Alcanna Inc. (the “
Company” or
“
Alcanna”) (TSX: CLIQ) today reported that it has
agreed to sell eight (8) convenience-format liquor stores on
Vancouver Island, British Columbia to Mid-Island Consumer Services
Co-operative (“
Mid-Island Co-op”). Alcanna will
retain its three (3) Vancouver Island stores in the greater
Victoria area.
Effective October 8, 2020, Alcanna and
Mid-Island Co-op entered into an asset purchase agreement (the
“Agreement”), which is binding on both parties
subject to customary conditions and consents. The total purchase
price is $21.1 million, inclusive of inventory and other assets,
and is subject to standard post-closing adjustments (the
“Transaction”). Closing costs for the Transaction
are estimated to be approximately $0.3 million. These eight (8)
stores contributed approximately $1.9 million to Alcanna’s profit
before income taxes in 2019 after adjusting for directly
attributable corporate overhead and depreciation.
On closing, the proceeds from the Transaction
will be used by Alcanna for investment in its Canadian liquor and
cannabis retail businesses, debt reduction and for general
corporate purposes.
James Burns, Vice Chair and CEO of Alcanna said:
“The sale of these 8 stores up-island fits with Alcanna’s strategy
to exit lower volume stores and ones in smaller communities in
order to concentrate on larger cities and higher volume stores. In
addition, Alcanna believes that the significant capital investments
required to keep these 8 stores competitive going forward would be
better allocated to growth opportunities in major markets.”
The Transaction is expected to close on or about
October 30, 2020.
Business Update
As a result of the ongoing coronavirus
(“COVID-19”) pandemic and the significant
uncertainty that the pandemic is causing for businesses and
investors, the Company is providing the following business and
financial update in advance of the release of our financial results
for the third quarter of 2020, which is tentatively planned for
November 13, 2020.
Alcanna’s liquor stores in all regions continued
to register sales and margins significantly higher compared to the
prior year. The Company anticipates that same-store liquor sales
for the three months ended September 30, 2020 will be approximately
15% higher than the prior year and total liquor gross margin as a
percentage of sales will be consistent or slightly higher than
those reported by the Company for the three months ended June 30,
2020. The Company believes this was primarily a result of shifting
customer consumption habits due to more people dining and
entertaining at home and continuing to stay away from on-premise
liquor establishments (restaurants, bars, lounges, sports venues,
etc.). The Company further believes these new consumer behaviour
patterns have become entrenched in people’s lifestyle choices and
expects consumer behaviour to continue in this manner for as long
as COVID-19 remains a threat to the health of Canadians.
Alcanna anticipates cannabis sales for the three
months ended September 30, 2020 will be approximately 23% higher
than the prior year with a gross margin as a percentage of sales of
approximately 33%. Alcanna also anticipates that the Cannabis
division will, consistent with the first and second quarters of
2020, provide a positive contribution to the Company’s profit
before income taxes in the third quarter of 2020. The Company
opened one cannabis store in Alberta during the third quarter of
2020 and is currently constructing seven (7) new cannabis locations
in Ontario and one additional location in Alberta.
Alcanna continued to improve the strength of its
balance sheet and cash flow profile during the third quarter of
2020. As at September 30, 2020, the Company’s existing capital
resources were approximately $69 million, which represents cash on
hand and availability under its Credit Facility and does not
include the net proceeds of approximately $20.8 million from the
Transaction which is expected to close on October 30, 2020. The
Company continues to have sufficient capital and credit
availability to finance operating requirements, growth strategies
and for general corporate purposes.
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 224 locations in Alberta and British
Columbia. The Company also operates 33 cannabis retail stores under
the “Nova Cannabis” brand, with 32 locations in Alberta and one
location in 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 in respect of the Transaction:
the cash proceeds of the Transaction, including price adjustments;
the satisfaction of all conditions to closing; the receipt of all
necessary consents; closing costs; the use of proceeds; and the
anticipated closing date.
In addition, this news release also contains
forward-looking information in respect of the Company's anticipated
results for the third quarter of 2020, which includes statements or
information pertaining to: same-store liquor sales and gross
margins as a percentage of sales; changing consumer behavior
patterns in light of the COVID-19 pandemic; anticipated cannabis
sales and gross margins as a percentage of those cannabis sales;
and the profitability of the cannabis division.
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
increase sales and margins, increase the number of its cannabis
retail store locations and enhance profitability of both its liquor
and cannabis businesses, 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
James BurnsVice Chair and Chief Executive
OfficerAlcanna Inc. (587) 460-1026
Alcanna (TSX:CLIQ)
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