TAS
TAS
TAS - Taste - Abridged Audited Financial Results: year ended 28 February 2007
Taste Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2000/002239/06)
(JSE code: TAS ISIN: ZAE000081162)
("Taste" or "the company" or "the group")
Highlights
* Revenue up 41%
* Attributable earnings up 196% to R8,4
million
* Earnings per share up 157%
* Headline earnings per share up 120%
* Net tangible asset value per share up
over 100%
* System-wide sales increased 36%
ABRIDGED AUDITED FINANCIAL RESULTS
FOR THE YEAR ENDED 28 FEBRUARY 2007
CONSOLIDATED INCOME STATEMENTS
Year ended Year ended
28 February 28 February
2007 2006
Audited Audited
R`000 R`000
Revenue 29 507 20 916
Gross profit 28 105 19 900
Other income 927 446
Operating costs (18 152) (15 536)
Earnings before interest, taxation, 10 880 4 810
depreciation and amortisation
("EBITDA")
Depreciation (231) (392)
Profit before interest and taxation 10 649 4 418
Net interest received/(paid) 1 146 (545)
Profit before taxation 11 795 3 873
Taxation (3 381) (1 025)
Profit after taxation 8 414 2 848
Minority interests 3 (1)
Earnings attributable to ordinary 8 417 2 847
shareholders
Reconciliation of headline earnings:
Earnings attributable to ordinary 8 417 2 847
shareholders
Adjusted for:
Restructuring costs - 313
Profit on sale of property, plant and (633) (190)
equipment
Headline earnings attributable to 7 784 2 970
ordinary shareholders
Weighted average shares in issue on 117 260 100 000
which earnings per share are based
(`000) (1)
Shares in issue at year-end (`000) 125 000 100 000
Earnings per share (cents) 7.2 2.8
Headline earnings per share (cents) 6.6 3.0
Note:
Weighted average shares in issue for 28 February 2006 is based on the
conversion of 64 110 ordinary shares in issue to 100 000 000 ordinary shares in
issue.
CONSOLIDATED BALANCE SHEETS
28 February 28 February
2007 2006
Audited Audited
R`000 R`000
ASSETS
Non-current assets 16 350 17 118
Property, plant and equipment 296 1 299
Intangible assets 14 760 14 760
Deferred lease charges 315 -
Deferred taxation 516 818
Loans receivable 463 241
Current assets 32 693 10 879
Inventories - 78
Trade and other receivables 5 174 4 425
Shareholder`s loan 89 79
Loans receivable 198 -
Bank balances 27 232 6 297
Total assets 49 043 27 997
EQUITY AND LIABILITIES
Capital and reserves 34 866 1 375
Issued capital 1 1
Distributable reserves 9 757 1 340
Share premium 25 077 -
Minority interest in subsidiaries 31 34
Non-current liabilities
Borrowings 895 3 070
Current liabilities 13 282 23 552
Shareholders` loans - 10 325
Taxation 3 047 869
Trade and other payables 7 855 9 863
Current portion of borrowings 2 380 2 495
Total equity and liabilities 49 043 27 997
Shares in issue (`000) (1) 125 000 100 000
Net asset value per share (cents) 27.9 1.3
Net tangible asset value per share 16.1 (13.4)
(cents)
Note:
Shares in issue for 28 February 2006 is based on the conversion of 64 110
ordinary shares in issue to 100 000 000 ordinary shares in issue.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Share Share Total Retained Total Minority Total
capital premium share income R`000 interests equity
R`000 R`000 capital R`000 R`000 R`000
R`000
Balance 1 1 - 1 (1 507) (1 506) 34 (1 472)
March 2005
Changes in
equity
Profit for - - - 2 847 2 847 - 2 847
year
Balance 1 1 - 1 1 340 1 341 34 1 375
March 2006
Changes in - 25 077 25 077 - 25 077 - 25 077
equity
Share
premium
Profit for - - - 8 417 8 417 (3) 8 414
year
Balance at 1 25 077 25 078 9 757 34 835 31 34 866
28 February
2007
CONSOLIDATED CASH FLOW STATEMENTS
Year ended Year ended
28 February 28 February
2007 2006
Audited Audited
R`000 R`000
Cash flow from operating activities 7 239 8 483
Cash generated by operating activities 6 995 9 195
Net interest received/(paid) 1 146 (545)
Taxation paid (902) (167)
Cash flows from investing activities 1 244 (15 001)
Property, plant and equipment acquired (151) (1 542)
Proceeds on disposals of property, 1 815 1 301
plant and equipment
Loans advanced (420) -
Intangible assets acquired - (14 760)
Cash flows from financing activities 12 452 9 546
Share premium 25 077 -
Loans raised - 13 612
Loans repaid (12 625) (4 066)
Change in cash and cash equivalents 20 935 3 028
Cash and cash equivalents at beginning 6 297 3 269
of year
Cash and cash equivalents at end of 27 232 6 297
year
OVERVIEW
The directors of Taste have pleasure in presenting the audited year-end results
for the 12 months ended 28 February 2007. Taste listed as the first food
franchising company on the Alternative Exchange ("ALTX") of the JSE Limited, on
21 June 2006. The company`s primary business is the franchising of trademarks
in the Quick Service Restaurant ("QSR") and fast-food sectors, currently
through its MAXI`S and Scooters Pizza brands.
