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TASTE HOLDINGS LIMITED - Summarised Reviewed Consolidated Results for the year ended 28 February 2019

Release Date: 31/05/2019 12:15
Code(s): TAS     PDF:  
Wrap Text
Summarised Reviewed Consolidated Results for the year ended 28 February 2019

Taste Holdings Limited
Incorporated in the Republic of South Africa
(Registration number 2000/002239/06) 
JSE code: TAS
ISIN: ZAE000081162
(Taste Holdings or Taste or the company or the group)

Summarised reviewed consolidated results 
for the year ended 28 February 2019

Highlights
* Starbucks and Domino's have commenced their store expansion plans;
* R132 million Rights Offer was concluded during the year to fund the expansion;
* Concluded a group-wide restructure;
* Concluded the outsourcing of non-core operations;
* Group revenue decreased by 7% to R960 million; and
* Headline Loss per share decreased by 39% to 25.6 cents. The per share 
  improvement was a function of the increase in the weighted average number 
  of shares in issue to 910 million shares (2018: 473 million shares) and the 
  financial performance.

Commentary 
Taste Holdings is pleased to report back on new management's first full year in 
control - a year of assessment and fundamental change for the group. The Domino's 
brand has been repositioned, Starbucks capex has been rationalized, financial 
discipline has been restored, the business backend has been restructured, and key 
appointments have been made. The business is now positioned to drive top line 
growth and realize attractive margins.

Planning and executing Taste's turnaround
The financial year started off with a new CEO (Tyrone Moodley) and COO (Dylan 
Pienaar) in place. The new executives were tasked by the board to understand the 
root cause of Taste's declining financial performance, develop and implement a 
turnaround strategy leading to sustainable positive financial performance.

The executives' approach was to commence a time-intensive and complex task of 
identifying, isolating and addressing the myriad of challenges hampering 
Taste's profitability, particularly within the Food Division.

Tyrone brought an investor's perspective into the core of the business, 
untainted by predetermined opinions on Quick Service Restaurant (QSR)  
and retail. Dylan's background in global QSR brands enabled us to build the 
needed steps and criteria into the group's revised commercial strategy and 
business model.

It quickly became evident that Taste was being held back by a lack of focus, 
having taken on too much by introducing two global brands and a centralised 
distribution system, while still bedding down its Luxury Goods Division, all 
at the same time. In addition, there was a lack of accountability and 
responsibility within our brands because of a centralised executive function 
sitting above the brands, resulting in slow and in some instances incorrect 
decisions.

Focus had to be introduced into the group, which started with looking at how we 
defined what we are. Taste needed to pick one discipline which it was confident 
it could master. A fundamental shift was made in Taste's definition by moving 
away from being an integrated retail operator to simply being an operator and 
franchisor of retail operations. As a result, parts of the group, being the 
food supply chain and jewellery manufacturing operations did not meet this 
definition.

While the Luxury Goods Division and Food Division brands are both retail 
operations, their similarities stop there. These brands operate in two very 
different segments of the retail markets. They are at different maturities 
in their life cycles with the Luxury brands being at a mature phase while 
the Food Division brands are in their start-up phase. As a result; each has 
vastly different capital requirements and significantly different risk 
profiles. Realising there were more differences than similarities between 
the brands, it was decided to split the group into two clear and distinctive 
business units being the Food Division and Luxury Goods Division. Each 
division manages its own functions and operations apart from information 
technology (IT), capital raising and strategy determination, which remain 
the responsibility of a scaled down Taste Support office. Functional 
responsibilities in the two divisions were split further into each 
individual brand, so that management focus is now allocated at the right 
level for each brand team to execute planning, track performance, evaluate 
outcomes and tweak where necessary in a continuous process of refinement 
specific to their brand nuances. Capital allocation and operational execution 
are clearly defined.

The Luxury Goods Division is a mature business with a well-established 
executive team in place. This team has been given the scope to pursue a 
swift return to consistent profitability. The board are entirely confident 
in the Luxury Goods Division's strategy, which is fundamental to Taste's 
turnaround drive.

