Wrap Text
Unaudited Condensed Consolidated Results For The Six Months Ended 31 August 2018
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 2018
Highlights
Balance sheet recapitalisation
Secured a loan facility of up to R200 million from the Riskowitz
Value Fund
Business model reorientation - Decentralisation of branded food
businesses and restructuring across the Group
Clear Food Strategic Focus on International Brands
Food Portfolio Review - Zebro's Disposal
Commentary
The first half of the 2019 financial year marked the beginning
of a new dawn for the Taste Group. Successive periods of
unsatisfactory results forced us to ask and answer tough
questions about our business. While this was not an easy
environment to operate in, given the internal revisions and
external economic headwinds, I am proud of the acceptance to
change that our team has demonstrated. In the short six months
that we have been on this new journey, we have managed to
make some significant changes to the group that will provide
a strong foundation for long-term sustainability and growth.
The changing face of Taste
The previous strategy to manage Taste as a single business
introduced a level of complexity in the Group that was not
only unnecessary but also costly. The first strategic
decision executed in the previous financial year was to
split the Group into two distinct verticals namely the Food
Division (Food) and the Luxury Goods Division (Luxury Goods).
Operating these verticals as independent businesses has allowed
us to focus on the unique opportunities in their respective
markets with laser-focused strategies, clear financial KPIs and
as far as possible separate capital and funding structures.
The Luxury Goods Division consists of retail outlets branded
under NWJ, Arthur Kaplan and World's Finest Watches. In the
prior financial year, we halted a process to divest from the
Luxury Goods Division when it became evident that a sale was
not ideal given the impact of the downturn in the local
retail environment. We have backed the management team to
devise an appropriate strategy to maximise value from this
division over the longer term.
The Food Division is made up of three major business units
namely (1) International Master Franchise Licences which
comprise Domino's Pizza (Domino's) and Starbucks Coffee
(Starbucks); (2) Locally-owned brands which consist of
Maxi's and The Fish and Chip Co and (3) Supply Chain
business, Buon Gusto which operates and manages the Food
Divisions' supply chain activities.
Another noteworthy event during the previous financial year
was the recapitalisation of the Group by the Riskowitz Value
Fund (RVF) which at the time was a significant anchor
shareholder of the Group. The funds raised through the
recapitalisation were used to pay down our debt facilities
which have unshackled us from a burdensome and increasingly
unserviceable debt structure. This, together with RVF's
long-term perspective, strategy and capital structure,
has allowed the management team to divert our focus away
from managing the market and the Group's capital structure
onto the operations of the Group, as should be the case.
As a result of the recapitalisation, RVF increased their
shareholding to a majority stake which has been a catalyst
for positive change. At the time of moving into a majority
position in January 2018, the Group's Board of Directors
were reconstituted and shortly thereafter, the Group CEO,
at the time, resigned. The board appointed one of RVF's
partners, Tyrone Moodley as the Acting Group CEO.
The new Board of Directors and CEO immediately focused on
identifying the root-cause of operating losses incurred over
the recent past and to determine the best way forward for the
Group to maximise shareholder value. The Executive team,
armed with this mandate from the Board and the unwavering
support of the anchor shareholder, have put in a large amount
of effort to gain a detailed understanding of the operating
performance of the Group. With this in mind, we want to
highlight the most critical focus areas for us going forward.
These are, overhauling our investment strategy to secure
long-term funding, revamping our business and operating
model and lastly building a strong team to execute on
strategic objectives.
Investing Strategy
The first critical decision we made was to pause the expansion
of the Domino's and Starbucks network. Firstly, to ensure that
the cash which remained in the Group post the settlement of
the debt facilities is sufficient to fund the expected current
operating losses of the Group but secondly and more importantly,
to afford us the opportunity to review the store operating models
of both brands and capital required to deliver an acceptable
return on investment. Our review of the business highlighted
that we could consistently deliver economic profit and
create shareholder value with a shift in our operating and
development strategies for both Domino's and Starbucks. At
present, Domino's existing corporate store network is producing
operating losses and whilst the Starbucks' store network is
profitable at an EBITDA level, it is not producing the required
return on the store investments. With the support and hands-on
collaboration of our global partners, the teams have worked
exceptionally hard to develop new store economic models,
investment case metrics and market development strategies.
