Prestige Holdings Limited - Exit from the Puerto Rico Market

Published: April 30, 2008

The following press release was received from Prestige Holdings Limited (PHL).

The Board of Directors of Prestige Holdings Limited (“the Company”) at its meeting of 23 April, 2008 took a decision to exit the Puerto Rico market. The Company entered this market in 2004, and managed the only T.G.I. FRIDAY’s restaurant in Puerto Rico to a condition of viability, before we acquired a 51% shareholding in Prestige Puerto Rico Restaurants, Inc. (“Prestige Puerto Rico”).

Since then, Prestige Puerto Rico built two additional restaurants in San Juan, but had been experiencing increasing losses in a recessionary economy that was plunged into crisis in May 2006 when the Government was shut down for two weeks due to gridlock in the Legislature over Puerto Rico’s budget. In November 2007, the Company acquired, without cash outlay, the remaining 49% shareholding in Prestige Puerto Rico, in a transaction that involved settlement by our former partner, of significant financial obligations to the business and to the Company.

Due to the worsening economic conditions in Puerto Rico, very recent further political uncertainty (the Governor and twelve of his associates were indicted by a United States Federal Grand Jury for corruption; deepening gridlock in the Legislature on fiscal reforms) and expert indicators pointing to a protracted recession, the Company decided not to consummate a new proposed Joint Venture partnership in this subsidiary that was signalled in my 2007 Chairman’s Report to Shareholders.

In reviewing the business during the first quarter and year to date, and taking into consideration our subsidiary’s and the Group’s performance during the previous two years, the Board of Directors decided to exit the Puerto Rico business to allow management to bring greater focus to the viable business units of our Group. Victor E Mouttet Limited, the Parent Company, as a means of facilitating that decision, offered to purchase our shares in Prestige Puerto Rico for the nominal sum of US$100 and the assumption of our significant obligations for Prestige Puerto Rico. Having considered all of the options available to the Company, the Board of Directors, in the absence of the Parent Company’s appointed member, who declared his interest, decided that it was in the Company’s best interest to accept that offer from the Parent for a clean break from this market.

This transaction would result in a loss of $6.1 million to the Company based upon the carrying value of this investment in our consolidated accounts at 30 November, 2007, plus subsequent advances and commitments, as well as $7.1 million of estimated net operating losses incurred by Prestige Puerto Rico for the five months to April, 2008 as a wholly-owned subsidiary. We have made advance provision for these losses in the unaudited financial statements for the quarter ended 29 February, 2008.

Joseph P. Esau
Chairman
28 April 2008


Source:The Trinidad and Tobago Stock Exchange Taken from: http://www.wisett.com/home/news.php?id=1017

Prestige Holdings loses $7.3 million

Published: April 29, 2008

Prestige Holdings Ltd has declared an after tax loss of $7.3 million (actually $7,344,000) for the first quarter ending February 2008.

The company has also sold off its loss-making businesses in Puerto Rico.

Prestige Holdings Ltd is the parent company of a number of well-known restaurant chains, including Kentucky Fried Chicken (KFC), Pizza Hut, TGI Friday’s and Long John Silver’s.

The first quarter loss was fully anticipated. In published accounts, chairman Joseph Esau said the group expected a fall in earnings due to its losses in Puerto Rico and “initial cost challenges” in the TGI Friday’s business in Barbados as well as “higher than expected” inflation in T&T.

Esau said group sales increased by 18 per cent to $176.4 million, and profit after tax declined by 24 per cent to $5.5 million excluding the Puerto Rico operations, compared with the first quarter last year. Esau said after mounting losses and a poor business outlook, Prestige Holdings decided to shut down its businesses in Puerto Rico.

Esau said that because of “worsening economic conditions” and expert opinion that the island was headed for a “protracted recession,” the board “decided not to consumate a new proposed joint venture and to get out of Puerto Rico in order to concentrate on developing the company’s other viable businesses.

The Puerto Rico businesses along with what the statement said were ‘significant obligations” were sold to Victor E Mouttet Limited, parent company of Prestige Holdings Limited, at a nominal price of US$100.

Esau said the decision was taken in the absence of the Victor E Mouttet representative on the Prestige Holdings board, who declared his interest in the transaction and left the meeting which was held on April 23.

In the process, Prestige Holdings Limited will take a loss of $6.1 million.

The company said it entered the Puerto Rican market in 2004.

Commenting on the T&T operations of Prestige Holdings Limited, Esau said the labour shortage in the country continues to be a major problem, especially during peak periods. He said this was a “constraint on sales levels.” He also said that inflation had had a “negative impact” on earnings for the quarter.

Despite this, Esau said the group had “achieved reasonable top line growth in all brands, particularly KFC and Pizza Hut.” He added that the company had increased prices “judiciously” to compensate for higher food prices and expected improved performance in the second quarter.

Esau said Prestige Holdings’ businesses in the Dominican Republic and Jamaica are producing profits while the TGI Friday’s restaurant in Barbados is still experiencing supply chain and other cost challenges.

Source:
Trinidad Guardian Newspapers
http://www.guardian.co.tt/business2.html