Oct 2006 Financial News

PHL Releases Nine Months Results

Oct 10, 2006

For the nine months ended August 31, 2006 Prestige Holdings Limited (PHL) reported a Diluted Earnings Per Share (EPS) of 26.42 cents. When compared to the nine months ended August 31, 2005, this represents a 19.45 per cent drop in Earnings. However, for the three months ended August 31, 2006 PHL’s EPS was actually up by 0.54 per cent (12.98 cents) when compared to the same period in 2005 (12.91 cents). The Chairman believes that this is noteworthy and states that this improved performance is an indication that the Company is recovering from the very difficult first half of 2006.

Sales for the nine month period were up by $21.34 million or 5.16 per cent to end the period at $434.51 million. For the quarter this figure amounted to $153.65 million and represented an increase of 7.29 per cent on the comparable period in the previous financial year. While sales are currently up, the Chairman has pointed out that the drop in profits in the year to date results have been the product of reduced sales in KFC Trinidad and Tobago in the first half of the year. He has also stated that there have been improvements in this unit in the third quarter and that sales are currently ahead of prior year levels.

Cost of Sales for the period amounted to $291.99, up by a minimal 5.43%. Thus Gross Profit for the nine months under review stood at $142.52 million compared to $136.21 million for the same period in 2005, an increase of $6.30 million or 4.63 per cent.

An increase in Operating Restaurant Expenses of $14.44 million or 15.03 per cent resulted in a nine month figure of $32.01 million. As such, Operating Profit for the period amounted to $32.01 million, down by $8.13 million or 20.26 per cent. Net Finance Costs also increased, from $6.65 million in the corresponding period in 2005 to $7.78 million in the current period (16.86 per cent). As a result, Profit before Taxation amounted to $24.23 million a drop of $9.26 million or 27.64 per cent on the same period in the last financial year.

The Effective Tax Rate for the period stood at 31.50 per cent while the comparable nine month Tax Rate in 2005 was 34.20 per cent. Profit after Taxation ended the period at $15.09 million a significant fall of 26.52 per cent or $5.45 million on the comparable figure for the period ended August 31, 2005.

The Board has resolved that the Company pay an Interim Dividend of 7 cents per share in respect of the financial year ending November 30, 2006- payable on October 27, 2006 to shareholders on record on October 13, 2006. The comparable Interim Dividend in 2005 was 9 cents per share.

The Chairman’s outlook is positive for the final quarter as the KFC business in Trinidad & Tobago is recovering to prior levels of profitability, while the T.G.I. FRIDAY’S businesses in Puerto Rico and in Jamaica, both of which have been operating at significant losses, are now generating improved results. However, while he expects improved profitability in the final quarter he does not expect the Company to achieve the prior year’s level in 2006.

Prestige Holdings Limited is currently trading at a price of $5.00 per share. In light of the current results and the Chairman’s outlook we are revising our Forecasted EPS to 38 cents. At the current price and our revised Forecasted EPS, this share is trading at a multiple of 13.16 times, which is not only attractive for the sector but is also in the lower end of PHL’s traditional trading range. Thus, at this time we revise our recommendation to a BUY.


Gia Singh
WISE Equity Research Team

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