TORONTO,
ON, May 9, 2023 /CNW/ - George Weston Limited
(TSX: WN) ("GWL" or the "Company") today announced its consolidated
unaudited results for the 12 weeks ended March 25, 2023(2).
GWL's 2023 First Quarter Report has been filed on SEDAR and
is available at sedar.com and in the Investor Centre section of
the Company's website at weston.ca.
Loblaw Companies Limited ("Loblaw") revenue and earnings growth
continued to reflect its focus on retail excellence. Drug retail
sales were led by continued strength in higher margin beauty and
cough and cold products. Drug retail sales growth rates were
further magnified by lapping Omicron related lockdowns last year.
Food retail sales growth accelerated through the quarter, after
lapping lockdown related benefits in the first part of 2022. This
was the case in both market and discount stores, though the latter
continued to outperform, benefiting from the heightened consumer
focus on price. Total retail gross margin increased due to higher
sales growth in more profitable front-store sales in drug stores,
offsetting a slight decline in food retail gross margin as costs
continued to increase faster than prices. Higher sales and cost
control leverage drove earnings in the quarter.
Choice Properties Real Estate Investment Trust ("Choice
Properties") delivered consistent operating and financial results
in the quarter, driven by the strength of its portfolio and the
quality and resiliency of its tenants. Choice Properties further
strengthened its market leading portfolio through capital recycling
and took steps to ensure its industry leading balance sheet was
maintained amidst on-going market volatility. Choice Properties
completed $268 million of
transactions and raised $737 million of financing, including
issuing $550 million of unsecured debentures with a ten-year
term. Looking ahead, Choice Properties' business is strong and well
positioned to execute on its strategic framework.
"GWL delivered strong results this quarter through consistent
performance in a dynamic environment," said Galen G. Weston, Chairman and Chief Executive
Officer of George Weston Limited. "Our operating divisions
delivered against their plans, by staying laser focused on the
needs of their customers and tenants. This unwavering commitment
will position us for continued success this year and into the
future."
2023 FIRST QUARTER HIGHLIGHTS
- Net earnings available to common shareholders of the Company
from continuing operations were $426
million, an increase of $63
million, or 17.4%, due to the favourable year-over-year net
impact of adjusting items.
- Adjusted net earnings available to common shareholders of the
Company(1) from continuing operations were $282 million and flat compared to the same period
in 2022.
- Diluted net earnings per common share from continuing
operations were $3.01, an increase of
$0.56 per common share, or
22.9%.
- Adjusted diluted net earnings per common share(1)
from continuing operations were $1.99, an increase of $0.09 per common share, or 4.7%.
- Repurchased for cancellation 1.4 million common shares at a
cost of $231 million.
- GWL Corporate(3) free cash flow(1) from
continuing operations was $186
million.
- The quarterly common share dividend to be increased by
$0.053, or 8.0%, from $0.660 per common share to $0.713 per common share.
CONSOLIDATED RESULTS OF OPERATIONS
The Company's results reflect the year-over-year impact of the
fair value adjustment of the Trust Unit liability as a result of
the significant changes in Choice Properties' unit price, recorded
in net interest expense and other financing charges. The Company's
results are impacted by market price fluctuations of Choice
Properties' Trust Units on the basis that the Trust Units held by
unitholders, other than the Company, are redeemable for cash at the
option of the holder and are presented as a liability on the
Company's consolidated balance sheet. The Company's financial
results are positively impacted when the Trust Unit price declines
and negatively impacted when the Trust Unit price increases.
Unless otherwise indicated, all financial information represents
the Company's results from continuing operations.
($ millions except
where otherwise indicated)
For the periods ended
as indicated
|
12 Weeks
Ended
|
|
|
|
|
|
Mar. 25,
2023
|
Mar. 26,
2022
|
$ Change
|
|
% Change
|
|
Revenue
|
|
$ 13,133
|
|
$ 12,407
|
$
726
|
|
5.9 %
|
|
Operating
income
|
|
$
957
|
|
$
1,166
|
$
(209)
|
|
(17.9) %
|
|
Adjusted
EBITDA(1)
|
|
$
1,507
|
|
$
1,422
|
$
85
|
|
6.0 %
|
|
Adjusted EBITDA
margin(1)
|
|
11.5 %
|
|
11.5 %
|
|
|
|
|
Net earnings
attributable to shareholders of the
Company from continuing operations
|
|
$
436
|
|
$
373
|
$
63
|
|
16.9 %
|
|
Net earnings
available to common shareholders
of the Company from continuing
operations
|
|
$
426
|
|
$
363
|
$
63
|
|
17.4 %
|
|
Adjusted net earnings
available to common shareholders
of the Company(1) from continuing
operations
|
|
$
282
|
|
$
282
|
$
—
|
|
— %
|
|
Diluted net earnings
per common share from
continuing operations ($)
|
|
$
3.01
|
|
$
2.45
|
$
0.56
|
|
22.9 %
|
|
Adjusted diluted net
earnings per common share(1) from
continuing operations ($)
|
|
$
1.99
|
|
$
1.90
|
$
0.09
|
|
4.7 %
|
|
|
|
|
|
|
|
|
|
|
|
|
In the first quarter of 2023, the Company recorded net earnings
available to common shareholders of the Company from continuing
operations of $426 million
($3.01 per common share), an increase
of $63 million ($0.56 per common share) compared to the same
period in 2022. The increase was due to the favourable
year-over-year net impact of adjusting items totaling
$63 million. The Company's consolidated underlying operating
performance was flat compared to the same period in 2022.
- The favourable year-over-year net impact of adjusting items
totaling $63 million ($0.47 per common share) was primarily due
to:
-
- the favourable year-over-year impact of the fair value
adjustment of the Trust Unit liability of $285 million ($2.00
per common share) as a result of the decrease in Choice Properties'
unit price;
partially offset by,
-
- the unfavourable year-over-year impact of the fair value
adjustment on investment properties of $200
million ($1.35 per common
share) driven by Choice Properties, net of consolidation
adjustments in Other and Intersegment; and
- the unfavourable year-over-year impact of the prior year
recovery related to a favourable Court ruling regarding a Glenhuron
Bank Limited ("Glenhuron") matter at Loblaw of $23 million ($0.16
per common share).
