Alcanna Reports 25% Growth in Sales, 32% Growth in Gross Margin, and a Return to Profitability in the Second Quarter 2020
August 19 2020 - 4:14PM
Alcanna Inc. (the “Company” or “Alcanna”) (TSX: CLIQ) today
reported its unaudited financial results for the three and six
months ended June 30, 2020.
Second Quarter Financial Results and
Business Update
Alcanna’s business in Q2 2020 continued with the
strong performance reported for Q1 2020 with significant increases
on all fronts from the prior year. Despite the COVID-19 pandemic
forcing most retail stores to close, Alcanna’s liquor and cannabis
retail stores were deemed to be essential services in all
jurisdictions (other than a brief period of several days for the
Ontario Nova Cannabis store) and therefore, all liquor and cannabis
retail locations have remained open for business.
Highlights for the three months ended June 30,
2020:
- Total sales from continuing operations were 24.9% higher rising
to $215.6 million from $172.6 million in 2019.
- Same-store liquor sales for Q2 2020 were up 13.4% while
enhancing gross margins in the liquor operating segment to 22.7% in
Q2 2020, compared to 21.7% in Q1 2020 and 22.1% in Q2 2019.
- Total gross margin dollars rose 31.7% to $50.5 million from
$38.3 million in the prior year.
- Operating profit before amortization and provisions for Q2 2020
rose 213.5% to $19.4 million from $6.2 million in the prior
year.
- Profit before income taxes rose to $6.1 million, compared to a
loss of $6.2 million in the prior year.
Alcanna’s liquor stores in all regions
experienced sales significantly higher than the prior year period
in the second quarter of 2020. We believe that the stronger than
expected same-store sales growth in the second quarter was
primarily a result of shifting customer consumption habits due to
more people dining and entertaining at home after the closure of
on-premise liquor establishments (restaurants, bars, lounges, etc.)
for the majority of this period of time, and now with the mass
gathering and social distancing restrictions on these
establishments when they reopened. We believe these new
consumer behaviour patterns will continue for the foreseeable
future with on-premise locations being allowed only restricted
operations and many consumers being uncomfortable in confined
public places as long as the COVID-19 threat remains.
Cannabis retail sales have generally been in
line with Management’s pre-COVID-19 expectations throughout the
second quarter and continue to follow this trend throughout Q3 2020
to date. Unlike liquor, where on-premise consumption of liquor has
been drastically reduced, the major competitor for legal cannabis
retailers is the illegal market, which did not shut down due to the
COVID-19 pandemic.
Total cannabis store sales for the second
quarter of 2020 rose 63.9% to $14.4 million from $8.8 million in
the prior year, and total gross margin dollars grew 132.1% to $4.9
million from $2.1 million. The Nova Cannabis business increased its
positive operating profit before amortization and provisions
contribution to Alcanna from the already positive Q1 2020 results,
which we believe makes Alcanna the only Canadian public company in
the retail cannabis business generating positive operating profit
before income taxes.
The Company’s condensed interim consolidated
financial statements and management’s discussion and analysis for
the three and six months ended June 30, 2020 will be available in
the Investors section of the Company’s website at www.alcanna.com
and will be filed on SEDAR and available at www.sedar.com.
FINANCIAL RESULTS
(In thousands of Canadian dollars except per share amounts,
unaudited) |
Three months ended June
30, |
|
Six months ended June
30, |
|
2020$ |
|
2019$ |
|
2020$ |
|
2019$ |
|
|
|
(Restated)(i) |
|
(Restated)(i) |
Sales |
215,623 |
|
172,584 |
|
377,740 |
|
299,098 |
|
Operating profit before amortization and provisions |
19,383 |
|
6,183 |
|
27,019 |
|
5,522 |
|
Net earnings (loss) from continuing operations |
11,163 |
|
(6,043 |
) |
4,641 |
|
(15,468 |
) |
Basic earnings (loss) per share from continuing operations |
0.28 |
|
(0.15 |
) |
0.12 |
|
(0.39 |
) |
Diluted earnings (loss) per share from continuing operations |
0.26 |
|
(0.15 |
) |
0.12 |
|
(0.39 |
) |
i) The financial results for the three and six months ended June
30, 2019 have been restated to exclude the results of the Company’s
Alaska Operations, which have been classified as discontinued
operations as a result of their sale on June 1, 2020. |
CONFERENCE CALL
Alcanna Inc. will host an analyst and investor
conference call on August 20, 2020 to discuss the unaudited
financial results for the three and six months ended June 30, 2020.
The conference call will take place at 10:00 a.m. M.T.
To participate in the call, please dial (416)
406-0743 or toll-free (800) 898-3989 and use the required
participant access code: 4011583#. An archived recording of the
conference call will be available approximately four hours after
the event, by dialling: (905) 694-9451 or Toll-Free Access: (800)
408-3053. The required passcode is: 2084623#.
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 226 locations in Alberta and British
Columbia. The Company also operates 33 cannabis retail stores under
the “Nova Cannabis” brand, with 32 locations in the Province of
Alberta and one in the Province of Ontario.
Alcanna's common shares and convertible
subordinated debentures trade on the Toronto Stock Exchange under
the symbols "CLIQ" and "CLIQ.DB", respectively.
Additional information about Alcanna Inc. is
available at www.sedar.com and the Company’s website at
www.alcanna.com.
FORWARD-LOOKING STATEMENTS
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”,
“intention”, 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 the growth of its
liquor and cannabis brands, and the impact that the COVID-19
pandemic may have on sales and customer shopping habits in the
future.
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 to grow
its cannabis retail store locations and enhance profitability of
its liquor business, and assumptions about the COVID-19 pandemic
and the impact it might have on the economies in the jurisdictions
that the Company operates in.
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, especially given the unprecedented uncertainty of the
full extent and impact of COVID-19, 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 duration and severity of the COVID-19 pandemic on the
business, operations and financial condition of the Company; the
risk that Alcanna will be unable to execute its strategic plan and
growth strategy, including the capital allocation and retail
cannabis strategy, as planned without significant adverse impacts
from various factors beyond its 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), 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
David GordeyExecutive Vice President and Chief
Financial OfficerAlcanna Inc. (780) 497-3262
Alcanna (TSX:CLIQ)
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