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VANCOUVER, British Columbia, Aug. 13, 2025 (GLOBE NEWSWIRE) -- The Keg Royalties Income Fund (the "Fund") (TSX: KEG.UN) is pleased to announce its financial results for the three months ended June 30, 2025 (the "quarter") and the six months ended June 30, 2025 ("YTD").
On May 5, 2025, the Fund entered into a non-binding letter of intent to which one or more affiliates of Fairfax Financial Holdings Limited ("Fairfax") will acquire all of the issued and outstanding units of the Fund other than those already owned by Fairfax (including the Exchangeable Partnership units held by KRL), at a purchase price of $18.60 per unit, payable in cash.
On June 17, 2025, the Fund entered into an arrangement agreement (the "Arrangement Agreement") with 1543965 B.C. Ltd. (the "Purchaser") a subsidiary of Fairfax, pursuant to which the Purchaser has agreed to acquire all of the issued and outstanding units of the Fund ("Units") other than Units already owned by Fairfax, for a price of $18.60 per Unit (the "Purchase Price"), payable in cash (the "Transaction").
On July 3, 2025, the Supreme Court of British Columbia granted an interim order authorizing various matters in connection with the Transaction, including the holding of the special meeting on August 1, 2025 (the "Meeting") of the holders ("Unitholders") of the Units and holders ("Exchangeable Unitholders") of securities exchangeable for Units and the mailing of the management information circular (the "Circular") in respect thereof. On August 1, 2025, Unitholders and Exchangeable Unitholders voted overwhelmingly in favor of the Transaction with over 98% of the votes cast at the Meeting in favor of the Transaction.
On August 7, 2025, the Supreme Court of British Columbia issued a final order approving the statutory plan of arrangement under the Business Corporations Act (British Columbia) in respect of the Transaction by the Purchaser. In accordance with the final order, the Transaction closed at 12:05 a.m. (Pacific Time) on August 13, 2025. The Units have been delisted from the Toronto Stock Exchange as of the close of trading on August 12, 2025.
HIGHLIGHTS
- Royalty Pool Sales(1) up 0.9% to $176.8M for the quarter and up 4.0% to $370.6M YTD
- Keg Restaurants Ltd. ("KRL") Average Sales per Operating Week(1) up 3.0% to $132,000 for the quarter and up 5.3% to $138,000 YTD
- KRL Same Store Sales(1) up 4.8% for the quarter and up 7.0% YTD
- Distributable Cash(1) down 5.2% to $0.267/Fund unit for the quarter and down 8.5% to $0.632/Fund unit YTD
- Paid a special cash distribution of $0.04/Fund unit on January 31, 2025
- Payout Ratio(2) was 106.3% for the quarter and 89.7% YTD
Royalty Pool Sales reported by the 104 Keg restaurants in the Royalty Pool(1) were $176,815,000 for the second quarter of 2025, an increase of $1,640,000 or 0.9% from the comparable quarter of the prior year. Year-to-date, Royalty Pool Sales increased by $14,167,000, or 4.0% to $370,591,000. The increase in Royalty Pool Sales during both the second quarter and year-to-date of 2025 was primarily due to the increase in same store sales of Keg restaurants included in the Royalty Pool of 4.6% in the second quarter and 6.8% year-to-date.
Royalty income increased by $66,000 or 0.9% from $7,007,000 in the three months ended June 30, 2024 to $7,073,000 in the three months ended June 30, 2025. For the six months ended June 30, 2025, royalty income increased by $567,000 or 4.0% from $14,257,000 for the six months ended June 30, 2024 to $14,824,000 for the six months ended June 30, 2025. The increases in royalty income are directly correlated to the increases in Royalty Pool Sales.
(1) This is a non-IFRS supplementary financial measure. Please refer to the "Non-GAAP and other financial measures disclosure (NI 52-112)" section of this press release.
(2) This is a non-IFRS ratio. Please refer to the "Non-GAAP and other financial measures disclosure (NI 52-112)" section of this press release.