Given the above progress we believe that once we have secured
long term funding for the Group, we can enable the expansion
of the brands' networks.
A Purpose Driven Operating Model
As a consequence of clear deliberation between the Food and
Luxury Goods Division, the franchised group shared services model
no longer held relevance as it proved costly, had the unintended
consequence of removing responsibility and accountability for
functional operations from the brands and slowed down the
decision-making process which had to go through multiple
layers in the organisational structure.
We therefore made a decision during the period to adjust the
Food Divisions operating model to move away from the centralised
model of shared services into a decentralised model with each
business having their own functional teams within their respective
brand. The decentralised model is aimed at ensuring that the
managing executives of the brands can take full responsibility
and accountability for all aspects of their business' operations
with an acute focus on owning and operating stores.
We concluded a restructure of the shared services business unit
during the period resulting in the HR, finance, marketing, site
acquisition and store development function being moved into the
respective business units.
The restructure has resulted in the removal of the functional
executive layer within shared services and replaced by functional
operational managers within the business units. It is expected
that restructure will result in a R9,0 million reduction in head
office costs with the full effect of this reduction only being
realised in the 2020 financial year.
One further area of the business model which came under review
was the vertically integrated supply chain business, Buon Gusto.
Our operational review concluded that the insource supply chain
operations have contributed significantly to the poor performance
of the Food Division over the past few years as the business
failed to shift its model from a profit centre servicing franchised
stores to what is today a predominantly corporate-owned store
network requiring an effective cost centre solution. It also
became clear that the appropriate investments in systems and
procedures in the supply chain business had not been made and
would require capital in order to elevate the business to
acceptable levels of performance.
In order for us to become the best restaurant operator and
franchisor in the country our brands need to be supported by
the best supply chain possible. Any time, capital or resources
invested into these supply chain competencies would dilute
focus away from owning and operating stores.
Therefore, we will begin a process during the second half of
the financial year to identify the best way to move the supply
chain operations into an outsourced model and to identify a
leading supply chain service provider to partner with. We will
retain the dough production business as this allows us to
control the quality and consistency of the dough used in our
Domino's network.
Building a World Class Team
We believe in the heuristic ‘performance is a function of
two key characteristics - ability and motivation.' When we
appoint the right people into the right roles and empower
them, the work itself becomes intrinsically valuable and
rewarding, creating a sturdy foundation for long term
performance. Over the period we did two things to translate
this philosophy into practice; (1) decentralising our brands
empowered each Brand ME to build their respective fit for
purpose teams, holding them accountable for brand specific
execution and performance; and (2) we made critical appointments
and welcomed the assistance from our International Brand
partners with strategic secondments into our market with which
they bring a wealth of industry knowledge and experience. The
impact of the increased cooperation was felt immediately within
each brand. Although we are only in the first innings of these
human capital revisions, we believe that this approach will
enable us to implement the necessary changes to our business
rapidly.
Some key appointments we want to highlight here are; Dylan
Pienaar as Chief Operating Officer for the Food Division,
and Bruce Layzell as the Domino's Managing Executive. Both
Bruce and Dylan have experience in the Quick Service Restaurant
(QSR) industry and more importantly experience in operating
Global brands in South Africa, having operated KFC, Burger
King, Dunkin Donuts and Baskin-Robbins between them. In
January we welcome a new strategic Starbucks appointment
who brings 17 years' experience currently operating out of
the Starbucks EMEA region.
Duncan Crosson will continue to lead the Luxury Goods Division
as CEO. Despite substantial external headwinds in the Luxury
Goods Division, we are confident that Duncan will be able to
steer the ship and mitigate risk and losses responsibly.
Financial overview
The South African economy continued to retract during the period
under review and the compounding effects of higher fuel charges,
higher VAT and income taxes on the consumers' disposable income
and spending habits, had a negative impact on the financial
results for this reporting period.
Over the period we have seen a contraction in consumer spend
across all our brands resulting in a 3% decline in revenue.
Notwithstanding the economic headwinds we've identified several
areas for improvement.
The Food Division revenue increased by 13% to R319 million
(2017: R282 million) with gross margins remaining constant
despite not passing the VAT and fuel increases onto consumers.
The Food Divisions operating costs increased by 7% largely as
a result of the operating costs of Starbucks doubling since the
comparative period due to the addition of eight stores in the
network and the expiration of a royalty concession granted to
Taste by Domino's International.
