Wrap Text
Unaudited Condensed Consolidated Results for the Six Months Ended 31 August 2017
Taste Holdings Limited
Incorporated in the Republic of South Africa
(Registration number 2000/002239/06)
JSE code: TAS ISIN: ZAE000081162
(“Taste” or “the company” or “the group”)
UNAUDITED CONDENSED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2017
CONDENSED GROUP CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 August 31 August 28 February
% 2017 2016 2017
change R'000 R'000 R'000
Revenue (3) -9% 483 109 529 175 1 097 614
Cost of sales (275 341) (328 580) (671 237)
Gross profit (4) 4% 207 768 200 595 426 377
Other income 633 415 1 047
Operating costs (5) -16% (262 214) (225 730) (502 080)
EBITDA* (6) -118% (53 813) (24 720) (74 656)
Amortisation and depreciation (7) (19 490) (16 442) (36 047)
Operating loss (73 303) (41 162) (110 703)
Investment revenue (8) 7 079 11 762 16 298
Finance costs (9) (23 351) (16 104) (34 809)
Loss before taxation -97% (89 575) (45 504) (129 214)
Taxation (10) 23 665 11 142 28 060
Loss for the period (65 910) (34 362) (101 154)
Attributable to:
Equity holders of the company -91% (65 839) (34 414) (100 818)
Non-controlling interest (11) (71) 52 (336)
(65 910) (34 362) (101 154)
Loss per share (cents) -74% (16.0) (9.2) (26.8)
Diluted loss per share (cents) -71% (15.4) (9.0) (26.2)
*Earnings before interest, tax, depreciation and amortisation (“EBITDA”)
CONDENSED GROUP CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
31 August 31 August 28 February
2017 2016 2017
R'000 R'000 R'000
ASSETS
Non-current assets 572 222 585 421 560 478
Property, plant and equipment (13) 181 626 185 551 191 751
Intangible assets (14) 97 024 117 771 103 774
Goodwill (15) (23) 133 184 112 927 121 581
Net investment in finance lease (16) 7 111 11 122 8 905
Other financial assets (17) 43 574 86 019 46 820
Deferred tax (18) 109 703 72 031 87 647
Non-current assets held for sale - 181 -
Current assets 520 535 526 520 457 492
Inventories (19) 311 390 344 379 341 424
Net investment in finance lease (16) 544 495 522
Trade and other receivables 57 695 78 118 66 722
Current tax receivables 635 4 258 897
Advertising levies 11 765 7 395 3 416
Other financial assets (17) 10 474 2 520 11 720
Cash and cash equivalents 128 032 89 355 32 791
Total assets 1 092 757 1 112 122 1 017 970
EQUITY AND LIABILITIES
Equity attributable to holders of company 613 412 624 260 559 086
Share capital 4 4 4
Retained earnings (129 417) 2 825 (63 579)
Share premium (20) 728 397 611 777 611 606
Equity-settled share-based payment reserve 14 428 9 654 11 055
Non-controlling interest 1 222 1 226 (2 732)
Non-current liabilities 306 077 297 863 284 884
Borrowings (21) 270 543 253 499 246 916
Lease equalisation 11 025 6 517 11 025
Deferred tax 24 509 37 847 26 943
Current liabilities 172 046 188 773 176 732
Current tax payable 796 4 216 179
Bank overdrafts 41 846 45 856 48 259
Borrowings (21) 10 962 5 552 13 543
Lease equalisation 2 480 5 798 1 164
Trade and other payables 115 962 127 351 113 587
Total equity and liabilities 1 092 757 1 112 122 1 017 970
Number of shares in issue ('000) 456 747 375 189 376 587
Net asset value per share (cents) 134.6 166.7 147.7
Net tangible asset value per share (cents) (22) 88.7 111.1 93.6
CONDENSED GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity-
settled
share- Total
based attributable to Non-
Share Share payment Retained equity holders controlling Total
capital premium reserve earnings of the group interest equity
R’000 R’000 R’000 R’000 R’000 R’000 R’000
Balance at 31 August 2016 4 611 777 9 654 2 825 624 260 1 226 625 486
Options exercised - (171) - - (171) - (171)
Share-based payment reserve - - 1 401 - 1 401 - 1 401
