June 2015 - Imvescor Restaurant Group

By The Numbers
TSX: IRG
January 2016
FORWARD LOOKING STATEMENTS
• This presentation will contain forward-looking statements.
• Investors should be aware that any forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from those disclosed here
today.
• Investors are directed to the Company’s Annual Information Form for a full discussion of risks.
• Management does not intend to discuss any undisclosed material information today.
• This presentation will also contain non-IFRS measures such as System Sales, Same Restaurant
Sales, and Operating EBITDA. The following is not an exhaustive list of non-IFRS measures.
2
BOARD OF DIRECTORS
François-Xavier Seigneur, Chairman - 2014
* Arnaud Ajdler, Audit and Risk Committee, Member – 2013
President of EFFIX INC., the exclusive advertising and sponsorship sales
agency for the Montreal Canadiens, the Bell Centre and Evenko.
Partner of Engine Capital L.P.
Gary O’Connor, Audit and Risk Committee, Chairman - 2014
Roland Boudreau, Corporate Governance, Human Resources and
Compensation Committee, Member - 2014
Retail consultant with over forty six years in the Canadian retail industry in both the
food
and non-food categories.
Retired Partner of KPMG Canada (1968 – 2009) and KPMG Barbados (20092012)
Michael Forsayeth, Audit and Risk Committee, Member - 2014
Pierre Raymond, Corporate Governance, Human Resource
and Compensation Committee, Chairman – 2014
Former partner of Stikeman Elliott LLP, a Canadian national law firm.
Chief Executive Officer of Granite REIT a publicly listed industrial real estate
investment trusts in Canada.
Patrick Sugrue, Corporate Governance, Human Resources and
Compensation Committee, Member - 2014
Business consultant in the manufacturing, corporate and franchise retail, packaged
goods and restaurant industries.
* Not seeking re-election. Roula Zaarour, new nominee seeking election at AGM on March 10, 2016
3
MANAGEMENT TEAM
Frank Hennessey - 2014
President and Chief Executive Officer
Amber Coggan-Imbeault - 1988
Brand Leader – Pizza Delight
Tania M. Clarke - 2015
Chief Financial Officer
Peter Mammas – 2013
Brand Leader – Baton Rouge
Isabelle Breton - 2013
General Counsel and Secretary
Vincent Dugas - 2014
Vice President - Purchasing
Nicolas Bergeron - 2012
Vice President – Retail & Commensal
Marie-Line Beauchamp - 2016
Brand Leader- Mikes
John Prontzos - 2015
Brand Leader - Scores
Robert Longtin - 2015
Senior Director- Restaurant Development
Sandrine Fhima - 2014
Senior Director – Human Resources
4
Imvescor is the largest multi-branded full-service family restaurant franchisor
in Quebec. 8 of the 10 leading full-service restaurant chains in Quebec are
home grown
FY 2015
Newfoundland and Labrador
15
Quebec
P.E.I.
Ontario
25
128
4 brands 98% franchised
Trattoria di Mikes 1967 (73)
Pizza Delight 1968 (84)
Baton Rouge 1992 (29)
Scores 1995 (41)
5
38
New Brunswick
14
Nova Scotia
25M+ guests annually
227 locations
$372M in system sales
5
REVERSING THE DOWNWARD TREND
System Sales
Sales ($M)
413
254
Larger
marketing fund
to build
awareness
Store Count
405
396
386
253
251
240
371
372
234
227
System sales
growth
2010
2011
2012
2013
2014
Cycle of
Growth
Operating
leverage on
revenue growth
Improved
franchisee
profitability,
health and
morale
2015
Renovate, rejuvenate, and rationalize to drive shareholder value
6
CORPORATE
FRANCHISE
BRILLIANT at THE BASICS
SERVICE & TRAINING
Enhance guest experience and ambiance through front-of-house training
PURCHASING
Innovate to drive sales; timely market intelligence; RFP all categories
MENU
Rationalize menus; focus on core for greatness and feed retail product
pipeline; highlight local ingredients
MARKETING
Effective media spend focused on Creative and driving traffic; emphasize
quality, service, ambiance and value; move to 100% online ordering for 1117% higher average guest cheque
OPTIMIZE G&A
Lever scalable, shared-service business model; apply best practices and
assess structures that best fit our business; consolidate offices in Montreal
for corporate functions
GOVERNANCE
Re-composition of the Board of Directors ; review of corporate policies and
internal controls; improved franchisee relationships and expanded investor
relations program and communications
7
2015 STRATEGIC PLAN OBJECTIVES
BASELINE
(FY2014)
REVENUE
Target
(FY2018)
Actuals
2015 vs 2014
$47.2M
+14% -18%
-4.6%
-2.7%
+3% - 5%
per year
+2.9%
NO. OF RESTAURANTS
234
10 net new
227 (3%)
RESTAURANT FRESHNESS FACTOR
47%
80%
50%
$16.0M