At the same time, an evaluation of the businesses that did not fit into 
Taste's revised definition and those incurring unnecessary costs and 
management attention was undertaken. The three businesses identified 
were; the Food Division's supply chain operations, the Luxury Goods 
Division's jewellery manufacturing operations and the Zebro's chicken 
brand. The jewellery manufacturing operations were consequently outsourced 
to a leading manufacturer during the year, which has lowered production 
costs for jewellery. The process of outsourcing the Food Division's supply 
chain operations to a leading supply chain operator commenced during the 
year and it is expected that this function will be completely moved across 
by the second quarter of 2019. This will result in a lower cost to deliver 
products to store and will eliminate the losses that have been incurred by 
the supply chain operations. The divestment from the Zebro's brand and assets 
was due to their poor performance in the highly competitive chicken QSR 
category.

IT has been prioritised as a key enabler of Taste's revised business model, 
which is why it remains a support centre shared service. The group has barely 
scratched the surface of the intellectual property (IP) inherent in our 
Domino's Pizza and Starbucks licence partnerships. Leveraging this IP can 
potentially enhance the group's online offerings to levels unheard-of in 
southern Africa.

The world of commerce everywhere is being challenged by fast incoming 
technologies that are transforming how business is done. By embracing IT 
as a key business enabler through every level of the group, we can leverage 
Domino's and Starbucks IP to build our businesses through data driven 
decision-making and compelling service offerings to our customers. Our 
role will never encompass innovation but rather laser focused execution.

The restructure will result in a lower overall cost structure, but once-off 
costs impacted on this year's results. Although the restructure was largely 
concluded during the financial year, the effects of the cost reduction 
will only be seen at the end of the new financial year (FY 2020). Strong 
evidence of this operational turnaround has already emerged in the group's 
2018/19 year-end financials, but a journey of a year or more remains for 
restoring Taste to sustainable profitability.

Rollout of stores, particularly Domino's and Starbucks
During this period, it was decided to identify the challenges hampering the 
profitability of the current store network before expanding the network 
further.

Identifying the problem areas and implementing solutions stipulated by the 
revised operating model was an arduous six-month exercise, but a new rollout 
plan based on substantially reduced setup costs and the reality of South 
Africa's current economic environment has been finalised. The mission is to 
execute these strategies and continuously track performance, evaluate 
outcomes and refine as necessary. This is a continuous and virtuous 
process of implementation and improvement.

The group receives a constant flow of enquiries from landlords wanting to 
launch a Domino's or Starbucks outlet on their properties and look forward 
to finally turning those requests into reality.

Collaboration with global partners
Since the introduction of the new executives, the group has played open cards 
with its global partners on its financial position and were humbled by their 
overwhelmingly helpful responses and support. Teams from Domino's and 
Starbucks pointed out solutions already available in their corporate IP 
offerings, enabling us to concentrate on implementation rather than systems 
innovation. Taste also collaborated with licensees across the globe who shared 
their responses to similar situations they overcame in their respective 
histories.

These high-quality collaborations have informed much of our forward planning, 
as well as confirming our confidence in the future viability of Taste as a 
profitable custodian of global brands. Most importantly, Domino's and 
Starbucks fully support Taste's revised business and operating model.

Review of the group performance
* Group revenue decreased by 7% to R960 million (2018: R1.03 billion), driven 
  by a 12% reduction in luxury goods sales and a 1% reduction in food sales;
* Gross profit decreased by 5% to R405 million (2018: R425 million) primarily 
  due to lower luxury goods margins resulting from lower selling prices which 
  was partially offset by improved food margins;
* Impairments and once-off restructuring costs totalled R102 million (2018: 
  R24 million);
- Excluding the impairments and once-off costs, group operating costs 
  decreased by 4% or R23 million to R575 million (2018: R599 million);
- Including the impairments and once-off costs, group operating costs 
  increased by 9% or R54 million to R677 million (2018: R623 million);
- Excluding the impairments and once-off costs, the group recorded an EBITDA 
  loss of R116 million (2018: R130 million loss) representing a R14 million 
  improvement;
- Including the impairments and once-off costs, the group recorded and EBITDA 
  loss of R217 million (2018: R153 million loss) representing an increase of 
  R64 million.
* The group has no long-term debt. Our current finance costs are for working 
  capital and overdraft facilities, which totalled R19 million at 28 February 
  2019 (of which R11 million was repaid subsequent to year end). Net finance 
  costs accordingly decreased to R5 million (2018: R44 million);
* A depreciation and amortisation charge of R45 million (2018: R43 million) 
  was largely unchanged from prior years as the existing store network were 
  rationalised during the year;
* Headline loss per share decreased by 16.2 cents to 25.6 cents (2018: 
  41.8 cents loss). The per share improvement was a function of the increase 
  in the weighted average number of shares in issue to 910 million shares 
  (2018: 473 million shares) and the financial performance.