The board is pleased to announce that Taste has delivered better than expected
results since listing in June 2006, exceeding prospectus forecasts,
predominantly through the organic growth of its brands. Revenue, at R29,5
million, showed an increase of 41% from the previous year. EBITDA improved by
126% to R10,9 million, with an increase in operating margins from 23% in 2006
to 37% in 2007. Attributable earnings increased 196% to R8,4 million and
headline earnings per share increased by 120% to 6.6 cents per share for the
year under review.
As no acquisitions were made during this year, the strong performance can be
attributed to a combination of organic growth from the existing brands and a
substantial improvement in the operating margins from the previous year. The
change in operating margin is primarily a function of reaching the economies of
scale that are achievable as the franchise system grows and the disposal of
company-owned stores. The group`s total store base increased 24% from 119
outlets to 147, positioning the group well to benefit from the favourable
trading conditions within the sectors in which its brands operate.
TASTE`S BRANDS
System-wide sales increased for both the Scooters Pizza and MAXI`S brands as
well as like-on-like sales, which excludes sales from new stores. Across the
network the group`s system-wide sales increased 36% from the previous period.
These increases represent volume increases as both brands had sub-inflationary
menu price increases, consistent with the value positioning of both brands.
As the marketing funds are based on a percentage of system-wide sales, this
sales growth has increased the size of the marketing funds for the coming year.
This will allow the brands to aggressively increase awareness and drive organic
growth.
Scooters Pizza`s continued focus on being the leading pizza delivery chain, and
a leader in innovation saw the chain being voted the prestigious accolade of
"Best Pizza in Johannesburg 2006", as well as being a finalist in the Franchise
Association of Southern Africa`s "Brand Builder of the Year" award, an award it
has won twice previously. The year saw the brand gain significant market share
in its territories through a focused strategy of improved service and product
innovation. Value continues to be a key driver in this sector and the brand`s
pricing model is well-suited to the current inflationary environment.
MAXI`S Restaurants, the brand acquired in April 2005, underwent an extensive
revamp during 2006, with a number of areas of the business seeing renovation
and improvement. An updated store design was introduced during the year, as
well as the opening of the first Halaal outlet catering for the large Muslim
market. An aggressive new product strategy during the year capitalised on the
demand from afternoon and dinner consumers seeking value, while still building
on the brands` core business of breakfast and lunch. After joining the team in
January 2007, Christo Calitz, the previous CEO of Pleasure Foods (which
incorporated the Wimpy brand), was appointed in the dual role of Group
Marketing Executive and Managing Director of MAXI`S. Christo brings with him a
wealth of experience in the industry, which, together with investment in the
brand, positions MAXI`S well to meet future growth expectations.
FINANCIAL RESULTS
For the year to 28 February 2007, revenues increased as expected by 41% to
R29,5 million (2006: R20,9 million). Operating margins improved from 23% in
February 2006 to 37% in February 2007. This has primarily been the result of
the move to a pure franchising model and the achievement of the economies of
scale inherent in a franchising model, which the company has strategically
targeted during the year. EBITDA increased 126% to R10,9 million (2006: R4,8
million) for the year under review.
