EDMONTON, Alberta, Oct. 09, 2020 (GLOBE NEWSWIRE) -- 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 Burns
Vice Chair and Chief Executive Officer
Alcanna Inc.
(587) 460-1026