THE BOTTOM LINE
Taste Holdings really needs to get a bigger pizza the action
Loss-making owner of Domino’s Pizza and Starbucks should sell its luxury-goods division and focus on food
The difficulties at franchise group Taste Holdings are continuing. It said in a trading update this week that it expects a loss per share of between 7.8c and 8.4c for the six months to end-August.
Although this is a significant improvement on the 16c loss reported in the previous year, the loss is mostly due to the increase in the number of shares following a rights offer on January 29.
The rights offer raised R398m, which was used to reduce its long-term debt from R284m to R26m, and increased the number of shares from 376 million to 473 million. The rights offer led to its underwriter and then minority shareholder, Riskowitz Value Fund, taking a 64.5% holding in the group.
News that it foresees a continuation of its losses is a further blow to the group following the disappointing numbers it produced for its full-year results.
Revenue was down 5% to R1.04bn and it more than doubled its operating loss to R228m. The year also saw it bring in a new CEO, with a new board, with Tyrone Moodley replacing founder Carlo Gonzaga.
Moodley has had his hands full. He is preparing Taste for a possible split into two separate units: the problematic luxury-goods division that houses jewellery chains NWJ and Arthur Kaplan; and its food division that operates Domino’s Pizza, Starbucks, Zebro’s Chicken, Maxi’s and The Fish and Chip Co stores.
The group is at a crossroads. It has to figure out what to do with its luxury-goods division. It has to either find a buyer or manage to successfully turn it around. Finding a buyer is easier said than done – it couldn’t find a buyer for the price it wanted a year ago.