| Wed 23 May 2012, 8:24 | | TAS - Taste Holdings Limited - Reviewed provisional condensed financial results |
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TAS
TAS
TAS - Taste Holdings Limited - Reviewed provisional condensed financial results
for the year ended 29 February 2012
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")
Reviewed provisional condensed financial results for the year ended
29 February 2012
Salient Features
* Revenue up 13% to R265.3 million
* EBITDA up 14% to R42.1 million
* Operating profit up 16% to R35.6 million
* Headline earnings up 17% to R21.4 million
* Headline earnings per share up 16% to 12.4 cents
* System-wide sales up 21% to R909 million
* Dividend up 39% to 4.6353 cents per share
* Total stores up 66% to 543
Condensed consolidated statement of comprehensive income
29 February 28 February
2012 2011
% Reviewed Audited
change R`000 R`000
Revenue 1 13% 265 293 233 751
Gross profit 2 10% 133 912 121 904
Other income 9 771
Operating costs 3 7% (98 341) (91 907)
Operating profit 16% 35 580 30 768
Share option IFRS 2 charge 4 (399) (176)
Interest income 884 615
Finance costs 5 (5 684) (5 925)
Profit before taxation 20% 30 381 25 282
Taxation 6 (9 310) (7 245)
Profit for the year 17% 21 071 18 037
Other comprehensive income - -
Total comprehensive income for the 17% 21 071 18 037
year
Attributable to:
Equity holders of the parent 17% 21 071 18 037
Non-controlling interests - -
Reconciliation of headline earnings:
Earnings attributable to ordinary 17% 21 071 18 037
shareholders adjusted for:
Impairment losses 491 300
Profit on sale of property, plant and (165) (86)
equipment, non-current assets held for
sale and retail stores
Tax effect on headline earnings 24 4
adjustments
Headline earnings attributable to 17% 21 421 18 255
ordinary shareholders
Weighted average shares in issue 172 850 170 161
(`000) 7
Fully diluted shares in issue (`000) 182 785 179 815
Earnings per share (cents) 15% 12.2 10.6
Fully diluted earnings per share 15% 11.5 10.0
(cents)
Headline earnings per share (cents) 16% 12.4 10.7
Fully diluted headline earnings per 15% 11.7 10.2
share (cents)
Condensed consolidated statement of financial position
29 February 28 February
2012 2011
Reviewed Audited
R`000 R`000
Assets
Non-current assets 167 414 100 652
Property, plant and equipment 11 853 11 813
Intangible assets 8 87 045 67 570
Goodwill 8 64 669 18 654
Other financial assets 9 3 092 1 620
Deferred tax 755 995
Non-current assets held for sale 10 1 258 1 749
Current assets 168 693 114 083
Inventories 11 70 576 62 221
Trade and other receivables 12 56 606 32 873
Taxation 1 137 1 933
Advertising levies 1 435 755
Other financial assets 9 3 631 3 247
Cash and cash equivalents 35 308 13 054
Total assets 337 365 216 484
Equity and liabilities
Capital and reserves 171 840 118 515
Issued capital 2 2
Distributable reserve 91 162 75 196
Share premium 7 80 101 43 141
Share option reserve 575 176
Non-current liabilities 76 320 46 915
Borrowings 13 54 195 30 071
Long-term employee benefits 252 429
Deferred tax 21 873 16 415
Current liabilities 89 205 51 054
Provisions 250 250
Current tax payable 55 299
Trade and other payables 12 66 707 30 852
Balances due to vendors 1 000 -
Bank overdrafts 9 770 5 111
Dividends payable 17 -
Current portion of borrowings 13 11 406 14 542
Total equity and liabilities 337 365 216 484
Number of shares in issue (`000) 7 194 161 170 161
Net asset value per share (cents) 88.5 69.6
Net tangible asset value per share (cents) 14 21.6 28.6
Condensed consolidated statement of cash flows
29 February 28 February
2012 2011
Reviewed Audited
R`000 R`000
Cash flow from operating activities 20 412 21 658
