Diversified Royalty Corp. (TSX: DIV and DIV.DB) (the
“Corporation” or “DIV”) is pleased to announce preliminary results
for Mr. Lube, AIR MILES®, Sutton and Mr. Mikes for the three months
ended June 30, 2019 (“Q2 2019”).
Mr. Lube Second Quarter Results
Mr. Lube Canada Limited Partnership (“Mr. Lube”)
generated same-store-sales-growth (“SSSG”) of 4.2% for the Mr. Lube
stores in the royalty pool for Q2 2019, compared to SSSG of 3.2%
for the three months ended June 30, 2018 (“Q2 2018”). Mr. Lube
generated SSSG of 4.3% for the six months ended June 30, 2019
compared to SSSG of 3.8% for the six months ended June 30, 2018.
Mr. Lube’s SSSG was driven by continued growth in all aspects of
the business, including oil services, tire sales and service as
well as strong store-level execution.
DIV expects to report that aggregate royalty
income and management fees of $4.1 million were generated from Mr.
Lube in Q2 2019, an increase of $0.3 million from Q2 2018. The
growth in royalty income was driven by the addition of four Mr.
Lube locations to the Mr. Lube royalty pool on May 1, 2019,
positive SSSG, the increase in the Mr. Lube royalty rate that came
into effect on May 1, 2018, and the net addition of one Mr. Lube
location to the Mr. Lube royalty pool on May 1, 2018.
AIR MILES® Second Quarter Results
Alliance Data Systems Inc. (“ADS”) issued a news
release earlier today announcing that AIR MILES® reward miles
issued decreased by 1.5% in Q2 2019 primarily due to less
promotional activity in the grocery vertical, with year-to-date AIR
MILES® reward miles issued flat. ADS also disclosed that AIR MILES®
reward miles redeemed decreased by 2% in Q2 2019.
DIV expects to report that royalty income of
$2.0 million was generated from the AIR MILES® licenses in Q2 2019,
and was flat compared to Q2 2018. DIV’s royalty payment is derived
from several AIR MILES metrics, including AIR MILES reward miles
issued, AIR MILES reward miles redeemed, service revenue,
commissions and promotional items, which affect quarterly
variability.
Sutton Second Quarter Results
DIV expects to report that royalty income and
management fees of $1.0 million were generated from Sutton Group
Realty Services Ltd. (“Sutton”) in Q2 2019, representing a 2.0%
increase over Q2 2018.
Mr. Mikes Second Quarter Results
On May 20, 2019, DIV acquired the trademarks and
certain other intellectual property rights utilized by Mr. Mikes
Restaurants Corporation (“Mr. Mikes”) in its restaurant business.
DIV expects to report that royalty income and management fees of
$0.5 million were generated from Mr. Mikes from May 20, 2019, the
date of acquisition, to June 30, 2019.
Second Quarter Commentary
Sean Morrison, President and Chief Executive
Officer of DIV stated, “This is another strong quarter for Mr.
Lube, while AIR MILES royalties are flat and Sutton continues to
perform as expected. We are also excited to have added Mr. Mikes to
our portfolio this quarter. Mr. Mikes is a strong franchise
business with 42 locations and an excellent management team.”
Mr. Morrison continued, “With available cash of
over $45 million, we continue to actively pursue accretive royalty
transactions.”
The financial information contained in this news
release is preliminary, is based upon the estimates and assumptions
of the respective management of DIV, Mr. Lube, Sutton, and Mr.
Mikes as applicable, has not yet been approved by their respective
Audit Committees or Boards of Directors, and has not been subject
to a review by their respective auditors. The final Q2 2019
financial results could differ materially from the above
preliminary financial information.
Correction to Q1 2019 Mr. Lube SSSG
Q1 2019 SSSG for Mr. Lube locations in the Mr.
Lube Royalty Pool has been corrected and is now reported as 4.5%,
which was previously reported to be 5.6% in DIV’s news releases
dated April 25, 2019 and May 9, 2019, DIV’s MD&A dated May 9,
2019 and Mr. Lube’s MD&A filed May 9, 2019. The correction to
the previously reported SSSG figure has been made following the
identification of a formula input error in the calculation of such
figure. There are no changes required to DIV’s or Mr. Lube’s Q1
2019 financial statements as a result of this correction and all
other figures in DIV’s and Mr. Lube’s respective Q1 2019 MD&A
were correct as reported.
About Diversified Royalty Corp.
DIV is a multi-royalty corporation, engaged in
the business of acquiring top-line royalties from well-managed
multi-location businesses and franchisors in North America. DIV’s
objective is to acquire predictable, growing royalty streams from a
diverse group of multi-location businesses and franchisors.
DIV currently owns the Sutton, Mr. Lube, AIR
MILES® and Mr. Mikes trademarks in Canada. Sutton is among the
leading residential real estate brokerage franchisor businesses in
Canada with over 200 offices across Canada. Mr. Lube is the leading
quick lube service business in Canada with 181 locations across
Canada and over $235 million of annual system sales. AIR MILES® is
Canada’s largest coalition loyalty program with over 200 leading
brand-name sponsors; approximately two-thirds of Canadian
households actively participate in the AIR MILES® Program. Mr.
Mikes operates 42 casual steakhouse restaurants primarily in
smaller western Canadian communities with over $85 million of
annual system sales.
