouse®, which are currently not in consideration to be part of the Royalty Pool. For more information on SIR Corp. or the SIR Royalty Income Fund, please visit www.sircorp.com.

About SIR Royalty Income Fund

The Fund is a trust governed by the laws of the province of Ontario that indirectly has interests in the trademarks used by SIR.

Caution concerning forward-looking statements

Certain statements contained in this report, or incorporated herein by reference, including the information set forth as to the future financial or operating performance of the Fund or SIR, that are not current or historical factual statements may constitute forward-looking information within the meaning of applicable securities laws (forward-looking statements). Statements concerning the objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of the Fund, the SIR Holdings Trust (the Trust), the Partnership, SIR, the SIR Restaurants or industry results, are forward-looking statements. The words may, will, should, would, could, expect, believe, plan, anticipate, intend, estimate and other similar terminology and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Fund, the Trust, the Partnership, SIR, the SIR Restaurants or industry results, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. These statements reflect Managements current expectations, estimates and projections regarding future events and operating performance and speak only as of the date of this document. Readers should not place undue importance on forward-looking statements and should not rely upon this information as of any other date. Risks related to forward-looking statements include, among other things, challenges presented by a number of factors, including: the impact of the COVID-19 pandemic; market conditions at the time of this filing; competition; changes in demographic trends; weather; changing consumer preferences and discretionary spending patterns; changes in consumer confidence; changes in national and local business and economic conditions; pandemics or other material outbreaks of disease or safety issues affecting humans or animals or food products; changes in tariffs and international trade; changes in foreign exchange and interest rates; changes in availability of credit; legal proceedings and challenges to intellectual property rights; dependence of the Fund on the financial condition of SIR; legislation and governmental regulation, including the cost and/or availability of labour as it relates to changes in minimum wage rates or other changes to labour legislation and forced closures of restaurants and bars; laws affecting the sale and use of alcohol (including availability and enforcement); changes in cannabis laws; accounting policies and practices; changes in tax laws; and the results of operations and financial condition of SIR. The foregoing list of factors is not exhaustive. Many of these issues can affect the Funds or SIRs actual results and could cause their actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, the Fund or SIR. There can be no assurance that SIR will remain compliant in the future with all of its financial covenants under the Credit Agreement and imposed by the lender. Given these uncertainties, readers are cautioned that forward-looking statements are not guarantees of future performance and should not place undue reliance on them. The Fund and SIR expressly disclaim any obligation or undertaking to publicly disclose or release any updates or revisions to any forward-looking statements. Forward-looking statements are based on Managements current plans, estimates, projections, beliefs and opinions, and the Fund and SIR do not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change, except as expressly required by applicable securities laws.

In formulating the forward-looking statements contained herein, SIR Management has assumed that it will be successful in dealing with the effects of the COVID-19 pandemic and that business and economic conditions affecting SIRs restaurants and the Fund will return to normalcy within the medium term.

For more information concerning the Funds risks and uncertainties, please refer to the March 31, 2021 Annual Information Form, for the period ended December 31, 2020, which is available under the Funds profile at www.sedar.com. All of the forward-looking statements made herein are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Fund or SIR.

SOURCE SIR Royalty Income Fund



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