Headline earnings increased 162% from the previous period to R7,8 million
(2006: R2,9 million), and attributable earnings increased 196% from the
previous period to R8,4 million (2006: R2,8 million). Headline earnings per
share increased 120% to 6.6 cents (2006: 3.0 cents).
The nature of the company`s business model is such that trade and other
payables, which include advertising and new store development creditors, may
fluctuate significantly in the short to medium term, depending on the number
and timing of new stores opened and the company`s monthly commitments to
advertising spend. The effect of this can be seen in the lower operating cash
flow in this year, despite much stronger cash generation from the core
franchising activities.
BASIS OF PREPARATION OF THE AUDITED RESULTS
Statement of compliance
The abridged financial statements comprise a consolidated balance sheet at 28
February 2007, a consolidated income statement, consolidated statement of
changes in equity and summarised consolidated cash flow statement for the year
ended 28 February 2007. The abridged financial statements have been prepared
in accordance with the recognition and measurement criteria of International
Financial Reporting Standards ("IFRS") and the presentation and disclosure
requirements of IAS 34, Interim Financial Reporting.
The basis of preparation is consistent with the prior comparative year.
The abridged financial statements were approved by the board of directors on 24
April 2007.
Basis of measurement
The abridged financial statements have been prepared on the historic cost basis
except for certain financial instruments measured at fair value.
AUDITORS` REPORT
BDO Spencer Steward (Jhb) Inc`s. unqualified auditors` report on the abridged
financial statements contained in this report are available for inspection at
the company`s registered office.
PROSPECTS
The continued growth of the consumer markets in which the Taste brands operate
augurs well for the 2008 financial year. The number of time-starved, value
conscious consumers continues to grow which, together with the emerging middle
class, is driving the current growth in the segment. Taste`s brands are well-
positioned within this sector as both brands have very strong family and value
propositions.
The sales growth and associated increase in marketing funds will allow the
brands to further increase awareness and penetrate new markets. The
availability of sites and demand from franchisees continues to be strong, which
combined with the increased marketing funds, has established a solid platform
for organic growth of the brands in the future.
During the last year Taste invested in systems and in building internal
capacity to acquire a third brand in the medium term. Combined with the
company`s strong cash position and low debt levels, it is well positioned for a
successful acquisition. There are also opportunities to acquire and convert
sites into the existing brands. The launch of the Scooters Pizza next
generation outlet in March 2007 has positioned the brand to be able to target
new markets in which it currently does not trade.
CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary announcement dated 26 April 2007
and are advised that Taste has entered into negotiations, which if successfully
concluded may have a material effect on the price of the company`s securities.
Accordingly, shareholders are advised to exercise caution when dealing in the
company`s securities until a full announcement is made.
SHARE CAPITAL
In terms of the detailed prospectus of Taste, dated 7 June 2006, the trustees
of the Share Incentive Trust have the power to grant 2 500 000 shares at 90
cents per share, to certain executives and key management on the achievement of
headline earnings per share for the financial year ended 28 February 2007.
Employees have accepted 2 500 000 ordinary shares that were offered by the
Share Incentive Trust.
DIVIDEND POLICY
In line with the company`s growth strategy, no dividend was declared for the
year.
On behalf of the Board
C F Gonzaga
Chief Executive Officer
D J Crosson
Chief Financial Officer
3 May 2007
CORPORATE INFORMATION
Non-executive directors:
R L Daly (Chairperson), T D Edwards, K Utian, J B Currie
Executive directors:
C F Gonzaga (CEO), D J Crosson (CFO), L Gonzaga, L S Minnaar
Registration number: 2000/002239/06
Registered address: 2nd Floor, The Wanderers, The Campus, 57 Sloane Street,
Bryanston, 2191
Postal address: PO Box 7833, Sandton City, 2146
Company secretary: D J Crosson
Telephone: (011) 575 1400
Facsimile: (011) 576 1465
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited
Designated Adviser: Exchange Sponsors (Pty) Limited
These results and an overview of Taste are available at www.tasteholdings.co.za
Date: 03/05/2007 08:45:01 Produced by the JSE SENS Department.
