Taste Holdings delves aggressively into 5-year growth plan - CNBC Africa

Taste Holdings delves aggressively into 5-year growth plan

Earnings

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Taste takes over the Zebro’s Chicken and Domino’s Pizza brands. PHOTOS: Pizza.dominos.com/Zomato.com

“The last six months saw the group embark on its ambitious five-year growth plan. This was kick-started with the acquisition of Zebro’s Chicken on 1 March 2014 and securing the exclusive Master Franchise rights for Domino’s Pizza for 30 years in seven African countries in April 2014,” commented Taste Holdings Limited on its financial results for the six months ended 31 August 2014.

The South African based management group posted a 15 per cent increase in core revenue to 302.2 million rand with core EBITDA up by 10 per cent to 23.3 million rand and core profit at 16.3 million rand

No interim dividend has been declared.

As expected, Taste’s core headline earnings decreased by 1.1 million rand to 8.8 million rand while core headline earnings per share fell by 0.8 cents to 4.3 cents due to the restructuring of its food division for Domino’s Pizza and Zebro’s Chicken.  

(READ MORE: Domino's Pizza roll-out may eat into Taste's HEPS)

As part of its growth plan, the group registered a one billion rand Domestic Medium Term Note programme with an initial issuance of 125 million rand. In September, Taste raised 180 million rand from shareholders through a rights offer.

“This capital structure will allow the group access to capital in a more predictable manner in the future and is more closely aligned with the acquisitive opportunities in the local market; the roll-out of the Domino’s Pizza conversion; and expansion opportunities in the Jewellery segment of the group,” continued the statement.

(READ MORE: S.Africa's Taste Holdings to raise rights offer)

Taste’s Fish & Chip Co, a brand for the lower income consumer, posted a 4 million rand decline in gross profit due to new store openings and the impact that an inflation hike on wild-caught hake had on sales.

“The consolidation of the food services business during the prior year has yielded expected efficiencies and consequently, savings in transport, a reduction in stock days and a lower per-kilogram cost of delivery. These continue to improve and will carry through into the next reporting period.”

Zebro’s Chicken, on the other hand, that also targets the lower income consumer market, reported double digit sales growth in the last six months.

Taste said that its confident the conversion of Scooters Pizza and St Elmo’s outlets to Domino’s Pizza stores will lead to Domino’s becoming the leading pizza delivery brand in Southern Africa over the next five years.  

“It is anticipated that there will be once-off costs relating to the initial store conversions, establishment of a centralised dough production facility and initial training and marketing. However, the benefits of being part of a global brand with an entirely re-imaged store network; increased marketing spend and the consumer interest typically shown in new global brands, will contribute positively to store sales and overall market share in the already large and growing pizza segment,” said Taste.

The group’s NWJ, South Africa’s third largest jewellery brand, delivered positive earnings although at a slower pace than prior periods due to the current consumer environment.

Corporate owned outlets increased from 26 in 2013 to 39 this year. Taste said it will embark on further expansion of corporate store ownership.

Going forward, the group added that new store openings for its fish category will be minimised while its main focus will be on growing the Domino’s Pizza brand.

(READ MORE: S.Africa's Taste Holdings revenue up 24 per cent)

“The opening of new Domino’s Pizza outlets this year and the conversion of Scooters Pizza and St Elmo’s outlets next year to this leading global brand will drive incremental sales in the growing pizza market. The judicious value accretive application of over 200 million rand of the capital that has been raised in the last six months holds similarly large opportunity for future growth for the group.”

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