The Luxury Goods Division encountered one of the toughest trading
conditions on record. The industry was hit hard by cash-strapped
consumers which resulted in decreasing jewellery and watch sales
coupled with increasing pressure on discount luxury goods. Sales
for the first half of the year declined by 13% to R220 million
(2017: R253 million) and gross margins declined 1.9% due to
increased promotional activity and deeper discounts to revolve
stock. The division has focused on reducing operating costs by
streamlining and optimising their cost base, which has resulted
in 4.2% reduction in the operating costs of the division.
Inventory continued to be well managed, supporting the
business needs in the face of unpredictable trading conditions,
the result was an improvement in inventory turn versus the
comparable period.
An increase in equity raised the weighted average number of shares
in issue to 899 million shares (2017: 410 million). The resultant
headline loss was 8.0 cents per share (2017: loss of 15.9 cents
per share). Cash and cash equivalents decreased to R48.5 million
(2017: R86 million) at the end of the current period.
Operational review
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 and Maxi's brands. Taste's food brands span
across a diversified portfolio of product categories (coffee, 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). In June 2018, we divested from Zebro's Chicken,
reducing sales of our locally-owned brands.
The slowdown in the store rollout has allowed the Food Division to
realign their respective brand strategies and focus on planning
their growth initiatives for the next financial period. Same-store
sales in local-owned brands remained positive, albeit at 1% for the
six months, while same-store sales for Domino's increased to 2.8%.
Two further Starbucks stores were added in April 2018 and July 2018
which brings the total number of Starbucks stores to 12.
Although sales have increased in the Starbucks brand, there is
pressure on the first four stores that can be measured on a
same-store sales basis. In June 2018, Zebro's Chicken was sold
which reduced sales in the locally-owned brands with The Fish and
Chip Co showing slightly increased revenue through the period.
The brand portfolio requires further strategic alignment in order
to focus on the international brand portfolio.
Luxury Goods
The Luxury Goods Division consists of retail outlets branded under
NWJ, Arthur Kaplan and World's Finest Watches. Through Arthur Kaplan
and World's Finest Watches, Taste is a leading retailer of luxury
Swiss watches in South Africa, with brands like Rolex, Omega,
Breitling, Hublot, TAG Heuer, Longines, Rado, Cartier, IWC and
Montblanc, among its custodian brands.
Its brands appeal to a diversified customer base ranging from the
premium watch and jewellery buyers (Arthur Kaplan and World's Finest
Watches) to first-time jewellery and fashion watch buyers (NWJ).
The continued downturn in the retail sector has had a sustained
negative impact on the results of the Luxury Goods Division. This
required us to revisit the business units' operating model, to look
for ways to limit the negative impact which resulted in two major
components of the business undergoing a restructure:
* The closure of the NWJ manufacturing facility and outsource all
jewellery manufacturing to third-party suppliers in an effort to
increase margins.
* The second area was a restructure and rationalisation of the head
office support structure. These changes allow us to reduce our
fixed costs and better manage our variable costs, relieving some
pressure on working capital.
The division has focused on our retail footprint and has sought
to manage and close poor performing stores actively. This will
be an area of continued focus to maximise our investment returns.
The continuing unpredictable retail trading patterns are
expected to persist and to remain challenging for the remainder
of the financial year, mainly driven by uncertain macroeconomic
conditions, depressed business in general and negative consumer
sentiment. The division is founded on good retail locations,
world-class quality brands and deep institutional knowledge
within the business. We believe the changes we've made to date
coupled with our strong brands will enable us to limit the
economic impact on our business.
Subsequent events
On 1 October the Group appointed PSG Capital as its sponsor.
Shareholders are hereby advised that on 26 November 2018 Taste
entered into an agreement with its anchor shareholder,
Riskowitz Value Fund LP (RVF), in terms of which RVF has
agreed to provide the Company with an unsecured, subordinated
shareholder loan in the amount of R50 000 000 (RVF Loan), which
may, at the election of RVF, be increased to R200 000 000. The
initial term of the RVF Loan is 12 months and may be renewed
annually at the discretion of RVF. Interest on the RVF Loan will
accrue monthly at an interest rate of 16% per annum (Loan).