Comprehensive loss for the period - - - (66 404) (66 404) (3 958) (70 362)
Balance at 1 March 2017 4 611 606 11 055 (63 579) 559 086 (2 732) 556 354
Share issue (12) - 116 202 - - 116 202 - 116 202
Options exercised - 589 - - 589 - 589
Share-based payment reserve - - 3 373 - 3 373 - 3 373
Comprehensive loss for the period - - - (65 839) (65 839) 3 954 (61 885)
Balance at 31 August 2017 4 728 397 14 428 (129 417) 613 412 1 222 614 634
CONDENSED GROUP CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 August 31 August 28 February
2017 2016 2017
R'000 R'000 R'000
Cash flows from operating activities (31 098) (73 420) (99 559)
Cash utilised by operating activities (14 881) (62 068) (68 187)
Investment revenue (8) 7 079 11 762 16 298
Finance costs (9) (23 351) (16 104) (34 809)
Taxation paid 55 (7 010) (12 861)
Cash flows from investing activities (5 085) (57 327) (82 053)
Acquisition of property, plant and equipment (13) (28 238) (33 978) (48 242)
Proceeds of disposals of property, plant and equipment (13) 28 167 249 703
Acquisition of non-current asset held-for-sale - (181) (181)
Disposal of non-current assets held-for-sale - 3 459 3 659
Acquisition of business (23) (14 062) (13 709) (15 882)
Investment in finance lease (16) 1 772 (416) (358)
Loans paid/(advanced) 4 493 (7 293) (15 316)
Net acquisition of intangibles (14) 2 783 (5 458) (6 436)
Cash flows from financing activities 137 837 3 750 (5 439)
Proceeds from issue of shares (12) 116 791 589 418
Loans raised/(paid) (21) 21 046 3 161 (5 857)
Change in cash and cash equivalents 101 654 (126 997) (187 051)
Cash acquired from business acquisition - - 1 087
Cash and cash equivalents at beginning of the period (15 468) 170 496 170 496
Cash and cash equivalents at end of the period 86 186 43 499 (15 468)
CONDENSED GROUP CONSOLIDATED SEGMENTAL REPORT
Inter-
segment
Food Jewellery Corporate division
Unaudited division division services revenues Total
Six months ended 31 August R’000 R’000 R’000 R’000 R’000
Revenue 282 100 253 313 11 400 (63 704) 483 109
EBITDA (47 501) 3 892 (10 204) - (53 813)
Segment depreciation and amortisation (14 021) (4 662) (807) - (19 490)
Operating loss (61 521) (769) (11 013) - (73 303)
Investment revenue 3 993 134 20 827 (17 875) 7 079
Finance costs (13 143) (8 274) (19 809) 17 875 (23 351)
Loss before taxation (70 670) (8 910) (9 995) - (89 575)
Segment assets 557 393 418 155 117 209 - 1 092 757
Segment liabilities 125 849 205 457 146 817 - 478 123
Segment capital expenditure 18 048 3 976 37 - 22 061
Unaudited six months ended 31 August 2016
Revenue 265 783 296 483 10 000 (43 091) 529 175
EBITDA (41 446) 25 626 (8 900) - (24 720)
Segment depreciation and amortisation (11 774) (3 851) (817) - (16 442)
Operating profit/(loss) (53 220) 21 775 (9 717) - (41 162)
Investment revenue 5 904 275 27 872 (22 289) 11 762
Finance costs (17 100) (7 601) (13 692) 22 289 (16 104)
Profit before taxation (64 416) 14 449 4 463 - (45 504)
Segment assets 541 363 468 835 101 924 - 1 112 122
Segment liabilities 130 795 258 754 97 086 - 486 635
Segment capital expenditure 23 100 11 328 84 - 34 512
Audited year ended 28 February 2017
Revenue 551 099 622 116 8 500 (84 101) 1 097 614
EBITDA (117 670) 60 917 (17 903) - (74 656)
Segment depreciation and amortisation (26 014) (8 407) (1 626) - (36 047)
Operating profit/(loss) (143 684) 52 510 (19 529) - (110 703)
Investment revenue 8 202 424 37 078 (29 406) 16 298
Finance costs (18 911) (17 071) (28 233) 29 406 (34 809)
(Loss)/profit before taxation (154 392) 35 862 (10 684) - (129 214)
Segment assets 529 023 462 388 26 559 - 1 017 970
Segment liabilities 118 888 238 448 104 280 - 461 616
Segment capital expenditure 31 994 16 152 84 - 48 230
Notes to the financial information
