Home' Trinidad and Tobago Guardian : March 22nd 2015 Contents MARCH 22 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STCOKS | SBG11
With its Barbados
longer a drag on
Ltd (PHL) deliv-
ered an improved
profit in 2014. Meanwhile, its Jamaican operations
have not yet turned the corner.
Let us now review the company s results for
the year ended November 30, 2014.
Total assets declined by $10.8 million (2.25 per
cent) to $467.5 million from the previous balance
of $478.2 million. Most of the disposals in relation
to the company s withdrawal from the Barbados
market were previously reflected in 2013.
The value of property, plant and equipment
fell by a net of $14.3 million to $262.1 million
from $276.4 million as at the end of 2013. Mainly,
this reflected the effect of depreciation charges
of $40.1 million exceeding net new additions of
Influenced by higher sales, inventories rose
to $46 million from $41.6 million.
Meanwhile, cash and cash equivalents rose
by a modest $1.8 million, closing at $57.3 million
from $55.5 million as at the end of 2013. Here,
increased cash generated from operating activities
(including profit) was helped by lower investing
activities (including the reduced purchase of
Finally, financing activities consumed almost
$63 million. The repayment of borrowings used
up $14.5 million and dividends to shareholders
contributed $18.7 million while the movement
in other equity instruments consumed a net $25
Total liabilities closed 2014 at $236.2 million;
this was almost $20 million lower than the 2013
figure of $256.2 million.
Driving this decline was lower balances for
both long-term and short-term debt. The former
contracted to $108.5 million from $122.5 million;
this reflects continuing payments on a bond
with an original balance of $140 million and a
fixed rate of 6.25 per cent. In the case of the
latter, the outstanding amount narrowed to $14
million from $14.5 million; this decline was due
entirely to the elimination of the Barbados dollar
debt of $542k.
Pension liabilities increased from $147.8 million
to last year s $496.1 million; this movement pri-
marily was due to the elimination of the unrecog-
nised actuarial losses of $343.1 million.
Amounts due to related parties declined from
$6.8 million in 2013 to $1.6 million. Primarily, this
reflected the elimination of $5 million in borrowings
due to the ultimate parent company (As explained
below, this related to the Subway purchase).
Total shareholders equity improved from $222
million to last year s $231.3 million. Here, the
principal driver was the rise in retained earnings
to $162.5 million from the previous level of $130.9
The figure was mainly boosted by current
year s profit of $50.3 million and reduced by div-
idends to shareholders of $18.7 million.
The value of other equity instruments declined
to $25 million from the previous level of $50
million. The original sum carried an interest rate
of 7.5 per cent. In November 2014, PHL repaid
the full amount and then reissued three new
instruments, bearing an interest rate of 5.00 per
cent, totalling $25 million. Those new instruments
are repayable at the company s option.
As part of its purchase of the Subway business,
$15 million of the total purchase price of $65
million was to be settled via six semi-annual
payments of $2.5 million spread over the period
May 2012 to November 2014. There is no further
liability with respect to this portion of the pur-
With 62,203,193 shares outstanding, each
share has a book value of $3.72 (2013: $3.57).
Sales & profits
Total sales rose by 2.2 per cent to $921.8 million
from $902.2 million. Trinidad sales improved
from $889.1 million to $910.1 million or by 2.3
The overseas operations, mainly comprising
those in Jamaica, delivered both lower sales and
reduced losses. This territory mostly comprises
the TGI Friday s brand.
Gross profit rose by only 1.9 per cent as the
cost of sales accelerated by slightly more than
the sales improvement.
Both other operating expenses and adminis-
trative expenses exhibited marginal declines. The
former sliding to $191.1 million from $191.4
million while the latter closed 2014 at $59 million
from the previous year s $59.8 million.
Other income rose to $1.92 million from the
previous level of $1.68 million. Interestingly, in
2012, this line item was $1.85 million. (The main
components of this item are not disclosed in the
notes to the accounts).
