Home' Trinidad and Tobago Guardian : October 26th 2014 Contents The restaurant management company, Prestige
Holdings Ltd, delivered a reasonable top-line
result for the nine months ended August 2014.
Revenues improved by 3.9 per cent to $697.7
million from $671.3 million for the same period
in 2013. Gross profit advanced by 3.75 per cent,
moving from 2013 s $242.1 million to $251.2 million in the current
Better control of both operating and administrative expenses
resulted in a 13.2 per cent improvement in operating profits;
these rose from $55 million in 2013 to 62.2 million in the 2014
After offsetting other income, administrative expenses increased
marginally to $46.3 million from 2013 s $46.2 million. Other
restaurant operating expenses increased by a modest 1.2 per
cent, moving from $141 million last year to $142.7 million in
the 2014 session.
Finance costs fell by $1.43 million to register at $9.15 million
from last year s $10.58 million.
These changes resulted in pre-tax profit from continuing
operations coming in at $53.1 million; this is 19.5 per cent higher
than the $44.4 million reported for the same period in 2013.
A slightly higher effective tax rate of almost 32 per cent (2013:
29.7 per cent) saw the after-tax result close at $36.3 million;
this represents a 16.2 per cent improvement on the 2013 figure
of $31.2 million.
In the 2013 result, the profit for the period was further dec-
imated by $8.7 million, which related to the closure of its
Barbados operations. This resulted in PHL reporting a net profit
of $22.5 million for that period.
Owners of the parent accounted for $24.3 million profit while
non-controlling interests incurred a loss of $1.8 million. Con-
sequently, the current period s net profit to shareholders of
$36.3 million reflects an improvement of 49.3 per cent over the
comparative result of $24.3 million.
These results reflect EPS, inclusive of ESOP shares, of $0.583
and compares very favourably with $0.392 for the same period
On the basis of these better results, the interim dividend was
increased from $0.12 in 2013 to $0.15 this year; this dividend
was paid on October 20, 2014.
Third quarter performance
During the third quarter, sales of $238.1 million were mar-
ginally lower than for the same period in 2013. In addition,
both gross and operating profit figures were below the numbers
for the same period in 2013.
Much of this result could be attributed to labour challenges
at both KFC and Subway franchises, collectively characterised
as Quick Service Restaurants (QSR).
The biggest positive movement occurred in net finance
costs, which fell by almost $2.2 million during the quarter.
That change resulted in higher pre-tax and after- tax results,
when compared to the comparative quarter in 2013.
The discontinued operations in Barbados pulled down the
2013 quarterly result to a modest $4.27 million. Consequently,
the $12.5 million reported for the August 2014 period is almost
three times greater than the comparative net result of $4.27
million reported for 2013.
In the fourth quarter of 2013, PHL generated $231 million
in revenues and delivered an after-tax result of $13.1 million
(excluding the Barbados adjustment).
If we assume that sales and, in particular, profitability in
the current quarter can improve and that finance costs would
be lower, then it should be possible for PHL to deliver an EPS
of between $0.22 and $0.25 for this period.
Using the lower figure and adding it to the year-to-date
result of $0.583, the total EPS for the full year could come
in at $0.803. On that basis, the final dividend could be $0.20,
bringing the total for the year up to $0.35.
If the share price were to advance to the currently indicated
level of $10.00, then the dividend yield would be 3.5 per cent.
Lack of a local franchise
Over more than forty years of operation, PHL has always
had foreign-based franchises. This has allowed it to build up
a significant body of knowledge and expertise as to how to
operate a successful franchise business.
One obvious disadvantage of a foreign-based franchise is
that it creates a significant outflow of foreign currency for
fees and food.
It is a source of puzzlement that PHL has not yet sought
to leverage that collective expertise to create and develop a
locally-based franchise in the food industry. Options such as
pelau, shark and bake, roti and other East Indian fare or even
Chinese cuisine easily come to mind.
In addition, to obvious foreign exchange earnings, it would
also help create a positive image for the country and region
Perhaps, one significant stumbling block is that the company
(and service industries generally) have not yet found suitable
and imaginative ways to train motivate and retain front-line
Paolo Kernahan, in his article in the October 11 Saturday
Guardian, suggested: "We must go beyond throwing our hands
up in the air and crying that it is so hard to get good workers."
Following through on this advice is the challenge.
Possibility of acquiring Linda's Bakery Ltd
Linda s Bakery Ltd was founded in 1959 by Mr Lionel Chin
Fatt. The company was named after Chin Fatt s wife, Linda
and now operates from 12 locations throughout Trinidad.
Following the death of its founder on February 7, 2013, Linda s
Bakery Ltd was sold to three entrepreneurs: Christian Mouttet
(either directly or via the family company, Vemco Ltd); Adam
Aboud (owner of Adam s Bagels in Maraval) and one other
person, whom I have not yet identified.
Vemco Ltd is the parent company of Prestige Holdings Ltd,
owning 42,690,175 shares; this corresponds to 68.7 per cent
of the number of shares outstanding (62,154,211).
Is it reasonable to speculate that, at some point in the not-
too-distant future, an arrangement could be put in place whereby
PHL acquires the majority shares in Linda s Bakery Ltd?
What would this acquisition achieve?
Certainly, it would extend PHL s stable of franchises. It will
also mark the first time that PHL has ventured into the local-
ly-based franchise market. It is also possible that Linda s could
soon become a supplier of bread to the Subway franchise, among
This development would also allow PHL to expand the present
Linda s network at a measured pace. Pending the phased opening
of the southern highways, its KFC brand, in particular, may
have somewhat limited opportunities for much immediate
The possibility of this acquisition materialising may be one
of the factors that are tending to push PHL s share price closer
to (or perhaps, beyond) the $10 mark.
OCTOBER 26 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG11
In my article published on September 21, 2014, under the
heading "Investors reserve their enthusiasm for budget
measures," I received some useful feedback concerning the
revenue figures for GHL and SFC.
GHL's revenues for the six months to June 2014 were
stated as $715.3 million; this figure is made up of three
components: net insurance income results, that is, net pre-
miums less claims paid of $267.3 million; net fair value
gains on financial instruments of $28.8 million; and net in-
come from other investing activities of $419.2 million.
In the case of Sagicor Financial Corporation (SFC), the ar-
ticle listed their revenues as TT$3.135 billion (US$501.7
million) for the same six-month period. However, in order
to make a better comparison with GHL, benefits paid of
US$289 million (TT$1.806 billion) should have to be de-
ducted from this gross figure. Consequently, the revised
"revenue" figure for SFC is now TT$1.329 billion.
Although this comparison is a little better, it is still some-
what distorted, because both income and some benefits
figures are amalgamated. In its interim reporting, SFC does
not disclose its premium revenues separately; this presen-
tation is very different from GHL. We need to refer back to
the annual reports, where more detail is given, to make a
better revenue comparison.
Using the SFC method of reporting its 2013 results, total
revenues (net premiums, investment and fees and other)
for that year were US$1.040 billion (using a conversion of
6.35, TT$6.604 billion). Under this same method, GHL rev-
enues came in at TT$4.62 billion. On that basis, SFC's 2013
total revenues were about 43 per cent greater than GHL's.
However, if we restrict our comparison to net 2013 pre-
miums, then the gap between the two companies is signifi-
cantly reduced; SFC's $4.172 billion (US$657 million) was
only about 20 per cent greater than GHL's $3.477 billion.
Prestige Holdings Ltd has potential
Despite stumbling in Q3...
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