Growing Taste for profits

Taste Holdings has reported a 50% growth in headline earnings to R5.3-million in the six months to August 2011. Off the back of this it is evaluating several food acquisitions and prospects for implementing a distribution capacity.

Taste is a South-African based integrated franchise group that currently owns the Scooters Pizza, St Elmo’s Woodfired Pizza and Maxi’s restaurants in its food division, totalling 324 outlets. It also manufactures selected products for these brands in its new food services division.

Taste also owns NWJ, the third-largest jewellery brand and only vertically integrated franchise jewellery chain.

CEO Carlo Gonzaga reported at the release of the interim results that system-wide sales had grown by 27% to R416-million. Combined with the higher revenues from the food services division, this boosted group sales to R113.4-million (2010: R92.5-million).

Sound management contained operating cost increases to 8%, translating into a hike in the profit margin to 9.4% (8%) and a 44% boost in profit to R10.7-million. Management currently envisages paying only a final dividend.

Same-store sales in the pizza division rose 10% and exceeded 14% for NWJ corporate-owned stores. The integration of St Elmo’s was progressing as planned and since August, the division now manufactures all the sauces and spices for the food brands. Gonzaga expects this division to continue growing in the next six months.

While same-store top-line jewellery sales were flat, the division has recently experienced increased spend per transaction to boost the quality of earnings. During the period under review system-wide sales rose 7.9% to R109 million with the company-owned stores achieving growth exceeding 14% on a like-for-like basis. Gonzaga said in the past six months, the biggest challenges were the rising input costs in the jewellery division; unsustainably-high energy costs for the food franchisees and the unpredictability of jewellery consumer spending.

However, management remains committed to seeking out food division acquisitional opportunities, while restocking several NWJ franchisees in the past two months has seen sales growths in line with the corporate-owned store performances. This achievement bodes well for the current period.

Scooters and Maxi’s have been nominated as finalists in the Franchise Association of Southern Africa’s (FASA) Brand Builder of the Year award, an award Scooters has already won three times. Scooters is also a finalist in the FASA Franchisor of the Year award, won by Maxi’s last year.

Looking ahead, Gonzaga is positive on Taste’s ability to grow revenues despite being wary of the impact global issues will have on local consumer confidence. The food services division is also expected to continue its substantial growth trajectory, while management evaluates further acquisitions.