1. Reconciliation of headline loss
31 August 31 August 28 February
% 2017 2016 2017
change R'000 R'000 R'000
Reconciliation of headline loss:
Loss attributable to ordinary shareholders -91% (65 839) (34 414) (100 818)
Adjusted for:
Impairment losses - 705 5 260
Loss/(profit) on sale of property, plant and equipment and
non-current assets available for sale 545 (55) 2 062
Tax effect on headline (loss)/earnings adjustments (102) 10 (385)
Headline loss attributable to ordinary
Shareholders -94% (65 396) (33 754) (93 881)
Adjusted for: (2)
Transaction costs and other once-off costs 1 299 694 1 149
Once-off and upfront Domino's and Starbucks costs 4 791 13 986 52 622
Tax effect on core earnings adjustments (761) (4 110) (15 056)
Core headline loss (2) -159% (60 067) (23 184) (55 166)
Weighted average shares in issue ('000) (12) 410 155 375 981 375 927
Weighted average diluted shares in issue ('000) 426 167 381 618 384 379
Loss per share (cents) -74% (16.0) (9.2) (26.8)
Diluted loss per share (cents) -71% (15.4) (9.0) (26.2)
Headline loss per share (cents) -77% (15.9) (9.0) (25.0)
Diluted headline loss per share (cents) -74% (15.3) (8.8) (24.4)
Core headline loss (2) -159% (60 067) (23 184) (55 166)
Core headline loss per share (cents) (2) -135% (14.6) (6.2) (14.7)
2. As previously disclosed, the core earnings adjustment for the six months ended 31 August 2017
(“2017” or “the current period”) is limited to pre-opening expenses of corporate-owned stores;
material, exceptional once-off costs or revenues; and non-cash lease smoothing and IFRS 2
charges. This is non-comparable to the six months ended 31 August 2016 (“prior period” or “2016”)
adjustment as the prior period adjustment included expenses associated with the final conversions
to Domino’s, and the launch of Starbucks. As these brands have now been established, there are
no further launch costs. Some of these costs continue in the business as part of the ongoing
support structure required to support the future growth of the business.
The after-tax core earnings adjustment for the current period amounts to R5.3 million (2016: R10.6
million). Accordingly, noting the non-comparability of the core adjustment, the core headline loss
per share for the current period is 14.6 cents per share compared to a core headline loss per
share of 6.2 cents per share for the prior period.
3. The 9% decrease in group revenue for the current period is driven by the lower revenue in the
Luxury Goods division. Luxury goods are cyclical and negatively influenced by macro-economic
uncertainty in the country, relative Rand strength and disposable income. This division reported a
15% decrease in same-store sales on the back of a 25% increase in same-store sale in the prior
period. The division ended the current period on 79 stores (2016: 83 stores).
Revenue in the Food division decreased by 1% or R2.9 million after inter-segment eliminations.
The Food revenue decrease is largely attributable to a decrease in distribution and royalty revenue
commensurate with the sales decline in the locally-owned brands. Domino’s recorded a same-
store sales increase of 1%, while the locally-owned brands recorded a decline of 8.6%. The Food
division had 69 (six Starbucks, 63 Domino’s) corporate-owned stores (2016: 34 stores)
4. Gross profit increased by R7.1 million or 4% over 2016. This is primarily due to having more
corporate stores in the Food division which trade at higher margins than the group average, as
well as margins in corporate stores improving from the prior period. Consequently, group gross
profit margin increased to 43% (2016: 37.9%). Pleasingly, the Luxury Goods division margin
percentage was unchanged for the current period.
