Johannesburg - Taste Holdings, which recently brought Starbucks to SA, has paid a hefty price for its expansion strategy as it reversed its previous profitable position.
The group, which grew revenue 41 percent to just top the R1 billion mark in the year to February, reported a headline loss or R60 million, a 489 percent reversal of its previous profitable position of R15.4 million.
This translated into a headline loss per share of of 19.2 cents compared with the 6.8c it reported last year.
CEO Carlo Gonzaga says “the last two years have undoubtedly been transformative for the group”.
He notes the company is in the midst of an “ambitious” five-year growth plan focused on licencing global brands, boosting sales, buying back franchised outlets and supporting all this through a leveraged shared service and vertically integrated platform.
“As we reflect on our progress against this strategy, 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.
"In 24 ‘short’ months we have become the licensees of the worlds’ leading pizza delivery and ecommerce 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 – being stewards of brands like Rolex, Hublot, Omega, Breitling, TAG Heuer, Longines and Rado, more recently also representing Cartier, IWC and Montblanc in selected outlets.
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“The Zebro’s Chicken acquisition complemented our established presence of The Fish & Chip Co among lower income consumers, and our vertical integration platform has scaled significantly through the establishment of dough production and a world class distribution facility that has been vetted by our international licence partners.”
Gonzaga notes this sort of ambitious growth is usually the domain of unlisted companies, which are not in the public eye, and Taste now has to unlock the value behind these deals.
“The short-term financial scoreboard will show that these opportunities have not come, and will not come, without their lessons, often earned in sweat and ultimately reflected in our short-term earnings. Having now secured multiple long term drivers of earnings we have entered a period of inward focus to unlock the value these opportunities hold.”
Stripping out its expansionary costs, core headline earnings only declined 87 percent to R4.7 million compared with R36 million a year ago.
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This translates into core headline earnings 91 percent lower at 1.5 c.
In a statement issued to shareholders on Wednesday, the company explains its core earnings measure is used to evaluate operating performance.
The measure strips out the cost of starting up Domino’s and Starbucks in SA, and other once-off costs and revenues.
During the past 16 months, the company - which started out owning Scooters Pizza and Maxis before buying Natal Wholesale Jewellers, opened 74 Domino’s stores, which includes some Scooters it converted.
In the past financial year, it also integrated Arthur Kaplan and World’s Finest Watches into its portfolio.
Its operating costs grew 93 percent to R488.7 million.
Taste’s share price lost 8.16 percent to trade at R225 by noon.
IOL