Cash generated by operating activities 39 132 32 036
Interest income 884 615
Finance costs (5 684) (5 925)
Dividends paid (5 088) -
Taxation paid 15 (8 832) (5 068)
Cash flows from investing activities (61 588) (13 901)
Acquisition of property, plant and equipment (2 954) (1 755)
Acquisition of non-current assets held for - (60)
sale
Proceeds of disposals of property, plant and 11 515
equipment
Proceeds on disposal of non-current assets 211 3 212
held for sale
Proceeds on disposal of retail store 1 150 -
Acquisition of business 16 (56 000) (9 461)
Loans advanced (1 856) (4 045)
Acquisition of intangible assets (2 150) (2 307)
Cash flows from financing activities 58 771 (5 390)
Decrease in long-term employee benefits (177) (177)
Proceeds from issue of shares 7 36 960 -
Loans raised 17 20 988 1 233
Loans raised/(repaid) to vendors 1 000 (6 446)
Change in cash and cash equivalents 17 595 2 367
Cash and cash equivalents at beginning of 7 943 5 576
year
Cash and cash equivalents at end of year 25 538 7 943
Condensed consolidated statement of changes in equity
Share Share Total Share Retained
share option
capital premium capital reserve income Total
R`000 R`000 R`000 R`000 R`000 R`000
Balance 1 March
2010 2 43 141 43 143 57 159 100 302
Share option
reserve 176 176
Profit for the
year 18 037 18 037
Balance 1 March
2011 2 43 141 43 143 176 75 196 118 515
Share option
reserve 4 399 399
Share issue 7 36 960 36 960 36 960
Dividends paid (5 105) (5 105)
Profit for the
year 21 071 21 071
Balance 29
February 2012 2 80 101 80 103 575 91 162 171 840
Condensed consolidated segmental report
29 February 28 February
2012 2011
% Reviewed Audited
change R`000 R`000
Segment revenue
Food 18 52% 96 229 63 160
Franchise 19 46 073 37 688
Food services 47 679 14 680
Retail 20 2 477 10 792
Jewellery 21 0% 170 793 171 611
Franchise and wholesale 113 867 116 056
Retail 22 56 844 52 347
Concession retail 82 3 208
Eliminations 23 (1 729) (1 020)
Group revenue 13% 265 293 233 751
Segment operating profit
Food 44% 25 428 17 712
Franchise 24 22 479 17 810
Food services 25 3 577 690
Retail 26 (628) (788)
Jewellery -5% 23 097 24 248
Franchise and wholesale 27 13 778 17 292
Retail 28 9 333 7 265
Concession retail (14) (309)
Corporate services 29 16% (12 945) (11 192)
Group operating profit 30 16% 35 580 30 768
Segment assets
Food 164 891 37 469
Franchise 31 99 939 23 094
Food services 31 63 553 12 462
Retail 1 399 1 913
Jewellery 99 511 92 879
Franchise and wholesale 62 919 56 348
Retail 36 592 34 352
Concession retail - 2 179
Corporate services 72 963 86 136
Total group assets 337 365 216 484
Segment liabilities
Food 103 307 27 696
Franchise 31 68 953 24 219
Food services 31 34 353 3 422
Retail 1 55
Jewellery 42 790 50 730
Franchise and wholesale 41 823 50 123
Retail 967 607
Concession retail - -
Corporate services 19 428 19 543
Total group liabilities 165 525 97 969
Notes to the financial information
1. Despite the sale of non-core retail food outlets and the discontinuance of
the jewellery concession business, resulting in R11.5 million less revenue
when compared to the year ended 28 February 2011 ("the prior period" or
"2011"), revenue increased 13%. The largest contributor to this increase
was the food segment, driven by increases in both the food services and
franchise divisions.
2. The gross profit increase of 10% is lower than the revenue increase due to
an expected decline in the gross margin from 52% in 2011 to 51% for the
year ended 29 February 2012 ("the current period" or "2012"). This decline
is due to the higher revenue and profit contribution from the food services
division, which has a lower gross margin than the remainder of the group.
