Mr. Jeff Good reports

SIR ROYALTY INCOME FUND ANNOUNCES FILING OF SIR CORP. FISCAL 2024 SECOND QUARTER RESULTS

SIR Corp., the operating entity from which SIR Royalty Income Fund's equity income is ultimately derived, has filed its financial results for the 12-week and 24-week periods ended Feb. 11, 2024 (Q2 2024 and YTD (year to date) 2024, respectively). SIR's unaudited interim consolidated financial statements and management's discussion and analysis (MD&A) for Q2 2024/YTD 2024 can be accessed via the fund's profile on SEDAR+ or the SIR website.

Q2 2024 business update:

• Food and beverage revenue from corporate restaurant operations was $59.3-million, compared with $60.0-million for the 12-week period ended Feb. 12, 2023 (Q2 2023).
• Consolidated same-store sales (SSS) (1) declined by 3.5 per cent.
• SIR completed a renovation to the Jack Astor's location in Ancaster, Ont., to implement a refreshing, more contemporary and immersive guest-facing experience. The restaurant was closed for 13 days to complete the renovation.
• On Jan. 1, 2024, the new Scaddabush Italian Kitchen & Bar restaurant in Whitby, Ont., was added to the royalty pooled restaurants.
• SIR permanently closed the Scaddabush restaurant located in the Mimico neighbourhood of Etobicoke, Ont., Reds Wine Tavern in downtown Toronto and Reds Kitchen + Wine Bar Fallsview in Niagara Falls. These restaurants were removed from the royalty pooled restaurants on Jan. 1, 2024.

Subsequent event:

• On Feb. 27, 2024, SIR opened a new Scaddabush restaurant in the Don Mills neighbourhood of Toronto. This new Scaddabush restaurant is expected to be added to the royalty pooled restaurants on Jan. 1, 2025.

Results of operations summary

SIR has advised the fund that food and beverage revenue from corporate restaurant operations was $59.3-million in Q2 2024, a decline of 1.2 per cent compared with $60.0-million in Q2 2023. The slight decline was primarily attributable to decreased SSS (1), which was due to lower guest counts and delivery sales at Jack Astor's and lower guest counts at the Signature restaurants, partially offset by price increases across SIR's restaurant network and the continued same store sales growth of Scaddabush. During Q2 2024, one Jack Astor's restaurant was closed for 13 days to complete a renovation. During Q2 2023, two Jack Astor's locations were closed for a combined total of 14 days to complete renovations.

SSS (1) performance includes all SIR restaurants, except for those restaurants that were not open for the entire comparable periods in fiscal 2024 and fiscal 2023, and the Abbey's Bakehouse retail outlet as it is a seasonal restaurant.

Net loss and comprehensive loss totalled $2.3-million for Q2 2024, compared with $21.2-million for Q2 2023. Net loss and comprehensive loss totalled $7.9-million for YTD 2024, compared with $39.5-million for the 24-week period ended Feb. 12, 2023 (YTD 2023). The positive variances reflect changes in the amortized cost of the ordinary LP (limited partnership) units and Class A units of the SIR Royalty LP that SIR holds. This resulted in expenses of $2.9-million in Q2 2024 and $8.8-million in YTD 2024, compared with expenses of $21.8-million in Q2 2023 and $42.5-million in YTD 2023. These non-cash changes in Q2 2024 and YTD 2024 are due to changes to the estimated cash flows derived from the fund and an increase in the underlying unit price of the fund compared with the end of fiscal 2023.

Adjusted net earnings (2) were $600,000 in Q2 2024, compared with $700,000 in Q2 2023. Adjusted net earnings (2) for YTD 2024 were $900,000, compared with $3.0-million in YTD 2023. The declines are partially attributable to a $600,000 reduction in earnings from corporate restaurant operations in Q2 2024, compared with Q2 2023, and a $1.9-million reduction in earnings from corporate restaurant operations in YTD 2024, compared with YTD 2023.

Liquidity and capital resources

As at Feb. 11, 2024, SIR had cash and equivalents of $1.9-million, compared with $8.2-million as at Aug. 27, 2023. As at Feb. 11, 2024, SIR had drawn $30.0-million against the $41.9-million maximum principal borrowing under the company's credit facility.

Outlook

SIR continues to monitor consumer spending behaviour in light of current evolving macroeconomic factors, including inflation and higher interest rates, and their potential impact on the Canadian economy and consumer confidence. Continuing business impacts due to changes in the minimum wage, rising commodity costs and supply shortages have all been influential in the bar and restaurant industry's changes in pricing over all.