- The Company's consolidated underlying operating performance was
flat compared to the same period in 2022 driven by:
-
- the favourable underlying operating performance of Loblaw and
Choice Properties;
offset by,
-
- an increase in the adjusted effective tax rate(1)
primarily attributable to an increase in tax expense as a result of
GWL's participation in Loblaw's Normal Course Issuer Bid ("NCIB")
program;
- the unfavourable year-over-year impact of Other and
Intersegment, primarily driven by the elimination of internal lease
arrangements; and
- an increase in adjusted net interest expense and other
financing charges(1).
- Diluted net earnings per common share from continuing
operations included the favourable impact of shares purchased for
cancellation over the last 12 months ($0.09 per common share) pursuant to the Company's
NCIB.
Adjusted net earnings available to common shareholders of the
Company(1) from continuing operations in the first
quarter of 2023 were $282 million, flat compared to the same
period in 2022 due to the Company's consolidated underlying
operating performance described above.
Adjusted diluted net earnings per common share(1)
from continuing operations in the first quarter of 2023 were
$1.99, an increase of $0.09 per common share, or 4.7%, compared to the
same period in 2022. The increase was due to the
favourable impact of share repurchases.
CONSOLIDATED OTHER BUSINESS MATTERS
The Company completed the following GWL Corporate(3)
financing activities:
NCIB – Purchased and Cancelled Shares In the
first quarter of 2023, the Company purchased and cancelled
1.4 million shares under its NCIB (2022 – 0.4 million shares)
at a cost of $231 million (2022 –
$57 million). As at March 25, 2023, the Company had 139.3 million
shares issued and outstanding, net of shares held in trusts
(March 26, 2022 – 146.5 million
shares).
In the first quarter of 2023, the Company entered into an
automatic share purchase plan ("ASPP") with a broker in order to
facilitate the repurchase of the Company's common shares under its
NCIB. During the effective period of the ASPP, the Company's broker
may purchase common shares at times when the Company would not be
active in the market.
Refer to Section 3.6, "Dividends and Share Repurchases" of the
Management's Discussion and Analysis ("MD&A") in the Company's
2023 First Quarter Report for more information.
Participation in Loblaw's NCIB The Company
participates in Loblaw's NCIB in order to maintain its
proportionate percentage ownership interest. During the first
quarter of 2023, GWL received proceeds of $188 million (2022 –
$10 million) from the sale of Loblaw shares.
REPORTABLE OPERATING SEGMENTS
The Company operates through its two reportable operating
segments: Loblaw and Choice Properties. Other and Intersegment
includes eliminations, intersegment adjustments related to the
consolidation and cash and short-term investments held by the
Company. All other company level activities that are not allocated
to the reportable operating segments, such as interest expense,
corporate activities and administrative costs are included in Other
and Intersegment.
Loblaw has two reportable operating segments, retail and
financial services. Loblaw's retail segment consists primarily of
food retail and drug retail. Loblaw provides Canadians with
grocery, pharmacy and healthcare services, health and beauty
products, apparel, general merchandise and financial services.
Choice Properties owns, manages and develops a high-quality
portfolio of commercial and residential properties across
Canada.
Excerpt of Segment Information
The accounting policies of the reportable operating segments are
the same as those described in the Company's 2022 audited annual
consolidated financial statements. The Company measures each
reportable operating segment's performance based on adjusted
EBITDA(1). No reportable operating segment is reliant on
any single external customer.
|
|
12 Weeks
Ended
|
|
|
|
Mar. 25,
2023
|
|
|
Mar. 26,
2022
|
|
($ millions)
|
|
Loblaw
|
Choice
Properties
|
Other
and
Inter-
segment
|
Total
Segment
Measure
|
Elim-
inations
|
Total
|
|
|
Loblaw
|
Choice
Properties
|
Other and
Inter-
segment
|
Total
Segment
Measure
|
Elim-
inations
|
Total
|
|
Revenue
|
|
$
12,995
|
$
325
|
$
2
|
$
13,322
|
$
(189)
|
$
13,133
|
|
|
$ 12,262
|
$
328
|
$
2
|
$ 12,592
|
$ (185)
|
$
12,407
|
|
Operating
income
|
|
$
767
|
$
306
|
$
(116)
|
$
957
|
$
—
|
$
957
|
|
|
$
736
|
$
629
|
$
(199)
|
$
1,166
|
$
—
|
$
1,166
|
|
Net interest expense
and other financing charges
|
|
181
|
35
|
(145)
|
71
|
—
|
71
|
|
|
142
|
242
|
(62)
|
322
|
—
|
322
|
|
Earnings before
income taxes
from continuing operations
|
|
$
586
|
$
271
|
$
29
|
$
886
|
$
—
|
$
886
|
|
|
$
594
|
$
387
|
$
(137)
|
$
844
|
$
—
|
$
844
|
|
Operating
income
|
|
$
767
|
$
306
|
$
(116)
|
$
957
|
$
—
|
$
957
|
|
|
$
736
|
$
629
|
$
(199)
|
$
1,166
|
$
—
|
$
1,166
|
|
Depreciation and
amortization
|
|
675
|
1
|
(94)
|
582
|
|
|
|
|
631
|
1
|
(83)
|
549
|
|
|
|
Adjusting
items(i)
|
|
4
|
(77)
|
41
|
(32)
|
|
|
|
|
(26)
|
(405)
|
138
|
(293)
|
|
|
|
Adjusted
EBITDA(i)
|
|
$
1,446
|
$
230
|
$
(169)
|
$
1,507
|
|
|
|
|
$
1,341
|
$
225
|
$
(144)
|
$
1,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) Certain items
are excluded from operating income to derive adjusted
EBITDA(1).
