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Taste Holdings puts interim loss in context

Oct 12 2016 16:39
Carin Smith

Cape Town - Despite recording a R10m loss - translating into a 6.1c headline loss per share - during the interim period to August 2016, SA based management group Taste Holdings has experienced significant gains in its licensed brand strategy, it announced on Wednesday.

Group system-wide sales rose 7.4% to R858m, translating into a 15% core revenue increase to R519m. There was an additional R18m core gross margin compared to the corresponding period, a 10% hike.

Taste owns and licenses a portfolio of franchised and owned, category specialist and formula-driven quick service restaurants, coffee and luxury retail brands housed within its food and luxury goods divisions.

Taste CEO Carlo Gonzaga told Fin24 the loss must be seen in context, explaining it stems from the food division where the group rolled out the launch of the Starbucks Coffee and Domino's Pizza brands in SA.

"We expected to be in this position at this stage," he said.

He said the group is still strategically focussed on licensing leading global brands, leveraging scale among its low-cost food brands, increasing ownership of corporate-owned stores across both divisions and supporting this growth through a vertically integrated platform.

A highlights for him during the interim period was the good performance of the luxury goods business - where consumers in the upper income groups are more resilient.

The luxury goods division, the stewards of brands like Rolex, Omega, Hublot, Breitling, Rado, TAG Heuer and Longines Swiss watches and, more recently, Cartier, IWC and Montblanc watches and writing instruments, achieved same-store sales growth of 25%.

Two other highlights for him were the launching of Starbucks Coffee in the group's food business and the progress made with the conversion of Domino's Pizza outlets from Scooters Pizza and St Elmo’s Pizza outlets.

Domino’s has experienced a 17% average weekly sales rise since March, while the three Starbucks stores have traded well ahead of the original investment cases and forecasts.

"Now we can focus on the business side of Domino's. Our biggest challenge was to complete conversion of the Domino's outlets and to be operationally more efficient," said Gonzaga.

"The launching of Starbucks was a challenge, but there was an extraordinary effort from the team. Starbucks is exceeding our expectations," he said.

Looking ahead, Gozaga said the group will focus on building a pipeline for Starbucks this year and the next. It will also continue to focus on the Domino's pipeline for next year and beyond.

"As those businesses get underway, we will start to look at more expansion. We paid our school fees with Domino's and applied those lessons with Starbucks," said Gonzaga.

He praised the huge amount of support he gets from Starbucks' and Domino's international team.

Gonzaga said Taste will continue focussing inward to unlock potential opportunities as they currently also represent the best available return on capital in the market.

In line with company policy, Taste does not declare an interim dividend.

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