Unanswered questions
The company denies it is ‘haemorrhaging’ cash, but it needs more funds to roll out more Domino’s and Starbucks stores
Taste Holdings’ AGM this week was hardly the explosive affair it could have been given the company’s relentless share price slide over the past year, with just one retail investor in attendance.
But, after months of silence under the new management team of CEO Tyrone Moodley and COO Dylan Pienaar, as well as a virtually new board — with the exception of chair Grant Pattison — Taste’s directors were surprisingly happy to talk. Taste, which holds exclusive rights to global brands Domino’s Pizza and Starbucks, has no plans to delist, says Pattison. That’s despite the view of some, including Vunani Securities small-cap analyst Anthony Clark, who says going private is the “only option” for majority shareholder, the Riskowitz Value Fund, “to save their investment”. The fund is managed by low-profile Usbased investor Sean Riskowitz. “There’s been no discussion at all on that front,” says Pattison. Asked whether it is in Taste’s interest to remain a public company, he says: “It’s still a very valuable mechanism to raise capital. Whoever was a shareholder in the unlisted scenario would have to make the commitment to put the money in … there are people who have put money in (including myself) and I’d rather see management turn the business around.” Riskowitz Value Fund ended up with 64.5% of Taste’s shares after a January rights issue, in which the company raised R398m. Taste’s most recent set of financials — annual results for the year ended February — showed that it had just R96.2m cash left in the kitty.
But, says Pattison, the board is still “comfortable” that Taste can continue operating.
“We review that status every quarter, and should it be necessary, the board will make an announcement in that respect.”
While Taste’s luxury goods division, which houses jewellery brands NWJ and Arthur Kaplan, had a disastrous year, contributing to a R241m loss, Moodley says the business is not “haemorrhaging” cash.
Asked whether Taste can provide further information about its planned return on investment in its two key franchise brands, Domino’s and Starbucks, Moodley says the company is still doing a “deep dive” into its stores’ economics model. “We’re trying to ascertain why it has not worked,” he says, adding that the company is working on a “new economic model” to bring to shareholders.
This it hopes to present to the board by November.
According to Moodley, year-to-date pizza sales are “trending upwards” and the company has stopped closing stores. But while Taste’s cash position remains as brittle as it does, the company has decided to put a complete halt to new-store development.
Moodley and recently appointed COO Pienaar, who left Burger King SA owner
Grand Parade earlier this year, are adamant that Domino’s and Starbucks are not about to withdraw their support of Taste.
Of their recent meetings with both companies in the US, Pienaar says: “It definitely wasn’t a crusade to say ‘Please can we hold onto this brand?’; it was the exact opposite. My experience is that there’s never been a power play between the brand owner and the