Pizza Pizza Royalty Corp. Announces Third Quarter Financial Results
Tuesday, November sixth, 2018
Toronto, Ontario, November 6, 2018 – Pizza Pizza Royalty Corp. (the “Company”), which owns the Pizza Pizza and Pizza 73 Rights and Marks, launched monetary outcomes as we speak for the three and 9 months ended September 30, 2018.
Third quarter highlights:
- Royalty Pool gross sales decreased zero.four%
- Similar retailer gross sales decreased zero.eight%
- Restaurant community decreased by 4 places
- Royalty Pool gross sales decreased zero.6%
- Similar retailer gross sales decreased 1.four%
- Restaurant community grew by seven places
- Royalty Pool of eating places elevated by seven efficient January 1, 2018
For the three months ended September 30, 2018 (“Quarter”), System Gross sales from the 758 eating places within the Royalty Pool decreased zero.four% to $138.5 million from $139.zero million within the prior yr comparable quarter when there have been 751 eating places within the Royalty Pool. For the 9 month interval ended September 30, 2018, Royalty Pool System Gross sales decreased zero.6% to $404.9 million from $407.four million in the identical interval final yr.
Complete Royalty Pool System Gross sales for the three and 9 month durations decreased over the comparative durations because of the reported lower in similar retailer gross sales progress (“SSSG”), offset by the influence of latest eating places added to the Royalty Pool on January 1, 2018.
SSSG, the important thing driver of yield progress for shareholders of the Firm, decreased by zero.eight% for the Quarter in comparison with the identical quarter final yr. Yr-to-date, SSSG decreased by 1.four% in comparison with the identical interval in 2017.
SSSG is pushed by the change within the buyer examine and buyer visitors, each of that are affected by modifications in pricing and gross sales combine. Through the third quarter, the typical buyer verify elevated whereas the client visitors rely decreased. The typical buyer verify initially elevated within the first quarter because of growing retail costs to partially offset provincial minimal wage will increase. Administration is intently monitoring shopper response to retail pricing methods.
Paul Goddard, CEO, Pizza Pizza Restricted stated, “In the third quarter, additional value offerings and our new Cauliflower crust pizzas gave the brands stronger sales momentum when compared to the second quarter. We look to build on this positive momentum in the fourth quarter, which historically, has been our strongest sales quarter.”
Mr. Goddard went on to say, “As the largest shareholder in Pizza Pizza Royalty Corp. (on a fully diluted basis), Pizza Pizza Limited’s interests are closely aligned with public shareholders’. I want to reinforce that Pizza Pizza’s business fundamentals remain solid and the monthly dividend is supported by a significant cash reserve to smooth any short-term weakness in system sales. Our brands continue to be market leaders, supported by operational excellence and a healthy marketing fund.”
MONTHLY DIVIDENDS AND WORKING CAPITAL RESERVE
Within the Quarter, the Firm declared shareholder dividends of $5.three million, or $zero.2139 per Share, which is unchanged from the prior yr comparable quarter. The payout ratio was 102% for the Quarter and was 101% within the comparative quarter final yr.
For the 9 month interval, the Firm declared shareholder dividends of $15.eight million, or $zero.6417 per Share, which is unchanged from the prior yr comparable interval. The payout ratio was 106% for the primary 9 months and was 102% within the prior yr comparable interval.
The Firm’s working capital reserve is $four.2 million at September 30, 2018. The reserve is on the market to stabilize dividends within the occasion of short- to medium-term variability in System Gross sales and, thus, the Firm’s royalty revenue. The Firm doesn’t have capital expenditure necessities or staff. The reserve has decreased $895,000 since December 31, 2017. Traditionally, the Firm’s fourth quarter operational outcomes have added money to the reserve.
The year-to-date lower within the reserve is attributable to the reported unfavourable SSSG, in addition to a 2017 true-up cost to Pizza Pizza Restricted of $111,000 made as a part of the January 1 Adjustment Date within the first quarter. With this reserve in place, the Firm will proceed to focus on an annual payout ratio at or close to 100% on an annualized foundation.
