TORONTO, Nov. 21,
2023 /CNW/ - George Weston Limited (TSX: WN) ("GWL"
or the "Company") today announced its consolidated unaudited
results for the 16 weeks ended October 7,
2023(2).
GWL's 2023 Third Quarter Report has been filed on SEDAR+
and is available at sedarplus.ca and in the Investor Centre section
of the Company's website at weston.ca.
"George Weston delivered another
quarter of positive results, underpinned by the consistent strong
operational and financial performance of its businesses," said
Galen G. Weston, Chairman and Chief
Executive Officer of George Weston Limited. "Choice Properties
delivered stable cash flows and strong occupancy, and customers
responded favourably to Loblaw's offering of value, service, and
quality. With strong performance from both of its market-leading
businesses, George Weston is well
positioned for the rest of the year."
Loblaw Companies Limited ("Loblaw") delivered another quarter of
strong operational and financial results as it continued to execute
on retail excellence. Loblaw's focus on providing value across its
food and drug retail businesses led to sales growth, increased
market share, and higher unit sales. Drug retail sales reflected
ongoing strength in front store beauty products and increased
prescription sales. In food retail, Loblaw's discount stores
benefited from increased traffic from customers seeking quality and
value from its private label brands and personalized PC
OptimumTM offers. Loblaw continued to invest in opening
new discount stores, including its 150th discount Maxi location in
the community of Ville-des-Laurentides, which celebrated its first
full-shop discount grocery store. Retail gross margin declined in
both food and drug as a result of targeted promotional investments
and increased shrink. Increased investments to lower food prices
were reflected in Loblaw's internal food inflation, which was lower
than Canada's food CPI. Higher
sales and ongoing cost control initiatives drove adjusted net
earnings growth in the quarter.
Choice Properties Real Estate Investment Trust ("Choice
Properties") delivered positive operating and financial results in
the third quarter. Choice Properties performance is supported by
stable cash flows, reflecting the strength of its necessity-based
portfolio and demand for its well-located industrial assets, as
well as an industry leading balance sheet. In a volatile economic
environment, Choice Properties is well positioned to execute on its
strategic priorities and deliver strong and consistent operating
performance.
2023 THIRD QUARTER HIGHLIGHTS
- Net earnings available to common shareholders of the Company
from continuing operations were $610
million, a decrease of $279
million, or 31.4%. Diluted net earnings per common share
from continuing operations were $4.41, a decrease of $1.73 per common share, or 28.2%. The decrease
was due to the unfavourable year-over-year net impact of adjusting
items, primarily driven by the unfavourable year-over-year impact
of the fair value adjustment on investment properties.
- Adjusted net earnings available to common shareholders of the
Company(1) from continuing operations were $466 million, an increase of $13 million, or 2.9%.
- Adjusted diluted net earnings per common share(1)
from continuing operations were $3.36, an increase of $0.24 per common share, or 7.7%.
- Repurchased for cancellation 2.4 million common shares at a
cost of $364 million.
- GWL Corporate(3) free cash flow(1) from
continuing operations was $319
million.
CONSOLIDATED RESULTS OF OPERATIONS
The Company's results reflect the year-over-year impact of the
fair value adjustment of the Trust Unit liability as a result of
the significant changes in Choice Properties' unit price, recorded
in net interest expense and other financing charges. The Company's
results are impacted by market price fluctuations of Choice
Properties' Trust Units on the basis that the Trust Units held by
unitholders, other than the Company, are redeemable for cash at the
option of the holder and are presented as a liability on the
Company's consolidated balance sheet. The Company's financial
results are positively impacted when the Trust Unit price declines
and negatively impacted when the Trust Unit price increases.
Unless otherwise indicated, all financial information represents
the Company's results from continuing operations.