These changes allowed PHL to report an oper-
ating profit of $83.9 million. This represented
an improvement of 9.9 per cent over the previous
year s $76.4 million.
Net finance costs were $1.75 million lower
than the $13.8 million incurred in 2013. This
decline was mainly due to the $1.68 million in
borrowing prepayment fees incurred in the pre-
vious year as part of its debt restructuring exer-
The company s effective tax rate increased
from 29.2 per cent to last year s 30.1 per cent.
This saw the tax take increase to $21.6 million
from $18.2 million in 2013.
These changes allowed PHL to report a profit
from continuing operations of $50.3 million.
This was 13.4 per cent greater than the $44.3
million earned in 2013. The 2013 result was
further reduced to $36.4 million due to the $7.9
million loss from its discontinued operations in
Profit attributable to shareholders rose from
$38 million in 2013 to last year s $50.3 million.
These figures translated into EPS for 2014 of
$0.81 and $0.62 for 2013.
About 98.7 per cent of the company s sales
and virtually all of its profit are generated from
its local operations. The overseas businesses, at
this time only Jamaica, have not yet started to
make any contribution to profit.
Debt and financial ratios
During 2014, PHL s gearing ratio declined to
22 per cent from 28 per cent in 2013. The com-
pany deployed total capital of $296.4 million
(2013: $308.6 million). Of this amount, its net
debt was $65.2 million (22 per cent) while its
equity comprised $231.2 million (78 per cent).
The decline in net debt was achieved by the
combination of total debt reduction and an
increase in cash resources. The improved equity
position also contributed to the overall reduction
in the gearing ratio.
The company also achieved an improved cur-
rent ratio position. In 2013, current assets of
$127 million were only marginally greater than
current liabilities of $126.4 million. In 2014, its
current assets increased to $133 million while its
current liabilities fell to $121 million, thus giving
the company greater operating flexibility.
Share price & dividends
Over the past year PHL s shares have been
rising slowly. On March 27, 2014, it was quoted
at $9.29 and it closed on December 31, 2014 at
$9.56. Since the release of its 2014 results on
February 10, 2015, investors have shown greater
interest in the share; consequently, this stronger
demand allowed it to close at $10.00 on March
Dividends for 2014 improved to $0.32 from
the previous year s $0.27. At its most recent
price, the current dividend gives investors a yield
of 3.2 per cent.
Labour challenges and technology
The company cites labour shortages and high
absenteeism as being its major challenges. If
these issues could be resolved, it anticipates that
both sales and profitability would be positively
At a recent conference held on March 11, 2015,
PHL s managing director cited the negative effects
of the CEPEP and URP programmes have on all
service industries. There was also a call to open
up the market to immigrant labour.
Using the example of 650 workers, the com-
pany s estimated labour shortage, it was estimated
that the government could save nearly $40 million
(CEPEP wages = $30 million, VAT = $7 million
and corporation tax of $2.5 million).
The company offers its workers many incen-
tives, including free meals and uniforms. It has
also reduced the minimum educational require-
ments. Perhaps, it might also consider expanding
this programme to include providing incentives
for new employees to complete their secondary
education, even advancing on to trade schools
or university level courses? (A variation of this
plan is being implemented by the US-based
Perhaps, another option might be to find ways
to encourage greater use of telephone and Internet
ordering of its products? (Maybe, a 3 to 5 per
cent discount might be applicable if a customer
uses that option, then pays and collects the order
PHL s labour challenges are not unique to it.
For example, banks are constantly trying to push
their customers away from face-to-face contacts
with tellers (for most basic transactions) to greater
reliance on technological interactions.
Although the restaurant business tends to
involve greater human interactions, there may
still be some possibilities to use technology more
Let us see what people and technology solu-
tions can emerge over the coming months...
After exiting the Barbados market
Prestige Holdings turns in
an improved 2014 result
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