Review of the divisional performance
                
                   28-Feb-19       28-Feb-18        Variance    Variance
                       R'000           R'000           R'000           %         
Food                 469 530         475 476          (5 946)        (1%)
Jewellery            489 980         558 845         (68 865)       (12%)
Group Revenue        959 510       1 034 321         (74 811)        (7%)
Food                 218 923  47%    209 742   44%     9 181          4%
Jewellery            186 484  38%    215 593   39%   (29 109)       (14%)
Group Gross Profit   405 407  42%    425 335   41%   (19 928)        (5%)
Food                (428 213)       (387 775)        (40 438)       (10%)
Jewellery           (231 395)       (202 678)        (28 717)       (14%)
Corporate            (17 363)        (32 182)         14 819         46%
Group Operating 
Cost                (676 971)       (622 635)        (54 336)        (9%)
Food                (166 423)       (141 083)        (25 340)       (18%)
Jewellery            (32 653)         23 074         (55 727)      (241%)
Corporate            (17 319)        (32 182)         15 263         47%
Group EBITDA        (216 395)       (150 591)        (65 804)       (44%)
Food                (199 233)       (172 751)        (26 482)       (15%)
Jewellery            (42 963)         13 240         (56 203)      (424%)
Corporate            (18 930)        (34 198)         15 268         45%
Group Operating 
loss                (261 126)       (193 709)        (67 417)       (35%)

Food division
The Food Division revenue decreased by R6 million or 1% (after intersegment 
eliminations) to R470 million (2018: R475 million). This decrease emanated 
primarily from the closures of underperforming stores; specifically, 
Domino's (4 stores); Maxi's (8 stores) and The Fish & Chip Co (net reduction 
of 2 stores).

The Food Division's overall gross profit margin improved to 47% (2018: 44%) 
as result of the drive to reduce food costs and efficiencies. This initiative 
required paying close attention to supply chain operations, specifically 
procurement.

Operating costs increased by 1% to R370 million (2018: R367 million) 
excluding the impairments and once-off costs of R58 million (2018: 
R21 million). The impairments and once-off restructuring costs totalled 
R45 million (2018: R16 million) and R13 million (2018: R5 million) 
respectively. Operating costs increased by R40 million to R428 million 
(2018: R388 million) when including the impairments and once-off costs.

Excluding the impairments and once-off costs, the Food Division's EBITDA 
loss decreased by R13 million to R110 million (2018: R123 million). Including 
the impairments and once-off costs, the Food Division's EBITDA loss increased 
by R25 million to R166 million (2018: R141 million) primarily due to these 
costs and lower aggregate sales as a result of the smaller store network.

Excluding the impairments and once-off costs, the operating loss decreased 
to R141 million (2018: R152 million), representing a R11 million improvement. 
Including the impairments and once-off costs the operating loss increased to 
R199 million (2018: R173 million) representing an increase of R26 million. 
The derecognition of deferred tax assets, another once-off non-cash item, 
being an additional contributor to the increase with depreciation and 
amortisation being largely unchanged at R35 million (2018: R34 million).

Luxury goods division
System-wide sales in the Luxury Goods Division reduced by 14% to R506 million 
(2018: R589 million) as a result of store closures in both NWJ (8 corporate 
stores and 3 franchise stores) and Arthur Kaplan (1 store), the World's Finest 
Watches being closed for a month due to refurbishment and pressure on the 
retail sector given the economic conditions. Consumer disposable income is 
declining, and average selling prices are lower as consumers look for the 
best deals.

Against this backdrop, revenue decreased by R69 million or 12% to R490 
million (2018: R559 million) as revenue in both brands, Arthur Kaplan and 
NWJ, were down.

Tough trading conditions that continuously exerted downward pressure on 
sales and margins required a rigorous drive to take costs out of the 
business. The divisional review concluded that we should restructure the 
Support office to reduce fixed costs and better manage variable costs, and 
outsource our manufacturing operations in order to ensure focus on retail 
operations and margin improvements.

Operating costs reduced by 6% to total R188 million (2018: R200 million), 
excluding once-off costs of R44 million (2018: R3 million), which include 
R40 million impairments (2018: R3 million) and once-off restructuring costs 
of R4 million for NWJ. Operating costs increased to R231 million (2018: 
R203 million) including the impairments and once-off costs.