5. Both divisions contributed to the 16% or R36 million increase in operating costs. This increase is
mainly made up as follows:
- R3.2 million in the Luxury Goods division which equates to a 3.6% increase. The decline in
revenue saw costs as a percentage of its revenue increasing to 37.1% (2016: 30.6%).
- R31.7 million in the Food division, R28 million of which relates to the division owning more
corporate stores than the prior period. Excluding additional stores, expenses increased
R3.7 million, or 3.5% over the prior period.
Included in operating costs in the current period are pre-opening and non-cash expenses of
R6 million (2016: R14.7 million). These costs form part of the core adjustment (see note 2) and
comprise of:
- Corporate store pre-opening expenses of R1.4 million (2016: R5.5 million); and
- Lease smoothing and IFRS 2 share-based payment expenses of R4.6 million
(2016: R0.5 million). These expenses are non-cash.
6. The group reported an EBITDA loss of R53.8 million for the period (2016: R24.7 million loss). The
table below reflects the segmental performance before and after the core adjustment described
in point five above.
31 August 31 August
% 2017 2016
change R'000 R'000
EBITDA
Food -15% (47 501) (41 446)
Jewellery -85% 3 892 25 626
Corporate Services -15% (10 204) (8 900)
Group EBITDA -118% (53 813) (24 720)
Core EBITDA
Food -59% (42 171) (26 446)
Jewellery -82% 4 439 25 306
Corporate Services -12% (9 991) (8 900)
Group core EBITDA -375% (47 723) (10 040)
7. The increase of R3 million in depreciation and amortisation is due to the increased number of
corporate-owned stores in compared to the prior period. This amount is expected to grow in future
as the Food division adds to its corporate store base.
8. Investment revenue comprises of interest charged to franchisees on conversion loans and interest
received on positive cash balances. The decrease of R4.7 million is mainly made up of:
- R2.3 million decrease in interest from franchisees (see note 3) as these stores have
become corporate-owned; and
- Lower positive cash balances on hand during the current period.
9. The increase in finance costs is due to a combination of:
- the group paying a higher interest rate than it previously did on its debt facilities as a result
of the group‘s net leverage ratio for the year ended 28 February 2017 exceeding three; and
- additional facility of R48 million to open new corporate Domino’s and Starbucks outlets.
10. The group’s effective tax rate for the current period is 26.4% as a result of continuing expenses
such as intangible amortisation and IFRS 2 share-based payment expenses, which are not
deductible for tax purposes.
11. This relates to a shareholding by the Luxury Goods division of 58% in a company that owns three
NWJ stores.
12. The change in the weighted average number of shares in issue is as a result of 80 million shares
issued in terms of a renounceable claw-back rights offer to Taste shareholders in June 2017.
13. The increase in property, plant and equipment as a result of the additional corporate stores in the
group has been offset by the following disposals since 31 August 2016:
- the disposal in April 2017 of the property in Midrand which houses the dough manufacturing
and food distribution businesses of the Food division, for R28 million; and
- the sale in December 2016 of the food manufacturing assets in the Cullinan facility for
R9.5 million to the facility’s management in terms of a funded buy-out as part of a strategic
realignment of the Food division.
14. The decrease in intangible assets mainly relates to the reclassification of certain intangibles to
property, plant and equipment and to goodwill when stores are acquired from franchisees.
15. The increase in goodwill from the prior period is attributable to the acquisition of stores from
franchisees per note 23.
16. This amount represents the value of ovens and other pizza equipment being leased to franchisees
that have converted their stores to Domino’s. This amount reduces as franchisees pay as well as
when stores are acquired from franchisees.
17. Other financial assets consist of:
- Loans made to marketing funds of brands within the group, including pre-funding the
Domino’s marketing fund through a loan to launch the brand in South Africa.
- Conversion loans provided to Scooters and St Elmo’s franchisees for the conversion of
their stores to Domino’s.
- Extended payment terms given to franchisees of the group.