SIR continues to innovate and provide immersive new product and service offerings to increase dine-in guest visits to its restaurants and to capitalize on the growth of takeout and delivery services in commercial food service. The amendment to SIR's credit agreement with its lender in June, 2023, provides greater certainty and availability of financing, enabling SIR to continue to invest in restaurant renovations, new restaurants and other initiatives to drive growth.

During YTD 2024, SIR completed renovations to seven Jack Astor's restaurants, expanding the total number of renovated Jack Astor's locations to 16 since the beginning of fiscal 2022. SIR also completed renovations to its Reds Square One location in Mississauga, Ont., during the fourth quarter of fiscal 2023. The company is pleased with the success of these renovations and plans to invest in similar restaurant renovations throughout fiscal 2024.

SIR has commitments to lease five properties in Barrie, London, Guelph and Oshawa, Ont., and at the intersection of Queen Street East and Broadview Avenue in Toronto, upon which it plans to build one new Jack Astor's restaurant, three new Scaddabush restaurants and one new Duke's Refresher + Bar.

SIR is converting the former Reds Wine Tavern in downtown Toronto into a new, Italian-themed fine dining restaurant brand called Edna + Vita, which is currently under construction and is expected to open during SIR's fiscal 2024 third quarter.

SIR is currently evaluating alternative uses for the recently closed Scaddabush (Mimico) and Reds Kitchen + Wine Bar Fallsview.

Reconciliation of adjusted net earnings (2)

An attached table reconciles net loss and comprehensive loss for the 12-week and 24-week periods ended Feb. 11, 2024, and Feb. 12, 2023, respectively, to adjusted net earnings (2).

About SIR Corp.

SIR is a privately held Canadian corporation that owns a portfolio of 52 restaurants in Canada. SIR's Concept brands include: Jack Astor's Bar and Grill, with 37 locations; and Scaddabush Italian Kitchen & Bar, with 11 locations. SIR also operates one-of-a-kind Signature brands, including Reds Square One and The Loose Moose. All trademarks related to the Concept and Signature brands noted above are used by SIR under a licence and royalty agreement with SIR Royalty LP. SIR also owns two additional Signature restaurants, including a Duke's Refresher + Bar, in downtown Toronto, and Abbey's Bakehouse, a seasonal restaurant in Muskoka, Ont., which are currently not in consideration to be part of the royalty pool.

About SIR Royalty Income Fund

The fund is a trust governed by the laws of the Province of Ontario that receives distribution income from its investment in the SIR Royalty LP and interest income from the SIR loan. The fund intends to pay distributions to unitholders on a monthly basis.

(1) Same-store sales and same-store sales growth (SSSG) are non-GAAP (generally accepted accounting principles) financial measures and do not have standardized meanings prescribed by international financial reporting standards (IFRS). However, SIR believes that SSS and SSSG are useful measures and provide investors with an indication of the change in year-over-year sales. SIR's method of calculating SSS and SSSG may differ from those of other issuers, and accordingly, SSS and SSSG may not be comparable with measures used by other issuers. SSSG is the percentage increase in SSS over the prior comparable period. SSS includes revenue from all SIR restaurants except for those restaurants that were not open for the entire comparable period and Abbey's Bakehouse in Muskoka, Ont., as it is a seasonal restaurant. When a SIR restaurant is closed, the revenue for the closed restaurant is excluded from the calculation of SSS and SSSG for both the quarter in which the restaurant is closed and the current year to date.

(2) Adjusted net earnings (loss) is calculated by removing the change in amortized cost of the ordinary LP units and Class A LP units of the partnership from the net earnings (loss) for the period. Adjusted net earnings (loss) is a non-GAAP financial measure and does not have a standardized meaning prescribed by IFRS. Management believes that in addition to net earnings (loss), adjusted net earnings (loss) is a useful supplemental measure to evaluate SIR's performance. Changes in the amortized cost of the ordinary LP units and Class A LP units of the partnership is a non-cash transaction and varies with changes in the market price of the fund units. The exclusion of the change in amortized cost of the ordinary LP units and Class A LP units of the partnership 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 SIR's performance. SIR's method of calculating adjusted net earnings (loss) may differ from the methods used by other issuers. Please refer to the reconciliation of net earnings (loss) to adjusted net earnings (loss) for Q2 2024 and YTD 2024 provided in this news release.

We seek Safe Harbor.