| Mon 6 Oct 2008, 8:47 | | TAS - Taste Holdings - Unaudited Condensed Financial Results: Six Months |
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TAS
TAS
TAS - Taste Holdings - Unaudited Condensed Financial Results: Six Months
Ended 31 August 2008
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 95%
- EBITDA up 51%
- Headline earnings up 14%
- Normalised earnings per share up 17%
- Headline earnings per share up 7%
- Cash earnings per share up 31%
UNAUDITED CONDENSED FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 31 AUGUST 2008
CONSOLIDATED INCOME STATEMENTS
6 months 6 months 12 months
ended ended ended
31 August 31 August 29
February
2008 2007 2008
Unaudited Unaudited Audited
R`000 R`000 R`000
Revenue 31 763 16 261 33 793
Gross profit 23 328 15 547 32 327
Other income 864 35 58
Operating costs (16 593) (10 559) (20 266)
Earnings before interest, taxation, 7 599 5 023 12 119
depreciation and amortisation
("EBITDA")
Depreciation and amortisation (885) (176) (404)
Profit before interest and taxation 6 714 4 847 11 715
Negative goodwill arising on 8 435 - -
acquisition
Net interest received 628 1 138 2 421
Profit before taxation 15 777 5 985 14 136
Taxation (2 065) (1 779) (4 166)
Profit after taxation 13 712 4 206 9 970
Minority interests - - 31
Earnings attributable to ordinary 13 712 4 206 10 001
shareholders
Reconciliation of headline
earnings:
Earnings attributable to ordinary 13 712 4 206 10 001
shareholders
Adjusted for:
Negative goodwill arising on (8 435) - -
acquisition
Profit on sale of property, plant (474) (4) (20)
and equipment
Headline earnings attributable to 4 803 4 202 9 981
ordinary shareholders
Weighted average shares in issue 132 527 125 000 125 000
(`000)
Shares in issue at period end 170 161 125 000 125 000
(`000)
Earnings per share (cents) 10.3 3.4 8.0
Normalised earnings per share 4.0 3.4 8.0
Headline earnings per share (cents) 3.6 3.4 8.0
CONSOLIDATED BALANCE SHEETS
31 August 31 August 29 February
2008 2007 2008
Unaudited Unaudited Audited
R`000 R`000 R`000
ASSETS
Non-current assets 91 095 18 283 18 606
Property, plant and equipment 7 289 1 129 1 028
Intangible assets 66 814 - -
Goodwill 14 760 16 122 16 122
Deferred lease charges 1 048 439 1 004
Deferred taxation 1 184 593 452
Current assets 102 144 39 492 44 799
Inventories 54 611 53 67
Trade and other receivables 28 225 6 843 13 702
Advertising levies 3 678 1 252 1 982
Shareholder`s loan 89 89 89
Other financial assets 999 1 402 999
Bank balances 14 542 29 853 27 960
Total assets 193 239 57 775 63 405
EQUITY AND LIABILITIES
Capital and reserves 76 613 39 072 44 836
Issued capital 2 1 1
Distributable reserves 33 470 13 963 19 758
Share premium 43 141 25 077 25 077
Minority interest in subsidiaries - 31 -
Non-current liabilities 74 395 300 276
Borrowings and other payables 46 883 300 276
Deferred taxation 17 512 - -
Deferred payment 10 000 - -
Current liabilities 42 231 18 403 18 293
Taxation 4 826 4 822 1 141
Trade and other payables 32 573 11 796 16 557
Bank balances 1 220 - -
Current portion of borrowings 3 612 1 785 595
Total equity and liabilities 193 239 57 775 63 405
Net asset value per share (cents) 45.0 31.3 35.9
Tangible net asset value per share 7.4 18.4 23.0
(cents)
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 25 077 25 078 15 034 40 112 31 40 143
September
2007
Changes in - - - - - - -
equity
Profit for - - - 4 724 4 724 (31) 4 693
period
Balance 1 1 25 077 25 078 19 758 44 836 - 44 836
March 2008
Changes in 1 18 064 18 065 - 18 065 - 18 065
equity:
Issue of
shares
Profit for - - - 13 712 13 712 - 13 712
period
Balance at 2 43 141 43 143 33 470 76 613 - 76 613
31 August
2008
CONSOLIDATED CASH FLOW STATEMENTS
6 months 6 months 12 months
ended ended ended
31 August 31 August 29
February
2008 2007 2008
Unaudited Unaudited Audited
R`000 R`000 R`000
Cash flow from operating activities 8 008 7 040 6 629
Cash generated by operating 9 019 5 984 10 216
activities
Net interest received 628 1 138 2 421
Taxation paid (1 639) (82) (6 008)
Cash flows from investing (100 335) (3 229) (3 497)
activities
Property, plant and equipment (1 070) (1 025) (1 161)
acquired
Proceeds on disposals of property, 2 851 23 53
plant and equipment
Loans advanced - (741) (338)
Acquisition of subsidiary tangible (52 681) - -
net assets
Deferred lease charges (44) (124) (689)
Goodwill and intangible assets (49 391) (1 362) (1 362)
acquired
Cash flows from financing 77 689 (1 190) (2 404)
activities
Proceeds from issue of shares 18 065 - -
Loans raised 59 624 (1 190) (2 404)
Change in cash and cash equivalents (14 638) 2 621 728
Cash and cash equivalents at 27 960 27 232 27 232
beginning of period
Cash and cash equivalents at end of 13 322 29 853 27 960
period
SEGMENT REPORT
6 months 6 months 12 months
ended ended ended
31 August 31 August 29
February
% 2008 2007 2008
Unaudited Unaudited Audited
change
R`000 R`000 R`000
Gross revenue 95% 31 763 16 261 33 793
Food divisions 19% 19 368 16 261 33 793
Non-food division 12 395 - -
Operating profit 41% 6 844 4 847 11 715
Food divisions 3% 5 008 4 847 11 715
Non-food divisions 1 836 - -
Excludes amortisation of intangible assets.
