Second Cup to get new corporate name as it moves to diversify beyond coffee

MISSISSAUGA, Ont. - The Second Cup Ltd. CEO says "active conversations are already underway" for possible acquisitions as it plans to change its name and business structure.

"(We're) looking for brands that can benefit from the operational expertise that we've developed over more than 40 years in the Canadian foodservice industry," wrote Steven Pelton in an email. Pelton was appointed to the top post in May, succeeding Garry Macdonald, who retired from the position.

"A great example might be a regional brand that's poised to grow further and needs support to expand nationally."

The company announced Friday it intends to change its name to Aegis Brands Inc. -- a move that is subject to approvals from shareholders and the Toronto Stock Exchange, where its shares are listed.

Pelton will be chief executive of Aegis Brands, which will own and operate the existing Second Cup Coffee Co. as one of a portfolio of brands.

The new name means to sponsor, support or protect, the company said, and is intended to reflect the benefits the parent company structure will offer the brands that operate under it.

So far, the only brand is Second Cup, but the company is looking to acquire other players in the coffee, foodservice and cannabis sectors.

It's too soon to say how many acquisitions the company will make and over what period of time, said Pelton.

But conversations are already underway, said Pelton, "with a goal to grow as soon as possible, and in responsible manner."

It's hard to define an exact budget, he said, and acquisition terms could include cash, shares, debt or a combination of those.

The company had $12.336 million in cash and cash equivalents as of Sept. 28, 2019, according to its most recent financial filings released Friday.

"If we decide to take on debt, it would always be at a very responsible rate and a very low multiple of our earnings."

The name change was announced as Second Cup reported a third-quarter loss as sales at its cafes fell from the same time last year.

The corporation posted a $762,000 net loss and a $62,000 adjusted net loss with about $6.7 million of revenue. System sales were $32.9 million and same-store sales, a key metric for retailers, fell 2.9 per cent.

Net loss was four cents per share and adjusted net loss per share was insignificant.

The adjusted loss excluded a reduction in the value of Second Cup's investment in National Access Cannabis warrants.

A year earlier, Second Cup had a $766,000 net profit, and $432,000 adjusted net profit with about $5.9 million of revenue and $35.7 million of system sales from its cafes.

This report by The Canadian Press was first published Nov. 8, 2019.

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