($ millions except
where otherwise indicated)
For the periods ended
as indicated
|
16 Weeks
Ended
|
|
|
|
|
Oct. 7, 2023
|
Oct. 8,
2022
|
$ Change
|
|
% Change
|
|
Revenue
|
|
$
18,407
|
|
$ 17,520
|
$
887
|
|
5.1 %
|
|
Operating
income
|
|
$
1,231
|
|
$
1,474
|
$
(243)
|
|
(16.5) %
|
|
Adjusted
EBITDA(1)
|
|
$
2,019
|
|
$
1,951
|
$
68
|
|
3.5 %
|
|
Adjusted EBITDA
margin(1)
|
|
11.0 %
|
|
11.1 %
|
|
|
|
|
Net earnings
attributable to shareholders of the Company from continuing
operations
|
|
$
624
|
|
$
903
|
$
(279)
|
|
(30.9) %
|
|
Net earnings
available to common shareholders of the Company from continuing
operations
|
|
$
610
|
|
$
889
|
$
(279)
|
|
(31.4) %
|
|
Adjusted net earnings
available to common shareholders
of the Company(1) from continuing
operations
|
|
$
466
|
|
$
453
|
$
13
|
|
2.9 %
|
|
Diluted net earnings
per common share from continuing operations ($)
|
|
$
4.41
|
|
$
6.14
|
$ (1.73)
|
|
(28.2) %
|
|
Adjusted diluted net
earnings per common share(1) from continuing
operations ($)
|
|
$
3.36
|
|
$
3.12
|
$ 0.24
|
|
7.7 %
|
|
|
|
|
|
|
|
|
|
|
In the third quarter of 2023, the Company recorded net earnings
available to common shareholders of the Company from continuing
operations of $610 million ($4.41 per common share), a decrease of
$279 million ($1.73 per common
share) compared to the same period in 2022. The decrease was due to
the unfavourable year-over-year net impact of adjusting items
totaling $292 million ($1.97 per
common share), partially offset by an improvement of
$13 million ($0.24 per common
share) in the consolidated underlying operating performance of the
Company described below.
- The unfavourable year-over-year net impact of adjusting items
totaling $292 million ($1.97 per common share) was primarily due to:
- the unfavourable year-over-year impact of the fair value
adjustment on investment properties of $263
million ($1.83 per common
share) driven by Choice Properties, net of consolidation
adjustments in Other and Intersegment; and
- the unfavourable year-over-year impact of the fair value
adjustment of the Trust Unit liability of $58 million ($0.32
per common share) as a result of the decrease in Choice Properties'
unit price;
partially
offset by,
-
- the favourable year-over-year impact of the fair value
adjustment on Choice Properties' investment in Allied Properties
Real Estate Investment Trust ("Allied") of $22 million ($0.15
per common share) as a result of the decrease in Allied's unit
price.
- The improvement in the Company's consolidated underlying
operating performance of $13 million
($0.24 per common share) was
primarily due to:
- the favourable underlying operating performance of Loblaw;
- the favourable underlying operating performance of Choice
Properties; and
- a decrease in the adjusted effective tax rate(1)
driven by the favourable impact from adjustments to certain tax
provisions;
partially
offset by,
-
- the unfavourable year-over-year impact of Other and
Intersegment, primarily driven by the elimination of internal lease
arrangements and the prior year elimination of Loblaw's accelerated
depreciation;
- an increase in depreciation and amortization; and
- an increase in adjusted net interest expense and other
financing charges(1).
- Diluted net earnings per common share from continuing
operations also included the favourable impact of shares purchased
for cancellation over the last 12 months ($0.15 per common share) pursuant to the Company's
Normal Course Issuer Bid ("NCIB").
Adjusted net earnings available to common shareholders of the
Company(1) from continuing operations were
$466 million, an increase of $13 million, or 2.9%,
compared to the same period in 2022 due to the improvement in the
Company's consolidated underlying operating performance described
above.
Adjusted diluted net earnings per common share(1)
from continuing operations in the third quarter of 2023 were
$3.36, an increase of $0.24 per common share, or 7.7%, compared to the
same period in 2022. The increase was due to the favourable
performance in adjusted net earnings available to common
shareholders(1) from continuing operations and 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 third quarter of 2023, the
Company purchased and cancelled 2.4 million shares under its
NCIB (2022 – 2.5 million shares) for aggregate consideration
of $364 million (2022 –
$376 million). As at October 7,
2023, the Company had 135.5 million shares issued and
outstanding, net of shares held in trusts (October 8, 2022 – 142.2 million shares).
In the third quarter of 2023, the Toronto Stock Exchange ("TSX")
accepted an amendment to the Company's NCIB to allow Wittington
Investments, Limited ("Wittington"), the Company's controlling
shareholder, to participate in the NCIB in a fixed proportion of
50% of Wittington's pro rata share of the issued and outstanding
common shares of the Company.