|
Other and Intersegment includes the following items:
|
|
12 Weeks
Ended
|
|
|
|
Mar. 25,
2023
|
|
|
Mar. 26,
2022
|
|
($ millions)
|
|
Revenue
|
Operating
Income
|
Net
Interest
Expense
and Other
Financing
Charges
|
|
|
Revenue
|
Operating
Income
|
Net Interest
Expense
and Other
Financing
Charges
|
|
Internal lease
arrangements
|
|
$ —
|
$
(55)
|
$
(27)
|
|
|
$ —
|
$
(38)
|
$
(22)
|
|
Recognition of
depreciation on Choice Properties'
investment properties classified as fixed assets
by
the Company and measured at cost
|
|
—
|
—
|
—
|
|
|
—
|
(10)
|
—
|
|
Fair value adjustment
on investment properties
|
|
—
|
(43)
|
—
|
|
|
—
|
(119)
|
3
|
|
Fair value adjustment
on Choice Properties'
Exchangeable Units
|
|
—
|
—
|
95
|
|
|
—
|
—
|
(119)
|
|
Fair value adjustment
on Trust Unit liability
|
|
—
|
—
|
(192)
|
|
|
—
|
—
|
93
|
|
Unit distributions on
Exchangeable Units paid by
Choice Properties to GWL
|
|
—
|
—
|
(74)
|
|
|
—
|
—
|
(73)
|
|
Unit distributions on
Trust Units paid by Choice
Properties, excluding amounts paid to GWL
|
|
—
|
—
|
52
|
|
|
—
|
—
|
51
|
|
Reversal of Loblaw gain
on sale of disposition of
property to Choice Properties
|
|
—
|
—
|
—
|
|
|
—
|
(19)
|
—
|
|
Other
|
|
2
|
(18)
|
1
|
|
|
2
|
(13)
|
5
|
|
Total
|
|
$
2
|
$ (116)
|
$
(145)
|
|
|
$
2
|
$
(199)
|
$
(62)
|
|
Elimination of
intercompany rental revenue
|
|
(189)
|
—
|
—
|
|
|
(185)
|
—
|
—
|
|
Total including
Eliminations
|
|
$
(187)
|
$ (116)
|
$
(145)
|
|
|
$
(183)
|
$
(199)
|
$
(62)
|
|
|
|
|
|
|
|
|
|
|
|
|
Loblaw Operating Results
($ millions except
where otherwise indicated)
For the periods ended
as indicated
|
|
12 Weeks
Ended
|
|
|
|
|
Mar. 25,
2023
|
Mar. 26,
2022
|
$ Change
|
|
% Change
|
|
Revenue
|
|
$ 12,995
|
|
$ 12,262
|
$ 733
|
|
6.0 %
|
|
Operating
income
|
|
$
767
|
|
$
736
|
$
31
|
|
4.2 %
|
|
Adjusted
EBITDA(1)
|
|
$
1,446
|
|
$
1,341
|
$ 105
|
|
7.8 %
|
|
Adjusted EBITDA
margin(1)
|
|
11.1 %
|
|
10.9 %
|
|
|
|
|
Depreciation and
amortization
|
|
$
675
|
|
$
631
|
$
44
|
|
7.0 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Loblaw revenue in the first quarter of 2023
was $12,995 million, an increase
of $733 million, or 6.0%, compared to the same period in
2022, driven by an increase in retail sales and an improvement in
financial services revenue.
Retail sales were $12,735 million, an increase of
$690 million, or 5.7%, compared to the same period
in 2022. The increase was primarily driven by the following
factors:
- food retail sales were $9,011
million (2022 – $8,682
million) and food retail same-store sales growth was 3.1%
(2022 – 2.1%), including the negative impact of 1.1% related to the
timing of New Year's Day. Food retail same-store sales were also
negatively impacted by higher than normal eat-at-home levels in the
prior year;
-
- the Consumer Price Index as measured by The Consumer Price
Index for Food Purchased from Stores was 10.5% (2022 – 7.5%), which
was generally in line with Loblaw's internal food inflation;
and
- food retail traffic increased and basket size decreased.
- drug retail sales were $3,724
million (2022 – $3,363
million) and drug retail same-store sales growth was 7.4%
(2022 – 5.2%);
-
- pharmacy and healthcare services same-store sales growth was
4.7% (2022 – 6.8%) and front store same-store sales growth was
10.3% (2022 – 3.6%). Pharmacy and healthcare services sales
included Lifemark Health Group ("Lifemark") revenue of $118 million. Lifemark revenues are excluded from
same-store sales; and
- on a same-store basis, the number of prescriptions dispensed
decreased by 1.9% (2022 – increased by 5.8%) and the average
prescription value increased by 6.0% (2022 – 0.4%).
Financial services revenue in the first quarter of 2023
increased by $52 million, or 19.0%, compared to the same
period in 2022, primarily driven by higher interest income from
growth in credit card receivables, higher interchange income and
other credit card related revenue due to an increase in customer
spending.
Operating Income Operating income in the first
quarter of 2023 was $767 million, an increase of
$31 million, or 4.2%, compared to the same period in 2022.
Adjusted EBITDA(1) Loblaw adjusted
EBITDA(1) in the first quarter of 2023 was $1,446 million, an increase of $105 million,
or 7.8%, compared to the same period in 2022, driven by an increase
in retail. Financial services adjusted EBITDA(1) was
flat compared to the same period in 2022.
Retail adjusted EBITDA(1) increased by $105 million compared to the same period in 2022,
driven by an increase in retail gross profit of $237 million,
partially offset by an increase in retail selling, general and
administrative expenses ("SG&A") of $132
million.
- Retail gross profit percentage of 31.3% increased by 20 basis
points (2022 – increased by 80 basis points) primarily driven by
growth in higher margin drug retail front store categories,
partially offset by a slight decrease in food retail margins.
- Retail SG&A as a percentage of sales was 20.3%, a
favourable decrease of 10 basis points compared to the same period
in 2022. The favourable decrease was primarily due to operating
leverage from higher sales.
Financial services adjusted EBITDA(1) was flat
compared to the same period in 2022, primarily driven by the
unfavourable year-over-year impact of the expected credit loss
provision from lapping a prior year release of $5 million versus the current year increase of
$6 million and higher costs from an
increase in customer spending and the growth in credit card
portfolio, which was offset by higher revenue as described
above.
Depreciation and Amortization Loblaw depreciation
and amortization in the first quarter of 2023 was $675 million, an increase of $44 million compared to the same period in 2022.
