May 2007 Financial News

FFL Releases Year End Results

May 08, 2007

Results for the Year Ended December 31, 2006

For the Year Ended December 31, 2006, Flavorite Foods Limited (FFL) reported Earnings Per Share (EPS) of 67 cents. This represented an increase of 24.07 per cent or 13 cents on the comparable period of 2005.

Revenue for fiscal 2006 rose to $58.657 million and was up on the corresponding period of fiscal 2005 by 7.42 per cent or $4.054 million. Cost of Sales amounted to $27.430 million which was an increase of $2.342 million or 9.34 per cent on the previous financial year. This resulted in Gross Profit increasing by 5.80 per cent or $1.711 million from $29.516 million in 2005 to $31.227 million in 2006. Other Operating Income grew by a significant 18.78 per cent or $0.204 million to $1.288 million.

For the period under review Distribution Expenses increased by a minimal 3.37 per cent or $0.370 million to $11.347 million while Administrative Expenses was up 1.40 per cent or $0.183 million to $13.224 million. Other Operating Expenses, however, saw a considerable increase of $0.342 million or 72.23 per cent from $0.474 million in fiscal 2005 to $0.816 million in fiscal 2006. Thus, FFL’s Operating Profit increased by 16.69 per cent or $1.019 million to close the financial year 2006 at $7.128 million. Finance Costs also rose significantly, moving from $55.094 million in fiscal 2005 to $71.859 million in fiscal 2006, an increase of 30.43 per cent.

Profit Before Taxation stood at $7.056 million, up 16.56 per cent or $1.003 million on the prior year. The Effective Tax Rate for fiscal 2006 was 25.90 per cent compared to a Tax Rate of 30.12 per cent for the previous year. Ultimately, Net Profit for fiscal 2006 amounted to $5.228 million up by 23.60 per cent or $0.998 million on the corresponding figure of $4.230 million for fiscal 2005.

The Board of Directors has proposed a final dividend of $0.30 per share compared to $0.15 paid in fiscal 2005.

The shares of FFL are currently trading at a price of $4.60. Based on a forecasted EPS of 80 cents for fiscal 2007 and the current price, these shares are trading at a price to earnings multiple of 5.75 times. This multiple is attractive for this share, since FFL typically trades in the band of 9 to 10 times. However, approximately 85 per cent of these shares are held by two substantial shareholders, namely: Stone Street Capital Limited (80%) and T. Geddes Grant Pension Fund Plan (5%). Thus, while we would recommend a BUY based on fundamentals, we caution investors on the availability and liquidity of this share.

Nancy Chen
WISE Equity Research Team