Distributable Cash available to pay distributions to public unitholders decreased by $166,000 from $3,198,000 ($0.282/Fund unit) to $3,032,000 ($0.267/Fund unit) for the quarter, and decreased by $670,000 from $7,850,000 ($0.691/Fund unit) to $7,180,000 ($0.632/Fund unit) year-to-date. The decrease in Distributable Cash for the three and six months ended June 30, 2025 was primarily due to $460,000 and $475,000 in costs incurred directly related to the Transaction ("Transaction Costs") during the respective periods of the current year, of which $328,000 and $343,000, respectively, are expected to be reimbursed by the Purchaser upon closing of the Transaction.
During the second quarter of both 2025 and 2024, regular cash distributions of $3,222,000 ($0.284/Fund unit) were paid to Fund unitholders. During the six months ended June 30, 2025 and 2024, regular cash distributions of $6,444,000 ($0.568/Fund unit) were paid to Fund unitholders. Additionally, special cash distributions of $454,000 ($0.04/Fund unit) and $908,000 ($0.08/Fund unit) were paid on January 31, 2025 and January 31, 2024, respectively.
The Payout Ratio was 106.3% for the second quarter of 2025, and 89.7% year-to-date. Excluding the Transaction Costs, the Payout Ratio was 92.3% for the second quarter of 2025, and 84.2% year-to-date.
The Fund remains financially well positioned with cash on hand of $2,145,000 and a positive Working Capital Before Classification of Class C and Exchangeable Partnership Units as Current Liabilities balance of $3,877,000 as at June 30, 2025.
"Both myself and Tim Kerr have been honoured to be the Trustees for The Keg Royalties Income Fund," said Kip Woodward, Chairman of the Fund. "We are encouraged by the Keg's long-term focus on creating the best guest experiences and the unwavering commitment of Keggers."
"We are pleased with KRL's sales performance during the second quarter of 2025. Same Store Sales increased 4.8% versus the comparable quarter of 2024," said Nick Dean, President of KRL. "We believe this is a result of remaining focused on delivering the Keg's renowned hospitality and providing significant value to our guests," he concluded.
NON-GAAP AND OTHER FINANCIAL MEASURES DISCLOSURE ("NI 52-112")
NI 52-112 prescribes disclosure requirements that apply to certain Non-IFRS measures known as "specified financial measure". This press release makes reference to certain non-IFRS measures which provides important information regarding the Fund's financial performance and ability to pay distributions to unitholders. By considering these non-IFRS measures in combination with IFRS measures, the Fund believes that readers are provided with additional and more useful information about the Fund's financial performance as opposed to considering IFRS measures alone. The terms "System Sales", "Royalty Pool", "Royalty Pool Sales", "Same Store Sales", "Distributable Cash Before SIFT Tax", "Distributable Cash", "Payout Ratio", "Operating Weeks", "Average Sales per Operating Week" and "Working Capital Before Classification of Class C and Exchangeable Partnership Units as Current Liabilities" are non-IFRS measures and non-IFRS ratios. These non-IFRS measures reported by the Fund do not have standardized meanings as prescribed by IFRS, and the Fund's method of calculating these measures may differ and may not be comparable to similar measures reported by other issuers.
"System Sales" is a non-IFRS supplementary financial measure representing the gross sales of all corporate restaurants owned by KRL, and the gross sales reported to KRL by franchise restaurants without independent audit, in any period. The total System Sales of KRL are of interest to readers as it best reflects KRL's overall sales performance.
"Royalty Pool" is a non-IFRS supplementary financial measure representing a specific pool of Keg restaurants for which System Sales is calculated, obligating KRL to make monthly royalty payments to the Partnership equal to 4% of these gross sales.
"Royalty Pool Sales" is a non-IFRS supplementary financial measure representing the total gross sales reported by Keg restaurants included in a specified Royalty Pool, for which the Fund receives a royalty of 4% on these reported gross sales in any period.
"Same Store Sales" is a non-IFRS supplementary financial measure representing the overall increase or decrease in gross sales from a group of Keg restaurants (those restaurants that operated during the entire period of both the current and prior years), compared to gross sales for the same group of restaurants for the same period of the prior year.