EARNINGS PER SHARE (“EPS”)
Absolutely-diluted primary EPS decreased 1.four% to $zero.213 for the Quarter and decreased 1.9% to $zero.632 for the 9 month interval, in comparison with the prior yr durations. EPS decreased, as in comparison with 2017, because of a lower in royalty revenue and a rise in PPL’s Equal Shares on the January 1, 2018 Adjustment Date.
As in comparison with primary EPS, the Firm considers “adjusted” EPS to be a extra significant indicator of the Firm’s working efficiency and, subsequently, presents fully-diluted, adjusted EPS. Adjusted EPS for the Quarter decreased zero.four% to $zero.222 when in comparison with the identical interval in 2017, and decreased 1.7% for the 9 month interval.
CURRENT INCOME TAX EXPENSE
Present revenue tax expense for the Quarter and 9 month interval was comparatively according to the 2017 comparable durations at $1.four million and $four.2 million, respectively.
Of specific observe is that the Firm’s earnings from operations earlier than revenue taxes, calculated underneath Worldwide Financial Reporting Requirements (“IFRS”), can differ considerably from its taxable revenue, largely because of the tax amortization of the Pizza Pizza and Pizza 73 Rights and Marks. The quantity of the tax amortization deducted is predicated on a declining foundation and can lower yearly.
The variety of eating places within the Firm’s Royalty Pool elevated by seven places to 758 on the January 1, 2018 Adjustment Date. The variety of eating places within the Royalty Pool will stay unchanged by means of December 31, 2018.
In the course of the Quarter, Pizza Pizza Restricted (“PPL”) opened its first Pizza Pizza conventional restaurant in Vancouver with two further eating places to comply with later within the yr. Pizza Pizza opened 4 non-traditional places, along with opening one Pizza 73 conventional restaurant. Two conventional and 7 non-traditional Pizza Pizza eating places have been closed through the Quarter.
Through the 9 month interval, PPL opened 19 eating places. By model, Pizza Pizza opened 5 conventional and 9 non-traditional eating places; two conventional and 9 non-traditional eating places closed. Pizza 73 opened three conventional and two non-traditional eating places; one non-traditional restaurant closed.
Readers ought to notice that the variety of eating places added to the Royalty Pool annually might differ from the variety of restaurant openings and closings reported by PPL on an annual foundation because the durations for which they’re reported differ barely.
SELECTED FINANCIAL HIGHLIGHTS
The next desk units out chosen monetary info and different knowledge of the Firm and must be learn along side the consolidated monetary statements of the Firm. Readers ought to word that the 2018 outcomes are usually not immediately similar to the 2017 outcomes due to the truth that there are 758 eating places within the 2018 Royalty Pool in comparison with 751 eating places within the 2017 Royalty Pool.
(1) The quantity eating places for which the Pizza Pizza Royalty Restricted Partnership earns a royalty (“Royalty Pool”), as outlined within the amended and restated Pizza Pizza license and royalty settlement (the “Pizza Pizza License and Royalty Agreement”) and the amended and restated Pizza 73 license and royalty settlement (the “Pizza 73 License and Royalty Agreement”) (collectively, the “License and Royalty Agreements”). For the 2018 fiscal interval, the Royalty Pool consists of 652 Pizza Pizza eating places and 106 Pizza 73 eating places. The variety of eating places added to the Royalty Pool annually might differ from the variety of restaurant openings and closings reported by PPL on an annual foundation because the durations for which they’re reported differ barely.
(2) SSSG means the change in interval product sales of Pizza Pizza and Pizza 73 eating places as in comparison with gross sales within the earlier interval, the place the eating places have been open no less than 13 months. Moreover, for a Pizza 73 restaurant whose restaurant territory was adjusted on account of a further restaurant, the gross sales used to derive the Step-Out Cost could also be added to gross sales to reach at SSSG. SSSG doesn’t have any standardized which means beneath IFRS. Subsequently, these figures is probably not similar to comparable figures introduced by different corporations. See “Reconciliation of Non-IFRS Measures” in Administration’s Dialogue & Evaluation (“MD&A”).
