Six month sales up, earnings off as Elephant & Castle adjust

Business Wire, August 29, 1995

VANCOUVER, BC--(BUSINESS WIRE)--Aug. 29, 1995--Elephant & Castle Group Inc. Tuesday reported increased sales and a loss from operations during the six-month period ended June 30, 1995.

Sales climbed more than 10 per cent to CDN $12.6 million from CDN $11.4 million for the comparable period of 1994.

Earnings dropped from a loss of CDN $175,878 in 1994 ($.07 per share) to a loss of CDN $1.25 million ($.50 per share) in the current period, including a large, one-time reserve of CDN $900,000, established to provide for any unexpected costs that may be forthcoming relative to closure of restaurants at Shilo Inn properties in Yuma, Ariz. and Pomona, Calif.

The loss for the six-month period, excluding the reserve amount, was CDN $352,749 ($.14 per share).

Chairman and Chief Executive Officer, Jeffrey Barnett said that the increase in sales was largely attributed to the impressive volume of business at the company's two newest locations - the Holiday Inn Crowne Plaza in Winnipeg, Manitoba and the Holiday Inn Center City in Philadelphia.

"The results at the Holiday Inn facilities bode very well for the future," Barnett added. "However, we are disappointed with results at our mall facilities and particularly with the large increase in the net loss in Pomona location of Shilo Inns, where the E&C had operated a non-brand restaurant. The Elephant & Castle no longer operates restaurants for Shilo."

Higher interest and higher labour costs brought about by an increase in the basic wage affected certain restaurants in Canada. Food and beverage costs on a percentage of sales remained constant during the period at 29.4 per cent.

As well as the Shilo facilities, Elephant & Castle has also closed its Toronto Eaton Centre E&C location. Mr. Barnett said that occupancy expenses in Toronto were increasing at a rate that was no longer acceptable.

The first six months of the year have historically been the company's weak period of the year and are not necessarily indicative of annual performance. On a positive note, Barnett said that the two new Holiday Inn locations are resulting in increased occupancy and operating expense percentages. When all pre-opening expenses are fully amortized after one year, the Company expects that these restaurants will have a significant positive impact on earnings.

Earlier this month, the company opened a new deli-concept restaurant - Rosie's on Robson - in Vancouver and performance to date is on schedule with projections. Additional Elephant & Castle-branded restaurants/pubs are scheduled for the 600-room Holiday Inn on the Embarcadero in San Diego and the 500-room Holiday Inn on Union Square in San Francisco.

On balance, Barnett concluded, "We at the Elephant & Castle are very optimistic about the future. This has been a transition period, and we haven't managed as well as we might have. We are tightening the screws, and expect significant profitability in future quarters and years." -0-

ELEPHANT & CASTLE GROUP INC.
Financial Highlights   (unaudited)
(CDN $ - Canadian dollars)