"Distributable Cash Before SIFT Tax" is a non-IFRS supplementary financial measure and is defined as the periodic cash flows from operating activities as reported in the IFRS unaudited condensed consolidated interim financial statements, including the effects of changes in non-cash Working Capital Before Classification of Class C and Exchangeable Partnership Units as Current Liabilities, plus the Specified Investment Flow-through Trust tax ("SIFT" tax) paid (including current year instalments), less interest and financing fees paid on the term loan, less the Partnership distributions attributable to KRL through its ownership of Exchangeable units.
"Distributable Cash" is a non-IFRS supplementary financial measure and is defined as the amount of cash available for distribution to the Fund's public unitholders and is calculated as Distributable Cash Before SIFT Tax, less current year SIFT tax expense. Distributable cash is a non-IFRS financial measure that does not have a standardized meaning prescribed by IFRS, and therefore may not be comparable to similar measures presented by other issuers. However, the Fund believes that Distributable Cash, both before and after SIFT tax, provides useful information regarding the amount of cash available for distribution to the Fund's public unitholders.
"Payout Ratio" is a non-IFRS ratio and is computed as the ratio of aggregate cash distributions paid during the period plus any special distributions declared or paid during the same period (numerator) to the aggregate Distributable Cash of the period (denominator).
"Operating Weeks" is a non-IFRS supplementary financial measure representing the number of weeks a restaurant is open for in-store dining, without significant capacity restrictions, during a respective period.
"Average Sales per Operating Week" is a non-IFRS supplementary financial measure and is defined as the sales generated by an average restaurant during those operating weeks when restaurants were fully open for in-store dining, during a respective period. This metric is calculated by dividing total System Sales for any financial period by the total Operating Weeks open during the same financial period.
"Working Capital Before Classification of Class C and Exchangeable Partnership Units as Current Liabilities" is a non-IFRS supplementary financial measure and is defined as the Fund's current assets less current liabilities before Class C and Exchangeable Partnership units. The Fund believes this metric provides useful information to readers as Working Capital Before Classification of Class C and Exchangeable Partnership Units as Current Liabilities represents the Fund's current working capital amounts expected to be settled for cash within the next twelve months.
FINANCIAL HIGHLIGHTS
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| ($000's except per unit amounts) | 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Restaurants in the Royalty Pool | 104 | 105 | 104 | 105 | ||||||||||||
| Royalty Pool Sales | $ | 176,815 | $ | 175,175 | $ | 370,591 | $ | 356,424 | ||||||||
| Royalty income (1) | $ | 7,073 | $ | 7,007 | $ | 14,824 | $ | 14,257 | ||||||||
| Interest income (2) | 1,079 | 1,088 | 2,149 | 2,177 | ||||||||||||
| Total income | $ | 8,152 | $ | 8,095 | $ | 16,973 | $ | 16,434 | ||||||||
| Administrative expenses (3) | (613) | (124) | (790) | (237) | ||||||||||||
| Interest and financing expenses (4) | (188) | (263) | (382) | (528) | ||||||||||||
| Operating income | $ | 7,351 | $ | 7,708 | $ | 15,801 | $ | 15,669 | ||||||||
| Distributions to KRL (5) | (3,249) | (3,219) | (6,716) | (6,516) | ||||||||||||
| Profit before fair value gain (loss) and income taxes | $ | 4,102 | $ | 4,489 | $ | 9,085 | $ | 9,153 | ||||||||
| Fair value gain (loss) (6) | (25,943) | 7,522 | (20,602) | 2,453 | ||||||||||||
| Income tax recovery (expense) (7) | (1,107) | (1,199) | (2,488) | (2,445) | ||||||||||||
| Profit (loss) and comprehensive income (loss) | $ | (22,948) | $ | 10,812 | $ | (14,005) | $ | 9,161 | ||||||||
| Distributable Cash Before SIFT Tax | $ | 4,173 | $ | 4,397 | $ | 9,656 | $ | 10,297 | ||||||||
| Distributable Cash | $ | 3,032 | $ | 3,198 | $ | 7,180 | $ | 7,850 | ||||||||
| Distributions to Fund unitholders (8) | $ | 3,222 | $ | 3,222 | $ | 6,444 | $ | 6,444 | ||||||||
| Payout Ratio | 106.3% | 100.8% | 89.7% | 82.1% | ||||||||||||
| Per Fund unit information (9) | ||||||||||||||||
| Profit before fair value gain (loss) and income taxes | $ | 0.361 | $ | 0.395 | $ | 0.800 | $ | 0.806 | ||||||||
| Profit (loss) and comprehensive income (loss) | $ | (2.021) | $ | 0.952 | $ | (1.234) | $ | 0.807 | ||||||||
| Distributable Cash Before SIFT Tax | $ | 0.368 | $ | 0.387 | $ | 0.850 | $ | 0.907 | ||||||||
| Distributable Cash | $ | 0.267 | $ | 0.282 | $ | 0.632 | $ | 0.691 | ||||||||
| Distributions to Fund unitholders (8) | $ | 0.284 | $ | 0.284 | $ | 0.568 | $ | 0.568 | ||||||||
Notes:
(1) The Fund, indirectly through The Keg Rights Limited Partnership (the "Partnership"), earns royalty income equal to 4% of gross sales of Keg restaurants in the Royalty Pool.