Results include one month of results of the NWJ group.
OVERVIEW
The directors of Taste have pleasure in presenting the unaudited interim
financial results for the six months ended 31 August 2008 ("interim period").
Taste is a South African based management group invested in a portfolio of
mostly franchised, category specialist retail brands that are represented in
over 250 locations within South Africa.
The period under review saw the announcement and successful conclusion of the
acquisition of NWJ, a 25-year old, vertically integrated jewellery franchise.
The acquisition has expanded the growth opportunities for Taste beyond the
food sector as well as added critical mass in certain key areas of the
business.
As the NWJ transaction became unconditional on 1 August 2008, the period
under review includes the results of the NWJ group for one month.
Revenue increased 95% to R31.8 million (2007: R16.3 million), with EBIDTA
increasing 51% to R7.6 million (2007: R5 million) for the period. Headline
earnings per share ("HEPS") increased 7%, as expected, after the issue of
shares to the NWJ directors as part of the sale agreement. Half-year
earnings growth has historically been lower than full-year expectations due
to more stores being opened in the second half of the year and historically
better trading conditions in the second half of the year. This trend will
become more significant with the acquisition of NWJ which historically
performs substantially better in the second half of the year. Cash earnings
per share ("CEPS") increased as expected by 31% to 4.6 cents (2007: 3.5
cents).
TASTE`S BRANDS
All three of the groups` brands target consumers in the LSM 6-10 categories
and have strong value propositions within their segments. This latter
attribute of the groups` brands is advantageous in the as the average South
Africa consumer seeks value to counter the squeeze on disposable income. The
pressures on disposable income have seen consumers `buy down` into both the
NWJ and Maxi`s brands as a result of their strong value propositions within a
repositioned, aspirational, image. The Scooters Pizza brand operates in a
sector where growth has been driven by the macro trend of dual-income
families that are time-starved; where convenience has become a way of life
rather than an optional indulgence. Furthermore, it is a well-documented
trend that consumers buy from trusted, well-established brands, when they are
under financial pressure. All three of Taste`s brands are well established:
Scooters Pizza being the second largest pizza delivery chain in the country;
Maxi`s having been established for over 15 years, and NWJ being the fourth-
largest jewellery chain by outlets and having a 25-year history in South
Africa.
Maxi`s has gained substantial momentum and yielded positive results in the
last 12 months as a result of its renewed focus on selecting only A-grade
locations, and the re-imaging of the network to the new positioning. The re-
positioning of the brand under the hand of Christo Calitz has been accepted
by franchisees and landlords alike, with all new stores opening in the new
image. Re-imaged stores continue to experience increases in year-on-year
sales in excess of 20%, a re-affirmation that the re-positioning is relevant
to consumers. Maxi`s has signed an exclusive agreement with Caltex to
convert all the existing BJ`s sites on the national highways to Maxi`s. The
iconic bridge site over the N1 freeway in Midrand has successfully been
converted and plans are in place to convert five other sites before the
Christmas season.
Scooters Pizza has continued its aggressive growth and currently has 126
outlets nationally. The brand continues to focus on offering value to family
consumers through its special offers and the unmatched home delivery promise
of "39 minutes or it`s free". The revamping of the network is gaining
momentum with five stores scheduled to be revamped during the remainder of
the financial year, and approximately 10 new stores planned for the second
half of the year. The introduction of Pizza Alert, an SMS notification
system that alerts customers when their order leaves the store, is a first in
South Africa in the segment which, when combined with the recent introduction
of online ordering, reinforces the innovative character of the brand.