In the third 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 Note 11, "Share Capital" of the Company's third quarter
2023 unaudited interim period condensed consolidated financial
statements for more information.
Participation in Loblaw's NCIB The
Company participates in Loblaw's NCIB in order to maintain its
proportionate percentage ownership interest. In the third quarter
of 2023, the Company received proceeds of $171 million (2022 –
$190 million) from the sale of Loblaw common shares.
REPORTABLE OPERATING SEGMENTS
The Company operates through its two reportable operating
segments: Loblaw and Choice Properties. Other and Intersegment
includes eliminations, intersegment adjustments related to the
consolidation and cash and short-term investments held by the
Company. All other company level activities that are not allocated
to the reportable operating segments, such as interest expense,
corporate activities and administrative costs are included in Other
and Intersegment.
Loblaw has two reportable operating segments, retail and
financial services. Loblaw's retail segment consists primarily of
food retail and drug retail. Loblaw provides Canadians with
grocery, pharmacy and healthcare services, health and beauty
products, apparel, general merchandise and financial services.
Choice Properties owns, manages and develops a high-quality
portfolio of commercial and residential properties across
Canada.
Excerpt of Segment Information
The accounting policies of the reportable operating segments are
the same as those described in the Company's 2022 audited annual
consolidated financial statements. The Company measures each
reportable operating segment's performance based on adjusted
EBITDA(1). No reportable operating segment is reliant on
any single external customer.
|
|
16 Weeks
Ended
|
|
|
|
Oct. 7,
2023
|
|
|
Oct. 8, 2022
|
|
($ 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
|
|
$
18,265
|
$
325
|
$
2
|
$
18,592
|
$
(185)
|
$
18,407
|
|
|
$ 17,388
|
$
309
|
$
2
|
$ 17,699
|
$
(179)
|
$
17,520
|
|
Operating
income
|
|
$
1,063
|
$
214
|
$
(46)
|
$
1,231
|
$
—
|
$
1,231
|
|
|
$
989
|
$
501
|
$
(16)
|
$
1,474
|
$
—
|
$
1,474
|
|
Net interest expense
(income) and other
financing charges
|
|
234
|
(221)
|
72
|
85
|
—
|
85
|
|
|
217
|
(447)
|
243
|
13
|
—
|
13
|
|
Earnings before
income taxes from
continuing operations
|
|
$
829
|
$
435
|
$
(118)
|
$
1,146
|
$
—
|
$
1,146
|
|
|
$
772
|
$
948
|
$
(259)
|
$
1,461
|
$
—
|
$
1,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
$
1,063
|
$
214
|
$
(46)
|
$
1,231
|
$
—
|
$
1,231
|
|
|
$
989
|
$
501
|
$
(16)
|
$
1,474
|
$
—
|
$
1,474
|
|
Depreciation and
amortization
|
|
880
|
1
|
(118)
|
763
|
|
|
|
|
864
|
—
|
(135)
|
729
|
|
|
|
Adjusting
items(i)
|
|
(19)
|
19
|
25
|
25
|
|
|
|
|
(9)
|
(278)
|
35
|
(252)
|
|
|
|
Adjusted
EBITDA(i)
|
|
$
1,924
|
$
234
|
$
(139)
|
$
2,019
|
|
|
|
|
$
1,844
|
$
223
|
$
(116)
|
$
1,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) Certain items
are excluded from operating income to derive adjusted
EBITDA(1).
