EDMONTON, Alberta, March 14, 2019 (GLOBE NEWSWIRE) -- Alcanna Inc. (the “Company” or “Alcanna”) (TSX: CLIQ) today reported its results for the fourth quarter and full year ended December 31, 2018.
Alcanna Inc. reported Canadian same-store sales growth of 7.4% and U.S. same-store sales growth of 6.0% in the fourth quarter of 2018. This was the Company’s best quarter of same-store sales growth in six years. “Alcanna continues to do exactly what we said we would do,” said James Burns, CEO of Alcanna. “The Board and management set out in 2018 to change Alcanna from a declining business anchored in the past to a dynamic growth-oriented company. Our objectives were – and continue to be – to recapture lost market share, expand and re-invent our preferred label program, enter the discount segment of the Alberta liquor retail industry, launch an entirely new cannabis retail business, and invest significantly in our existing and new locations and in our people to position the company for significant medium to long-term shareholder value enhancement.”
“We executed well on each and every one of these fronts,” added Mr. Burns. “Our Nova Cannabis brand established itself as of October 17th, 2018 as a market leader. We formed the Canadian Liquor Retailers Alliance with Ace Liquor to become Alberta’s largest retailer in the discount segment by number of stores. Our same-store sales increased even in the face of declining total liquor retail sales for the province of Alberta and a weak provincial economy. We revamped our preferred label program to fit the markets we serve, and invested significantly in renovating existing stores, building new stores, and building a management team appropriate to grow a business of this size and complexity.”
“The goodwill impairment charge recorded in the fourth quarter of 2018 reflects several factors that developed during the quarter including the current market dynamics, our change in strategy that we have undertaken for the Company, and recognition that goodwill carried forward from historic acquisitions, and the assumptions used to derive that goodwill, is no longer relevant to how the Company intends to operate, specifically in Alberta, going forward. While the impairment and provision charges recorded in the quarter do have an effect on net income, we do not anticipate these charges to have any impact on future operations, liquidity, or cash flows from operating activities.”
“Alcanna is on track to turn our strong balance sheet into a strong generator of cash flow in the medium to long term. These fourth-quarter results indicate clearly that the metrics most important to understanding our strategy and the objectives essential to our future growth have all been met or exceeded,” said Mr. Burns.
UPDATE TO THE COMPANY’S BOARD OF DIRECTORS
As the Company continues to pursue its strategic objective of enhancing growth, efficiency and cost containment remain guiding principles. In furtherance of these principles, the Board has resolved to reduce its size from ten to six Directors. This reduction in Board size is expected to be effective as of the Company’s annual and special meeting of shareholders to be held on May 9, 2019 and is consistent with our efforts to create a more efficient and dynamic Company. Accordingly, effective February 26, 2019, Ms. Rees resigned from the Board. The Company will provide further details on its corporate governance practices, including the six nominees to be proposed for election to the Board, in its management information circular, which is expected to be mailed to shareholders in early April.
IMPAIRMENTS AND PROVISIONS
During the three months and year ended December 31, 2018, the Company recorded the following impairment charges to goodwill, intangible assets, and property and equipment, as well as a provision for onerous lease contracts:
- $145.5 million impairment charge to the goodwill allocated to the Canadian cash generating unit (“CGU”). The recoverable amounts of the CGU declined in 2018 primarily due to downward adjustments to management’s forecasted sales and profitability, an increase in the weighted average cost of capital rate of discount used to fair value the CGU, and recognition that goodwill carried forward from historic acquisitions, and assumptions used to derive the goodwill, was no longer relevant to how the Company intends to operate in the retail industry in Alberta as of Q4 2018. The profits in the Canadian CGU are expected to grow over the next five years, however these profits are anticipated to be lower than the expectations used for the goodwill impairment test in the prior and past years.
- $0.9 million impairment provision on retail liquor licenses and indefinite life trade name, which are classified as indefinite life intangible assets, related to two stores in British Columbia. The impairment related to: (i) two indefinite life brands names for which the Company no longer assigns any value to ($1.1 million); (ii) three retail liquor licenses for stores in British Columbia where management’s forecasted sales and profitability declined for these locations as a result of increased competition in the areas that these stores operate in ($0.7 million); and (iii) a net of reversal of impairment charges recorded in prior years for two liquor stores in British Columbia where Management’s forecasted sales and profitability increased due to a sustained improvement in operating results ($0.9 million).
- $1.2 million impairment provision on property and equipment. This impairment related to eighteen liquor stores in Alberta where management’s estimate of fair value, based on forecasted profitability of these stores over the terms of their leases, was less than the carrying value of the assets for these stores.