The increase in depreciation and amortization was primarily driven
by an increase in depreciation of information technology ("IT") and
leased assets, accelerated depreciation of $10 million (2022 – nil) due to the reassessment
of the estimated useful life of certain IT assets and accelerated
depreciation of $7 million (2022 –
nil) as a result of network optimization. Depreciation and
amortization in the first quarter of 2023 included $114 million (2022 – $117
million) of amortization of intangible assets related to the
acquisitions of Shoppers Drug Mart Corporation ("Shoppers Drug
Mart") and Lifemark.
Loblaw Other Business Matters
Network Optimization In the first quarter of 2023,
Loblaw recorded charges of $15
million associated with network optimization, which include
accelerated depreciation of $7
million, as described above, and other charges.
Real Estate Dispositions In the first quarter of
2023, Loblaw disposed of sixteen real estate properties for
proceeds of $87 million (2022 – $13
million). Real estate disposition proceeds will be used to
partially fund increased capital investments.
Choice Properties Operating Results
($ millions except
where otherwise indicated)
For the periods ended
as indicated
|
|
12 Weeks
Ended
|
|
|
|
|
|
Mar. 25,
2023
|
Mar. 26,
2022
|
|
$ Change
|
|
% Change
|
|
Revenue
|
|
$
325
|
|
|
$
328
|
|
$
(3)
|
|
(0.9) %
|
|
Net interest expense
and other financing charges
|
|
$
35
|
|
|
$
242
|
|
$
(207)
|
|
(85.5) %
|
|
Net income
|
|
$
271
|
|
|
$
387
|
|
$
(116)
|
|
(30.0) %
|
|
Funds from
Operations(1)
|
|
$
177
|
|
|
$
175
|
|
$
2
|
|
1.1 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Choice Properties revenue in the first quarter
of 2023 was $325 million, a decrease
of $3 million, or 0.9%, compared to
the same period in 2022 and included $189
million (2022 – $184 million)
generated from tenants within Loblaw retail. The decrease in
revenue was primarily driven by:
- foregone revenue following the disposition of six office assets
(the "Office Asset Sale") to Allied Properties Real Estate
Investment Trust ("Allied") in the second quarter of 2022;
partially offset by,
- an increase in rental revenues from the retail and industrial
portfolios driven by improved occupancy and higher rental
rates;
- the impact of acquisitions and completed developments; and
- higher capital recoveries.
Net Interest Expense and Other Financing Charges
Choice Properties net interest expense and other financing charges
in the first quarter of 2023 were $35
million compared to $242
million in the same period in 2022. The decrease of
$207 million was primarily driven
by:
- the favourable year-over-year impact of the fair value
adjustment on the Class B LP units ("Exchangeable Units") of
$214 million as a result of the
decrease in the unit price in the quarter; and
- an increase in interest income on mortgages and loans
receivable due to a higher average outstanding balance in the
period;
partially offset by,
- an increase in interest expense on long-term debt due to higher
interest rates and a higher average balance compared to the same
period in 2022.
Net Income Choice Properties recorded net income of
$271 million in the first quarter of
2023, compared to $387 million in the same period in 2022. The
decrease of $116 million was primarily driven by:
- the unfavourable year-over-year change in the adjustment to
fair value of investment properties, including those held within
equity accounted joint ventures of $318
million; and
- the unfavourable change in the adjustment to fair value of
investment in real estate securities as a result of a decrease in
Allied's unit price of $15
million;
partially offset by,
- lower net interest expense and other financing charges as
described above.
Funds from Operations(1) Funds from
operations(1) in the first quarter of 2023 were
$177 million, an increase of
$2 million compared to the same period in 2022. The increase
was primarily due to an increase in rental revenues from the retail
and industrial portfolios and an increase in interest income, which
was partially offset by increases in interest expense and general
and administrative expenses and the impact of the Office Asset
Sale. The impact of the Office Asset Sale includes foregone rental
income, partially offset by the distributions from Choice
Properties' investment in real estate securities of Allied and
interest income from the consideration received in exchange for
assets sold.
Choice Properties Other Business Matters
Subsequent Events On March
30, 2023, Choice Properties completed an exchange of office
properties with its partner. The exchange resulted in Choice
Properties disposing of its 50% interest in Calgary Place in
exchange for the partner's 50% interest in Altius Centre and a
vendor take-back mortgage with a face value of $14 million (fair value of $11 million). As at March
25, 2023, $48 million related
to the disposed property was recorded in Assets Held for
Sale on the Company's condensed consolidated balance
sheet.
OUTLOOK(2)
The Company's 2023 outlook remains unchanged and it continues to
expect adjusted net earnings(1) from continuing
operations to increase due to the results from its operating
segments, and to use excess cash to repurchase shares.
Loblaw Loblaw will continue to execute on
retail excellence while advancing its growth initiatives in 2023.
Loblaw's businesses remain well placed to service the everyday
needs of Canadians. However, Loblaw cannot predict the precise
impacts of global economic uncertainties, including the
inflationary environment, on its 2023 financial results.
For the full year 2023, Loblaw continues to expect:
- its retail business to grow earnings faster than sales;
- adjusted net earnings per common share(1) growth in
the low double digits;
- to increase investments in its store network and distribution
centres by investing a net amount of $1.6
billion in capital expenditures, which reflects gross
capital investments of approximately $2.1
billion offset by approximately $500
million of proceeds from real estate dispositions; and
- to return capital to shareholders by allocating a significant
portion of free cash flow to share repurchases.
Choice Properties Choice Properties is focused on
capital preservation, delivering stable and growing cash flows and
net asset value appreciation, all with a long-term focus. Choice
Properties' high-quality portfolio is primarily leased to
necessity-based tenants and logistics providers, who are less
sensitive to economic volatility and therefore provide stability to
its overall portfolio. Choice Properties continues to experience
positive leasing momentum across its portfolio and is well
positioned to handle its 2023 lease renewal exposure. Choice
Properties also continues to advance its development program, with
a focus on industrial opportunities, which provides it with the
best opportunity to add high-quality real estate to its portfolio
at a reasonable cost and drive net asset value appreciation over
time.