|
Other and Intersegment includes the following items:
|
|
16 Weeks
Ended
|
|
|
|
Oct. 7,
2023
|
|
|
Oct. 8, 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
|
|
$
2
|
$ (1)
|
$
(39)
|
|
|
$
2
|
$ 19
|
$
(35)
|
|
Recognition of
depreciation on Choice Properties'
investment properties classified as fixed assets
by
the Company and measured at cost
|
|
—
|
(8)
|
—
|
|
|
—
|
12
|
—
|
|
Fair value adjustment
on investment properties
|
|
—
|
(27)
|
—
|
|
|
—
|
(34)
|
(3)
|
|
Fair value adjustment
on Choice Properties' Exchangeable Units
|
|
—
|
—
|
352
|
|
|
—
|
—
|
578
|
|
Fair value adjustment
on Trust Unit liability
|
|
—
|
—
|
(219)
|
|
|
—
|
—
|
(277)
|
|
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
|
|
—
|
—
|
53
|
|
|
—
|
—
|
51
|
|
Intersegment
consolidation adjustments
|
|
—
|
(1)
|
—
|
|
|
—
|
(3)
|
—
|
|
Other
|
|
—
|
(9)
|
(1)
|
|
|
—
|
(10)
|
2
|
|
Total
|
|
$
2
|
$
(46)
|
$
72
|
|
|
$
2
|
$ (16)
|
$
243
|
|
Elimination of
intercompany rental revenue
|
|
(185)
|
—
|
—
|
|
|
(179)
|
—
|
—
|
|
Total including
Eliminations
|
|
$
(183)
|
$
(46)
|
$
72
|
|
|
$
(177)
|
$ (16)
|
$
243
|
|
|
|
|
|
|
|
|
|
|
|
|
Loblaw Operating Results
($ millions except
where otherwise indicated)
For the periods ended
as indicated
|
|
16 Weeks
Ended
|
|
|
|
|
|
Oct. 7, 2023
|
Oct. 8, 2022
|
$ Change
|
|
% Change
|
|
Revenue
|
|
$ 18,265
|
|
$ 17,388
|
$ 877
|
|
5.0 %
|
|
Operating
income
|
|
$
1,063
|
|
$
989
|
$
74
|
|
7.5 %
|
|
Adjusted
EBITDA(1)
|
|
$
1,924
|
|
$
1,844
|
$
80
|
|
4.3 %
|
|
Adjusted EBITDA
margin(1)
|
|
10.5 %
|
|
10.6 %
|
|
|
|
|
Depreciation and
amortization
|
|
$
880
|
|
$
864
|
$
16
|
|
1.9 %
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Loblaw revenue in the third quarter of 2023
was $18,265 million, an increase
of $877 million, or 5.0%, compared to the same period in
2022, driven by an increase in retail sales and in financial
services revenue.
Retail sales were $17,982 million, an increase of
$852 million, or 5.0%, compared to the same period
in 2022. The increase was primarily driven by the following
factors:
- food retail sales were $12,843
million (2022 – $12,221
million) and food retail same-store sales growth was 4.5%
(2022 – 6.9%);
- the Consumer Price Index ("CPI") as measured by The Consumer
Price Index for Food Purchased from Stores was 7.1% (2022 – 10.7%)
which was higher than Loblaw's internal food inflation;
and
- food retail traffic increased and basket size decreased.
- drug retail sales were $5,139
million (2022 – $4,909
million) and drug retail same-store sales growth was 4.6%
(2022 – 7.7%);
- pharmacy and healthcare services same-store sales growth was
7.4% (2022 – 4.7%). On a same-store basis, the number of
prescriptions dispensed increased by 0.9% (2022 – 0.9%) and the
average prescription value increased by 5.1% (2022 – 3.3%);
and
- front store same-store sales growth was 1.8% (2022 –
10.7%).
In the third quarter of 2023, seven food and drug stores
were opened, and one store was closed, resulting in a net increase
in retail square footage of 0.3 million square feet, or
0.4%.
Financial services revenue in the third quarter of 2023
increased by $29 million, or 8.3%, compared to the same
period in 2022. The increase was primarily driven by higher
interest income from growth in credit card receivables and higher
interchange income and other credit card related revenue from an
increase in customer spending, partially offset by lower sales
attributable to The Mobile Shop.
Operating Income Loblaw operating income in the
third quarter of 2023 was $1,063 million, an increase of
$74 million, or 7.5%, compared to the same period in 2022.
Adjusted EBITDA(1) Loblaw adjusted
EBITDA(1) in the third quarter of 2023 was $1,924 million, an increase of $80 million,
or 4.3%, compared to the same period in 2022, driven by an increase
in retail of $61 million and an increase in financial services
of $19 million.
Retail adjusted EBITDA(1) increased by
$61 million compared to the same period in 2022, driven by an
increase in retail gross profit of $230 million, partially
offset by an increase in retail selling, general and administrative
expenses ("SG&A") of $169 million.