NWJ is South Africa`s fourth-largest jewellery chain by outlets and has
performed better than expected despite higher gold prices and the effects of
inflation and interest rates on consumer spending. The brand opened five new
stores in the period under review, and plans a further five for the remainder
of the year. The brand is being repositioned by Hylton Rabinowitz, the
founder, to remain contemporary and relevant to consumers, while not losing
its strong value position in the market. The six re-imaged stores have thus
far shown year-on-year sales growth of between 15% and 40%, exceeding
expectations. With the majority of sales being cash sales, NWJ has, thus
far, stood up well in what have been tough trading conditions and the brand
is poised for aggressive expansion as it leverages the site and marketing
infrastructure of the larger Taste group.
FINANCIAL RESULTS
Revenue for the interim period increased 95% to R31.8 million (2007: R16.3
million). EBITDA rose by 51% to R7.6 million (2007: R5 million), although
EBIDTA margin declined to 24% as the lower overall margin of NWJ is
consolidated. The lower margin in NWJ is due to NWJ being vertically
integrated, whereby it owns retail outlets as well as manufactures, sources
and distributes 100% of the group`s products. EBIDTA margin for the group`s
food franchising division declined marginally to 43.3% (2007: 46%) on the
back of higher than anticipated salary growth as the divisions invest in
human capacity in anticipation of future growth. Profit after tax (after the
elimination of negative goodwill arising from the transaction) grew 25% to
R5.3 million (2007: R4.2 million) and this continues, despite lower margins
in the overall business, to be underpinned by strong cash flows, with CEPS
increasing 31% to 4.6 cents (2007: 3.5 cents). Headline earnings per share
increased 7% to 3.6 cents (2007: 3.4 cents).
The nature of the company`s business model is such that trade and other
payables, including advertising and new store development creditors, may
fluctuate significantly relative to the prior year reporting period,
depending on the number and timing of new stores opened, and the company`s
monthly commitments to advertising spend.
BASIS OF PREPARATION
Statement of compliance
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 South African Companies Act and the
Listings Requirements of the JSE Limited.
The basis of preparation is consistent with the prior comparative year.
Basis of measurement
The abridged financial statements have been prepared on the historic cost
basis except for certain financial instruments measured at fair value.
ACQUISITIONS
On 1 August 2008 the group acquired 100% of NWJ Holdings (Pty) Limited. The
fair values of the assets and liabilities of the subsidiaries acquired are
set out below:
R`000
Tangible assets 82 812
Intangible assets 45 124
Liabilities (20 195)
Net identifiable assets 107 741
and liabilities
Negative goodwill on (8 435)
acquisition
Total consideration 99 306
Consideration paid in 18 065
shares
Consideration paid in cash 71 241
Deferred consideration 10 000
99 306
The purchase consideration (including transaction costs) was discharged by
the issue of 45 161 291 Taste shares, a cash payment of R71.24 million and a
deferred amount of R10.0 million which will be potentially released over a
two-year period based on certain inventory warranties being met. The fair
value of the Taste shares issued was determined to be R0.40 per share based
on the market price at the time of issue.
During the one month for which the NWJ Group`s results were included in these
results, the NWJ Group contributed R12.4 million to revenue and operating
profit of R1.8 million.
PROSPECTS
The directors anticipate that the economic challenges of the past twelve
months will continue into the near future. Consumers are expected to
gravitate to brands they know and trust, and that offer value for money.
All three brands have already launched fresher, contemporary images that are
showing positive year-on-year sales growth. As the systems gain momentum
with the re-imaging they will gain market share, especially from smaller,
less trusted brands. The brands are investigating different trading formats
to fit current trading conditions and that will lower set-up costs. In this
respect Maxi`s has already launched a pilot store which is performing well.
The penetration of the Maxi`s brand into the Caltex network holds particular
promise as does the re-imaging of NWJ outlets. The vertically integrated
model, particular to the NWJ business, provides various opportunities to
utilise the capacity of the manufacturing, sourcing and distribution division
to unlock value. Taste will continue to assess opportunities to grow its
current brands through acquisition - as was the case with BJ`s and their
conversion to Maxis - and to add further brands to its portfolio.
DIVIDEND POLICY
In line with the company`s growth strategy, no dividend was declared for the
six month period.
On behalf of the Board
C F Gonzaga D J Crosson
Chief Executive Officer Chief Financial Officer
6 October 2008
CORPORATE INFORMATION
Non executive directors: R L Daly (Chairperson), K Utian, J Currie
Executive directors: C F Gonzaga (CEO), D J Crosson (CFO), L Gonzaga, H
Rabinowitz, D Buxton* (*Alternate director)
Registration number: 2000/002239/06
Registered address: 2nd Floor, The Wanderers, The Campus, 57 Sloane Street,
Bryanston
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: Vunani Corporate Finance
Date: 06/10/2008 08:47:08 Produced by the JSE SENS Department.
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