Mr. Kip Woodward reports

THE KEG ROYALTIES INCOME FUND ANNOUNCES SECOND QUARTER 2023 RESULTS

The Keg Royalties Income Fund has released its financial results for the three months ended June 30, 2023, and the six months ended June 30, 2023.

Highlights:

• Royalty pool sales (1) down 2.9 per cent to $171.2-million for the quarter and up 14.2 per cent to $363.1-million year to date;
• KRL (Keg Restaurants Ltd.) average sales per operating week (1) down 1.3 per cent to $126,000 per operating week for the quarter and up by 6.6 per cent to $133,000 per operating week YTD;
• Same-store sales (1) down 2.3 per cent for the quarter and up 14.9 per cent YTD;
• Distributable cash (1) down 1.2 per cent to 29.4 cents per fund unit for the quarter and up 22.2 per cent to 63.5 cents per fund YTD;
• Payout ratio (2) was 96.4 per cent for the quarter and 89.4 per cent YTD.

Royalty pool sales reported by the 107 Keg restaurants in the royalty pool were $171,216,000 for the quarter, a decrease of $5,148,000 or 2.9 per cent from the comparable quarter of the prior year. Year to date, royalty pool sales increased by $45.02-million or 14.2 per cent to $363.09-million. The decrease in royalty pool sales during the second quarter of 2023 was mostly due to a slight decrease in same-store sales while the YTD increase was primarily due to 169 more operating weeks (1) in the first half of the current year than in the first half of the prior year. During the first quarter of the prior year, restaurants were closed for 218 operating weeks because of temporary government-mandated restaurant closures related to the COVID-19 pandemic, whereas in the current year, there were no such closures.

Royalty income decreased by $206,000 or 2.9 per cent from $7,055,000 in the three months ended June 30, 2022, to $6,849,000 in the three months ended June 30, 2023. For the first six months of 2023, royalty income increased by $1,801,000 or 14.2 per cent from $12,723,000 for the six months ended June 30, 2022, to $14,524,000 for the six months ended June 30, 2023.

Distributable cash available to pay distributions to public unitholders decreased by $41,000 from $3,383,000 (29.8 cents per fund unit) to $3,342,000 (29.4 cents per fund unit) for the quarter, and increased by $1.31-million from $5,897,000 (51.9 cents per fund unit) to $7,207,000 (63.5 cents per fund unit) year to date. During the second quarter of 2023 and 2022, distributions of $3,222,000 (28.4 cents per fund unit) were paid to fund unitholders. During the first six months of both 2023 and 2022, distributions of $6,444,000 (56.8 cents per fund unit) were paid to fund unitholders. The payout ratio was 96.4 per cent for the second quarter of 2023 and 89.4 per cent year to date.

The fund remains financially well positioned with cash on hand of $2,345,000 and a positive working capital balance of $3,661,000 as at June 30, 2023.

(1) This is a non-international financial reporting standard supplementary financial measure.

(2) This is a non-IFRS ratio.

"We are satisfied with KRL's financial performance thus far during 2023 despite a slight decline in guest visits and same-store sales during the second quarter of 2023," said Nick Dean, president of KRL. "During the second quarter of the prior year, there was a temporary surge in guest visits, following almost two years of guests being confined to their homes because of the COVID-19 pandemic," he continued. "Throughout the remainder of 2023, management will remain focused on delivering a superior product and service experience and driving guest demand with world-class marketing," he concluded.

"We are very pleased with the financial results of the fund during the second quarter of 2023," said Kip Woodward, chairman of the fund. "Distributable cash available to pay distributions to public unitholders and the payout ratio remain well within our targets."

The fund (Toronto Stock Exchange: KEG.UN) is a limited-purpose, open-ended trust established under the laws of the Province of Ontario that, through The Keg Rights Limited Partnership, owns certain trademarks and other related intellectual property used by KRL. In exchange for use of those trademarks, KRL pays the fund a royalty of 4 per cent of gross sales of Keg restaurants included in the royalty pool.

With approximately 10,000 employees, over 100 restaurants and annual system sales approaching $700-million, Vancouver-based KRL is the leading operator and franchisor of steak house restaurants in Canada, and has a substantial presence in select regional markets in the United States. KRL continues to operate The Keg restaurant system and expand that system through the addition of both corporate and franchised Keg steak houses. KRL has been named the No. 1 restaurant company to work for in Canada in the latest edition of Forbes Canada's best employers 2023 survey, securing third place in the overall ranking across all industries in the country.

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