Alcanna Inc. reported its results for the fourth quarter and year ended December 31, 2019. For the year ended December 31, 2019 Alcanna achieved a 21.7% growth in total sales versus 2018. The fourth quarter sales increase was 21.5% over Q4 in 2018. Gross margin dollars for the year increased to $178.3 million – a 12.8% increase from 2018.
“Alcanna continued on course throughout 2019 with an aggressive strategy begun in 2018 to regain and grow market share in our core Alberta liquor business and to establish Nova Cannabis as a leader in the Canadian cannabis retail industry and we delivered on that strategy,” said James Burns Vice Chair and CEO. “Alcanna began 2019 with five Nova Cannabis retail locations in Alberta and now have thirty opened, along with a highly successful entrance into the Ontario market with a store in Toronto. With all of this accomplished, the Company ends 2019 with our liquor CAPEX program largely behind us and in an excellent position to return to turning sales into bottom-line results.”
Fourth quarter and subsequent event highlights:
- As of today, Alcanna has 30 Nova Cannabis retail stores operating in Alberta, of which 12 opened in the fourth quarter of 2019, and another 7 opened in January 2020. Alcanna is poised to expand Nova Cannabis into Ontario now that the Ontario government has opened the licensing process and anticipates constructing and opening 10 to 20 new stores in Ontario in 2020 dependant on finding excellent locations, the pace at which the Ontario regulator can grant new licences, cannabis supply, and the competitive environment.
- Alcanna made reductions to corporate overhead of approximately $1 million annually in the fourth quarter, which is in addition to the $2 million in annual savings made in the third quarter.
|(In thousands of Canadian dollars
except per share amounts, unaudited)
|Three months ended December 31||Year ended December 31|
|Operating profit before amortization and provisions||12,420||1,561||32,059||1,846|
|Net loss from continuing operations||(14,290||)||(151,306||)||(32,574||)||(158,330||)|
|Basic and diluted loss per share from|
|from continuing operations||(0.35||)||(4.08||)||(0.83||)||(4.48||)|
|Operating profit before amortization and provisions||12,420||1,561||34,593||8,353|
|Net earnings (loss) from continuing operations||(14,290||)||873||(30,668||)||356|
|Basic and diluted loss per share from continuing operations||(0.35||)||0.02||(0.78||)||0.01|
On January 1, 2019, the Company adopted the new accounting standard, IFRS 16, Leases (“IFRS 16”) using the modified retrospective approach and has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The adoption of IFRS 16 has had a significant effect on the comparability of our reported results, including operating profit (loss) before amortization and provisions, which is disclosed in the audited consolidated financial statements for the year ended December 31, 2019 and 2018 and discussed further in the Company’s Management’s Discussion and Analysis for the three months and year ended December 31, 2019.
The adoption of IFRS 16 results in a significant increase in operating profit before amortization and provisions in 2019 which may not provide for a meaningful comparison to 2018 given that the comparatives for 2018 have not been restated. For the year ended December 31, 2019, the adoption of IFRS 16 resulted in the recognition of depreciation expense related to right-of-use-assets of $18.1 million, lease liability interest charge of $19.2 million a reduction to rent expense of $35.9 million and a lease remeasurement expense of $0.3 million. For the three-month period ended December 31, 2019, the adoption of IFRS 16 resulted in the recognition of depreciation expense related to right-of-use-assets of $4.6 million, lease liability interest charge of $5.1 million, a reduction to rent expense of $9.6 million, and a lease remeasurement expense of $1.7 million.
Sales in Q4 2019 were positively impacted compared to the same period in the prior year by:
- Operating five (5) retail cannabis stores that opened in Q4 2018, four (4) that opened in Q2 2019, one (1) that opened in Q3 2019 and twelve (12) that opened in Q4 2019.
Net loss from continuing operations during the fourth quarter of 2019 compared to fourth quarter of 2018 decreased primarily as a result of the goodwill impairment recorded in 2018.
Alcanna is one of the largest private sector retailers of alcohol in North America and the largest in Canada by number of stores – operating 255 locations in Alberta, British Columbia and Alaska. The Company also operates 31 cannabis retail stores under the “Nova Cannabis” brand, with 30 locations in the Province of Alberta and one in the Province of Ontario. With revenues in excess of $800 million per year, Alcanna processes over 20 million individual retail transactions of beverage alcohol and cannabis.