Interest accrued on the RVF loan is payable at maturity. The
full amount of the RVF Loan is available for Taste's access
immediately upon applicable regulatory approvals, which is
expected shortly.
Directorate
On 31 May 2018, Evan Tsatsarolakis resigned as Chief Financial
Officer, and on the same day, we appointed Dylan Pienaar as
Executive Director. Dylan, who had been appointed as the Group's
Chief Operating Officer in March 2018, assumed the role of
Acting Chief Financial Officer in addition to his existing
responsibilities until a suitable candidate is appointed to
fill the role.
Outlook
Despite the tremendous strides we have made in resetting our
foundation to enable long-term sustainability and growth, we
are acutely aware that far more work will be required before
achieving profitability across all divisions and brands in the
Group. Our focus during the second half of the financial year
will be on growth plans in the Food Divisions and moving closer
to positive EBITDA in our current store networks. The growth
plans and funding requirements are based on the revised strategy
of the Group which will focus on growing Domino's and Starbucks.
In consultation with our global partners the pause on capital
expenditure will continue until we are confident that we are
able to deliver investment grade returns.
Divestiture of Non-Core Food Operations
We will continue investigating moving the Food Division's supply chain
activities to an outsourced model. This will include identifying a
leading supply chain service provider.
Domino's Store Profitability
Domino's was the most significant contributor to the Group's EBITDA
loss for the period, predominantly due to losses from corporate stores.
As mentioned previously, some of these losses are attributable to
increased costs that we did not pass onto the consumer. We have
identified several opportunities that will enable us to get Domino's
corporate store to EBITDA break-even as-soon-as-possible. The
initiatives will focus on increasing order counts and reducing food
costs. We have implemented many of these initiatives, and we are
confident that the positive results will start flowing through
in the second part the of the financial year.
The condensed consolidated results have not been reviewed or audited
by the group's auditors and were prepared under the supervision of
Mr D Pienaar CA(SA), the Chief Financial Officer of the group.
On behalf of the Board
TC Moodley D Pienaar
Chief Executive Officer Chief Financial Officer
27 November 2018
Condensed group consolidated statement of comprehensive income
for the six months ended 31 August 2018
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 August 31 August 28 February
% 2018 2017 2018
change R'000 R'000 R'000
Revenue (3) 469 956 483 109 1 043 977
Cost of sales (267 131) (275 341) (612 445)
Gross profit (2) 202 825 207 768 431 532
Other income 2 374 633 3 591
Operating costs (3) (270 725) (262 214) (621 753)
EBITDA* (22) (65 526) (53 813) (186 630)
Amortisation and
depreciation (21 724) (19 490) (41 662)
Operating loss (87 250) (73 303) (228 292)
Investment revenue (4) 6 092 7 079 17 295
Finance costs (5) (2 239) (23 351) (44 745)
Loss before taxation 7 (83 397) (89 575) (255 742)
Taxation (6) 9 240 23 665 14 750
Loss for the year (74 157) (65 910) (240 992)
Attributable to:
Equity holders of the
company (13) (74 071) (65 839) (241 202)
Non-controlling
interest (7) (86) (71) 210
(74 157) (65 910) (240 992)
Loss per share
(cents) (8) 49 (8.2) (16.0) (51.0)
Diluted loss per share
(cents) (8) 47 (8.2) (15.4) (51.0)
Headline loss per
share (cents) (8) 50 (8.0) (15.9) (41.8)
Diluted headline loss
per share (cents) (8) 48 (8.0) (15.3) (41.8)
* Earnings before interest, tax, depreciation and amortisation
(EBITDA).