Operating costs include the following noteworthy items:
* Impairments of R40 million (2018: R3 million). This amount includes 
  R1 million for the restructuring and R39 million allocated to Arthur 
  Kaplan goodwill.
* Depreciation and Amortisation of R10 million (2018: R10 million).
* Employee cost of R75 million (2018: R80 million). This includes 
  R3.2 million for the human capital restructure and evidences the cost 
  reductions attained.

Excluding the impairments and once-off cost, the Luxury Goods Division 
would have made an EBITDA profit of R11 million (2018: R26 million). 
Including the impairments and once-off costs, the division achieved an 
EBITDA loss of R33 million (2018: R23 million profit) largely attributable 
to a R14 million swing in profitability in NWJ and the R39 million Arthur 
Kaplan goodwill impairment.

Excluding the impairments and once-off costs of R44 million (2018: 
R3 million), the Luxury Goods Division achieved an operating profit of 
R1 million (2018: R16 million). Including the impairments and once-off 
costs, the division finished the year with an operating loss of R43 million 
(2018: R13 million operating profit).

Looking ahead
The executive team have a board-approved business plan that envisages a 
turnaround and resumed growth aligned to realistic milestones set for this 
year-end and through the next decade. This plan will focus on the following 
key areas over the upcoming year with the focal point being retail 
operations:

* Starbucks - will focus on expanding the corporate store network on a 
  revised capex model and achieving the required return on investment for 
  each new store;
* Domino's Pizza - will focus on getting its existing store network to 
  EBITDA break-even. Domino's will then expand its corporate store network 
  within a CAPEX model calculated to achieve the required investment 
  returns;
* Maxi's - will continue to consolidate its franchise network and roll out 
  its new brand image. The brand's key focus is to grow same-store sales 
  and improve the overall network profitability;
* The Fish & Chip Co - will focus on expanding its franchise network while 
  concurrently growing same-store sales;
* NWJ - Launching and rolling out a refreshed brand and store design, with 
  the key focus on improving sales and returning to profitability. The first 
  store has been refreshed and is open for trade in Canal Walk, Cape Town;
* Arthur Kaplan - a refreshed World's Finest Watches in the heart of Sandton 
  City will be followed by the launching and rolling out of a refreshed brand, 
  store design and new online store for Arthur Kaplan. The key focus is on 
  improving watch sales and increasing jewellery's share of the sales mix; and
* Taste Holdings - will focus on ensuring that its retail store operations 
  generate an EBITDA profit for the year. It will be resolute on capital 
  allocation decisions to ensure that the required investment returns are 
  achieved and where it does not make sense, walk away from subpar 
  opportunities. Taste will continue to engage with various capital markets 
  in order to secure further funding.

Appreciation
Taste wholeheartedly thank our shareholders for affording us this opportunity 
to steer Taste Holdings back onto the right track. We thank the board for their 
guidance and our global brand partners for their enthusiastic support and 
sharing of insights.

Most of all, we applaud the resilience of our managers, employees and partners 
for taking on this exciting challenge, restructuring and the host of changes 
implicit in a turnaround of this extent and complexity. You remain the heart 
of this business and none of this would be possible without your buy-in and 
determination to make it all work.

Directorate
The following changes were made to the board: 

Resignations:
Mr. NG Brimacombe resigned as independent non-executive director effective 
25 March 2019

Appointments:
Mr. D Pienaar, change of duties to Chief Operating Officer on 14 January 2019, 
and change of duties to Chief Executive Officer on 25 March 2019.

Change of duties:
Mr. TC Moodley changed from Chief Executive Officer to non-executive director.

Mr. Hannes van Eeden was appointed as the Chief Financial Officer effective 
14 January 2019.

Events subsequent to year-end
No significant events subsequent to year-end to which shareholders need to 
be informed of.

Dividend to shareholders
No dividend has been declared for the year ended 28 February 2019. 

On behalf of the board

D Pienaar
Chief Executive Officer

H van Eeden
Chief Financial Officer

31 May 2019

Condensed reviewed consolidated results for the year ended 28 February 
2019

Review conclusion
The condensed consolidated financial information for the year ended 
28 February 2019 has been reviewed by BDO South Africa Incorporated, who 
expressed an unmodified review conclusion. The auditor's review report 
does not necessarily report on all the information contained in this 
announcement of the financial results. Shareholders are therefore advised 
that, in order to obtain a full understanding of the engagement, they 
should obtain a copy of the auditor's review report together with the 
accompanying financial information from the issuer's registered office. 
A copy of the auditor's review report is available for inspection at the 
company's registered office together with the financial information 
identified in the auditor's review report.