- Retail gross profit percentage of 30.6% decreased by 20 basis
points compared to the same period in 2022. Retail margins declined
slightly, primarily driven by higher shrink.
- Retail SG&A as a percentage of sales was 20.3%, which
remained constant when compared to 2022 as operating leverage from
higher sales was partially offset by higher in-quarter investments
in network optimization and process and efficiency initiatives
totaling approximately $50
million.
Financial services adjusted EBITDA(1) increased
by $19 million compared to the same period in 2022, primarily
driven by higher revenue as described above, partially offset by
higher contractual charge-offs from growth in the credit card
portfolio and the year-over-year impact of the expected credit loss
provision.
Depreciation and Amortization Loblaw depreciation
and amortization in the third quarter of 2023 was
$880 million, an increase of $16 million compared to the
same period in 2022. The increase in depreciation and amortization
was primarily driven by an increase in depreciation of fixed assets
related to conversions of retail locations, information technology
("IT") assets and leased assets, and accelerated depreciation
of $2 million (2022 – nil) as a
result of network optimization, partially offset by the impact of
prior year accelerated depreciation due to the reassessment of the
estimated useful life of certain IT assets.
Depreciation and amortization in the third quarter of 2023
included $154 million (2022 – $151 million) of
amortization of intangible assets related to the acquisitions of
Shoppers Drug Mart Corporation ("Shoppers Drug Mart") and Lifemark
Health Group ("Lifemark").
Loblaw Other Business Matters
Network Optimization During the third quarter of
2023, Loblaw recorded charges of $13
million associated with network optimization. Included in
the charges was accelerated depreciation of $2 million as described above, and other charges.
Loblaw now expects to record total charges related to network
optimization of approximately $60
million to $70 million during
2023, an increase from $50 million to
$60 million, as a result of
incremental network optimization activity.
Choice Properties Operating Results
($ millions except
where otherwise indicated)
For the periods ended
as indicated
|
|
16 Weeks
Ended
|
|
|
|
|
|
|
Oct. 7, 2023
|
|
|
Oct. 8, 2022
|
|
$
Change
|
|
% Change
|
|
Revenue
|
|
$
325
|
|
|
$
309
|
|
$
16
|
|
5.2 %
|
|
Net interest income and
other financing charges
|
|
$
(221)
|
|
|
$
(447)
|
|
$ 226
|
|
50.6 %
|
|
Net income
|
|
$
435
|
|
|
$
948
|
|
$
(513)
|
|
(54.1) %
|
|
Funds from
Operations(1)
|
|
$
181
|
|
|
$
173
|
|
$
8
|
|
4.6 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Choice Properties revenue in the third
quarter of 2023 was $325 million, an
increase of $16 million, or 5.2%,
compared to the same period in 2022 and included $186 million (2022 – $180
million) generated from tenants within Loblaw. The
increase in revenue was primarily driven by:
- higher rental rates primarily in the retail and industrial
portfolios;
- higher capital and operating recoveries;
- acquisitions and completed developments; and
- higher lease surrender revenue.
Net Interest Income and Other Financing
Charges Choice Properties net interest income and
other financing charges in the third quarter of 2023 were
$221 million compared to
$447 million in the same period in 2022. The decrease of
$226 million was primarily driven by:
- the unfavourable year-over-year change of the fair value
adjustment on the Class B LP units ("Exchangeable Units") of
$226 million as a result of the
decrease in the unit price in the quarter; and
- 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;
partially offset by,
- the favourable year-over-year change of the fair value
adjustment on the financial real estate assets; and
- an increase in interest income due to a higher average
outstanding balance on mortgages and loans receivable.
Net Income Choice Properties recorded net
income of $435 million in the third
quarter of 2023, compared to $948 million in the same period
in 2022. The decrease of $513 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 $321
million as a result of lower fair value gains recognized in
the current year; and
- lower net interest income and other financing charges as
described above;
partially offset by,
- the favourable year-over-year change in the adjustment to fair
value of investment in real estate securities of $24 million as a result of the decrease in
Allied's unit price; and
- an increase in rental revenue as described above.
Funds from Operations(1) Funds from
operations(1) in the third quarter of 2023 were
$181 million, an increase of $8 million compared to the
same period in 2022. The increase was primarily due to the increase
in rental revenue and an increase in interest income, which was
partially offset by increases in interest expense and general and
administrative expenses.