Choice Properties is confident that its business model, stable
tenant base, strong balance sheet and disciplined approach to
financial management will continue to position it well for future
success. However, Choice Properties cannot predict the precise
impacts of the broader economic environment on its 2023 financial
results. In 2023, Choice Properties will continue to focus on its
core business of essential retail and industrial, its growing
residential platform and its robust development pipeline, and is
targeting:
- stable occupancy across the portfolio, resulting in 2-3%
year-over-year growth in Same-Asset NOI, Cash
Basis(4);
- annual FFO(1) per Unit Diluted(4) in a
range of $0.98 to $0.99, reflecting 2-3% year-over-year growth;
and
- stable leverage metrics, targeting Adjusted Debt to
EBITDAFV(4) of approximately 7.5x.
FORWARD-LOOKING STATEMENTS
This News Release contains forward-looking statements about the
Company's objectives, plans, goals, aspirations, strategies,
financial condition, results of operations, cash flows,
performance, prospects, opportunities and legal and regulatory
matters. Specific forward-looking statements in this News Release
include, but are not limited to, statements with respect to the
Company's anticipated future results, events and plans, strategic
initiatives and restructuring, regulatory changes, including
further healthcare reform, future liquidity, planned capital
investments, and the status and impact of IT systems
implementations. These specific forward-looking statements are
contained throughout this News Release including, without
limitation, in the "Outlook" section of this News Release.
Forward-looking statements are typically identified by words such
as "expect", "anticipate", "believe", "foresee", "could",
"estimate", "goal", "intend", "plan", "seek", "strive", "will",
"may", "should" and similar expressions, as they relate to the
Company and its management.
Forward-looking statements reflect the Company's estimates,
beliefs and assumptions, which are based on management's perception
of historical trends, current conditions and expected future
developments, as well as other factors it believes are appropriate
in the circumstances. The Company's estimates, beliefs and
assumptions are inherently subject to significant business,
economic, competitive and other uncertainties and contingencies
regarding future events, and as such, are subject to change. The
Company can give no assurance that such estimates, beliefs and
assumptions will prove to be correct.
Numerous risks and uncertainties could cause the Company's
actual results to differ materially from those expressed, implied
or projected in the forward-looking statements, including those
described in the "Enterprise Risks and Risk Management" sections of
the MD&A in the Company's 2022 Annual Report and the Company's
Annual Information Form for the year ended December 31, 2022.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect the Company's
expectations only as of the date of this News Release. Except
as required by law, the Company does not undertake to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
DECLARATION OF QUARTERLY DIVIDENDS
Subsequent to the end of the first quarter of 2023, the
Company's Board of Directors declared a quarterly dividend on GWL
Common Shares, Preferred Shares, Series I, Preferred Shares, Series
III, Preferred Shares, Series IV and Preferred Shares,
Series V payable as follows:
Common
Shares
|
$0.713 per share
payable July 1, 2023, to shareholders of record June 15,
2023;
|
|
|
Preferred Shares,
Series I
|
$0.3625 per share
payable June 15, 2023, to shareholders of record May 31,
2023;
|
|
|
Preferred Shares,
Series III
|
$0.3250 per share
payable July 1, 2023, to shareholders of record June 15,
2023;
|
|
|
Preferred Shares,
Series IV
|
$0.3250 per share
payable July 1, 2023, to shareholders of record June 15,
2023;
|
|
|
Preferred Shares,
Series V
|
$0.296875 per share
payable July 1, 2023, to shareholders of record June 15,
2023.
|
2023 FIRST QUARTER REPORT
The Company's 2022 Annual Report and 2023 First Quarter Report
are available in the Investor Centre section of the Company's
website at www.weston.ca and have been filed on SEDAR and are
available at www.sedar.com.
INVESTOR RELATIONS
Shareholders, security analysts and investment professionals
should direct their requests to Roy
MacDonald, Group Vice-President, Investor Relations, at the
Company's Executive Office or by e-mail at investor@weston.ca.
Additional financial information has been filed electronically
with various securities regulators in Canada through SEDAR. This News Release
includes selected information on Loblaw, a public company with
shares trading on the Toronto Stock Exchange ("TSX"), and selected
information on Choice Properties, a public real estate investment
trust with units trading on the TSX. For information regarding
Loblaw or Choice Properties, readers should refer to the respective
materials filed on SEDAR from time to time. These filings are also
maintained on the respective companies' corporate website:
www.loblaw.ca and www.choicereit.ca.
ANNUAL MEETING
The George Weston Limited Annual Meeting of Shareholders will be
held on Tuesday, May 9, 2023 at 11:00
a.m. (ET) at the Royal Conservatory, TELUS Centre for
Performance and Learning, Koerner
Hall, 273 Bloor Street West, Toronto, Ontario, Canada. Shareholders who are
not able to attend in person will be able to listen, participate
and vote at the meeting in real time through a web-based platform
at https://web.lumiagm.com/249009731 (meeting password:
george2023). To access via audio-conference please dial (416)
764-8688 or 1-888-390-0546. Playback will be available two hours
after the event at (416) 764-8677 or 1-888-390-0541, password:
370303#.
Ce rapport est disponible en français.
|
|
Endnotes
|
|
|
(1)
|
See the "Non-GAAP and
Other Financial Measures" section in Appendix 1 of this News
Release, which includes the reconciliation of such non-GAAP and
other financial measures to the most directly comparable GAAP
measures.
|
(2)
|
This News Release
contains forward-looking information. See "Forward-Looking
Statements" section of this News Release and the Company's 2022
Annual Report for a discussion of material factors that could cause
actual results to differ materially from the forecasts and
projections herein and of the material factors and assumptions that
were used when making these statements. This News Release should be
read in conjunction with GWL's filings with securities regulators
made from time to time, all of which can be found at www.weston.ca
and www.sedar.com.
|
(3)
|
GWL Corporate refers to
the non-consolidated financial results and metrics of GWL. GWL
Corporate is a subset of Other and Intersegment.
|
(4)
|
For more information on
Choice Properties measures see the 2022 Annual Report filed by
Choice Properties, which is available on sedar.com or at
choicereit.ca.
|
|
|
APPENDIX 1: NON-GAAP AND OTHER FINANCIAL MEASURES
The Company uses non-GAAP and other financial measures and
ratios as it believes these measures and ratios provide useful
information to both management and investors with regard to
accurately assessing the Company's financial performance and
financial condition.