- Funded sale of the food manufacturing assets of the Cullinan facility (see note 13).
In February 2017, the loan to the Domino’s marketing fund was assessed, and a decision was
made not to charge interest on this loan in order to ensure that more funds are available for future
brand marketing. A present value discount adjustment was made to reflect the loan at its present
value. This adjustment amounts to R36 million, is non-cash, and is the primary reason for the
decrease in other financial assets over the prior period.
18. The increase in the deferred tax asset from the prior period is due to the loss before tax reported
by the Food division. The recoverability of these losses is assessed annually at year end.
19. Net working capital generated R35 million from the year ended 28 February 2017, attributable
mainly to the Luxury Goods division.
20. The increase in share premium from the prior period is consequent to the shares issued as per
note 12.
21. The increase in borrowings from the prior period is due to the additional funding facility as per
note 9.
22. Net tangible asset value per share is calculated by excluding goodwill, intangible assets and the
deferred taxation liability relating to intangible assets, from net asset value.
23. During the current period the group concluded the following acquisitions listed below. None of the
goodwill recognised on these acquisitions is expected to be deductible for income tax purposes.
The purchase price allocations have been disclosed as provisional, as permitted by IFRS3
Business Combinations and will be finalised within 12 months of acquisition date:
Acquisition of NWJ stores
Goodwill arose on the acquisition of the business of one NWJ store in March 2017. The rationale
for this acquisition is consistent with the brands strategy of:
- expanding its corporate store ownership; and
- retaining key strategic sites.
The fair value of assets and liabilities acquired is set out below:
R'000
Property, plant and equipment 75
Trade and other receivables 3
Inventory 609
Fair value of assets acquired 687
Consideration paid (881)
In cash (881)
Goodwill acquired (194)
During the period that this store was owned it contributed R1 million to revenue and R0.1 million
to EBITDA. The revenue and operating profit as if this store was owned for a full year cannot be
disclosed, as complete and compliant financial records of this store prior to the date that it was
acquired could not be obtained.
Acquisition of Domino’s stores
During the year the Food division acquired the business of seven Domino’s outlets in order to
expand its corporate store footprint.
The fair value of assets and liabilities acquired is set out below:
R'000
Property, plant and equipment 5,657
Fair value of assets acquired 5,657
Consideration paid (13,180)
Balance owed by vendors (13,180)
Goodwill acquired (7,523)
During the period that these stores were owned they contributed R8.2 million to revenue and an
EBITDA loss of R0.5 million. The revenue and EBITDA as if these stores were owned for a full
year cannot be disclosed, as complete and compliant financial records of these stores prior to the
date that they were acquired could not be obtained.
Acquisition of Domino’s stores
In December 2016, the Food division acquired an 80% share in Aloysius Trading Proprietary
Limited (“Aloysius”), a company which owned 15 Domino’s franchise stores in Gauteng, Free
State, North West, Mpumalanga and Limpopo. The remaining 20% of shares were retained by
the existing management who have been franchisees of Taste for ten years. In March 2017, the
Food division acquired the remaining 20% minority interest. Management remain in the business.
The fair value of the minority interest acquired is set out below:
R'000
Minority interest 3,885
Fair value of assets acquired 3,885
Consideration paid -
Goodwill acquired (3,885)
During the period that these 15 stores were owned/operated by the Food division, they contributed
R30.6 million to revenue and R3 million to EBITDA.
COMMENTS FROM THE CEO
Any operational gains made during the six months ended 31 August 2017 (“2017” or “the current year”)
have been overshadowed by the brutal and sustained decline in consumer spending across almost all
categories that the group trades in. The improvements in labour, margin and costs were not enough to
counter the sales decline, especially in the first quarter of the current period.
We expected sales in the Luxury Goods division to decline. Luxury Goods are cyclical and follow
consumer sentiment, the exchange rate and disposable income trends reasonably predictably. What
we did not expect was the extent nor the speed of the decline in the first quarter of the current period.
Having responded with increased marketing spend and even tighter controls, the second quarter of the
current period showed materially better sales and profit performance in this division, which has
continued into September.
