- Earnings: Earnings Per Share increased 290.6% to $0.125
- Performance Drivers:
- Improved Revenues
- Lower Finance Costs
- Higher Margins
- Cooling inflationary pressures
- Increased economic activity
- Rating: Maintained at MARKETWEIGHT
- Earnings: Earnings Per Share fell 7.8% to $0.71 from $0.77
- Performance Drivers:
- Robust Revenues
- Lower Margins
- Increased economic activity
Rating: Maintained at UNDERWEIGHT
This week, we at Bourse review the financial performance of Prestige Holdings Limited (PHL) for its first quarter ended 28th February 2023 and Angostura Holdings Limited (AHL) for its financial year ended 31st December 2022. PHL’s performance benefitted from higher revenues with an uptick in economic activity, while AHL’s profitability was affected by higher production costs. As the economy regains momentum, what can investors anticipate in the upcoming months? We discuss below.
Prestige Holdings Limited (PHL)
Prestige Holdings Limited (PHL) reported a Diluted Earnings per Share (EPS) of $0.13 for the first quarter ended February 28th, 2023, a significant 290.6% increase from $0.03 reported in Q12022. Revenue advanced 25.6%, from a previous $246.5M in Q12022 to $309.5M in the current period. Despite a 26.9% increase in cost of sales, Gross Profit rose 22.8% from the prior period to $95.6M. Other Operating Expenses and Administrative expenses increased 9.2% and 43.4% respectively. Other income decreased 33% to $2.6M. Resultantly, PHL reported Operating Profit of $16.2M in Q12023 relative to $10.6M in the prior comparable period, a 53.3% improvement. Finance Costs fell 2.1% to stand at $4.6M. The Group recorded a Profit Before Tax (PBT) of $11.6M, a 98% increase relative to the Profit Before Tax of $5.8M recorded in Q12022. Overall, PHL reported Profit Attributable to Owners of the Parent Company of $7.8M, rising 289.0% from $2.0M in the prior comparable period.
PHL’s total revenue advanced to $309M in Q12023 from $246M in Q12022, continuing on an upward trend since the Group’s most heavily COVID-affected period. Revenue growth was 25.6% quarter-over-quarter, likely benefitting from the return of Carnival and associated seasonal activities. The Group expects improved results in 2023 through physical expansion with the recent opening of two new restaurants.
PHL anticipates a total of 5 new locations to be opened in Trinidad and Tobago in 2023, having already opened two in the first quarter. The Group is also expected to open its first Starbucks restaurant in Guyana in April 2023.
Despite a slight decline in PHL’s Gross Profit Margin from 31.6% in Q12022 to 30.9 % in Q12023, the Group’s profitability margins generally improved. Operating Profit Margin moved from 4.3% to 5.2 % in Q12023, supported by seasonal activity in the first quarter. This would have filtered into its Profit Before Tax (PBT) margin, improving from 2.4% in Q12022 to 3.7% in Q12023.
The Bourse View
PHL trades at a current market price of $8.11, up 29.1% year-to-date and trades at a P/E ratio of 12.3 times, lower than the Trading sector average of 11.3 times. The Group announced a final dividend of $0.20 to be paid on May 15th 2023 to shareholders on record as at April 13th, 2023. The stock offers investors a trailing dividend yield of 4.0%, above the sector average of 3.1%. While inflationary pressures could pressure margins from both sales and input cost perspectives, PHL continues to be navigate the current environment relatively well. Margins could further improve, with recent inflation data pointing to lower input costs on the horizon. On the basis of recovering profitability and relatively attractive dividend yields, tempered by current inflationary pressures, Bourse maintains a MARKETWEIGHT rating on PHL.
Angostura Holdings Limited (AHL)
AHL reported an Earnings per Share (EPS) of $0.71 for the period ended 31st December 2022 (FY2022), a 7.8% fall relative to the $0.77 reported in the prior comparable period.
Revenue for the period was reported as $1.03B, advancing 11.8% from $921.6M recorded in FY2021. The Group noted that this achievement represented the highest recorded sales in its history. Cost of Goods Sold increased 13.0% to $552.5M from $488.9M. Resultantly, Gross Profit advanced 10.3% to $477.4M. Selling and Marketing Expenses advanced 17.6% to $180.3M in FY2022 relative to $153.3M in FY2021. Administrative Expenses stood at $102.7M, up 17.9% from the prior period. AHL reported an Expected credit loss of $7.4M in FY2022 relative to an expected writeback of $6.4M in FY2021. Results from Operating Activities stood at $184.2M, a 7.7% decline compared to $199.6M reported in FY2021. Finance Income increased 33.5% to $21.4M (FY2021: 16.0M) while Finance Costs climbed 36.4% to $1.7M (FY2021: $1.2M). Group Profit Before Tax for the period contracted 4.9% from $214.5M to $204.0M. Taxation expense increased 4.6% to $58.8M from $56.2M, with the effective tax rate moving from 26.2% in FY2021 to 28.8% in FY2022. Overall, AHL recorded a Profit for the Period of $145.2M, 8.3% lower than a previous $158.3M.
The Rum and Bitters manufacturer reported revenue growth of 11.8% in FY2022. According to the Group, improved revenues were driven by growth in the international market, contributing 60.0% of total revenues due to increased demand of Angostura Bitters in North America and EMEAA (Europe, Middle East, Africa and Asia). Locally, growth was driven by an uptick in rum sales and the Group’s imported portfolio as economic activity continues to gain momentum.
Higher Expenses Compress Margins
Notwithstanding increased revenues, Group performance continued to be impacted by increased raw material prices and supply chain challenges, pushing production costs upward. These factors were reflected in lower margins, with Gross Profit Margin declining to 46.4% relative to 47.0% in FY2021. Operating Profit Margin fell to 17.9% from a prior 21.7% in FY2021, weighed by a 17.6% increase in Selling and Marketing Expenses. The Group engaged in increased brand marketing expenditure, including promotions on Tamboo Spiced Rum internationally and the launch of Angostura Ginger Chill locally. Profit After Tax Margin slipped to 14.1% in FY2022 from 17.2% in FY2021.
The Bourse View
AHL is currently priced at $24.40 and trades at a trailing P/E of 34.4 times, above the combined Manufacturing Sector I&II average of 24.0 times. The Group announced a final dividend of $0.25 payable on July 31st 2023 to shareholders on record by July 12th 2023. This brings the total dividend paid by AHL to $0.35, consistent with the prior year. The stock offers investors a trailing dividend yield of 1.4%, below the sector average of 5.4% (excluding significant special dividends by other sector members, the sector ‘regular’ dividend yield stands at 2.9%).
The Group is poised to additionally benefit from seasonal increases in activity in its first quarter of 2023. Earnings growth, however, would likely depend on the Group’s ability to manage expenses and margins in the current inflationary environment. With inflation at the global level appearing to cool, AHL may benefit from input cost moderation in subsequent periods. On the basis of robust top-line performance, but tempered by current lower margins and relatively high valuations, Bourse maintains an UNDERWEIGHT rating on AHL.
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