Profits as skinny as the lattes

Taste, trying to make a success of Starbucks and Domino’s, needs to spend money — a lot — to make money

Cleaning up Taste’s kitchen has certainly not come cheap. And the few retail shareholders it has left after a succession of rights offers may have to wait another three years before the company hits “critical mass”.

Under the new management of interim CEO Tyrone Moodley and his permanent replacement, Dylan Pienaar, Taste — which owns the local rights to global food giants Starbucks and Domino’s Pizza — posted a R318m loss from continuing operations last week.

Pienaar, who has been in the CEO role since March, tells the FM that Taste will need up to R320m in further funding to get all its brands to start generating positive cash flows.

Analysts have largely stopped covering the once popular small-cap stock; most were flushed out by its rights offers, which have left Protea Asset Management, co-owned by Moodley and Us-based investor Sean Riskowitz, with 64% of Taste.

In its last cash call, for example, Taste issued 1.32-billion new shares at 10c each to raise R132m — all of it underwritten by the Riskowitz Value Fund, as well as private US investment vehicle the Rand Group and Uk-based private equity firm Eldon Capital.

Less than 5% of Taste is now held by retail investors.

Keith Mclachlan, small-caps portfolio manager at Alphawealth, says he checks in from time to time to see what the company is up to, but his original view — that Taste is in trouble — still holds true.

“They need more money, time and sales, and they need less competition and costs … and [money] is running out fast,” he says.

Taste, obviously, has a different view.

After an “arduous” six months identifying problem areas, the company says it has cut costs, honed management and split the