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Cape Town – South Africa’s Starbucks owner Taste Holdings’ ambitious plans to fund the company's expansion and the implementation of a corporate store ownership strategy saw year-end profits dive in 2016.
Increased borrowings and additional shares in issue and a depreciation increase caused by the corporate store ownership strategy saw core headline earnings per share decline 91% to 1.5 cents from 16.1 cents in 2015.
In its final results for the year ended February 29, Taste said group sales increased 9% to R1.72bn, while revenue increased by 41% to R1.01bn.
Taste [JSE:TAS] share price dropped almost 20% before retreating to trade down 11.84% at R2.16 by 10:29.
Core gross profit margin increased to 40.6% (2015: 39.6%), while EBITDA decreased 35% due to the start-up of the corporate store ownership programme in the food division.
Its highlights for the year include establishing 74 Domino's Pizza stores in 16 months, securing exclusive rights to develop Starbucks outlets in South Africa, and successfully integrating Arthur Kaplan and World's Finest Watches.
Taste Holdings CEO Carlo Gonzaga said the last two years have been transformative for the group.
“We spoke to an ambitious five-year growth plan that was strategically focused on licensing leading global brands in our existing segments; increasing scale and leverage in our low cost food brands; increasing ownership of corporate stores; and supporting this growth through a leveraged shared service and vertically integrated platform.
“I have never felt more privileged to lead such an exceptional team of partners who continue to drive the growth agenda, often in the face of scepticism and contrary to popular thinking,” he said.
“In 24 ‘short' months we have become the licensees of the worlds' leading pizza delivery and e-commerce brand - Domino's Pizza; the world's leading coffee roaster and retailer - Starbucks Coffee; and are the leading retailer (by number of outlets) of luxury Swiss watches.”
Our human capital has re-aligned to meet the demands of this growth and the quality of leadership in our divisions has materially improved, especially during the last year. Lastly, we embarked on an aggressive corporate store ownership strategy in our Food Division, through Domino's and more recently Starbucks.
“A fundamental enabler of this strategy has been restructuring our access to capital through a combination of continued support from shareholders and our newly established R1 billion Domestic Medium Term Note programme,” he said.
“These last two years have seen us focus much of our energy outward as we pursued the opportunities above and made the structural changes to leverage them.”