3. Operating costs continue to be well managed with operating costs as a
percentage of revenue declining from 39% in the prior period to 37%. This
is within the target range as communicated in August 2011.
4. The IFRS 2 charge relates to the Taste share option scheme.
5. These finance costs relate mainly to the loans for the acquisition of NWJ
and St Elmo`s.
6. The effective taxation percentage is 30.6% due mainly to the inclusion in
the current period of secondary tax on companies ("STC") relating to the
maiden dividend paid in July 2011.
7. The increase in the number of weighted average shares in issue is as a
result of the issue of 24 million ordinary shares to Brimstone Investment
Corporation Limited on 20 January 2012, to partially fund the acquisition
of The Fish & Chip Co.
8. The increase in intangible assets and goodwill relates to the acquisition
of The Fish & Chip Co. on 1 February 2012.
9. Other financial assets consist of:
* loans made to marketing funds of brands within the group. These loans
attract interest, and are repayable in monthly installments; and
* extended payment terms given by the brands to certain franchisees.
10. The decline in non-current assets held for sale is as a result of the
impairment of one company-owned food outlet, ownership of which is not a
core strategy.
11. The 13% (R8.3 million) increase in group inventory relates largely to:
* an increase of R5.8 million in jewellery inventory; and
* an expected increase of R2.5 million in the food services division,
proportionate to its revenue growth.
12. The changes in trade and other receivables and payables are due largely to
the acquisition of The Fish & Chip Co.`s distribution and franchise
business.
13. The increase in borrowings is as a result of the loan raised for the
acquisition of The Fish & Chip Co. The decrease in the current portion of
borrowings is as a result of the restructuring of the group`s debt into one
new loan, payable over five years from 1 February 2012.
14. Net tangible asset value is calculated by excluding goodwill, intangible
assets, and the deferred taxation liability relating to intangible assets,
from net asset value. The decline is due to the nature of the acquisition
of The Fish & Chip Co. wherein the major portions of the assets acquired
were classified as intangible.
15. The increase in taxation paid is due to:
* a refund in the prior period, thereby lowering the 2011 amount; and
* STC payable in the current period, with no comparable payment in the
prior period.
16. On 1 February 2012 the group acquired the assets and certain liabilities of
The Fish & Chip Co. The acquisition consisted of:
* franchise agreements of 202 outlets, associated trademarks, goodwill
and intellectual property;
* a distribution facility;
* certain tangible assets and liabilities relating to the business
including inter alia, stock, debtors and property, plant and
equipment;
The fair value of assets and liabilities acquired is set out below:
R`000
Property, plant and equipment 566
Intangible assets 20 624
Trade and other receivables 33 129
Inventory 1 000
Non-current assets held for sale 200
Advertising levies (960)
Trade and other payables (39 018)
Deferred tax (5 775)
Fair value of assets acquired 9 766
Consideration paid (56 000)
Goodwill acquired 46 234
The purchase consideration was discharged in cash. The purchase price
allocation has been provisionally accounted for, as permitted by IFRS 3
Business Combinations, and will be finalised within the next 12 months.
Any resulting material fair value adjustments to assets, liabilities and
the recognition of intangible assets will be accounted for accordingly.
During the month for which The Fish & Chip Co.`s results were included in
these results, it contributed R10.3 million to revenue and R2.4 million to
operating profit. This profit excludes costs of approximately R1.0 million,
which would not have been incurred were it not for the acquisition.
Shareholders are referred to the announcement made on SENS on 8 December
2011 regarding the pro-forma financial effects of the acquisition.
17. The loan raised relates to the acquisition of The Fish & Chip Co.
18. The food division consists of the core franchising division from
which new store and annuity income is generated; a retail division in
which corporate-owned stores are accounted for; and a food services
division which manufactures and distributes food products for the food
division. The ownership of corporate-owned retail stores is not a core
strategy of this division.