Further, certain non-GAAP and other financial measures of Loblaw
and Choice Properties are included in this document. For more
information on these measures, refer to the materials filed by
Loblaw and Choice Properties, which are available on sedar.com or
at loblaw.ca or choicereit.ca, respectively.
Management uses these and other non-GAAP and other financial
measures to exclude the impact of certain expenses and income that
must be recognized under GAAP when analyzing underlying
consolidated and segment operating performance, as the excluded
items are not necessarily reflective of the Company's underlying
operating performance and make comparisons of underlying financial
performance between periods difficult. The Company adjusts for
these items if it believes doing so would result in a more
effective analysis of underlying operating performance. The
exclusion of certain items does not imply that they are
non-recurring.
These measures do not have a standardized meaning prescribed by
GAAP and therefore they may not be comparable to similarly titled
measures presented by other publicly traded companies, and should
not be construed as an alternative to other financial measures
determined in accordance with GAAP. Unless otherwise indicated, all
financial information represents the Company's results from
continuing operations.
ADJUSTED EBITDA The Company believes adjusted
EBITDA is useful in assessing and making decisions regarding the
underlying operating performance of the Company's ongoing
operations and in assessing the Company's ability to generate cash
flows to fund its cash requirements, including its capital
investment program.
The following table reconciles adjusted EBITDA to operating
income, which is reconciled to GAAP net earnings attributable to
shareholders of the Company from continuing operations reported for
the periods ended as indicated.
|
|
12 Weeks
Ended
|
|
|
|
|
|
Mar. 25,
2023
|
|
|
|
|
Mar. 26,
2022
|
|
($ millions)
|
|
Loblaw
|
Choice
Properties
|
Other
and
Intersegment
|
Consolidated
|
|
|
Loblaw
|
Choice
Properties
|
Other and
Intersegment
|
Consolidated
|
|
Net earnings
attributable to shareholders
of the Company from continuing operations
|
|
|
|
|
$
436
|
|
|
|
|
|
$
373
|
|
Add impact of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling
interests
|
|
|
|
|
216
|
|
|
|
|
|
242
|
|
Income
taxes
|
|
|
|
|
234
|
|
|
|
|
|
229
|
|
Net interest expense
and other
financing charges
|
|
|
|
|
71
|
|
|
|
|
|
322
|
|
Operating
income
|
|
$
767
|
$
306
|
$
(116)
|
$
957
|
|
|
$
736
|
$ 629
|
$
(199)
|
$
1,166
|
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets acquired
with Shoppers Drug Mart and Lifemark
|
|
$
114
|
$
—
|
$
—
|
$
114
|
|
|
$
117
|
$
—
|
$
—
|
$
117
|
|
Fair value adjustment
on investment
properties
|
|
—
|
(92)
|
43
|
(49)
|
|
|
—
|
(410)
|
119
|
(291)
|
|
Loss (gain) on sale of
non-operating
properties
|
|
1
|
—
|
(2)
|
(1)
|
|
|
—
|
—
|
—
|
—
|
|
Fair value adjustment
of investment in real
estate securities
|
|
—
|
15
|
—
|
15
|
|
|
—
|
—
|
—
|
—
|
|
Fair value adjustment
of derivatives
|
|
3
|
—
|
—
|
3
|
|
|
(14)
|
—
|
—
|
(14)
|
|
Transaction costs and
other related expenses
|
|
—
|
—
|
—
|
—
|
|
|
3
|
5
|
—
|
8
|
|
Restructuring and
other related
(recoveries) costs
|
|
—
|
—
|
—
|
—
|
|
|
(15)
|
—
|
19
|
4
|
|
Adjusting
items
|
|
$
118
|
$
(77)
|
$
41
|
$
82
|
|
|
$
91
|
$
(405)
|
$
138
|
$
(176)
|
|
Adjusted operating
income
|
|
$
885
|
$
229
|
$
(75)
|
$
1,039
|
|
|
$
827
|
$
224
|
$
(61)
|
$
990
|
|
Depreciation and
amortization excluding the
impact of the above
adjustment(i)
|
|
561
|
1
|
(94)
|
468
|
|
|
514
|
1
|
(83)
|
432
|
|
Adjusted
EBITDA
|
|
$
1,446
|
$
230
|
$
(169)
|
$
1,507
|
|
|
$
1,341
|
$
225
|
$
(144)
|
$ 1,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) Depreciation
and amortization for the calculation of adjusted EBITDA excludes
the amortization of intangible assets, acquired with Shoppers Drug
Mart and Lifemark, recorded by Loblaw.
|
The following items impacted adjusted EBITDA in the first quarter
of 2023 and 2022:
Amortization of intangible assets acquired with Shoppers
Drug Mart and Lifemark The acquisition of Shoppers Drug
Mart in 2014 included approximately $6 billion of
definite life intangible assets, which are being amortized
over their estimated useful lives. Annual amortization associated
with the acquired intangible assets will be approximately
$500 million until 2024 and will decrease thereafter.
The acquisition of Lifemark in the second quarter of 2022
included approximately $299 million
of definite life intangible assets, which are being amortized over
their estimated useful lives.
Fair value adjustment on investment properties The
Company measures investment properties at fair value. Under the
fair value model, investment properties are initially measured at
cost and subsequently measured at fair value. Fair value is
determined based on available market evidence. If market evidence
is not readily available in less active markets, the Company uses
alternative valuation methods such as discounted cash flow
projections or recent transaction prices. Gains and losses on fair
value are recognized in operating income in the period in which
they are incurred. Gains and losses from disposal of investment
properties are determined by comparing the fair value of disposal
proceeds and the carrying amount and are recognized in operating
income.
Loss (gain) on sale of non-operating properties In
the first quarter of 2023, Loblaw recorded a loss related to the
sale of non-operating properties of $1
million.
In the first quarter of 2023, Choice Properties disposed of an
investment property recorded at fair value. On consolidation, the
Company recorded the property in fixed assets, which was recognized
at cost less accumulated depreciation. As a result, in the first
quarter of 2023, on consolidation, an incremental $2 million gain was recognized in Other and
Intersegment.