- A $4.2 million provision for onerous lease contracts. This provision related to sixteen liquor stores leases located in Alberta and seven leases in the cannabis segment where the unavoidable costs of meeting the obligations under the lease contract exceeded the economic benefit expected to be received under it from operating a retail store and/or from subleasing the space.
|(In thousands of Canadian dollars except per share amounts, unaudited)||Three months ended December 31||Year ended December 31|
|Operating profit before amortization and provisions1||1,561||7,981||1,846||26,148|
|Net loss from continuing operations||(151,306||)||(1,034||)||(158,330||)||(569||)|
|Basic and diluted loss per share from|
|from continuing operations||(4.08||)||(0.04||)||(4.48||)||(0.03||)|
|Operating profit before amortization and provisions||1,561||8,319||8,353||27,919|
|Net earnings from continuing operations||873||874||356||6,576|
|Basic and diluted earnings per share from continuing operations||0.02||0.03||0.01||0.07|
Alcanna Inc. will host an analyst and investor conference call on March 15, 2019 to discuss results for the three months and twelve months ended December 31, 2018. The conference call will take place at 10:00 a.m. M.T.
To participate in the call, please dial (416) 340-2216 or toll-free (800) 273-9672. An archived recording of the conference call will be available approximately one hour after the completion of the call, by dialling: (905) 694-9451 or Toll-Free Access: (800) 408-3053. The required passcode is: 5775181.
ABOUT ALCANNA INC.
Alcanna is one of the largest private sector retailers of alcohol in North America and the largest in Canada by number of stores – operating 236 locations in Alberta, British Columbia and Alaska. The Company also operates five cannabis retail stores under the “Nova Cannabis” brand in the Province of Alberta. With revenues in excess of $600 million per year, Alcanna processes over 18 million individual retail transactions of beverage alcohol and cannabis.
Alcanna's common shares and convertible subordinated debentures trade on the Toronto Stock Exchange under the symbols "CLIQ" and "CLIQ.DB", respectively.
This news release contains forward-looking statements or information (collectively "forward-looking statements") within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as “continue”, “anticipate”, "will", "should", “plan” and similar words suggesting future events or future performance. All statements and information other than statements of historical fact contained in this news release are forward-looking statements. In particular, this news release contains forward-looking statements pertaining to: implementing the Company’s strategy and objectives related to growth, efficiency, cost containment and generation of cash flow.
With respect to forward-looking statements contained in this news release, the Company has made assumptions regarding, among other things: the ability of management to execute the Company’s strategic plan and growth strategy, including its capital allocation strategy and specifically its ability significantly grow its cannabis retail store locations and enhance profitability of its liquor business.
Although the Company believes that the expectations reflected in the forward-looking statements, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations and assumptions will prove to be correct. Readers should not place undue reliance on forward-looking statements included in this news release. Forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that may cause actual performance and financial results to differ materially from any estimates, forecasts or projections. These risks and uncertainties include, among other things: the risk that we will be unable to execute our strategic plan and growth strategy, including the capital allocation and retail cannabis strategy, as planned without significant adverse impacts from various factors beyond our control; dependence on suppliers; potential delays or changes in plans with respect to capital expenditures and the availability of capital on acceptable terms; risks inherent in the liquor retail and cannabis industries; competition for, among other things, customers, supply, capital and skilled personnel; changes in labour costs and markets; incorrect assessments of the value of acquisitions; general economic and political conditions in Canada (including Alberta), Alaska and globally; industry conditions, including changes in government regulations; fluctuations in foreign exchange or interest rates; unanticipated operating events; failure to obtain regulatory and third‐party consents and approvals when required; changes in tax and other laws that affect us and our security holders; the potential failure of counterparties to honour their contractual obligations; stock market volatility; and the other factors described in the Company’s public filings (including the Annual Information Form) available at www.sedar.com. Readers are cautioned that this list of risk factors should not be construed as exhaustive.
The forward-looking statements contained in this news release are made as of the date hereof. Except as expressly required by applicable securities legislation, Alcanna does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.
For Further Information
Executive Vice President and Chief Financial Officer
1 Same-store sales, operating profit before amortization and provisions, adjusted operating profit before amortization and provisions, adjusted net earnings from continuing operations, and adjusted basic and diluted earnings per share are non-IFRS measures that do not have any standardized meaning prescribed by IFRS. For more information on these non-IFRS measures, see the ‘Non-IFRS Financial Measures’ in our Management Discussion and Analysis (“MD&A”) for the year ended December 31, 2018, which is available on the Company’s website (www.alcanna.ca/investors) and on the SEDAR website (www.sedar.com).