$20.0M
$15.9
SRS GROWTH
OPERATING EBITDA
8
8
4 Pillars
• QUALITY OF FOOD
• EXCEPTIONAL SERVICE
• VALUE
• AMBIENCE
While Optimizing G&A, Marketing and Investing in franchise network via RRP
9
RETAIL
Key Actions
Expand distribution into new channels
Introduce new, innovative menu offerings to grow retail
Market Share (Quebec) of Key Products
Baton Rouge Ribs - 83% (Fresh Rib Category)
Mikes Pizza - 10% – Highest Average Sales Per SKU (Frozen
Category)
Mikes Sauce - 14% – Highest Average Sales Per SKU (Sauce in jar
Category)
Source: AC Nielsen
Success in the restaurant drives retail success
10
Purchased out of bankruptcy in November 2013
SALES
# OF SKU’S
CUSTOMERS
MARKET SHARE –
Quebec (Fresh Prepared
Soups)
$8.1 M
(FY14 $8.4M)
19 Soups: 16 Frozen Meals
All Major Grocers
over 80%
(52 weeks ending June 2015)
New flavours launched & format change for bottom line savings
11
CORE FOCUS – RENOVATE
Baseline FY 2014
76
8
Baseline FRESH RATE: 47%
Bâton Rouge
Scores
52
3
4
11
11
55
Pizza Delight
11
5
22
31
29
17
4
26
5-8 years
8-10 years
14
2
9
9
< 5 years
Baseline < 8 yrs:
59% Pizza Delight
52% Bâton Rouge
46% Mikes
21% Scores
3
13
34
Mikes
55% > 8 years
40% >10 years
3
10-15 years
> 15 years
Targeted 2019 FRESH RATE: 80%
77% Pizza Delight
86% Bâton Rouge
84% Mikes
88% Scores
12
RESTAURANT REJUVENATION PLAN
Projected Rejuvenation Schedule based on Franchisee Expression of Interest
Key Plan Criteria
Timeline
PRE-RRP
FY
MAX COST
OF RENO
LOCATIONS
>8 YEARS
ESTIMATED
SPEND
2015
2016
2017
2018
TOTAL (CDN$M)
BÂTON
ROUGE
$450K
15
2
7
8
3
20
$1.0
PIZZA
DELIGHT
$150K
37
1
12
11
11
35
$1.1
SCORES
$400K
34
1
10
5
13
30
$1.5
An expression of Interest is Franchisee requesting IRG
contribution of 20% (to maximum of $50K per
location) of total capital costs for renovations of
guest-facing areas. Rejuvenation subject to IRG
approval, Franchisee financing in place, franchise
agreement in effect and with lease term and no
defaults.
Strategic plan $5.5M (110 locations)
Following the 2015 renovations, the freshness rate
increased to 50% from 47%.
Payback IRG: 3 years or shorter and for Franchisee:
3-4 years
MIKES
TOTAL
$200K
41
1
8
14
27
50
$2.0
127
5
37
38
52
135
$5.6
13
On our way…continued POSITIVE TRENDING
(in $M)
Q3
2015
Q2
2015
$96.0
$96.7
$89.9
$89.3
$93.7
2.5%
2.4%
1.2%
(0.2%)
(0.8%)
(2.5%)
4.9 percentage points
Net Earnings
3.5
2.5
2.6
1.6
(0.8)
522%
Operating EBITDA
4.5
4.3
3.8
3.2
3.8
20%
EBITDA
5.1
4.2
3.8
2.9
0.2
2051%
Free Cash Flow
5.3
3.2
3.1
3.6
1.4
278.9%
29%
40%
77%
56%
N/A
Operating EBITDA %
(as a % of revenue)
41.1%
37.6%
33.4%
29.0%
35.2%
5.9 percentage points
Free Cash Flow Margin
48.3%
28.8%
27.8%
32.1%
13.1%
35.2 percentage points
SYSTEM SALES
SRS %
Dividend Payout Ratio
Q4
2015
Q1
2015
Q4
2014
vs Q4 2014
First time in eight
quarters to have
growth in both
System Sales and
SRS
All brands trended
positively and
Scores is positive in
Q4
14
Strong Balance Sheet
(in $M)
Cash
Q4
2015
Q3
2015
Q2
2015
Q1
2015
Q4
2014
$3.6
$13.6
$13.0
$13.1
$10.4
114.1
113.9
124.0
125.6
121.4
-
28.4
29.1
29.8
30.5
Long-Term Debt
11.8
-
-
-
-
Total Liabilities
32.2
47.2
48.5
52.8
50.9
Shareholder’s Equity
81.9
76.9
75.0
72.8
70.5
Dividends paid
1.0
1.0
2.0
0.9
N/A
Working Capital (excluding debt)
1.0
8.3
6.7
4.9
5.7
Warrants O/S
6.7
8.7
8.7
10.8
13.3
Total Assets
Current Portion of Long-Term
Debt
Under leveraged
Dividend reinstated in
Q1 FY15 & increased
12.5% in Q1 FY16. Annual
Dividend Payout Ratio
48% or normalized 39%.
New credit facility
(August 2015) cheaper
and supports strategic
plan
Warrant expiry in
December 2016,
expected cash inflow of
$4.4M on 5.5M warrants
Strategic plan gaining traction
15
INVESTMENT PROPOSITION
A strong foundation of brands with wide market appeal
A leading position with natural barriers to entry from
competitors in core Quebec market
Strengthened management team composed of seasoned
restaurant and retail operators
Significant potential upside from retail
98% franchised and asset light—efficient at turning
revenue into operating EBITDA – 41.1%
Scalability through efficient shared service model
Poised to capitalize
on a leading market
position and
aggressive strategic
plan with
franchisee support
A strong balance sheet – net debt/EBITDA of 0.51x (TTM)
16
APPENDIX
RRP – BEFORE & AFTER
17
BEFORE
18
19
Pizza Delight
20
Pizza Delight
21
22
23
Mikes
24
25
26
27
BEFORE
28
29
Scores
30
Scores
31
BEFORE
32
33
Bâton Rouge
34
Bâton Rouge
35
Artist rendering
36
Bâton Rouge
37
NEW LOCATION – BÂTON ROUGE
STE-FOY, QUEBEC
Bâton Rouge
38