Mr. Galen Weston reports

GEORGE WESTON LIMITED REPORTS THIRD QUARTER 2023 RESULTS

George Weston Ltd. (GWL) has released its consolidated unaudited results for the 16 weeks ended Oct. 7, 2023.

GWL's 2023 third quarter report has been filed on SEDAR+ and is available on SEDAR+ and in the investor centre section of the company's website.

"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. "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 Ltd. 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 continuing 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 Optimum 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 (consumer price index). Higher sales and continuing cost control initiatives drove adjusted net earnings growth in the quarter.

Choice Properties Real Estate Investment Trust 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 per cent. Diluted net earnings per common share from continuing operations were $4.41, a decrease of $1.73 per common share, or 28.2 per cent. 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 from continuing operations were $466-million, an increase of $13-million, or 2.9 per cent.
• Adjusted diluted net earnings per common share from continuing operations were $3.36, an increase of 24 cents per common share, or 7.7 per cent.
• The company repurchased for cancellation 2.4 million common shares at a cost of $364-million.
• GWL corporate free cash flow 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.

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 with the same period in 2022. The decrease was due to the unfavourable year-over-year net impact of adjusting items totalling $292-million ($1.97 per common share), partially offset by an improvement of $13-million (24 cents per common share) in the consolidated underlying operating performance of the company described as follows:

• The unfavourable year-over-year net impact of adjusting items totalling $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;
  • The unfavourable year-over-year impact of the fair-value adjustment of the trust unit liability of $58-million (32 cents 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 of $22-million (15 cents 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 (24 cents per common share) was primarily due to:
  • The favourable underlying operating performance of Loblaw;
  • The favourable underlying operating performance of Choice Properties;
  • A decrease in the adjusted effective tax rate 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;
    • An increase in adjusted net interest expense and other financing charges.
• Diluted net earnings per common share from continuing operations also included the favourable impact of shares purchased for cancellation over the last 12 months (15 cents per common share) pursuant to the company's normal course issuer bid (NCIB).

Adjusted net earnings available to common shareholders of the company from continuing operations were $466-million, an increase of $13-million, or 2.9 per cent, compared with the same period in 2022 due to the improvement in the company's consolidated underlying operating performance.

Adjusted diluted net earnings per common share from continuing operations in the third quarter of 2023 were $3.36, an increase of 24 cents per common share, or 7.7 per cent, compared with the same period in 2022. The increase was due to the favourable performance in adjusted net earnings available to common shareholders from continuing operations and the favourable impact of share repurchases.

Consolidated other business matters

The company completed the following GWL corporate 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 Oct. 7, 2023, the company had 135.5 million shares issued and outstanding, net of shares held in trusts (Oct. 8, 2022: 142.2 million shares).

In the third quarter of 2023, the Toronto Stock Exchange accepted an amendment to the company's NCIB to allow Wittington Investments Ltd., the company's controlling shareholder, to participate in the NCIB in a fixed proportion of 50 per cent 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.

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.

Outlook

The company's 2023 outlook remains unchanged and it continues to expect adjusted net earnings 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 full-year 2023, Loblaw continues to expect:

• Its retail business to grow earnings faster than sales;
• Adjusted net earnings per common share 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, reflecting gross capital investments of approximately $2.1-billion offset by approximately $500-million of proceeds from real estate dispositions;
• 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, which 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, it now expects:

• Stable occupancy across the portfolio, resulting in year-over-year growth of 4 per cent to 5 per cent in same-asset net operating income, cash basis;
• Annual funds from operations per unit diluted in a range of 99 cents to $1, reflecting year-over-year growth of 3 per cent to 4 per cent;
• Stable leverage metrics, targeting adjusted debt to EBITDAFV (earnings before interest, taxes, depreciation, amortization and fair value) of approximately 7.5 times.

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 -- 71.3 cents per share, payable Jan. 1, 2024, to shareholders of record Dec. 15, 2023;
• Preferred shares, Series I -- 36.25 cents per share, payable Dec. 15, 2023, to shareholders of record Nov. 30, 2023;
• Preferred shares, Series III -- 32.5 cents per share, payable Jan. 1, 2024, to shareholders of record Dec. 15, 2023;
• Preferred shares, Series IV -- 32.5 cents per share, payable Jan. 1, 2024, to shareholders of record Dec. 15, 2023;
• Preferred shares, Series V -- 29.6875 cents per share, payable Jan. 1, 2024, to shareholders of record Dec. 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 and have been filed on SEDAR+ and are available on SEDAR+.

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