Condensed reviewed consolidated group statement of comprehensive income

                                                               Restated*   
                                                 Reviewed       Audited
                                                12 months     12 months 
                                                    ended         ended
                                              28 February   28 February
                                          %          2019          2018 
                                     change         R'000         R'000
Revenue                                 -7%       959 510     1 034 321
Cost of sales                                    (554 103)     (608 986) 
Gross profit                            -5%       405 407       425 335
Other income                                       10 438         3 591
Operating costs                        -10%      (632 240)     (579 517) 
EBITDA                                 -44%      (216 395)     (150 591) 
Amortisation and depreciation                     (44 731)      (43 118) 
Operating loss                                   (261 126)     (193 709) 
Investment revenue                                 10 192        17 159
Finance costs                                      (4 668)      (43 857) 
Loss before taxation                   -16%      (255 602)     (220 407) 
Taxation                                          (62 032)       12 122
Loss from continuing operations                  (317 634)     (208 285) 
Loss from discontinued
operations, net of tax                               (804)      (32 707)
Total comprehensive loss for the
year                                             (318 438)     (240 992) 
Attributable to:
Equity holders of the company          -32%      (318 227)     (241 202) 
Non-controlling interest                             (211)          210 
                                                 (318 438)     (240 992)
Loss per share (cents)                 -31%         (35.0)        (51.0) 
Diluted loss per share (cents)         -31%         (35.0)        (51.0)        

* Restated due to Zebro's chicken being classified as a discontinued 
  operation.

Condensed reviewed consolidated group statement of financial position

                                                 Reviewed        Audited
                                              28 February    28 February
                                                     2019           2018
                                                    R'000          R'000
Assets
Non-current assets                                328 747        513 399
Property, plant and equipment                     168 454        186 920
Intangible assets                                  82 501         86 027
Goodwill                                           40 165        121 348
Net investment in Finance lease                       849          4 919
Other financial assets                              6 484         25 345
Deferred tax                                       30 294         88 840
Current assets                                    456 167        479 053
Inventories                                       233 276        296 017
Net investment in Finance lease                       849            450
Trade and other receivables                        67 278         56 059
Current tax receivables                             1 590          1 911
Advertising levies                                  2 507          2 914
Other financial assets                              1 775          5 281
Cash and cash equivalents                         148 892        116 421
Total assets                                      784 914        992 452
Equity and liabilities
Equity attributable to holders of company         621 000        813 942
Share capital                                           8              8
Retained earnings                                (627 033)      (308 806) 
Share premium                                   1 238 757      1 112 154
Equity-settled share-based payment reserve          9 268         10 586
Non-controlling interest                            1 292          1 503
Non-current liabilities                            27 358         26 031
Borrowings                                              -          1 109
Lease equalisation                                 11 833         11 270
Deferred tax                                       15 525         13 652
Current liabilities                               135 264        150 976
Current tax payable                                 1 277              - 
Bank overdrafts                                     6 978         20 179
Borrowings                                         12 353          2 662
Lease equalisation                                  2 607          2 755
Trade and other payables                          112 049        125 380
Total equity and liabilities                      784 914        992 452
Number of shares in issue ('000)                2 218 970        898 970
Net asset value per share (cents)                    28.0           90.7
Net tangible asset value per share (cents)           23.1           69.6

Condensed reviewed consolidated group statement of changes in equity 

                                                                Equity- 
                                                                settled   
                                                                 share-
                                                       Total      based 
                                 Share      Share      share    payment 
                               capital    premium    capital    reserve 
                                 R'000      R'000      R'000      R'000
Balance 1 March 2017                 4    611 606    611 610     11 055
Share issue                          4    500 065    500 069          - 
Options exercised                    -        483        483          - 
Share based payment reserve          -          -          -       (469) 
Minority interest acquired
Comprehensive income for
the period                           -          -          -          -
Balance at 1 March 2018              8  1 112 154  1 112 162     10 586
Share issue                          -    126 603    126 603          - 
Share based payment reserve          -          -          -     (1 318) 
Comprehensive loss for the 
period                               -          -          -          -
Balance at 28 February 2019          8  1 238 757  1 238 765      9 268

