In addition to growing its footprint locally, franchise restaurant operator, Prestige Holdings Ltd (PHL), has ramped up its expansion plans to other regional markets in Jamaica and Guyana, which jurisdictions offer relatively easier access to foreign exchange. Today, we will review PHL’s results for the year ended November 30, 2024.
Assets increase
Total assets grew marginally from $902.4 million to $903.2 million.
Property, plant and equipment expanded from $289.4 million to $353.4 million. That increase was boosted by the acquisition of Highway Properties Ltd in Curepe; this property held three of its restaurants, from which it previously leased from the former owner and added a total of $23.25 million.
Of that total, $20.25 million was shown under land and $3 million was recorded under building improvements. The total land element was further enhanced by a revaluation surplus of $4.15 million.
Overall, the land element grew from $109.3 million to $133.7 million. Other net additions saw building improvements advance from $99.3 million to $112 million while plant and machinery increased from $41.8 million to $51 million and work-in-progress jumped from $5.6 million to $9.9 million.
Right-of-use assets declined from $271 million to $245 million and benefitted from the aforementioned acquisition.
Intangible assets slipped from $58.7 million to $57.4 million. The Weekenders/TGI Fridays goodwill was unchanged at $6.16 million while the indefinite life intangible asset, which relates to Subway, was stable at $40.8 million. However, other deferred costs fell from $11.7 million to $10.4 million.
Despite higher revenues, inventories declined from $90.2 million to $86 million. Here, food supplies and packaging materials dropped from $70.6 million to $50 million, conversely, consumable stores surged from $19.6 million to $36 million.
Trade and other receivables climbed from $31 million to $41 million. Net trade receivables swelled from $4.6 million to $13.6 million and prepayments advanced from $11.1 million to $14.5 million. However, other receivables decreased from $15.2 million to $12.9 million. Notably, receivables in non-TT currency doubled from $1.3 million to $2.6 million.
Current amounts from related parties dropped from $30.3 million to zero while cash and cash equivalents fell from $114 million to $104 million. The acquisition of Highway Properties and greater capital expenditure helped narrow that balance.
Liabilities fall
Total liabilities decreased by 7.2 per cent from $569.7 million to $528.7 million.
Borrowings rose from $49.1 million to $58.9 million with the current portion decreasing from $11.8 million to $7.2 million while the non-current element climbed from $37.3 million to $51.7 million.
Notably, debt denominated in US dollars fell from $15.2 million to $13.8 million.
Lease liabilities declined from $292.5 million to $269.5 million with the current portion decreasing from $32 million to $30 million while the non-current element fell from $260.5 million to $239.5 million.
Current trade and other payables decreased from $215.9 million to $176.7 million. Here, accruals climbed from $12.8 million to $57.3 million. Conversely, payroll taxes and other benefits withered from $18 million to $0.34 million while trade payables fell from $170.3 million to $106.3 million and stockbased compensation decreased from $14.8 million to $12.8 million. The only non-current payable was for stock-based compensation, which was unchanged at $0.293 million.
Amounts due to related parties climbed from $4.3 million to $11.67 million. Further, current tax liabilities advanced from $7.6 million to $11.6 million.
Equity expands
Total shareholders’ equity improved from $332.6 million to $374.5 million.
Retained earnings grew from $281.3 million to $319.67million. The current year’s profit of $66.5 million lifted the brought forward figure while dividends of $28.2 million restricted the closing balance.
Other reserves advanced from $37 million to $40.6 million. The gain on land revaluation contributed $4.15 million, however, currency translation differences clawed back $0.63 million.
The sale of treasury shares lowered that balance from $9.587 million to $9.557 million, however, share capital remained at $23.76 million. Further, the year-end number of shares outstanding increased from 61,310,319 to 61,315,724; consequently, the book value per share improved from $5.42 to $6.10.
Revenue and profit
Gross revenue grew by 1.6 per cent from $1.329 billion to $1.350 billion. However, the cost of sales increased by only 0.40 per cent from $893.2 million to $897.6 million and the gross profit advanced by 3.81 per cent from $436 million to $452.6 million. Those numbers reveal that the gross profit margin improved from 32.80 to 33.52 per cent.
As the table shows, the overseas operations, which entirely includes restaurants under the casual dining segment (TGI Fridays and Starbucks), experience higher gross profit margins. Locally, fiercer competition in the quick service category, tends to compress profit margins.
Included in the cost of sales was the cost of inventories, which declined from $594.5 million to $562.7 million.
