Westlife Development dips 6% to hit 52-week low on disappointing Q1 results

The company's consolidated net profit more-than-halved in Q1FY20 to Rs 5.77 crore from Rs 11.6 crore in a year ago quarter.

Shares of Westlife Development slipped 6 per cent intra-day to trade at Rs 272 apiece, also its 52-week low, on the BSE on Friday after the company’s consolidated net profit more-than-halved in Q1FY20 to Rs 5.77 crore from Rs 11.6 crore in the same period in the previous fiscal.
 

The company's total revenue during the quarter grew 12 per cent at Rs 382 crore on year-on-year basis while Earnings before interest, tax, depreciation and amortization (ebitda) margins contracted 180 bps at 8.57 per cent from 10.37 per cent.

The company, which owns Hardcastle Restaurants Pvt Ltd (HRPL) -- the master franchisee of McDonald’s restaurants in West and South India, reported a Same Store Sales Growth (SSSG) of 6.7 per cent, over a high SSSG of 24 per cent same quarter, last year.

“The new accounting standard mandates replacing of fixed long term rental costs with charges for the right-to-use asset and interest accrued on lease liability. These charges result in inflated operating EBITDA and lower profits,” the company said in a press release.

In a release dated July 17, 2019, India Ratings and Research (Ind-Ra) said,"Under HRPL’s master franchise agreement with McDonald’s, the royalty percentage has been kept unchanged by McDonalds at 4 per cent until FY21. This royalty fee will increase to 4.5 per cent in FY22 and FY23. This is in contrast to the earlier royalty structure which specified a royalty rate of 5 per cent of sales in FY16, 6 per cent in FY17 and FY18, 7 per cent in FY19 and 8 per cent thereafter. Any unexpected increase in the royalty fee to McDonald’s could negatively impact the credit metrics and thereby the ratings of the company” .

The rating agency has revised HRPL’s outlook to positive from stable while affirming its long-term issuer rating at ‘IND A+’ on expectation of sustenance of HRPL’s strong credit profile driven by steady growth in profitability.

At 11:04 am, Westlife Development was trading 6 per cent lower at Rs 274 on the BSE, as compared to 0.06 per cent gain in the S&P BSE Sensex. Around 32,000 equity shares have changed hands on the counter so far, against an average 22,000 shares traded in the past two weeks on the BSE.