Mr. Kip Woodward reports

THE KEG ROYALTIES INCOME FUND ANNOUNCES FOURTH QUARTER 2023 AND FULL YEAR 2023 RESULTS

The Keg Royalties Income Fund has released its financial results for the three months ended Dec. 31, 2023, and the 12 months ended Dec. 31, 2023.

Highlights:

• Royalty pool sales up 12.8 per cent to $202.5-million for the quarter and up 9.7 per cent to $741.7-million for the year;
• Keg Restaurants Ltd.'s average sales per operating week up 8.6 per cent to $140,000 for the quarter and up 5.7 per cent to $134,000 for the year;
• Same-store sales up 5.2 per cent for the quarter and up 8.5 per cent for the year;
• Distributable cash down 12.1 per cent to 23.8 cents per fund unit for the quarter and up 6.8 per cent to $1.159 per fund unit for the year;
• Declared a special cash distribution of eight cents per fund unit on Dec. 19, 2023;
• Payout ratio was 152.8 per cent for the quarter and 104.9 per cent for the year; excluding the special cash distribution, the payout ratio would have been 98.0 per cent for the year.

The fiscal year-end of KRL falls on the last Sunday in December in any year. As a result of the floating year-end date, approximately every sixth fiscal year contains 53 weeks of operation, and KRL's fiscal 2023 is such a year. Therefore, KRL's fourth quarter of 2023 contained 14 weeks of operation, and its fiscal year ended Dec. 31, 2023, contained 53 weeks of operation. The fund's fourth quarter of 2023 included 14 weeks of royalty pool sales and related royalty income, and its fiscal year contained 53 weeks of royalty pool sales and related royalty income.

Royalty pool sales reported by the 107 Keg restaurants in the royalty pool were $202,517,000 for the quarter, an increase of $23,054,000 or 12.8 per cent from the comparable quarter of the prior year. The increase in royalty pool sales during the fourth quarter of 2023 was due to the combination of the extra week of sales reported by KRL, and strong same-store-sales growth of 5.2 per cent generated in the comparable 13-week periods. For the year, royalty pool sales were $741,698,000, an increase of $65,303,000 or 9.7 per cent. The increase in royalty pool sales during 2023 was due to the combination of the extra week of sales reported by KRL and strong same-store-sales growth of 8.5 per cent generated in the comparable 52-week periods. During the first quarter of 2022, KRL's 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. The year-to-date same-store-sales growth reported includes the benefit of those incremental operating weeks in 2023.

Royalty income increased by $922,000 or 12.8 per cent from $7,179,000 in the three months ended Dec. 31, 2022, to $8,101,000 in the three months ended Dec. 31, 2023. For the year, royalty income increased by $2,612,000 or 9.7 per cent from $27,056,000 for the 12 months ended Dec. 31, 2022, to $29,668,000 for the 12 months ended Dec. 31, 2023.

Distributable cash available to pay distributions to public unitholders decreased by $373,000 from $3,076,000 (27.1 cents per fund unit) to $2,703,000 (23.8 cents per fund unit) for the quarter, and increased by $842,000 from $12,312,000 ($1.084 per fund unit) to $13,154,000 ($1.159 per fund unit) for the year. During the fourth quarter of 2023, distributions of $4.13-million (36.4 cents per fund unit) were declared to fund unitholders compared with $3,222,000 (28.4 cents per fund unit) declared in 2022. During 2023, distributions of $13,797,000 ($1.215 per fund unit) were declared to fund unitholders, an increase of $908,000 from the prior year. The increase in distributions to fund unitholders during the comparable three- and 12-month periods was entirely due the special cash distribution of eight cents per fund unit declared on Dec. 19, 2023.

In any reporting period, the fund's distributable cash is affected, both positively and negatively, by any changes in non-cash working capital balances recognized in that reporting period. The decrease in the fund's distributable cash in the fourth quarter of 2023 was primarily attributable to the negative effects of changes in non-cash operating working capital balances at Dec. 31, 2023, as the incremental operating cash flow associated with KRL's 53rd week of operation in the 2023 fiscal year will not be received by the fund until January, 2024. The fund's first quarter of 2024 will therefore include this extra week of operating cash flow, thereby increasing distributable cash and decreasing the payout ratio in the first quarter of 2024.

The payout ratio was 152.8 per cent for the fourth quarter of 2023 and 104.9 per cent for the year, both of which were negatively impacted by the declaration of the special cash distribution to unitholders in December, 2023. Excluding the special cash distribution of eight cents per fund unit declared on Dec. 19, 2023, the payout ratio would have been 119.2 per cent for the quarter and 98.0 per cent for the year.

The fund remains financially well positioned with cash on hand of $2,523,000 and a positive working capital balance of $2.38-million as at Dec. 31, 2023.

"We are very pleased with the financial results of the fund in 2023, and with KRL management's continued focus and acceleration of its renovation program during the year," said Kip Woodward, chairman of the fund. "The strong financial results allowed us to declare a special distribution of eight cents per fund unit in December, 2023."

"Management of KRL is pleased with the results achieved in 2023, showing same-store-sales improvements of 8.5 per cent, combined with increased guest counts of 5.9 per cent over 2022," said Nick Dean, president of KRL. "Throughout 2023, KRL made significant capital investments, renovating high performing locations in Canada and the United States, to uphold the high standards of the brand. Consumers are gravitating, more than ever, towards reliable brands that offer excellent price-value options, served in a polished casual atmosphere, by world-class hospitality experts. The Keg consistently meets these guest expectations, and these factors will continue to benefit KRL given its unmatched value proposition."

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 exceeding $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's Canada's best employers 2024 survey, securing 13th place in the overall ranking across all industries in the country.

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