Jul 2007 Financial News

PHL Releases Half Year Results

Jul 02, 2007

Results for the Half Year Ended May 31, 2007

For the Half Year Ended May 31, 2007, Prestige Holdings Limited (PHL) reported Earnings Per Share (EPS) of 17.3 cents which was up on the comparable Half Year period in 2006 by a significant 29.10 per cent. Q207 on Q206, this figure was up by 20.31 per cent. However, it is important to note that the Group’s Sales had suffered significantly in the first half of 2006 due to media coverage of the Aspergillosis fungus at a small poultry farm in Cumuto. Thus, this should be taken into consideration when comparing figures Half Year on Half Year. Q207 on Q107, the EPS was down 20.62 per cent from 9.7 cents to 7.7 cents.

Sales for the period under review amounted to $317.04 million compared to $280.86 million for HY06- an increase of 12.88 per cent. Cost of Sales increased by a similar margin, up 12.80 percent from $190.40 million (HY06) to $214.78 million (HY07). Consequently, Gross Profit for the half year amounted to $102.26 million, up 13.05 per cent or $11.81 million on the same period in the last financial year.

Operating Restaurants Expenses for HY07 was $82.42 million compared to $72.10 million in HY06- an increase of 14.31 per cent. Thus the Group’s Operating Restaurants Profit totaled $19.84 million, an increase of 8.10 per cent or $1.49 million on the corresponding period in FY06. Net Finance costs were up a marginal 2.92 per cent from $5.69 million in HY06 to $5.86 million in the period under review. As a result, Profit Before Taxation from Operating Restaurants stood at $13.96 million, up 10.43 per cent on HY06. Q207 on Q107, this figure was down by a significant 22.80 per cent from $7.89 million to $6.09 million.

The Effective Tax Rate for the Period under review was 33.06 per cent compared to a Tax Rate of 34.35 per cent for the same period in FY06. Ultimately, Profit After Taxation was $9.36 million, an increase of 25.45 per cent on the same figure for HY06.

The Chairman gave the following synopsis of the Company’s Brands:

KFC Operations

The 49 restaurants in Trinidad and Tobago continue to perform well in sales and profitability; however there is a continuous challenge of rising costs and labour shortages at the restaurant level. The 11 units in the Dominican Republic had good sales and reasonable profits in the half year, but have also been experiencing rising costs in recent months. This is being addressed at all levels.

T.G.I. FRIDAY’S
The 3 restaurants in Trinidad were profitable and upon completion of image enhancements to the restaurants in Port of Spain and Chaguanas, it is anticipated that performances will be improved. Completion is expected in the current quarter. There was strong growth in sales and profitability in Santo Domingo, Dominican Republic. The second restaurant in Santiago will be completed in the next financial year due to construction delays. Jamaica continued to deliver improved sales and earnings. However, in Puerto Rico the economy is severely challenging for the casual dining sector and as a result the 3 T.G.I restaurants have suffered significant losses. The Company has been investing heavily on improving the management and service at all levels and in April 2007 launched a marketing initiative to increase market share. PHL is closely monitoring the condition of that economy and the performance of the business. The first restaurant in Barbados is scheduled to open in August 2007.

OTHER BRANDS (Pizza Hut, Long John Silver’s and TCBY)
The 7 Pizza Hut Restaurants performed significantly better than in the same period of 2006 and an eight restaurant is scheduled to open at Chin Chin Junction, Cunupia in the third quarter. Long John Silver’s in Gulf City Mall experienced improved sales and the two restaurants are expected to be profitable in the second half of FY07. TCBY is also expected to see an improved performance in the second half year.

The Chairman has also stated the majority of the businesses are performing better than in 2006 and that barring any unforeseen adverse events, the Company is expected to see improved profits for 2007.

PHL last closed at a price of $6.22 on the local exchange. We are maintaining our forecast of 45 cents for FY07. At the current price and forecasted EPS, these shares are trading at a price to earnings multiple of 13.82 times. Given that this share usually trades within the band of 12 to 15 times we continue to recommend a HOLD at this time.


Gia Singh
WISE Equity Research Team