Fair value adjustment of investment in real estate
securities Choice Properties received Allied Class B
Units as part of the consideration for the Office Asset Sale on
March 31, 2022. Choice Properties
recognized these units as investments in real estate securities.
The investment in real estate securities is exposed to market price
fluctuations of Allied trust units. An increase (decrease) in the
market price of Allied trust units results in income (a charge) to
operating income.
Fair value adjustment of derivatives Loblaw is
exposed to commodity price and U.S. dollar exchange
rate fluctuations. In accordance with Loblaw's commodity risk
management policy, Loblaw enters into exchange traded futures
contracts and forward contracts to minimize cost volatility
relating to fuel prices and the U.S. dollar exchange rate. These
derivatives are not acquired for trading or speculative purposes.
Pursuant to Loblaw's derivative instruments accounting policy,
changes in the fair value of these instruments, which include
realized and unrealized gains and losses, are recorded in
operating income. Despite the impact of accounting for these
commodity and foreign currency derivatives on Loblaw's reported
results, the derivatives have the economic impact of largely
mitigating the associated risks arising from price and exchange
rate fluctuations in the underlying commodities and U.S. dollar
commitments.
Transaction costs and other related expenses In
connection with the acquisition of Lifemark, Loblaw recorded
acquisition costs of $3 million in
operating income during the first quarter of 2022.
During the first quarter of 2022, Choice Properties recorded
advisory, legal, personnel, and other costs related to the Office
Asset Sale totaling $5 million.
Restructuring and other related (recoveries) costs
The Company continuously evaluates strategic and cost reduction
initiatives related to its store infrastructure, distribution
networks and administrative infrastructure with the objective of
ensuring a low cost operating structure. Only restructuring
activities that are publicly announced related to these initiatives
are considered adjusting items.
In the first quarter of 2022, Loblaw recorded approximately
$15 million of restructuring and other related recoveries in
connection to the previously announced closure of two distribution
centres in Laval and Ottawa. Loblaw disposed of one of the
distribution centres for proceeds of $26 million and
recognized a gain of $19 million,
which was partially offset by $4 million of restructuring and
other related costs. Loblaw is investing to build a modern and
efficient expansion to its Cornwall distribution centre to serve its food
and drug retail businesses in Ontario and Quebec and volumes have been transferred.
In the first quarter of 2022, included in Loblaw's restructuring
and other related recoveries was a gain of $19 million related
to the disposition of a property to Choice Properties. On
consolidation, the $19 million
recovery recorded by Loblaw was reversed as it was an intercompany
transaction.
ADJUSTED NET EARNINGS AVAILABLE TO COMMON SHAREHOLDERS FROM
CONTINUING OPERATIONS AND ADJUSTED DILUTED NET EARNINGS PER COMMON
SHARE FROM CONTINUING OPERATIONS The Company
believes that adjusted net earnings available to common
shareholders from continuing operations and adjusted diluted net
earnings per common share from continuing operations are useful in
assessing the Company's underlying operating performance and in
making decisions regarding the ongoing operations of its
business.
The following table reconciles adjusted net earnings available
to common shareholders of the Company from continuing operations
and adjusted net earnings attributable to shareholders of the
Company from continuing operations to net earnings attributable to
shareholders of the Company and then to net earnings available to
common shareholders of the Company from continuing operations
reported for the periods ended as indicated.
($ millions except
where otherwise indicated)
|
12 Weeks
Ended
|
|
Mar. 25,
2023
|
|
Mar. 26,
2022
|
|
Net earnings
attributable to shareholders of the Company
|
|
$
436
|
|
|
$ 373
|
|
Less: Net
earnings from discontinued operations
|
|
—
|
|
|
—
|
|
Net earnings
attributable to shareholders of the Company from continuing
operations
|
|
$
436
|
|
|
$ 373
|
|
Less: Prescribed
dividends on preferred shares in share capital
|
|
(10)
|
|
|
(10)
|
|
Net earnings available
to common shareholders of the Company from continuing
operations
|
|
$
426
|
|
|
$ 363
|
|
Less: Reduction
in net earnings due to dilution at Loblaw
|
|
(2)
|
|
|
(2)
|
|
Net earnings available
to common shareholders from continuing operations for diluted
earnings per share
|
|
$
424
|
|
|
$ 361
|
|
Net earnings
attributable to shareholders of the Company from continuing
operations
|
|
$
436
|
|
|
$ 373
|
|
Adjusting items (refer
to the following table)
|
|
(144)
|
|
|
(81)
|
|
Adjusted net earnings
attributable to shareholders of the Company from
continuing operations
|
|
$
292
|
|
|
$ 292
|
|
Less: Prescribed
dividends on preferred shares in share capital
|
|
(10)
|
|
|
(10)
|
|
Adjusted net earnings
available to common shareholders of the Company from
continuing operations
|
|
$
282
|
|
|
$ 282
|
|
Less: Reduction
in net earnings due to dilution at Loblaw
|
|
(2)
|
|
|
(2)
|
|
Adjusted net earnings
available to common shareholders for diluted earnings per share
from continuing operations
|
|
$
280
|
|
|
$ 280
|
|
|
|
|
|
|
|
|
Diluted weighted
average common shares outstanding (in millions)
|
|
140.7
|
|
|
147.3
|
|
|
|
|
|
|
|
|
The following table reconciles adjusted net earnings available to
common shareholders of the Company from continuing operations and
adjusted diluted net earnings per common share from continuing
operations to GAAP net earnings available to common shareholders of
the Company from continuing operations and diluted net earnings per
common share from continuing operations as reported for the periods
ended as indicated.