While we expected the Food division to post an EBITDA loss for the period we have also concluded
that there is an element of cyclicality to the quick service restaurants (“QSR”) segment also following
consumer sentiment and disposable income. Brands trading in the lower income consumer segment
have borne the brunt of the sales decline. Our efforts to improve the value proposition, combined with
increased marketing spending, have been met with limited success and certainly have not been enough
to counter the current sales cycle. Although not immune from the cycle, Domino’s and Starbucks
performed acceptably during the period, with Dominos posting a 1% increase in same-store sales.
Notwithstanding reported lower foot counts in malls Starbucks stores individually continue to perform
above our 25% internal rate of return (“IRR”) hurdle.
In April this year the group took the strategic decision to separate the Food and Luxury Goods divisions
in the future. Having initiated a sale process it was soon evident that the timing of concluding a sale
was not ideal. The group has therefore stopped the sale process and is focussing its attention, across
both divisions, on the operational and tactical responses this environment necessitates.
GROUP OVERVIEW
The board of directors of Taste (“the Board”) presents the unaudited condensed consolidated financial
results for the six months ended 31 August 2017. Taste is a South African based management group
that owns and licenses a portfolio of franchised and owned, category specialist and formula driven
QSR’s, coffee and luxury retail brands currently housed within two divisions: food and luxury goods.
The group is strategically focussed on [1] licensing leading global brands; [2] leveraging our scale
among our owned food brands, [3] increasing ownership of corporate-owned stores across both
divisions; and [4] supporting this growth through a leveraged shared resources and vertically integrated
platform.
Group revenue decreased 9% to R483 million from the prior period, while gross margin increased five
percentage points due to having more corporate-owned stores in the Food division than in the prior
period. Gross margin was largely unchanged in the Luxury Goods division. Total operating costs
increased 16%, or R36 million. R28 million of these costs related to owning more corporate stores.
Excluding these non-comparable corporate stores, expenses in the Luxury Goods and Food divisions
increased 3.5% and 3.6% respectively. The group recorded an EBITDA loss of R54 million (2016:
R25 million). While an EBITDA loss was expected from the Food division, the extent of the decline in
EBITDA in the Luxury Goods division was not. Finance costs increased to R23.3 million (2016:
R16.1 million) as both the cost of borrowing and the quantum of borrowings increased.
An increase in equity raised the weighted average number of shares in issue to 410 million shares
(2016: 375 million). The resultant headline loss was 15.9 cents per share (2016: loss of 9 cents per
share). Consequent to the equity raised through a rights offer in the current period, cash and cash
equivalents increased to R86 million (2016: R43 million) at the end of the current period.
SEGMENTAL OVERVIEW
FOOD
The Food division licences the world’s leading coffee retailer and roaster – Starbucks; the world’s
largest pizza delivery chain - Domino’s; and owns The Fish & Chip Co, Zebro’s Chicken and Maxi’s
brands. Taste’s food brands are spread across a diversified portfolio of product categories (coffee,
chicken, pizza, fish, burgers and breakfasts) that appeal to middle-and-upper income consumers
(Starbucks, Domino’s, Maxi’s) as well as lower income consumers (The Fish & Chip Co, Zebro’s
Chicken).
The Food division continues its metamorphosis from a fully franchised, owned brand business, to a mix
of corporate and franchise-owned outlets, and owned and licenced brands. Same-store sales in
Domino’s remained positive, albeit at 1% for the six months, while same-store sales across our owned
brands declined 8.6%. The benefits of growing slowly in Starbucks are paying off with good controls
being implemented in the business and tangible continuous operational improvements in labour, margin
and supply chain being achieved. Two further Starbucks stores were added in August 2017, and a
further four openings by year end will bring the total trading outlets to ten. An immediate consequence
of the restrained consumer environment is lower short-term sales forecasts in our new-store investment
cases. These in turn impact the number of potential locations that meet our 25% internal rate of return
hurdle (“IRR”) reducing new store growth numbers to the lower end of our estimated ranges. Having
finalised its material investment in supply chain and human capital to support our licences brands, the
focus of the division is to grow Starbucks and Domino’s stores to the point where their individual profit
contributions exceed this support cost.