Choice Properties Other Business Matters
Subsequent Event Subsequent to the end of the third
quarter of 2023, Choice Properties completed the disposition of one
retail property and one office property for aggregate proceeds of
$81 million.
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 has successfully
completed its 2023 lease renewals. 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 has continued to focus on its
core business of essential retail and industrial, its growing
residential platform and its robust development pipeline, and based
on its year-to-date operating and financial performance, including
certain non-recurring items now expects:
- stable occupancy across the portfolio, resulting in 4-5%
year-over-year growth in Same-Asset NOI, Cash
Basis(4);
- annual FFO(1) per unit Diluted(4) in a
range of $0.99 to $1.00, reflecting 3-4% 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 third 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 January 1, 2024, to
shareholders of record December 15, 2023;
|
|
|
Preferred Shares,
Series I
|
$0.3625 per share
payable December 15, 2023, to shareholders of record November 30,
2023;
|
|
|
Preferred Shares,
Series III
|
$0.3250 per share
payable January 1, 2024, to shareholders of record December 15,
2023;
|
|
|
Preferred Shares,
Series IV
|
$0.3250 per share
payable January 1, 2024, to shareholders of record December 15,
2023;
|
|
|
Preferred Shares,
Series V
|
$0.296875 per share
payable January 1, 2024, to shareholders of record December 15,
2023.
|
2023 THIRD QUARTER REPORT
The Company's 2022 Annual Report and 2023 Third 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.sedarplus.ca.
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 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.
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.sedarplus.ca.
|
(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 www.sedarplus.ca or at
www.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 measures 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
www.sedarplus.ca or at www.loblaw.ca or www.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.
|
|
16 Weeks
Ended
|
|
|
|
|
|
Oct. 7,
2023
|
|
|
|
|
Oct. 8, 2022
|
|
($ millions)
|
|
Loblaw
|
Choice
Properties
|
Other &
Intersegment
|
Consolidated
|
|
|
Loblaw
|
Choice
Properties
|
Other &
Intersegment
|
Consolidated
|
|
Net earnings
attributable to shareholders of the
Company from continuing operations
|
|
|
|
|
$
624
|
|
|
|
|
|
$
903
|
|
Add impact of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling
interests
|
|
|
|
|
320
|
|
|
|
|
|
282
|
|
Income
taxes
|
|
|
|
|
202
|
|
|
|
|
|
276
|
|
Net interest expense
and other financing charges
|
|
|
|
|
85
|
|
|
|
|
|
13
|
|
Operating
income
|
|
$
1,063
|
$
214
|
$
(46)
|
$
1,231
|
|
|
$
989
|
$
501
|
$
(16)
|
$
1,474
|
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets acquired
with Shoppers Drug Mart and Lifemark
|
|
$
154
|
$
—
|
$
—
|
$
154
|
|
|
$
151
|
$
—
|
$
—
|
$
151
|
|
Fair value adjustment
of investment in real estate securities
|
|
—
|
45
|
—
|
45
|
|
|
—
|
69
|
—
|
69
|
|
Fair value adjustment
on investment properties
|
|
—
|
(26)
|
27
|
1
|
|
|
—
|
(347)
|
34
|
(313)
|
|
Gain on sale of
non-operating properties
|
|
(13)
|
—
|
(2)
|
(15)
|
|
|
(3)
|
—
|
—
|
(3)
|
|
Fair value adjustment
of derivatives
|
|
(6)
|
—
|
—
|
(6)
|
|
|
(6)
|
—
|
—
|
(6)
|
|
Foreign currency
translation and other company level activities
|
|
—
|
—
|
—
|
—
|
|
|
—
|
—
|
1
|
1
|
|
Adjusting
items
|
|
$
135
|
$
19
|
$
25
|
$
179
|
|
|
$
142
|
$
(278)
|
$
35
|
$
(101)
|
|
Adjusted operating
income
|
|
$
1,198
|
$
233
|
$
(21)
|
$
1,410
|
|
|
$
1,131
|
$
223
|
$
19
|
$
1,373
|
|
Depreciation and
amortization excluding the impact of
the above adjustment(i)
|
|
726
|
1
|
(118)
|
609
|
|
|
713
|
—
|
(135)
|
578
|
|
Adjusted
EBITDA
|
|
$
1,924
|
$
234
|
$
(139)
|
$
2,019
|
|
|
$
1,844
|
$
223
|
$
(116)
|
$
1,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Depreciation and
amortization for the calculation of adjusted EBITDA excludes
amortization of intangible assets, acquired with Shoppers Drug Mart
and Lifemark, recorded by Loblaw.
|
The following items impacted adjusted EBITDA in the third
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 of investment in real estate
securities Choice Properties received Allied Class B
Units as part of the consideration for the Choice Properties'
disposition of six office assets to Allied 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 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.