Condensed group consolidated statement of financial position
as at 31 August 2018
Unaudited Unaudited Audited
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
Assets
Non-current assets 511 036 572 222 513 399
Property, plant and equipment 177 401 181 626 186 920
Intangible assets 83 870 97 024 86 027
Goodwill (9) 121 348 133 184 121 348
Net investment in Finance lease (10) 4 767 7 111 4 919
Other financial assets (11) 26 644 43 574 25 345
Deferred tax 97 006 109 703 88 840
Current assets 370 157 520 535 479 053
Inventories 262 535 311 390 296 017
Net investment in Finance lease (10) 464 544 450
Trade and other receivables 47 605 57 695 56 059
Current tax receivables 2 445 635 1 911
Advertising levies 4 708 11 765 2 914
Other financial assets (11) 2 103 10 474 5 281
Cash and cash equivalents 50 297 128 032 116 421
Total assets 881 193 1 092 757 992 452
Equity and liabilities
Equity attributable to equity
holders of the company 739 307 613 412 813 942
Share capital 8 4 8
Retained earnings (383 529) (129 417) (308 806)
Share premium (12) 1 111 069 728 397 1 112 154
Equity-settled share-based payment
reserve 11 759 14 428 10 586
Non-controlling interest 1 207 1 222 1 503
Non-current liabilities 24 809 306 077 26 031
Borrowings (13) 106 270 543 1 109
Lease equalisation 11 270 11 025 11 270
Deferred tax 13 433 24 509 13 652
Current liabilities 115 870 172 046 150 976
Current tax payable 10 796 -
Bank overdrafts 1 749 41 846 20 179
Borrowings (13) 1 922 10 962 2 662
Lease equalisation 2 657 2 480 2 755
Trade and other payables 109 532 115 962 125 380
Total equity and liabilities 881 193 1 092 757 992 452
Number of shares in issue ('000) 898 970 456 747 898 970
Net asset value per share (cents) 82.4 134.6 90.7
Net tangible asset value per share
(cents) (14) 61.4 88.7 69.6
Condensed group consolidated statement of changes in equity
for the six months ended 31 August 2018
Equity-
settled
share-
based
Share Share payment Accumulated
capital premium reserve losses
Group R'000 R'000 R'000 R'000
Balance at 31 August 2017 4 728 397 14 428 (129 417)
Share issue 4 - - -
Options exercised - 383 757 - -
Share-based payment reserve - - (3 842) -
Comprehensive loss for
the period - - - (179 388)
Balance at 1 March 2018 8 1 112 154 10 586 (308 806)
Share issue - (1 085) - -
Share-based payment reserve - - 1 173 -
Dividends paid - - - (652)
Comprehensive loss for
the period - - - (74 071)
Balance at 31 August 2018 8 1 111 069 11 759 (383 529)
Total
attributable
to equity
holders of Non-
the controlling Total
group interest equity
Group R'000 R'000 R'000
Balance at 31 August 2017 613 412 1 222 614 634
Share issue 4 - 4
Options exercised 383 757 - 383 757
Share-based payment reserve (3 842) - (3 842)
Comprehensive loss for
the period (179 388) 281 (179 107)
Balance at 1 March 2018 813 942 1 503 815 445
Share issue (1 085) - (1 085)
Share-based payment reserve 1 173 - 1 173
Dividends paid (652) - (652)
Comprehensive loss for
the period (74 071) (296) (74 367)
Balance at 31 August 2018 739 307 1 207 740 514
Condensed group consolidated statement of cash flows
for the six months ended 31 August 2018
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
Cash flows from operating
activities (33 950) (31 098) (101 074)
Cash utilised by operating
activities (37 482) (14 881) (72 828)
Investment revenue (4) 6 092 7 079 17 295
Finance costs (5) (2 239) (23 351) (44 745)
Dividends paid (652) - -
Taxation paid 331 55 (796)
Cash flows from investing
activities (10 916) (5 085) (31 080)
Acquisition of property,
plant and equipment (11 412) (28 238) (53 933)
Proceeds of disposals of
property, plant and equipment 461 28 167 28 875
Acquisition of business - (14 062) (24 173)
Investment in finance
lease (10) 138 1 772 4 058
Loans paid 1 880 4 493 15 501
Net acquisition of
intangibles (1 983) 2 783 (1 408)
Cash flows from financing
activities (2 828) 137 837 243 864
Proceeds from issue of shares (1 085) 116 791 500 552
Loans raised/(paid) (13) (1 743) 21 046 (256 688)
Change in cash and cash
equivalents (47 694) 101 654 111 710
Cash and cash equivalents at
beginning of the year 96 242 (15 468) (15 468)
Cash and cash equivalents at
end of the year 48 548 86 186 96 242
Condensed group consolidated segmental report
for the six months ended 31 August 2018
Food Jewellery Corporate
Unaudited six months ended division division services
31 August 2018 R'000 R'000 R'000
Revenue 318 728 220 715 12 450
