Profit up at Prestige

Prestige Holdings with its KFC, Subway, TGI Fridays and Pizza Hut franchises reported improved results for the first twelve months of the fiscal year ending November 2014, but from revenues that were virtually flat.
Cost containment below that of 2013 also helped with the improvement in the profit out turn. Group revenue increased by 2 percent for the year to TT$922 million but declined 3 percent in the last quarter to $224 million. Profit after tax increased by 39 percent for the year to $50 million but declined by 98 percent to $101,000 in the November quarter. In 2013, the company wrote off its investment in TGI Friday operations in Barbados and was hit with an $8.7 million one off charge to profit, as a result.
The company faces cost and service quality problems in Trinidad where it has its main operation due to labour shortage in that country. Looking ahead the company has 110 restaurants outlets with one in Jamaica, room for expansion may be limited in the medium term thus negating the attractiveness of the stock as an attractive investment at this stage.
At the end of the fiscal year, Prestige had equity of $231 million and borrowing of $123 million and cash funds of $57 million. The stock sells for a PE of 12 times 2014 earnings and is likely to have limited upside potential, especially with interest rates on the rise in Trinidad.