LUXURY GOODS
The division consists of retail outlets branded under NWJ, Arthur Kaplan and World’s Finest Watches.
Through Arthur Kaplan and World’s Finest Watches, the division is the leading retailer (by number of
outlets) of luxury Swiss watches in the region, with brands like Rolex, Cartier, IWC, Omega, Breitling,
Hublot, Montblanc, TAG Heuer, Longines and Rado, among its custodian brands. Its brands appeal to
a diversified customer base ranging from premium watch and jewellery buyers (Arthur Kaplan and
World’s Finest Watches) to entry level jewellery and fashion watch buyers (NWJ).
Our Luxury Goods division, after multiple years of record financial performance, had its toughest six
months in recent history. Although first quarter same-store sales declined 19%, this decline slowed in
the second quarter to -11%, with the last three months decline from July to September further improving
to -3.4%. Costs increased 3.6%, well below rental and salary increases, while gross margin remained
largely unchanged. As part of our intention to separate the Food and Luxury Goods divisions in the
future the divisions have been ‘ring-fenced’ with each having access to their own appropriate funding.
Inventory was particularly well managed through the supply chain, without impacting customer facing
inventory. The division is founded on good retail locations, world class quality brands and deep
institutional knowledge within the business.
OUTLOOK
Despite improvements in sales in the most recent quarter the group remains bearish with regard to a
material sales recovery in the next six months. As appropriate, we will continue to invest in marketing
expenditure, enhancing the customer value proposition and building on the operational improvements
made to date.
Shareholders’ attention is drawn to the cautionary announcement made on 29 September 2017 wherein
the group announced it was evaluating a capital restructure that would see its long term debt of R225
million materially reduced and a combination of debt and equity raised to fund future Starbucks and
Domino’s stores. On the basis that this restructure is successful and assuming a moderate consumer
recovery next year, the Food division will reach a cash breakeven during the second half of next year.
The next six months will no doubt continue to test to the fortitude of South African consumers. We are
however confident that the strength of our brands across our divisions will see the group well placed to
capitalise on consumer spending as the cycles turn.
BASIS OF PREPARATION OF THE INTERIM RESULTS
Statement of compliance
Basis of preparation and accounting policies
The unaudited condensed consolidated results have been prepared in accordance with the recognition
and measurement requirements of International Financial Reporting Standards (“IFRS”), the
presentation and disclosure requirements of IAS 34 - Interim Financial Reporting, the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting
Pronouncements as issued by Financial Reporting Standards Council, the Listings Requirements of the
JSE Limited and in the manner required by the South African Companies Act 71 of 2008, as amended.
Accounting policies, which comply with IFRS, have been applied consistently by all entities in the group
and are consistent with those applied in the previous financial year except for amendments and
interpretations that came in to effect during the current financial year that have no impact on the group.
The condensed consolidated results have not been reviewed or audited by the group’s auditors and
were prepared under the supervision of Mr. E Tsatsarolakis, the Chief Financial Officer of the group.
On behalf of the Board
C F Gonzaga E Tsatsarolakis
Chief Executive Officer Chief Financial Officer
12 October 2017
CORPORATE INFORMATION
Non-executive directors: GM Pattison* (Chairperson), KM Utian*, A Berman*, HR Rabinowitz, TC
Moodley, WP van der Merwe*
*Independent
Executive directors: C F Gonzaga (CEO), D J Crosson, E Tsatsarolakis (CFO)
Registration number: 2000/002239/06
Registered address: 12 Gemini Street, Linbro Business Park, Sandton, 2065
Postal address: PO Box 1125, Ferndale, Randburg, 2160
Company secretary: iThemba Corporate Governance and Statutory Solutions Proprietary Limited
Telephone: (011) 608 1999
Facsimile: 086 696 1270
Transfer secretaries: Computershare Investor Services Proprietary Limited
Sponsor: Merchantec Capital
These results and an overview of Taste are available at www.tasteholdings.co.za
Date: 12/10/2017 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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