DIV expects to increase cash flow per share by
making accretive royalty purchases and through the growth of
purchased royalties. DIV expects to pay a predictable and stable
dividend to shareholders and increase the dividend as cash flow per
share increases allow.
Forward-Looking Statements
Certain statements contained in this news
release may constitute “forward-looking information” or “financial
outlook” within the meaning of applicable securities laws that
involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements to
be materially different from any future results, performance or
achievements expressed or implied by such forward-looking
information or financial outlook. The use of any of the words
“anticipate”, “continue”, “estimate”, “expect”, “intend”, “may”,
“will”, ”project”, “should”, “believe”, “confident”, “plan” and
“intends” and similar expressions are intended to identify
forward-looking information and financial outlook, although not all
forward-looking information and financial outlook contain these
identifying words. Specifically, forward-looking information and
financial outlook in this news release include, but are not limited
to, statements made in relation to: the expected financial results
of Mr. Lube, Sutton and Mr. Mikes for the three and six months
ended June 30, 2019, as applicable, and the amount of royalty
income expected to be reported by DIV as having been generated from
the AIR MILES® licenses during such periods; DIV pursuing various
opportunities to redeploy its cash in accretive royalty
transactions; DIV’s ability to pay a predictable and stable
dividend to shareholders; and DIV’s corporate objectives. These
statements involve known and unknown risks, uncertainties and other
factors that may cause actual results or events, performance, or
achievements of DIV to differ materially from those anticipated or
implied by such forward-looking information and financial outlook.
DIV believes that the expectations reflected in the forward-looking
information and financial outlook included in this news release are
reasonable but no assurance can be given that these expectations
will prove to be correct. In particular there can be no assurance
that: the final financial results of Mr. Lube, Sutton and Mr. Mikes
will be consistent with the preliminary results; LoyaltyOne’s
performance in 2019 may not be consistent with current
expectations; an increase in AIR MILES® reward miles issued will
not guarantee an increase in royalty income earned by DIV, as the
royalty payments made to DIV under the AIR MILES® licences are
derived from several AIR MILES® metrics and not solely based on the
number of AIR MILES® reward miles issued; DIV may not be successful
in identifying or completing any royalty acquisition opportunities,
and if completed such acquisitions may not be accretive; DIV will
be able to make monthly dividend payments to the holders of its
common shares; or DIV will achieve any of its corporate objectives.
Given these uncertainties, readers are cautioned that
forward-looking information and financial outlook included in this
news release are not guarantees of future performance, and such
forward-looking information and financial outlook should not be
unduly relied upon. More information about the risks and
uncertainties affecting DIV’s business and the businesses of its
royalty partners can be found in the “Risk Factors” section of its
Annual Information Form dated March 11, 2019, which is available
under DIV’s profile on SEDAR at www.sedar.com.
In formulating the forward-looking information
and financial outlook contained herein, management has assumed that
business and economic conditions affecting DIV and its royalty
partners will continue substantially in the ordinary course,
including without limitation with respect to general industry
conditions, general levels of economic activity and regulations.
These assumptions, although considered reasonable by management at
the time of preparation, may prove to be incorrect.
To the extent any forward-looking information or
statements in this news release constitute a “financial outlook”
within the meaning of applicable securities laws, such information
is being provided investors with timely disclosure of material
financial information with respect to the financial performance of
the Corporation and its royalty partners prior to the completion of
year end audits.
All of the forward-looking information and
financial outlook in this news release is 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 contemplated thereby will be realized or,
even if substantially realized, that they will have the expected
consequences to, or effects on, DIV contemplated thereby. The
forward-looking information and financial outlook included in this
news release is made as of the date of this news release and DIV
assumes no obligation to publicly update or revise such information
to reflect new events or circumstances, except as may be required
by applicable law.
Non-IFRS Financial Measures
Management believes that disclosing certain
non-IFRS financial measures provides readers with important
information regarding the Corporation’s financial performance and
its ability to pay dividends. By considering these measures in
combination with the most closely comparable IFRS measure,
management believes that investors are provided with additional and
more useful information about the Corporation than investors would
have if they simply considered IFRS measures alone. The non-IFRS
financial measures do not have standardized meanings prescribed by
IFRS and therefore are unlikely to be comparable to similar
measures presented by other issuers. Investors are cautioned that
non-IFRS measures should not be construed as a substitute or an
alternative to cash flows from operating activities as determined
in accordance with IFRS.
“Same Store Sales Growth” is used as a non-IFRS
measure in this news release. Further details with respect to this
non-IFRS measure will be included in the Corporation’s management’s
discussion and analysis for the three and six months ended June 30,
2019 once filed.
Third Party Information
This news release includes information obtained
from third party company filings and reports and other publicly
available sources. Although DIV believes these sources to be
generally reliable, such information cannot be verified with
complete certainty. Accordingly, the accuracy and completeness of
this information is not guaranteed. DIV has not independently
verified any of the information from third party sources referred
to in this news release nor ascertained the underlying assumptions
relied upon by such sources.
THE TORONTO STOCK EXCHANGE HAS NOT
REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR THE
ACCURACY OF THIS RELEASE.
Additional Information
Additional information relating to the
Corporation and other public filings, is available on SEDAR at
www.sedar.com.
Contact:Sean Morrison, President and Chief
Executive OfficerDiversified Royalty Corp. (604) 235-3146
Greg Gutmanis, Chief Financial Officer and VP
Acquisitions Diversified Royalty Corp. (604) 235-3146
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