(three) The Firm, not directly via the Partnership, incurs curiosity expense on the $47 million excellent financial institution mortgage. Curiosity expense additionally consists of amortization of mortgage charges and off-market swap funds. See “Interest Expense” within the Firm’s MD&A.
(four) Represents the distribution to PPL from the Partnership on Class B and Class D Models of the Partnership. The Class B and D Models are exchangeable into widespread shares of the Firm (“Shares”) based mostly on the worth of the Class B Change Multiplier and the Class D Trade Multiplier on the time of change as outlined within the Licence and Royalty Agreements, respectively, and symbolize 22.three% of the absolutely diluted Shares at June 30, 2018 (December 31, 2017 – 21.1%). Through the quarter ended March 31, 2018, because of the ultimate calculation of the equal Class B and Class D Share entitlements associated to the January 1, 2017 Adjustment to the Royalty Pool, PPL was paid a distribution on further equal Shares as if such Shares have been excellent as of January 1, 2017. Included within the three months ended March 31, 2018, is the cost of $111 in distributions to PPL pursuant to the true-up calculation (March 31, 2017 – PPL was paid $eight).
(5) “Adjusted earnings from operations”, “Adjusted earnings available for shareholder dividends”, “Adjusted earnings per Share”, “Payout Ratio”, and “Working Capital” shouldn’t have any standardized which means beneath IFRS. Subsequently, these figures is probably not corresponding to comparable figures introduced by different corporations. See “Reconciliation of Non-IFRS Measures” within the Firm’s MD&A.
(6) System Gross sales (as outlined within the Licence and Royalty Agreements) reported by Pizza Pizza and Pizza 73 eating places embrace the product sales of Pizza Pizza company-owned, jointly-controlled and franchised eating places, excluding gross sales and items and repair tax or comparable quantities levied by any governmental or administrative authority. System Gross sales don’t symbolize the consolidated working outcomes of the Firm however are used to calculate the royalties payable to the Partnership as introduced above.
A replica of the Firm’s interim condensed consolidated monetary statements and associated MD&A can be out there at www.sedar.com and www.pizzapizza.ca after the market closes on November 6, 2018.
As beforehand introduced, the Firm will host a convention name to debate the outcomes. The small print of the convention name are as follows:
Date: Tuesday, November 6, 2018
Time: 5:00 p.m. ET
Name-in quantity: 647-427-7450 / 888-231-8191
Recording name in quantity: 416-849-0833 / 855-859-2056
Out there till midnight, November 20, 2018
A recording of the decision may even be out there on the Firm’s web site at www.pizzapizza.ca.
Ahead Wanting Statements
Sure statements on this report might represent “forward-looking” statements which contain recognized and unknown dangers, uncertainties and different elements which can trigger the precise outcomes, efficiency or achievements to be materially totally different from any future outcomes, efficiency or achievements expressed or implied by such ahead wanting statements. When used on this report, such statements embrace such phrases as “may”, “will”, “expect”, “believe”, “plan”, and different comparable terminology. These statements mirror administration’s present expectations relating to future occasions and converse solely as of the date of this report. These forward-looking statements contain a variety of dangers and uncertainties, together with these described within the Firm’s annual info type. The Firm assumes no obligation to replace these ahead wanting statements, besides as required by relevant securities legal guidelines.
For additional info:
Curt Feltner, Chief Financial Officer, Pizza Pizza Restricted
(416) 967-1010 x307
www.pizzapizza.ca and www.pizza73.com or www.sedar.com.
Christine D’Sylva, Vice President, Finance & Investor Relations, Pizza Pizza Restricted
(416) 967-1010 x393
www.pizzapizza.ca and www.pizza73.com or www.sedar.com. Adjusted earnings and adjusted EPS aren’t acknowledged measures beneath Worldwide Financial Reporting Requirements (“IFRS”) and could also be calculated in a fashion that differs from that utilized by different issuers. For extra details about the calculation and use of those measures, please see “Reconciliation of Non-IFRS Measures” within the Firm’s Administration’s Dialogue & Evaluation (“MD&A”).