Analysis of Taste Holdings Ltd

Topics: Inventory, Asset, Balance sheet Pages: 7 (2083 words) Published: September 7, 2013
Du Pont Analysis of Taste Holdings Limited:
Inputs:
Feb 2013 Feb 2012
Revenue: 506 431 304 264

Net profit 24 775 21 071 (attributable to the parent)

Total Assets 369 667 341 365

Total Equity 189 246 171 840
(attributable to the parent)

*Assumption: RoE will be calculated using the profit and equity attributable to the equity holders of the parent (hence excluding NCI)

20132012
Efficiency (revenue/TA)1.3700.891
Profitability (NP/Revenue)4.892%6.925%
Leverage (TA/Equity)1.9531.987
RoE13.09%12.26%
*Rounding done to 3 decimal places
Introduction:
Whilst the global recession has passed, its impact continued to be felt and countries were slow to recover. As with many consumers globally, South Africans continued to experience the affects of the recession and their spending on consumer foodservice remained constrained. However, consumer foodservice continued to achieve steady current value growth boosted by the middle to upper LSM groups (living standards measure). Rising prices also contributed to increased value growth during the review period. With decreased disposable income, there is greater competition within South African consumer foodservice for ‘share of throat’. Despite economic pressures and the impact of the National Credit Act slowing down the growth of franchisees in South Africa, constant value growth will remain steady over the forecast period as the economy recovers. Service excellence is one the most important proponents for the brand of South Africa. In the highly competitive hospitality industry, service excellence goes a long way towards building the brand and reputation of a product. Taste Holdings Limited is driven towards investing in franchises that offer sustainable and compelling brands that differentiate its service from that of its competitors. These businesses maintain value leadership through operational excellence supported by high volumes relative to the category in which they trade. The diversified portfolio of Taste Holdings Limited provides the group with the platform to partake in the growth of various industries, including, but not limited to the retail industry, which has grown at annual average of 3 percent of the last 8 years. With the above mentioned factors, the group plans to have an annual compound growth rate in HEPS of 24%.

Asset efficiency

The asset efficiency of the firm has greatly improved in the current period to 1.370. This substantial improvement was as a result of revenue increasing at a faster rate (66.44%) compared to the relevant asset base, which only grew by 8.3% over the period under review. The substantial increase in the revenue would have been caused for numerous reasons. Firstly, the acquisition and integration of The Fish & Chip Co, by the wholly owned subsidiary Buon Gusto Cuisine (Pty) Ltd, would have contributed to the revenue earned by the group, primarily through service and franchise revenue. Furthermore, the establishment of the food distribution business, the NWJ-branded credit offering, coupled with increases in system-wide sales of approximately 52%, resulted in the mammoth increase in revenue in the current year. It should be noted, however, that an amount of R34 594 048 has been included in the revenue figure which represents contributions to marketing funds as part of the acquisition of the above mentioned company. The marginal increase in the asset base can be explained due to changes in the current assets, which increased by 13.37%, during the 2013 period. The significant increase in the inventory value can be attributed to the expansion of the NWJ brand, which acquired or opened new outlets in the current period as well as the establishment of the distribution business. Despite this, inventory turnover has increased to 3.311 (from 2.414)....
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