The focus of Taste Holdings [JSE:TAS] is on the opportunities offered by its various acquisitions and development agreements, CEO Carlo Gonzaga said on Tuesday at the announcement of the group's interim results to August 2015.
In the period under review Taste revenue grew by 62% to R490.3m, gross profit grew by 61% to R182.4m and system-wide sales grew by 7.2% to R800m.
Core earnings before interest, taxes, depreciation and amortisation (Ebitda), however, declined to R17.5m from the R23.m in the 2014 period.
Gonzaga explained that this was due to the launch of Domino's Pizza in November 2014.
Core headline earnings per share declined to 0.1c from 4.3c.
In the past 18 months Taste Holdings had secured the exclusive southern African development agreements for both Starbucks Coffee and Domino's Pizza.
These deals underpinned the group's long-term growth strategy, according to Gonzaga.
He warned that launching Starbucks and Domino's Pizza would impact on short-term earnings in the group's food division.
However, he regards the opportunities and growth potential as strong enough to warrant the investment and associated short-term earnings pressure.
The group had also acquired Arthur Kaplan Jewellers and Zebro's Chicken and for Gonzaga the short-term focus will be on what he sees as significant opportunities offered by these new businesses. A premium Arthur Kaplan watch and jewellery store is planned for 2016.
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In the period under review, the group announced it was planning a R226m rights offer in which existing shareholders had already committed more than 70% of the value.
This capital would be used to roll out the first 12 to 15 Starbucks outlets, establish the brand and grow the Arthur Kaplan footprint, according to Gonzaga.
In his view this would probably be the last equity raised for these opportunities, as future Starbucks growth would be funded with internally generated cash and debt.
In the food division, the Domino's Pizza roll-out was nearing completion and in Gonzaga's view management would take the lessons learnt in rolling out Domino's Pizza when rolling out Starbucks in a "measured and considered manner".
He sees the ultimate market opportunity for Starbucks to be for 150 to 200 outlets.
Capital expenditure was invested in the group's distribution and manufacturing capabilities and these are nearing completion.
Looking ahead, Gonzaga said weaker consumer sentiment, low disposable income growth and rising inflation were ever-present economic headwinds.
The next six months would see the group laying the foundation for the Starbucks launch, shifting gear in Domino's Pizza from conversion to new store and sales growth, executing some of the Arthur Kaplan opportunities and continuing with the efficiency improvements in the new food service facilities.
Source: Fin24