Next, other operating expenses increased from $229.5 million to $235.9 million; included in that category was depreciation expense of $35 million (2023: $32.1 million).
Further, administrative expenses fell from $105.7 million to $98.8 million. Contributing to that decline was the write-down of inventories, which dropped from $4.4 million to $1.5 million, however, allocated depreciation expenses climbed from $4.4 million to $6.6 million.
After cost of sales, the largest cost item is employee benefit expense, which advanced from $225.2 million to $247.9 million. Also, with greater assets in place, total depreciation and amortisation expense rose from $78.3 million to $81 million. Further, royalties increased from $81.9 million to $88.6 million
while repairs and maintenance surged from $33.5 million to $49.3 million.
Helping to reduce the overall expense picture was foreign exchange gain or loss, which improved from a loss of $3.1 million to a gain of $1.76 million. Also, the profit on the disposal of fixed assets climbed from $0.35 million to $1.3 million, while other expenses fell from $97 million to $80.9 million.
Other operating income decreased from $0.92 million to $0.73 million. Here, lease rental income was unchanged at $0.62 million, however, “miscellaneous income” dropped from $301,667 to $112,588.
Those changes saw the operating profit improve by 16.5 per cent from $101.8 million to $118.6 million. Finance costs eased from $18.22 million to $18.16 million. In line with higher debt, interest on bank loans rose from $2.77 million to $3.92 million while interest on leases fell from $15.44 million to $14.23 million. Those movements resulted in an expanded pre-tax profit of $100.5 million versus $83.6 million.
Although the standard tax rate remained at 30 per cent, the effective tax rate rose from 33.07 to 33.77 per cent and the tax expense expanded from $27.63 million to $33.93 million. Mainly, expenses not deductible for tax purposes surged from $3.92 million to $29.73 million, conversely, allowable tax expenses jumped from $0.76 million to $26.9 million. Consequently, the net profit grew from $55.9 million to $66.5 million.
After deducting the results attributable to minority interests (Guyanese operations), the net profit attributable to shareholders advanced from $55.9 million to $66.4 million.
Those results reveal current basic EPS of $1.08 versus $0.91.
Segment comments
Local sales increased by 0.8 per cent while, assisted by lower cost of sales, gross profit advanced by 3.5 per cent and pre-tax profit climbed by 23.7 per cent.
Its overseas business in Jamaica (TGIF) and Guyana (Starbucks) saw revenue climb by 28.2 per cent, however, impacted by higher cost of sales, gross profit rose by only 12.2 per cent and the pre-tax result halved. As noted earlier, margins are significantly greater in the overseas operations.
The quick service restaurant category includes KFC and Subway franchises. This grouping saw revenue edge up from $981.5 million to $985.4 million. However, the casual dining category, which includes TGIF, Starbucks and Pizza Hut outlets, grew revenues by 4.9 per cent from $347.7 million to $364.7 million.
In the current year, another TGI Fridays restaurant is planned for Jamaica and a new Starbucks outlet is scheduled to be opened in Guyana.
Q1 results
For the three months ended February 2025, PHL saw revenue increase by 0.5 per cent from $341.5 million to $343.1 million. However, the cost of sales advanced by 0.676 per cent from $225.7 million to $227.3 million; consequently, the gross profit improved by only 0.13 per cent from $115.7 million to $115.9 million.
Fortunately, boosted by the absence of non-recurring costs relating to inventory and employee costs, total expenses declined. Here, administrative expenses dropped from $36.9 million to $29 million. However, other operating expenses edged up from $59.3 million to $60.2 million. Further, finance costs fell from $4.62 million to $4.28 million. These changes progressed to a more robust profit attributable to shareholders of $15.65 million versus $9.88 million, which showed a 58.3 per cent improvement.
Consequently, period EPS advanced from 16 cents to 25.5 cents. Further, total assets expanded to $917.2 million while shareholders’ equity grew to $390.4 million;
consequently, the book value per share advanced to $6.37.
Shareholders’ returns
Over its fiscal year, PHL’s share price on the TTSE advanced by 10.68 per cent from $10.21 to $11.30 as of November 30, 2024. This year, the price closed as low as $10.11 on January 31 but ended at $10.61 on May 14. In line with higher profit, annual dividends improved from 45 cents to 52 cents.
The last price of $10.61 gives investors a yield of 4.90 per cent and reveals a premium of $4.24 or 66.6 per cent to its February 2025 book value of $6.37. Further, using trailing EPS of $1.175, it exhibits a modest P/E multiple of 9.03.
In the next article we will review the 2024 results of ANSA Merchant Bank Ltd.