19. Revenue in the food franchise division would have increased 16%, excluding
the revenue of one month of The Fish & Chip Co.
20. The decrease in revenue in retail outlets is due to the sale or closure of
corporate owned stores during the period.
21. The jewellery division consists of two core divisions: 17 corporate-owned
stores ("Retail"); and franchise and wholesale. The latter division
manufactures, sources, and distributes stock to franchisees, as well as
earning new-store and annuity royalty revenue. Concession retail relates to
two pilot projects that were conducted until April 2011. These have since
been discontinued.
22. The increase in revenue is significant in that the number of stores
contributing to this increase declined from 20 to 17 during the year. The
salient performance measure, same-store sales for those 17 stores,
increased 14.7% for the year. It remains a core strategy to own retail
outlets within the jewellery division.
23. This refers to interdivisional revenues in the food division which are
eliminated on consolidation.
24. Operating margin increased from 47.2% in 2011 to 48.8% in the current
period, due to an improved cost to revenue ratio as a result of the
economies of scale as the division grows.
25. Operating margin increased from 4.7% in 2011 to 7.5% in the current period.
It should however be noted that the prior year included a loss of R0.4
million.
26. The stores that contributed to these losses have been sold or closed
subsequent to year-end.
27. The decline in operating profit is a combination of 8 fewer new stores
being opened compared to the prior year; and sales of stock to franchisees
remaining flat. Costs as a percentage of revenue remained unchanged from
the prior year at 22%.
28. The increase in operating margin from 13.8% in 2011 to 16.4% in 2012 is a
combination of outstanding same-store sales, improved gross margins and
improved costs.
29. The 15.7% increase in corporate services includes costs associated with the
acquisition and integration of The Fish & Chip Co. Excluding these costs
corporate services would have increased 6.7%.
30. Group operating margin increased marginally to 13.4% (2011: 13.2%).
31. The significant increase is due to the acquisition of The Fish & Chip Co.
Group overview
The directors of Taste present the reviewed provisional condensed results for
the year ended 29 February 2012 ("2012" or "the current period"). Taste is a
South African-based management group, invested in a portfolio of mostly
franchised, category specialist, restaurant and retail brands, currently
represented in over 550 locations throughout Southern Africa.
A combination of same-store sales and new store openings saw system-wide sales
across the group increase by 21% to R909 million (2011: R752 million). This
contributed to a revenue increase of 13% to R265 million (2011: R234 million).
Despite a lower gross-profit margin due to the increased contribution of the
lower-margin food services business, profit before tax increased 20% to R30.4
million. Costs as a percentage of revenue improved for the third consecutive
year, declining from 39% to 37% in the current year, within the target range.
During the year, the group made further gains to vertically integrate its food
division; it launched the repositioned St Elmo`s restaurant concept; and
acquired the 202 store Fish & Chip Co. brand Operating profit margin increased
from the prior year to 13.4% while headline earnings per share ("HEPS")
increased 16% to 12.4 cents.
The directors are furthermore pleased to announce that a dividend of 4.6353
cents per share has been declared, a 39% increase over the maiden dividend
declared last year. The dividend cover of 3.1 times is lower than the 3.6 times
cover last year, and while conservative, takes into account the groups` strategy
to grow by acquisition as well as organically and is sustainable in the future
given the groups` cash generative business model.
Divisional overview
Food
The Food division consists of the Maxi`s, Scooters Pizza, St Elmo`s Woodfired
Pizza and The Fish & Chip Co. brands, as well as the food services division
which manufactures and distributes selected products to its food brands. With
the acquisition of The Fish & Chip Co. the division now has a portfolio of
brands offering value to consumers in the lower living standard measures
("LSMs") as well as the broader middle market. Additionally the repositioned St
Elmo`s brand caters for the casual-dining sit-down market. Each of the brands
is underpinned by strong value-for-money propositions; contemporary store
designs and convenience, through either service offerings or locations.