EBITDA (46 637) (8 299) (10 590)
Segment depreciation and
amortisation (15 749) (5 165) (810)
Operating loss (62 386) (13 464) (11 400)
Investment revenue 3 995 182 1 915
Finance costs (957) (586) (696)
Loss before taxation (59 348) (13 868) (10 181)
Segment assets 459 982 392 604 28 607
Segment liabilities 92 365 196 202 (147 888)
Segment capital expenditure 9 992 1 420 -
Unaudited six months ended
31 August 2017
Revenue 282 100 253 313 11 400
EBITDA (47 501) 3 892 (10 204)
Segment depreciation and
amortisation (14 021) (4 662) (807)
Operating loss (61 521) (769) (11 013)
Investment revenue 3 993 134 20 827
Finance costs (13 143) (8 274) (19 809)
Loss before taxation (70 670) (8 910) (9 995)
Segment assets 557 393 418 155 117 209
Segment liabilities 125 849 205 457 146 817
Segment capital expenditure 18 048 3 976 37
Audited year ended
28 February 2018
Revenue 605 102 558 845 26 000
EBITDA (177 123) 23 074 (32 581)
Segment depreciation and
amortisation (30 212) (9 834) (1 616)
Operating (loss)/profit (207 335) 13 240 (34 197)
Investment revenue 8 414 3 752 40 136
Finance costs (25 359) (18 883) (35 510)
Loss before taxation (224 280) (1 891) (29 571)
Segment assets 463 432 424 748 104 272
Segment liabilities 100 364 212 452 (135 809)
Segment capital expenditure 48 431 5 386 116
Inter-
segment
division
Unaudited six months ended revenues Total
31 August 2018 R'000 R'000
Revenue (81 937) 469 956
EBITDA - (65 526)
Segment depreciation and amortisation - (21 724)
Operating loss - (87 250)
Investment revenue - 6 092
Finance costs - (2 239)
Loss before taxation - (83 397)
Segment assets - 881 193
Segment liabilities - 131 854
Segment capital expenditure - 11 412
Unaudited six months ended
31 August 2017
Revenue (63 704) 483 109
EBITDA - (53 813)
Segment depreciation and amortisation - (19 490)
Operating loss - (73 303)
Investment revenue (17 875) 7 079
Finance costs 17 875 (23 351)
Loss before taxation - (89 575)
Segment assets - 1 092 757
Segment liabilities - 478 123
Segment capital expenditure - 22 061
Audited year ended 28 February 2018
Revenue (145 970) 1 043 977
EBITDA - (186 630)
Segment depreciation and amortisation - (41 662)
Operating (loss)/profit - (228 292)
Investment revenue (35 007) 17 295
Finance costs 35 007 (44 745)
Loss before taxation - (255 742)
Segment assets - 992 452
Segment liabilities - 177 007
Segment capital expenditure - 53 933
Notes to the condensed consolidated financial statements
for the six months ended 31 August 2018
Taste Holdings Limited (the company) is a South African registered
company. The condensed financial statements of the company comprise
the company and its subsidiaries (together referred to as the Group).
1. Statement of compliance
These unaudited condensed consolidated interim financial statements
have been prepared in accordance with the framework concepts and the
measurement and recognition requirements of International Financial
Reporting Standards (IFRS) and its interpretations adopted by the
International Accounting Standards Board in issue and effective for
the Group at 31 August 2018, and Financial Reporting Pronouncements
as issued by Financial Reporting Standards Council, and as a minimum
contains the information required by IAS 34 interim Financial Reporting,
the JSE Listings Requirements, and the Companies Act of South Africa.
2. Basis of preparation
The Group's unaudited condensed consolidated interim financial statements
as at and for the period ended 31 August 2018 have been prepared on the
going-concern basis. The accounting policies applied in the presentation
of the condensed consolidated interim financial statements are consistent
with those applied for the year ended 28 February 2018.
3. Changes in accounting policies
The Group has adopted all the new, revised or amended accounting standards
which were effective for the Group from 1 March 2018.
IFRS 15: Revenue from Contracts from Customers
New standard that requires entities to recognise revenue to depict the
transfer of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled
in exchange for those goods or services. Revenue is measured based on
consideration specified in a contract with a customer and excludes amounts
collected on behalf of third parties.
The new standard will also result in enhanced disclosures about revenue,
provide guidance for transactions that were not previously addressed
comprehensively and improve guidance for multiple-element arrangements.
