TGI Fridays profit swings to $17-million loss
Prestige writes off goodwill on Subway TrinidadSunday, March 07, 2021
BY DAVID ROSE
Unlike the prior financial year (FY) where TGI Fridays Jamaica generated a TT $1.3-million ($28.9 million) profit, the novel coronavirus pandemic sent its earnings far south as revenue fell by 48 per cent to TT $9.4 million and generated a net loss of TT $771,296 ($17.1 million) for the 2020 FY ending November 30, 2020.
The casual dining restaurant, which operates in the well-known Kingston 6 area, had a tumultuous year which ranged from being closed from April to June, a damaged roof, to shifting curfews. Even with all of these events, TGI didn't lay off any member of staff in the FY as noted by Marlon Danglade, who is the chief financial officer of Trinidadian parent company Prestige Holdings Limited.
As highlighted by the segmented financials, TGI had operating loss of TT $828,546 with the Jamaican subsidiary taking out financing (loans) during the year to support its passage through the storm. Financing costs came up to TT $222,0831 ($4.9 million), which is new for the company that hadn't utilised any form of debt in nearly a decade. Although there wasn't any separation of details for the balance sheet, the other segment of the balance sheet saw a 33 per cent expansion in total assets to TT $10.7 million ($236.6 million) with total liabilities climbing by 49 per cent to TT $10.6 million. This was mainly due to the implementation of IFRS 16 (International Financial Reporting Standards) which adds a right of use asset and lease liability that is amortised over the life of long-term leases.
PRESTIGE WRITES DOWN GOODWILL OF SUBWAY BRAND
Prestige Holdings didn't have a less difficult FY as its revenue base shrunk by 19 per cent to TT $896.9 million ($19.9 billion) with the TT $18.6-million impairment provision on its Subway brand leading to a loss of TT $17.7 million. Without this impairment, the adjusted net profit would have come up to TT $885,048 which still represents a 98 per cent drop from the TT $35.8 million ($793.1 million) in the 2019 FY.
The Subway business, which was acquired in 2011, composed of 45 restaurants spread across the twin island republic, still has a TT $40.8-million intangible asset provision relating to the franchise agreements Prestige owns. Despite writing down the goodwill, the audited notes stated, “Management's focus given the current economic conditions will be to continue on maximising operational efficiencies and growing the e-commerce aspect of the business, aimed in particular at the delivery, drive-thru and curbside channels. Revenue is expected to make a full recovery in year two with projected growth going forward.”
Revenue for the company's overall Trinidadian operations declined by 19 per cent to TT $887.5 million with the core quick service restaurant segment taking a similar decline to TT $707.7 million, while the casual dining segment dropped by 22 per cent to TT $189.2 million. Prestiges's effective control of cost of sales resulted in the 33 per cent gross profit margin being maintained albeit the fall to TT $294.8 million. Operating profit fell by 91 per cent to TT $5.5 million even with administrative and other operating expenses declining over the period.
Prestige's finance costs grew 319 per cent to TT $21.2 million as the company took out TT $31.2 million in additional borrowings mainly in the form of short-term debt. Due to the significant fall in pre-tax income, the company incurred a lower taxation charge which left it with a loss per share of TT $0.291 versus an earnings per share of TT $0.587.
Total assets rose by 73 per cent to TT $798.6 million, primarily from the inclusion of IFRS 16 which resulted in a TT $288.7 right of use asset. Total liabilities increased by 124 per cent due to the lease liability provision, while shareholder's equity declined by 6 per cent to TT $289.7 million. With relatively greater stability and confidence in the environment, Prestige's board declared a TT $0.06 (TT $3.75 million) on February 25 as dividends to shareholders.
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