                                          Total
                                   attributable
                          Accumu-     to equity         Non-
                            lated    holders of  controlling      Total
                             loss   the company     interest     equity
                            R'000         R'000        R'000      R'000
Balance 1 March 2017      (63 579)      559 086       (2 732)   556 354
Share issue                     -       500 069            -    500 069
Options exercised               -           483            -        483
Share based payment
reserve                         -          (469)           -       (469)
Minority interest 
acquired                   (4 025)       (4 025)       4 025          -
Comprehensive income
for the period           (241 202)     (241 202)         210   (240 992) 
Balance at 1 March
2018                     (308 806)      813 942        1 503    815 445
Share issue                     -       126 603            -    126 603
Share based payment
reserve                         -        (1 318)           -     (1 318)
Comprehensive loss
for the period           (318 227)     (318 227)        (211)  (318 438) 
Balance at 
28 February 2019         (627 033)     621 000         1 292    622 292 
  
Condensed reviewed consolidated group statement of cash flows

                                                             Restated*
                                               Reviewed       Audited  
                                              12 months     12 months 
                                                  ended         ended
                                            28 February   28 February
                                                   2019          2018
                                                  R'000         R'000
Cash flows from operating activities            (65 060)     (101 074) 
Cash utilised by operating activities           (70 915)      (73 580) 
Investment revenue                               10 192        17 159
Finance costs                                    (4 668)      (43 857) 
Taxation (paid) refund                              331          (796) 
Cash flows from investing activities            (24 453)      (31 080)
Acquisition of property, plant and 
equipment                                       (24 722)      (53 879)
Proceeds of disposals of property, 
plant and equipment                               2 953        28 875
Disposal of intangible asset                          -         5 042
Acquisition of business                               -       (24 173)
Disposal of discontinued operations, 
net of cash                                           66          (54)
Investment in finance lease                        3 671        4 058
Loans paid/(advanced)                              1 772       15 501
Net acquisition of Intangibles                    (8 193)      (6 450) 
Cash flows from financing activities             135 185      243 864
Proceeds from issue of shares                    126 603      500 552
Disposal of discontinued operations, 
net of cash                                       (2 012)      24 510
Loans raised/(paid)                               10 594     (281 198) 
Change in cash and cash equivalents               45 672      111 710
Cash and cash equivalents at beginning 
of the period                                     96 242      (15 468)
Cash and cash equivalents at end of 
the period                                       141 914       96 242 

* Restated due to Zebro's chicken being classified as a discontinued 
  operation.

Condensed reviewed consolidated group segmental report
                                                        
                                                                   
                               Food     Jewellery     Corporate  
Reviewed Twelve months     division      division      services      
ended 28 February             R'000         R'000         R'000       
Revenue                     601 295       489 980        16 755  
EBITDA                     (166 423)      (32 653)      (17 319)       
Segment depreciation 
and amortisation            (32 809)      (10 310)       (1 612)      
Operating loss             (199 233)      (42 963)      (18 930)       
Investment revenue            6 128         1 756         2 308       
Finance costs                  (386)       (2 618)       (1 664)         
Loss before taxation       (193 491)      (43 825)      (18 286)       
Loss from discontinued 
operation, net of tax          (804)            -             -       
Segment assets              327 102       345 266       112 546       
Segment liabilities          83 751        61 050        17 821      
Segment capital
expenditure                  14 486        10 204            32      
Restated* Audited 
year ended
28 February 2018
Revenue                     595 446       558 845        26 000     
EBITDA                     (141 083)       23 074       (32 582)       
Segment depreciation 
and amortisation            (31 668)       (9 834)       (1 616)       
Operating profit/(loss)    (172 751)       13 240       (34 198)      
Investment revenue            8 278         3 752        40 136  
Finance costs               (24 471)      (18 883)      (35 510)    
Loss before taxation       (188 944)       (1 891)      (29 572)    
Loss from discontinued 
operation, net of tax       (32 707)            -             -      
Segment assets              463 432       424 748       104 272      
Segment liabilities         100 364        66 913         9 730       
Segment capital
expenditure                  48 377         5 386           116      