|
|
12 Weeks
Ended
|
|
|
Mar. 25,
2023
|
|
Mar. 26,
2022
|
|
($ except where
otherwise indicated)
|
Net
Earnings
Available to
Common
Shareholders of
the Company
($ millions)
|
|
Diluted
Net
Earnings
Per
Common
Share
|
|
Net
Earnings
Available to
Common
Shareholders
of
the Company
($ millions)
|
|
Diluted
Net
Earnings
Per
Common
Share
|
|
Continuing
Operations
|
|
$ 426
|
|
$ 3.01
|
|
|
$ 363
|
|
$ 2.45
|
|
Add (deduct) impact of
the following(i):
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets acquired with Shoppers Drug Mart and
Lifemark
|
|
$
45
|
|
$ 0.32
|
|
|
$
46
|
|
$ 0.31
|
|
Fair value adjustment
on investment properties
|
|
(43)
|
|
(0.30)
|
|
|
(243)
|
|
(1.65)
|
|
Gain on sale of
non-operating properties
|
|
(1)
|
|
(0.01)
|
|
|
—
|
|
—
|
|
Fair value adjustment
of investment in real estate securities
|
|
14
|
|
0.10
|
|
|
—
|
|
—
|
|
Fair value adjustment
of derivatives
|
|
1
|
|
0.01
|
|
|
(6)
|
|
(0.04)
|
|
Transaction costs and
other related expenses
|
|
—
|
|
—
|
|
|
5
|
|
0.03
|
|
Restructuring and
other related costs
|
|
—
|
|
—
|
|
|
10
|
|
0.08
|
|
Fair value adjustment
of the Trust Unit liability(ii)
|
|
(192)
|
|
(1.37)
|
|
|
93
|
|
0.63
|
|
Outside basis
difference in certain Loblaw shares(iii)
|
|
32
|
|
0.23
|
|
|
37
|
|
0.25
|
|
Recovery related to
Glenhuron(iv)
|
|
—
|
|
—
|
|
|
(23)
|
|
(0.16)
|
|
Adjusting items
Continuing Operations
|
|
$
(144)
|
|
$
(1.02)
|
|
|
$ (81)
|
|
$
(0.55)
|
|
Adjusted Continuing
Operations
|
|
$
282
|
|
$ 1.99
|
|
|
$ 282
|
|
$ 1.90
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Net of income taxes and
non-controlling interests, as applicable.
|
(ii)
|
Trust Units held by
unitholders other than the Company are presented as a liability on
the Company's consolidated balance sheets as they are redeemable
for cash at the option of the holder, subject to certain
restrictions. This liability is recorded at fair value at each
reporting date based on the market price of Trust Units at the end
of each period through net interest expense and other financing
charges.
|
(iii)
|
The Company recorded
deferred tax expense on temporary differences in respect of GWL's
investment in certain Loblaw shares that are expected to reverse in
the foreseeable future as a result of GWL's participation in
Loblaw's NCIB.
|
(iv)
|
In 2021, the Supreme
Court ruled in favour of Loblaw on the Glenhuron matter. As a
result of related reassessments received during the first quarter
of 2022, Loblaw reversed $35 million of previously recorded
charges, of which $2 million was recorded as interest income and
$33 million was recorded as an income tax recovery, and an
additional $9 million, before taxes, was recorded in respect of
interest income earned on expected cash tax refunds.
|
GWL CORPORATE(3) FREE CASH FLOW FROM CONTINUING
OPERATIONS GWL Corporate(3) free cash
flow from continuing operations is generated from the dividends
received from Loblaw, distributions received from Choice
Properties, and proceeds from participation in Loblaw's Normal
Course Issuer Bid, less corporate expenses, interest and income
taxes paid.
|
|
12 Weeks
Ended
|
|
($ millions)
|
|
Mar. 25,
2023
|
|
|
Mar. 26,
2022
|
|
Dividends from
Loblaw
|
|
$
—
|
|
|
$
—
|
|
Distributions from
Choice Properties
|
|
83
|
|
|
83
|
|
GWL
Corporate(3) cash flow from operating businesses from
Continuing Operations
|
|
$
83
|
|
|
$
83
|
|
Proceeds from
participation in Loblaw's Normal Course Issuer Bid
|
|
188
|
|
|
10
|
|
GWL Corporate,
financing, and other costs(i)
|
|
(24)
|
|
|
(58)
|
|
Income taxes
paid
|
|
(61)
|
|
|
(94)
|
|
GWL
Corporate(3) free cash flow from (used in)
Continuing Operations
|
|
$
186
|
|
|
$ (59)
|
|
|
|
|
|
|
|
|
(i)
|
Included in Other and
Intersegment. GWL Corporate(3) includes all other
company level activities that are not allocated to the reportable
operating segments such as net interest expense, corporate
activities and administrative costs. Also included are preferred
share dividends.
|
CHOICE PROPERTIES' FUNDS FROM OPERATIONS Choice
Properties considers funds from operations to be a useful measure
of operating performance as it adjusts for items included in net
income that do not arise from operating activities or do not
necessarily provide an accurate depiction of its performance.
Funds from operations is calculated in accordance with the Real
Property Association of Canada's
Funds from Operations & Adjusted Funds from Operations for
International Financial Reporting Standards issued in January 2022.
The following table reconciles Choice Properties' funds from
operations to net income for the periods ended as
indicated.
($ millions)
|
12 Weeks
Ended
|
|
|
Mar. 25,
2023
|
|
|
Mar. 26,
2022
|
|
Net Income
|
|
$
271
|
|
|
$ 387
|
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
Transaction costs and
other related expenses
|
|
—
|
|
|
5
|
|
Adjustment to fair
value of unit-based compensation
|
|
(1)
|
|
|
1
|
|
Fair value adjustment
on Exchangeable Units
|
|
(95)
|
|
|
119
|
|
Fair value adjustment
on investment properties
|
|
(76)
|
|
|
(303)
|
|
Fair value adjustment
on investment property held in equity accounted
joint ventures
|
|
(16)
|
|
|
(110)
|
|
Fair value adjustment
of investment in real estate securities
|
|
15
|
|
|
—
|
|
Capitalized interest
on equity accounted joint ventures
|
|
3
|
|
|
—
|
|
Unit distributions on
Exchangeable Units
|
|
74
|
|
|
73
|
|
Internal expenses for
leasing
|
|
2
|
|
|
2
|
|
Other
|
|
—
|
|
|
1
|
|
Funds from
Operations
|
|
$
177
|
|
|
$ 175
|
|
|
|
|
|
|
|
|
SOURCE George Weston Limited