Gain on sale of non-operating properties In the
third quarter of 2023, Loblaw recorded a gain related to the sale
of non-operating properties of $13
million (2022 – $3
million).
In the third quarter of 2023, Choice Properties disposed of a
property and incurred a loss which was recognized in fair value
adjustment of investment properties. On consolidation, the Company
recorded the property in fixed assets, which was recognized at cost
less accumulated depreciation. As a result, in the third quarter of
2023, on consolidation, an incremental gain of $2 million was recognized in operating
income.
Fair value adjustment of derivatives Loblaw is
exposed to commodity price and U.S. dollar exchange
rate fluctuations. In accordance with Loblaw's commodity risk
management policy, Loblaw enters into exchange traded futures
contracts and forward contracts to minimize cost volatility
relating to fuel prices and the U.S. dollar exchange rate. These
derivatives are not acquired for trading or speculative purposes.
Pursuant to Loblaw's derivative instruments accounting policy,
changes in the fair value of these instruments, which include
realized and unrealized gains and losses, are recorded in
operating income. Despite the impact of accounting for these
commodity and foreign currency derivatives on Loblaw's reported
results, the derivatives have the economic impact of largely
mitigating the associated risks arising from price and exchange
rate fluctuations in the underlying commodities and U.S. dollar
commitments.
ADJUSTED NET EARNINGS AVAILABLE TO COMMON SHAREHOLDERS FROM
CONTINUING OPERATIONS AND ADJUSTED DILUTED NET EARNINGS PER COMMON
SHARE FROM CONTINUING OPERATIONS The Company
believes that adjusted net earnings available to common
shareholders from continuing operations and adjusted diluted net
earnings per common share from continuing operations are useful in
assessing the Company's underlying operating performance and in
making decisions regarding the ongoing operations of its
business.
The following table reconciles adjusted net earnings available
to common shareholders of the Company from continuing operations
and adjusted net earnings attributable to shareholders of the
Company from continuing operations to net earnings attributable to
shareholders of the Company and then to net earnings available to
common shareholders of the Company from continuing operations
reported for the periods ended as indicated.
($ millions except
where otherwise indicated)
|
16 Weeks
Ended
|
|
Oct. 7,
2023
|
|
Oct. 8, 2022
|
|
Net earnings
attributable to shareholders of the Company
|
|
$
624
|
|
|
$ 903
|
|
Less: Net loss
from discontinued operations
|
|
—
|
|
|
—
|
|
Net earnings
attributable to shareholders of the Company from continuing
operations
|
|
$
624
|
|
|
$ 903
|
|
Less: Prescribed
dividends on preferred shares in share capital
|
|
(14)
|
|
|
(14)
|
|
Net earnings available
to common shareholders of the Company from continuing
operations
|
|
$
610
|
|
|
$ 889
|
|
Less: Reduction
in net earnings due to dilution at Loblaw
|
|
(4)
|
|
|
(4)
|
|
Net earnings available
to common shareholders from continuing operations for diluted
earnings per share
|
|
$
606
|
|
|
$ 885
|
|
Net earnings
attributable to shareholders of the Company from continuing
operations
|
|
$
624
|
|
|
$ 903
|
|
Adjusting items (refer
to the following table)
|
|
(144)
|
|
|
(436)
|
|
Adjusted net earnings
attributable to shareholders of the Company from
continuing operations
|
|
$
480
|
|
|
$ 467
|
|
Less: Prescribed
dividends on preferred shares in share capital
|
|
(14)
|
|
|
(14)
|
|
Adjusted net earnings
available to common shareholders of the Company from
continuing operations
|
|
$
466
|
|
|
$ 453
|
|
Less: Reduction
in net earnings due to dilution at Loblaw
|
|
(4)
|
|
|
(4)
|
|
Adjusted net earnings
available to common shareholders for diluted earnings per share
from continuing operations
|
|
$
462
|
|
|
$ 449
|
|
|
|
|
|
|
|
|
Diluted weighted
average common shares outstanding (in millions)
|
|
137.3
|
|
|
144.1
|
|
|
|
|
|
|
|
|
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.
