JSE-listed Taste Holdings reported an operating loss of R78.7-million for the year ended February 29, compared with a R31.6-million profit in the year ended February 28, 2015.

Operating costs for the period under review were up 93% to R488.6-million from R253.6-million reported for the previous financial year.

In 24 months, Taste Holdings had become the licensee of the worlds’ leading pizza delivery and ecommerce brand, Domino’s Pizza; the world’s leading coffee roaster and retailer, Starbucks Coffee, opening its first store in Midrand’s Mall of Africa in April; and was the leading retailer (by number of outlets) of luxury Swiss watches.

Taste Holdings CEO Carlo Gonzaga said on Wednesday that the short-term financial scoreboard would show that these opportunities had not come, and would not come, without their lessons, often earned in sweat and, ultimately, reflected in its 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,” he noted, adding that the last two years had undoubtedly been transformative for the group.

During this time, the company had focused much of its energy outward as it pursued opportunities and made the structural changes to leverage them. “Taking on such substantive opportunities, two of them greenfield operations, in such a compressed timeframe has traditionally been the domain of unlisted entities, where the inherent uncertainties and their outcomes are out of public scrutiny,” Gonzaga averred. 

During the period under review, Taste Holdings increased its core revenue 41% for the year ended February 29 to R1.01-billion from R717.1-million in 2015, exceeding the R1-billion mark for the first time as an additional R293.6-million of core revenue was added.

This growth was a combination of system-wide sales for the period increasing by 9% to R1.72-billion from R1.58-billion, the acquisition of jewellery store chain Arthur Kaplan, additional corporate stores and increases in the food services business. Same-store sales in the Luxury Goods division were up 15%.

Core gross profit margin increased to 40.6% compared with 39.6% in 2015, as corporate stores become more significant contributors across both divisions. This added R126-million core gross profit compared with the prior period.

However, earnings before interest, taxes, depreciation and amortisation decreased to R47.2-million from the 2015 financial year’s R73.1-million, consequent to the start-up of the corporate store ownership programme in the Food division. Headline earnings per share (HEPS) decreased to 1.5c from 16.1c in 2015.

The cost of capital raised through increased borrowings and additional shares in issue through equity raised, in addition to a material depreciation increase relating to corporate store ownership, had led to the decline in HEPS.

“We spoke to an ambitious five-year growth plan that was strategically focused on licensing leading global brands in our existing segments, increasing scale and leverage in our low-cost food brands, increasing ownership of corporate stores and supporting this growth through a leveraged shared service and vertically integrated platform,” commented Gonzaga.

In addition, he highlighted that the Zebro’s Chicken acquisition (finalised in January 2014) complemented Taste Holdings’ established presence of The Fish & Chip Co among lower income consumers, and the company’s vertical integration platform had scaled significantly through the establishment of dough production and a world-class distribution facility that was vetted by its international licence partners.

Taste Holdings’ human capital had been realigned to meet the demands of its growth, with Gonzaga pointing out that the quality of leadership in the company’s divisions had materially improved, especially during the last year.

“Lastly, we embarked on an aggressive corporate store ownership strategy in our Food division, through Domino’s and more recently Starbucks. A fundamental enabler of this strategy has been restructuring our access to capital through a combination of continued support from shareholders and our newly established R1-billion Domestic Medium Term Note programme.”