Oct 2008 Financial News

PHL Releases Nine Months Results

Oct 21, 2008

Earnings Per Share
Prestige Holdings Limited (PHL), for the Nine Months Ended August 31 2008, reported a diluted Loss Per Share (LPS) of 0.44 cents compared to a diluted Earnings Per Share (EPS) of 24.0 cents in the corresponding period of fiscal 2007. Q308 on Q307, the Company’s EPS was up an outstanding 98.5 per cent or 6.6 cents from 6.7 cents to 13.3 cents. According to the Chairman, the results were generated from an average of 84 restaurants compared with 78 in the same period of 2007. The Group ended the period with 85 restaurants, excluding Puerto Rico.

Financials (NM08 on NM07)
• Sales, up 17.6 per cent or $81.3 million to $542.3 million
• Cost of Sales, up 19.2 per cent or $59.5 million to $369.8 million
• Gross Profit, up 14.5 per cent or $21.8 million to $172.5 million
• Operating Restaurants Expenses, up 23.4 per cent or $26.7 million to $141.1 million
• Operating Restaurants Profit, down 13.5 per cent or $4.9 million to $31.4 million
• Net Finance Costs, up 40.5 per cent or $3.2 million to $11.3 million
• Pre-Opening Expenses, down 36.8 per cent or $0.7 million to $1.2 million
• Profit Before Taxation from Continuing Operations, down 28.2 per cent or $7.4 million to $18.9 million
• Profit After Taxation from Continuing Operations, down 30.6 per cent or $5.7 million to $13.0 million

A synopsis on the various markets in which the Group operates are as follow:

Trinidad and Tobago
In Trinidad and Tobago, the KFC, Pizza Hut and T.G.I. Friday’s restaurants performed extremely well in Q308, despite extensive food cost inflation. Additionally, the Company has experienced improvements with its labour challenges through focused training and incentive programmes. However, the Company continues to be challenged by absenteeism and staffing levels.

Dominican Republic
The KFC and T.G.I. Friday’s restaurants in the Dominican Republic have endured the brunt of energy and food cost inflation in a declining economy and profitability is below Plan. However, according to the Chairman, brand awareness, service and product quality are high. Furthermore, the Company has minimal debt and it is expected that this market will continue to generate earnings for the Group.

Other Markets
The T.G.I. Friday’s restaurants in Barbados and Jamaica are also experiencing significant energy and food cost inflation. Jamaica continues to produce good sales levels and management is currently securing alternative supply sources in both these markets in order to counteract the rising food costs.

Outlook and Recommendation
The Chairman stated that with the Company’s exit from the Puerto Rico operations earlier this year and removal of that loss from the Group, a better second half year in 2008 is anticipated, as management refocuses on its core businesses and cost efficiency.

The shares of PHL are currently trading at a price of $3.60 on the local exchange. At our forecasted EPS of $0.10 and the current price, PHL is trading at a very high price to earnings multiple of 36.0 times. Hence, at this time, we continue to recommend a SELL on this share.


Nursama Juman
WISE Equity Research Team