Wrap Text
Starbucks, Domino’s And Arthur Kaplan Update and Trading Statement
TASTE HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 2000/002239/06)
Share code: TAS ISIN: ZAE000081162
(“Taste” or “the Group” or “the Company”)
STARBUCKS, DOMINO’S AND ARTHUR KAPLAN UPDATE AND TRADING STATEMENT
1. TRADING STATEMENT
Taste is currently finalising its results for the six months ended
31 August 2015(“the current period”).
Core Earnings
As with previous years the Group discloses core/normalised earnings. The
Group uses this core earnings measure to internally evaluate operating
performance, to evaluate itself against its peers, and to determine future
performance targets and long-range planning. Additionally, Taste believes
that stakeholders covering the Company’s financial performance also utilise
this measure. Taste will disclose this financial measure for as long as it
is relevant to stakeholders.
Anticipated core results range for the six months ended 31 August 2015
(“prior period” or “2014” refers to the six months ended 31 August 2014)
Food division Luxury goods Group
division
Core EBITDA R7.5m to R8.5m R18.5m to R19.5m R17m to R18m
(2014: R18.4m) (2014: R11.5m) (2014: R23.3m)
Core headline -R0.5m to R1m
earnings (2014: R8.8m)
Core headline -1c to 1c
earnings per (2014: 4.3c)
share
Core earnings exclude once-off costs and revenues; as well as Domino’s
upfront costs relating to the launching of the Domino’s brand in 2014; the
establishment of dough production and food distribution facilities
(including the temporary Domino’s ingredient subsidy as ingredient
suppliers and specifications are localised); and the conversion of the
Scooters Pizza and St Elmo’s stores to Domino’s stores. It is anticipated
that this adjustment in respect of Domino’s will continue during the
current financial year but will not be material to the group for the year
ended 28 February 2017.
With regard to launching and establishing the Starbucks brand in South
Africa: the group anticipates that it will incur once off investment costs
relating to initial training and travel; employment costs of a dedicated
Starbucks team well in advance of the first store opening: pre-opening
marketing & market research; and establishing IT and other infrastructure
(more fully described under in the Starbucks update below). As with
Domino’s, these costs will be excluded from core earnings and it is
anticipated that the exclusion from core earnings will not be material
beyond the year ended 28 February 2017.
In terms of the Listings Requirements of JSE Limited, companies are
required to publish a trading statement as soon as they become reasonably
certain that the financial results for the period to be reported on will
differ by more than 20% from that of the previous corresponding period.
Consequently, excluding the core adjustment detailed above the Directors
anticipate that:
- the loss per share (excluding the core earnings adjustment detailed
above) is expected to be between -10.18 cents and -10.88 cents,
representing a decrease of between 391% and 411%, compared to the
earnings per share of 3.5 cents for the prior period; and
- the headline loss per share(excluding the core earnings adjustment
detailed above) is expected to be between -10.13 cents and -10.81
cents, representing a decrease of between 394% and 414%, compared to
the headline earnings per share of 3.4 cents for the prior period.
2. DOMINO’S UPDATE
The change in core earnings in the food division when compared to the prior
period is predominantly due to the Domino’s conversion and brand
establishment, which commenced 11 months ago. Having launched the first
Domino’s store in October 2014, the brand now has 63 stores trading under
the Domino’s brand. Of the 63 outlets, 26 are corporate owned. Owning
these stores is an essential requirement of conversion and to date over
1600 people have been trained in these stores. This training requirement
has had the consequence that operational controls and efficiencies in these
corporate stores have been less than optimal and this has contributed to
the decline in food division earnings from the prior period and
consequently group earnings. We anticipate that these controls will
improve materially as the training load on these stores diminishes during
the next six months, and the stores management gains the requisite
experience. Sales in converted stores continue to be, on average, more than
60% higher than prior to conversion. The capital expenditure on the food
distribution and dough manufacturing facilities in Cape Town and
Johannesburg is now complete with both facilities having a combined
capacity to service in excess of 400 Domino’s outlets nationally in
addition to the existing outlets of the other food brands. Taste now
supplies Domino’s stores in excess of 95% of their ingredient and
consumable requirements, which has converted to approximately double the
per-store sales to stores from the distribution facility, when compared to
a Scooters Pizza outlet. As planned, Domino’s launched its online ordering
capability on 1 September, with a website, and mobile applications for iOS
and Android mobile platforms. All Domino’s stores will have this
functionality by the end of September 2015.
3. ARTHUR KAPLAN UPDATE
The Arthur Kaplan acquisition has exceeded the Company’s expectations in
both sales and profit performance since acquisition. Additionally, the
opportunities identified during the due diligence and expressed as part of
the acquisition rationale are materialising: a new premium watch and
jewellery store will be opened in April 2016, effectively increasing the
footprint by 10%, with no associated cost increase at the head office. In
the last 18 months two outlets have been refurbished and both these stores
have increased sales above expectations, in excess of 50%. Arthur Kaplan
has three refurbishments planned in the next 12 months. As expected the
Group has identified opportunities to acquire and convert independent
jewellers that operate in the same consumer segment to the Arthur Kaplan
brand.
4. STARBUCKS UPDATE
Following the announcement on 14 July 2015 wherein it was disclosed that a
subsidiary of Taste had signed an exclusive development agreement to
develop Starbucks Coffee Company (“Starbucks”) outlets in South Africa,
included below is an update on the progress:
- Market analysis has identified a conservative market opportunity of
more than 150 outlets in South Africa today. We foresee this growing
to more than 200 in five years.
- Despite this material market opportunity, Taste is, in the first 24
months, committed to launching the brand and all its elements;
building human capacity through training for future growth; and to
establishing a robust store unit economic model prior to capitalising
on the full market opportunity. Consequently, Taste envisages 12 to
15 outlets being built in the first 24 months from the first store
opening, which store is still scheduled for the first half of next
year and will be located in Gauteng.
- The response from landlords and interest in careers with Taste has
been unprecedented.
- Our initial indications are that product pricing will be aligned with
that of current premium offerings in the South African market.
- We anticipate that our first training facility will be operational in
March 2016.
The financial information on which this trading statement is based has not
been reviewed or reported on by Taste’s auditors. Taste's interim financial
results are expected to be released on SENS on or about 13 October
2015.
Johannesburg
23 September 2015
Sponsor
Merchantec Capital
Date: 23/09/2015 10:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