During the year the food services division made further progress against its
vertical integration strategy. It now produces all the sauces, spices and dough
pre-mixes for Maxi`s, Scooters Pizza and St Elmo`s. Production of sauces and
spices for the The Fish & Chip Co. will be internalised during the year. The
acquisition in February 2012 of The Fish & Chip Co. included a distribution
capability which will be leveraged during the current year to include
distribution and warehousing for the other brands in this division.
The division ended the year with 462 outlets (2011: 242 outlets) and system-wide
sales of R660 million (2011: R506 million), an increase of 30%. Excluding the
system-wide sales of one month of The Fish & Chip Co., the increase would have
been 25% over the prior year. Same-store sales in the division remained positive
throughout the year, ending at 5.8%. Although the division opened a net
positive number of stores, financial pressure on franchisee profitability
continued, due mainly to rising energy costs and restrained consumer spending in
the latter half of the year. This contributed to 24 store closures across all
brands in the division. At the annual Franchise Association of Southern Africa
("FASA") prestigious franchise awards, Scooters Pizza won the Brand Builder of
the Year Award for the fourth time since its inception in 2000, and was a
finalist in the Franchisor of the Year Award, an award which Maxi`s won in 2010.
Notwithstanding the positive outlook for the division due to the acceleration of
the vertical integration strategy, the acquisition of The Fish & Chip Co., and
the positive effects of the repositioned St Elmo`s brand, the division is
mindful of the restrained consumer spending patterns currently being
experienced.
Jewellery
NWJ is the third-largest jewellery brand in South Africa, with 81 outlets
located nationally. As the only vertically integrated franchise jewellery chain
in South Africa, it owns and operates approximately 21% of the total outlets;
provides franchising and merchandising services to its franchise network;
manufactures certain products sold by the NWJ outlets; and sources and
distributes the items not manufactured by its manufacturing facility. The
franchise services are comparable to the food franchise division of Taste in
that they offer their franchisees operational and marketing support, project
management, new site growth and development, and national brand-building
strategies in return for a royalty. The distribution division distributes all of
the goods sold through the NWJ outlets. Of these goods sold, approximately 40%
is manufactured by the manufacturing facility in Durban, 22% is imported and the
remaining 38% sourced locally. This model provides in-house innovation capacity,
fast routes to market and reduces input costs to franchisees through purchasing
economies of scale. A further benefit of owning the manufacturing facility is
that slow-moving or returned stock can be either re-worked with negligible yield
loss or transferred to another location where there is known demand for the
item.
Despite closing eight non-performing outlets during the year, system-wide sales
increased 2.4% to R249 million (2011: R243 million), with same-store sales
across both franchise and corporate stores increasing 2.6%. Operating profit in
the jewellery segment declined 5% and, consequently, operating profit margin
declined to 13.5% (2011: 14.1%). Costs as percentage of revenue remained
unchanged from the prior year at 22%. Franchisee same-store sales were unchanged
(-0.7%) for the year, as franchisees struggled to re-invest in an inflationary
commodity market, which negatively impacted the franchise and wholesale division
as it sells stock to franchisees. Combined with eight fewer store openings when
compared to 2011, profitability in this division, although improved from August
2011, declined.
Same-store sales in the 17 corporate owned retail outlets continued their
stellar performance, ending the year 14.7% above the prior year. Combined with
strong cost controls, operating profit grew 28% in this division with operating
margin increasing from 13.8% to 16.4%.
Consumer purchasing patterns continue to evolve and the year-long sustained
strong performance of the company-owned outlets is indicative of the strength of
the NWJ brand and its ability to offer consumers value. The division is focused
on improving franchisee`s ability to mimic corporate store performance, and will
consider acquiring stores from existing franchisees if the opportunity arises.
