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Taste posts impressive earnings

Johannesburg - Taste Holdings [JSE:TAS] on Wednesday reported a 51% increase in diluted headline earnings per share of 3.0 cents for the six months ended August 31, from 2.0 cents previously.

No interim dividend was declared.

Revenue advanced 23% to R133.4m and operating profit grew 44% to R10.7m.

Taste is a South African-based management group invested in a portfolio of mostly franchised, category specialist retail brands that are represented in over 324 locations within southern Africa.

The group operates two divisions - a jewellery division under the NWJ brand and a food division under the Scooters Pizza, Maxi's and St Elmo's brands.

"When compared to the prior period the group acquired the St Elmo's Woodfired Pizza brand; made substantial progress against its vertical integration strategy; and grew system-wide sales in both its jewellery and food divisions through a combination of new stores and same-store sales growth," the company said in a statement.

"While consumer spend in the food division continues to be robust, jewellery spend has continued to be unpredictable as the jewellery segment faces the challenge of combating substantial input cost inflation," it said.

System-wide sales across the group increased 27% to R416m and EBITDA was up 35% to R14.0m.

The group's food division ended the period with 246 outlets, that, combined with continued positive same-store sales, resulted in an increase of 36% in system-wide sales to R307m.

"During the current period, the division focused on its vertical integration strategy; the conversion of St Elmo's stores to Scooters Pizza outlets in the Gauteng region; and launching the repositioned St Elmo's brand and menu," Taste said.

NWJ, which is the third-largest jewellery brand in South Africa, with 82 outlets nationally, saw five store closures during the period under review.

As the only vertically-integrated franchise jewellery chain in the country, Taste owns and operates approximately 20% of the total outlets and provides franchising and merchandising services to its franchise network.

It also manufactures certain products sold by the NWJ outlets while sourcing and distributing the items not manufactured by its manufacturing facility.

System-wide sales increased 7.9% to R109m with same-store sales remaining marginally positive.

The 17 company-owned retail outlets performed well with same-store sales growth exceeding 14% for the six months.

"The greatest challenge this division faced during the current period was managing the increasing price of gold and the impact this had on gross margin maintenance, especially in the context of price-sensitive consumers," the company said.

Looking ahead, Taste said it anticipated that it would continue to grow the contribution of its food division as well as maintain current growth rates within the food brands in the near term.

"Management is evaluating potential acquisitions in the food division as well as the implementation of a distribution capability," it added.
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