Transformation of Aegis into a consolidator in
the food and beverage space continues
TORONTO, Aug. 10, 2021 /CNW/ - Today, Aegis Brands Inc.
(TSX: AEG) has reported financial results for the second quarter
ended June 26th, 2021.
Highlights
- Aegis entered into a strategic transaction to sell Hemisphere
Cannabis Co. ("Hemisphere")
- The sale of Second Cup closed on April
23rd, 2021
- Aegis' Net Loss from continuing operations for the quarter was
$1,191,000, or $0.05 per share compared to $1,207,000, or the same loss per share in the
second quarter of last year
- Bridgehead's Net Loss for the quarter was $23,000 compared to $494,000 in the second quarter of last year
Bridgehead
Sales at Bridgehead coffeehouses were hampered by the third wave
of COVID-19 during the second quarter, with Same Store Sales (SSS)
at -49.3% of 2019 results. However, revenues were bolstered by
Bridgehead's e-commerce and wholesale business that has emerged
through the pandemic. The brand continues to improve the bottom
line with a Net Loss of $5,000 year
to date compared to $1,000,000 by the
same time last year.
The leadership team at Bridgehead continues to innovate,
reposition and expand as they focus on the growth of three key
distribution channels: coffeehouses, online and wholesale. This
includes the opening of a new location at Carleton University (August
2021). Management is focused on growing Bridgehead's asset
light e-commerce and wholesale business segments, as they have the
potential to contribute as much or more profitability than the
"brick and mortar" locations. Year to date the e-commerce and
wholesale channels represent ~22% of the sales and produced 37% of
Bridgehead's EBITDA while requiring relatively little capital.
Hemisphere
Held for Sale and Discontinued Operations
On July 12, 2021, Aegis entered
into a strategic transaction with Kiaro Holdings Corp. ("Kiaro"), a
TSX-V-listed cannabis retailer and wholesale distributor, agreeing
to sell Hemisphere in consideration for a substantial equity stake
in Kiaro. In consideration for 100% of Hemisphere's common shares,
Kiaro will issue 61,300,000 common shares to Aegis, plus 6,700,000
common share purchase warrants. Kiaro will issue an additional
6,700,000 shares to Aegis upon the achievement of certain
commercial milestones during the first year following closing.
Aegis Brands Inc.
With the sale of Second Cup and the pending sale of Hemisphere,
the transformation of Aegis is well underway. As North America starts to return to pre-pandemic
activities, Aegis is eager to expand its presence in the food and
beverage sector through acquisitions and partnerships with great
brands across North America.
Consumers are enthusiastically returning to all types of food
service locations following a period of unmatched household
savings, and with fewer options to choose. An estimated 10% of
restaurants in Canada have closed
during the COVID-19 pandemic. This series of conditions has created
a very profitable environment for the great operators in the space
and highlights the opportunity for Aegis to consolidate great
restaurant companies and the entrepreneurs behind them.
Additionally, subject to the receipt of certain third-party
consents and other customary closing conditions, the sale of
Hemisphere to Kiaro is expected to close in the fall, enabling
Aegis to increase its focus on the growth of its Bridgehead Coffee
brand and execute its acquisition strategy. Upon completion of the
transaction, it is anticipated that Aegis will hold approximately
25% of Kiaro's common shares and will be Kiaro's largest
shareholder. Aegis' CEO Steven
Pelton intends to join the Kiaro board of directors at
closing. "We know the team at Kiaro will use their cannabis
industry expertise to successfully grow the business organically
and through acquisitions in a highly competitive market," said
Steven Pelton, President and CEO of
Aegis Brands. "This transaction with Kiaro allows us to focus our
people and our resources on Aegis' objectives in the food service
space. Meanwhile, we expect Kiaro to continue to use its resources
to gain the scale required to achieve its objectives in retail
cannabis."
Aegis continues to build an experienced leadership team that has
created and grown some of the best hospitality brands in
Canada. As previously announced,
Melinda Lee will be stepping in as
Chief Financial Officer on August
13th. Lee brings over 20 years of senior level
experience in financial management of public companies in various
industries, including hospitality. "With the sale of Second Cup and
pending sale of Hemisphere, we are now fully focused on partnering
with great hospitality brands, with great leadership, that we can
help grow in the food and beverage space" added Pelton.
NON-IFRS MEASURES
Aegis measures the success of its business in part by employing
several key performance indicators referenced herein that are not
recognized under IFRS, including same store sales and EBITDA.
These indicators should not be considered an alternative to IFRS
financial measures, such as net income, and are presented in this
presentation because management of Aegis believes that such
measures are relevant in interpreting the performance of its
business. As non–IFRS financial measures do not have standardized
definitions prescribed by IFRS, they are less likely to be
comparable with other issuers or peer companies. A description of
the non–IFRS measures used by Aegis in measuring its performance
and a reconciliation of certain non–IFRS measures to the nearest
IFRS measure is included in Aegis' management's discussion and
analysis for the second quarter ended June
26, 2021 available on SEDAR at www.sedar.com.
FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements within
the meaning of Canadian securities laws. These forward-looking
statements contain statements of intent, belief or current
expectations of Aegis. Forward-looking information is often, but
not always identified by the use of words such as "anticipate",
"believe", "expect", "plan", "intend", "forecast", "target",
"project", "may", "will", "should", "could", "estimate", "predict"
or similar words suggesting future outcomes or language suggesting
an outlook.
The forward-looking statements included in this press release,
including statements regarding the pending sale of Hemisphere, the
nature of Aegis' growth strategy going forward and Aegis' execution
on any of its potential plans (including with respect to the growth
and development of Bridgehead Coffee and identification of future
acquisition targets), are not guarantees of future results and
involve risks and uncertainties that may cause actual results to
differ materially from the potential results discussed in the
forward-looking statements.
Risks and uncertainties that may cause such differences include
but are not limited to: risks that the sale of Hemisphere may not
be completed or that the earn-out component of the purchase price
may never be realized; risks that the sale of Hemisphere may have a
negative impact on the market price and liquidity of Aegis' common
shares; risks related to the company's strategy going forward;
risks related to the COVID-19 pandemic; and other risks inherent in
the industry in which Aegis operates. Accordingly, readers should
not place undue reliance on the forward-looking statements and
information contained in this news release. Additional information
on these and other factors that could affect Aegis' operations or
financial results are included in reports on file with applicable
securities regulatory authorities and may be accessed through the
SEDAR website (www.sedar.com).
In respect of the forward-looking statements and information
included in this press release, Aegis has provided such in reliance
on certain assumptions that it believes are reasonable at this
time, including the ability of the company to manage the risks
(economic, operational, financial, and other risks) associated with
the COVID-19 pandemic, the ability of the company to identify new
acquisition opportunities and to successfully integrate past and
future acquisition targets into the company's business, and the
company's ability to generally execute on its strategy going
forward.
The forward-looking statements in this press release are made as
of the date it was issued and Aegis does not undertake any
obligation to update publicly or to revise any of the included
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by applicable
law.
About Aegis Brands Inc.
Aegis Brands Inc. currently owns and operates Bridgehead Coffee
and Hemisphere Cannabis Co. The company's vision is to build a
portfolio of amazing brands that can grow and flourish with access
to our resources and expertise. The company is committed to letting
each brand operate independently while providing shared expertise
to help them thrive.
For more information, please visit aegisbrands.ca.
SOURCE Aegis Brands Inc.