Basis of preparation of the reviewed results
Statement of compliance
Basis of preparation and accounting policies
The reviewed provisional condensed consolidated financial results are prepared
in accordance with the recognition and measurement requirements of International
Financial Reporting Standards ("IFRS"), the presentation and disclosure
requirements of IAS 34 - Interim Financial Reporting, the AC500 series issued by
the Accounting Practices Board, the Listings Requirements of the JSE Limited and
in the manner required by the South African Companies Act 71 of 2008. Accounting
policies which comply with IFRS have been applied consistently by all entities
in the group and are consistent with those applied in the previous financial
year. The preparation of these reviewed condensed consolidated financial results
for the year ended 29 February 2012 was supervised by the Financial Director, Mr
E Tsatsarolakis CA(SA).
The reviewed provisional condensed consolidated financial statements do not
include all of the information required for full annual financial statements and
should be read in conjunction with the consolidated annual financial statements
for the year ended 28 February 2011.
Auditors` report
BDO South Africa Inc., the group`s independent auditor, has reviewed the
provisional condensed financial results contained in this provisional report,
and has expressed an unmodified review report on the provisional financial
statements. Their review report is available for inspection at the company`s
registered office.
Prospects
The acquisition of The Fish & Chip Co. has added significant critical mass to
the group and the food division, accelerating its vertical integration strategy
as well as providing a beachhead into servicing lower LSM consumers. The group
anticipates opening approximately 50 new Fish & Chip Co. outlets during the next
6 months, extending its market leader advantage.
Notwithstanding the new-store growth and step-change increase in the food
services division, the group is cautious with regard to recent trends in
consumer spending, across all brands.
Taste remains committed to being a diversified franchisor invested in retail and
restaurant brands within Southern Africa. The group will continue to assess
opportunities in line with its strategy and is focused in the short term on
growing its jewellery division organically and integrating The Fish & Chip Co.
acquisition in order to unlock value within the food services division.
Dividend to shareholders
Notice is hereby given that a final gross cash dividend of 4.6353 cents per
ordinary share, payable out of income in respect of the year ended 29 February
2012 has been declared by the directors. The total STC credits utilised as part
of this declaration amount to R783,525.16. The number of ordinary shares in
issue at the date of this declaration is 195 881 291 and consequently the STC
credits utilised amount to 0.4 cents per share. There are no further STC
credits to carry forward. The local dividend tax rate is 15%. The net dividend
amount is 4.0 cents per share for shareholders not exempt from paying dividends
tax. In compliance with the requirements of Strate, the electronic and custody
system used by the JSE, the following dates are applicable:
Last day to trade cum-dividend Friday, 29 June 2012
Shares commence trading ex-dividend Monday, 2 July 2012
Record date Friday Friday, 6 July 2012
Payment of dividend Monday, 9 July 2012
Share certificates may not be dematerialised or rematerialised between Monday,
2 July 2012 and Friday, 6 July 2012, both dates inclusive.
On Monday, 9 July 2012 the cash dividend will be electronically transferred to
the bank accounts of all certificated shareholders where this facility is
available. Where electronic fund transfer is not available or desired, cheques
dated 9 July 2012 will be posted on that date. Dematerialised shareholders`
accounts with their CSDP or broker will be credited on Monday, 9 July 2012.
On behalf of the board
C F Gonzaga E Tsatsarolakis
Chief Executive Officer Financial Director
23 May 2012
Corporate information
Non-executive directors: R L Daly (Chairperson), K Utian, J B Currie,
A Berman, H R Rabinowitz, S Patel, W P van der Merwe
Executive directors: C F Gonzaga (CEO), D J Crosson, L Gonzaga,
E Tsatsarolakis (FD)
Registration number: 2000/002239/06
Registered address: 2nd Floor, The Wanderers, The Campus, 57 Sloane Street,
Bryanston
Postal address: PO Box 782244, Sandton City, 2146
Company secretary: M Pretorius
Telephone: (011) 608 1999
Facsimile: 086 696 1270
Transfer secretaries: Computershare Investor Services (Pty) Ltd
Sponsor: Vunani Corporate Finance
These results and an overview of Taste are available at www.tasteholdings.co.za
Date: 23/05/2012 08:24:01 Produced by the JSE SENS Department.
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