The Group recognises revenue when it transfers control over a product or
services to a customer.
The Group has identified that only the franchise revenue received from
The Fish & Chip Co brand has been impacted by this new standard however
the impact is not significant.
IFRS 9: Financial Instruments
IFRS 9 introduces a new approach to the classification of financial
assets, which is driven by the business model in which the asset is
held and their cash flow characteristics. A new business model was
introduced which does allow certain financial assets to be categorised
as fair value through other comprehensive income in certain
circumstances. The requirements for financial liabilities are mostly
carried forward unchanged from IAS 39. However, some changes were made
to the fair value option for financial liabilities to address the issue
of own credit risk.
The new model introduces a single impairment model being applied to all
financial instruments, as well as an expected credit loss model for
the measurement of financial assets. IFRS 9 contains a new model for
hedge accounting that aligns the accounting treatment with the risk
management activities of an entity, in addition, enhanced disclosures
will provide better information about risk management and the effect of
hedge accounting on the financial statements. IFRS 9 carries forward the
derecognition requirements of financial assets and liabilities from
IAS 39.
Financial assets and financial liabilities are recognised on the group's
balance sheet when the company becomes party to the contractual provisions
of the instrument.
Loans and receivables and financial liabilities are measured at initial
recognition at fair value and are subsequently measured at amortised cost
using the effective interest rate method.
The new standard has not had significant impact on amounts reported in
respect of the group's financial assets and financial liabilities.
4. Investment revenue comprises of interest charged to franchisees on
conversion loans and interest received on positive cash balances.
5. In February 2018 the proceeds of a rights issue was used to settle
the bonds therefore resulting in a reduction of finance costs of R21
million.
6. The group's effective tax rate for the current period is less than
28% as a result of continuing expenses such as intangible amortisation
and IFRS 2 share-based payment expenses, which are not deductible for
tax purposes. Additionally, the Food Division has not passed the deferred
tax asset relative to certain losses incurred.
7. This relates to a shareholding by the Luxury Goods Division of 58%
in a company that owns three NWJ stores.
8. Reconciliation of headline loss
31 August 31 August 28 February
Reconciliation of headline % 2018 2017 2017
loss change R'000 R'000 R'000
Loss attributable to ordinary
shareholders (13) (74 071) (65 839) (249 202)
Adjusted for:
Impairment losses 783 - 42 053
Loss on sale of property,
plant and equipment and
non-current assets
available for sale 1 892 545 4 839
Tax effect on loss
adjustments (353) (102) (3 274)
Headline loss attributable
to ordinary
Shareholders (10) (71 749) (65 396) (197 584)
Weighted average shares in
issue ('000) 898 970 410 155 473 060
Weighted average diluted
shares in issue ('000) 907 933 426 167 489 130
Loss per share (cents) 49 (8.2) (16.0) (51.0)
Diluted loss per share
(cents) 47 (8.2) (15.4) (51.0)
Headline loss per share
(cents) 50 (8.0) (15.9) (41.8)
Diluted headline loss per
share (cents) 48 (8.0) (15.3) (41.8)
9. The Goodwill decrease from August 2017 is attributable to impairments
made in the FY2018 financial year.
10. 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.
11. 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.
12. The increase in share premium from the prior period is consequent to
the rights issue of 442 222 223 at R0.90 on 29 January 2018.
13. The decrease in borrowings from the prior period is due to settlement
of debt in February 2018 using the rights issue monies received as per
note 12.
14. 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.
Corporate information
Non-executive directors
GM Pattison* (Chairperson), LCH Chou*, NG Brimacombe*, N Siyotula*, AJ Maizey
* Independent
Executive directors
TC Moodley (CEO), DJ Crosson, D Pienaar (CFO)
Registration number
2000/002239/06
Registered address
12 Gemini Street, Linbro Business Park, Sandton, 2065
Postal address
PO Box 1125, Ferndale, Randburg, 2160
Telephone: (011) 608 1999
Facsimile: 086 696 1270
Company secretary
iThemba Corporate Governance and Statutory Solutions Proprietary Limited
Transfer secretaries
Computershare Investor Services Proprietary Limited
Sponsor
PSG Corporate Services Proprietary Limited
These results and an overview of Taste are available at www.tasteholdings.co.za
Date: 27/11/2018 11:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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