(2) The Fund directly earns interest income on the $57.0 million loan to KRL (the "Keg Loan"), with interest income accruing at 7.5% per annum, payable monthly.
(3) The Fund, indirectly through the Partnership, incurs administrative expenses and interest on the operating line of credit, to the extent utilized.
(4) The Fund, indirectly through The Keg Holdings Trust ("KHT"), incurs interest expense on the $14.0 million term loan and amortization of deferred financing charges.
(5) Represents the distributions of the Partnership attributable to KRL during the respective periods on the Class A, entitled Class B, and Class D Partnership units ("Exchangeable units") and Class C Partnership units held by KRL. The Exchangeable units are exchangeable into Fund units on a one-for-one basis. These distributions are presented as interest expense in the unaudited condensed consolidated interim financial statements.
(6) Fair value gain (loss) is the non-cash decrease or increase in the market value of the Exchangeable units held by KRL during the respective period. Exchangeable units are classified as a financial liability under IFRS.
(7) Income taxes include the SIFT tax expense, and either a non-cash deferred tax expense or deferred tax recovery. The deferred tax expense or recovery primarily results from differences in income recognition between the Fund's accounting methods and enacted tax laws. It is also partially due to temporary differences between accounting and tax bases of the Keg Rights owned by the Partnership.
(8) Distributions to Fund unitholders include all regular monthly cash distributions paid to Fund unitholders during a period and any special distributions, either declared or paid, to Fund unitholders in the same period.
(9) All per unit amounts are calculated based on the weighted average number of Fund units outstanding, which are those units held by public unitholders during the respective period. The weighted average number of Fund units outstanding for the three and six months ended June 30, 2025 were 11,353,500 (three and six months ended June 30, 2024 - 11,353,500).
The Fund is a limited purpose, open-ended trust established under the laws of the Province of Ontario that, through The Keg Rights Limited Partnership, a subsidiary of the Fund, owns certain trademarks and other related intellectual property used by Keg Restaurants Ltd. ("KRL"). Vancouver-based KRL is the leading operator and franchisor of steakhouse restaurants in Canada and has a substantial presence in select regional markets in the United States. KRL has been named the number one restaurant company to work for in Canada in the latest edition of Forbes "Canada's Best Employers 2025" survey.
This press release may contain certain "forward looking" statements reflecting The Keg Royalties Income Fund's current expectations in the casual dining segment of the restaurant food industry. Investors are cautioned that all forward looking statements involve risks and uncertainties, including those relating to the Keg's ability to continue to realize historical same store sales growth, changes in market and existing competition, new competitive developments, and potential downturns in economic conditions generally. Additional information on these and other potential factors that could affect the Fund's financial results are detailed in documents filed from time to time with the provincial securities commissions in Canada.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy, which may be made only by means of the prospectus, nor shall there be any sale of the Fund units in any state, province or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any state, province or jurisdiction. The Keg Royalties Income Fund units have not been, and will not be registered under the U.S. Securities Act of 1933, as amended and may not be offered or sold in the United States absent registration or an application for exemption from the registration requirement under U.S. securities laws.