|
16 Weeks
Ended
|
|
|
Oct. 7,
2023
|
|
Oct. 8, 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
|
|
$
|
610
|
|
$
|
4.41
|
|
|
$
|
889
|
|
$
|
6.14
|
|
Add (deduct) impact of
the following(i):
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets acquired with Shoppers Drug Mart and
Lifemark
|
|
$
|
60
|
|
$
|
0.43
|
|
|
$
|
60
|
|
$
|
0.42
|
|
Fair value adjustment
of investment in real estate securities
|
|
42
|
|
0.30
|
|
|
64
|
|
0.45
|
|
Fair value adjustment
on investment properties
|
|
1
|
|
0.01
|
|
|
(262)
|
|
(1.82)
|
|
Gain on sale of
non-operating properties
|
|
(8)
|
|
(0.05)
|
|
|
(1)
|
|
(0.01)
|
|
Fair value adjustment
of derivatives
|
|
(2)
|
|
(0.01)
|
|
|
(3)
|
|
(0.02)
|
|
Fair value adjustment
of the Trust Unit liability(ii)
|
|
(219)
|
|
(1.60)
|
|
|
(277)
|
|
(1.92)
|
|
Outside basis
difference in certain Loblaw shares(iii)
|
|
(18)
|
|
(0.13)
|
|
|
(18)
|
|
(0.13)
|
|
Foreign currency
translation and other company level activities
|
|
—
|
|
—
|
|
|
1
|
|
0.01
|
|
Adjusting items
Continuing Operations
|
|
$
|
(144)
|
|
$
|
(1.05)
|
|
|
$
|
(436)
|
|
$
|
(3.02)
|
|
Adjusted Continuing
Operations
|
|
$
|
466
|
|
$
|
3.36
|
|
|
$
|
453
|
|
$
|
3.12
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 a
deferred tax recovery 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.
|
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.
|
|
16 Weeks
Ended
|
($ millions)
|
|
Oct. 7,
2023
|
|
|
Oct. 8, 2022
|
|
Dividends from
Loblaw
|
|
$
148
|
|
|
$ 139
|
|
Distributions from
Choice Properties
|
|
84
|
|
|
83
|
|
GWL
Corporate(3) cash flow from operating businesses from
Continuing Operations
|
|
$
232
|
|
|
$ 222
|
|
Proceeds from
participation in Loblaw's Normal Course Issuer Bid
|
|
171
|
|
|
190
|
|
GWL Corporate,
financing, and other costs(i)
|
|
(64)
|
|
|
(14)
|
|
Income taxes
paid
|
|
(20)
|
|
|
(24)
|
|
GWL
Corporate(3) free cash flow from Continuing
Operations
|
|
$
319
|
|
|
$ 374
|
|
|
|
|
|
|
|
|
(i)
|
Included in Other and
Intersegment. GWL Corporate 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)
|
16 Weeks
Ended
|
|
Oct. 7,
2023
|
|
|
Oct. 8, 2022
|
Net income
|
|
$
435
|
|
|
$ 948
|
Add (deduct) impact of
the following:
|
|
|
|
|
|
Fair value adjustment
on Exchangeable Units
|
|
(352)
|
|
|
(578)
|
Fair value adjustment
on investment properties
|
|
(27)
|
|
|
(141)
|
Fair value adjustment
on investment property held in equity accounted
joint ventures
|
|
1
|
|
|
(203)
|
Fair value adjustment
of investment in real estate securities
|
|
45
|
|
|
69
|
Capitalized interest
on equity accounted joint ventures
|
|
3
|
|
|
3
|
Unit distributions on
Exchangeable Units
|
|
74
|
|
|
73
|
Internal expenses for
leasing
|
|
2
|
|
|
2
|
Funds from
Operations
|
|
$
181
|
|
|
$ 173
|
|
|
|
|
|
|
SOURCE George Weston Limited