Condensed reviewed consolidated group segmental report

                             Inter- 
                            segment             
                           division
Reviewed Twelve months     revenues         Total
ended 28 February             R'000         R'000
Revenue                    (148 520)      959 510
EBITDA                            -      (216 395) 
Segment depreciation 
and amortisation                  -       (44 732) 
Operating loss                    -      (261 126) 
Investment revenue                -        10 192
Finance costs                     -        (4 668) 
Loss before taxation              -      (255 602)
Loss from discontinued 
operation, net of tax             -          (804) 
Segment assets                    -       784 914
Segment liabilities               -       162 622
Segment capital 
expenditure                       -        24 722
Restated * Audited 
year ended
28 February 2018
Revenue                    (145 970)    1 034 321
EBITDA                            -      (150 591) 
Segment depreciation 
and amortisation                  -       (43 118)
Operating profit/(loss)           -      (193 709) 
Investment revenue          (35 007)       17 159
Finance costs                35 007       (43 857) 
Loss) before taxation             -      (220 407)
Loss from discontinued 
operation, net of tax             -       (32 707) 
Segment assets                    -       992 452
Segment liabilities               -       177 007
Segment capital
expenditure                       -        53 879

                                                                Restated*                       
                                                 Reviewed        Audited
                                                12 months      12 months
                                                    ended          ended
                                              28 February    28 February
                                          %          2019           2018 
                                     change         R'000          R'000
Reconciliation of headline loss: 
Loss attributable to ordinary 
shareholders                           -32%      (318 227)      (241 203)
Adjusted for:
Impairment losses                                  85 380         42 053
Loss on sale of property, 
plant and equipment                                  (610)         4 839
Tax effect on headline
loss adjustments                                      137         (3 274)
Headline loss attributable to
ordinary shareholders                  -18%      (233 320)      (197 585)
Weighted average shares in issue
('000)                                            909 819        473 060
Weighted average diluted shares in
issue ('000)                                      927 195        489 130
Loss per share (cents)                 -31%         (35.0)         (51.0) 
Diluted loss per share (cents)         -31%         (35.0)         (51.0) 
Headline loss per share (cents)        -39%         (25.6)         (41.8) 
Diluted headline loss per share
(cents)                                -39%         (25.6)         (41.8)

* Restated due to Zebro's chicken being classified as a discontinued 
  operation.

Notes to the condensed reviewed consolidated financial statements
for the year ended 28 February 2019 
Taste Holdings Limited (the company) is a South African registered 
company. The summarised consolidated financial statements of the 
company comprise the company and its subsidiaries (together 
referred to as the group).

Basis of preparation of the condensed reviewed results 
Statement of compliance
The reviewed condensed consolidated financial results are prepared 
in accordance with the Listings Requirements of the JSE Limited 
(the JSE Listings Requirements) for provisional reports, and 
the requirements of the Companies Act, 2008 (Act 71 of 2008), 
as amended (the Companies Act). The JSE Listings Requirements 
require provisional reports to be prepared in accordance with the 
framework concepts and the measurement and recognition requirements 
of International Financial Reporting Standards (IFRS) and Financial 
Reporting Pronouncements as issued by the Financial Reporting 
Standards Council and to also, as a minimum, contain the information 
required by IAS 34 Interim Financial Reporting. The accounting 
policies applied in the preparation of the reviewed condensed 
consolidated financial statements are consistent with those 
accounting policies applied in the preparation of the previous 
consolidated annual financial statements, except for the adoption 
of IFRS9 Financial Instruments and IFRS15 Revenue from Contracts 
with Customers. Required by the JSE Listing Requirements, the group 
reposts headline earnings in accordance with Circular 4/2018: 
Headline Earnings as issued by SAICA. This report was compiled 
under the supervision of Mr. H van Eeden CA(SA), Chief 
Financial Officer.

Operating performance commentary

Group revenue decreased by 7% to R960 million (2018: R1.03 
billion), driven mainly by:
* The Food Division's revenue decreased by R6 million or 1% (after 
  intersegment eliminations) to R470 million (2018: R476 million). 
  Sales were under pressure, as evident from the system-wide sales, 
  and there were a number of store closures across the brands.
* The Luxury Goods Division's revenue decreased by R69 million or 
  12% to R490 million (2018: R559 million). Luxury goods are 
  cyclical and negatively influenced by macro-economic uncertainty 
  in the country, relative rand strength and disposable income which
  all impact on revenue. Network consolidation resulted in both NWJ 
  and Arthur Kaplan closing stores, while our World's Finest Watches 
  store was closed for a month for refurbishment.

Group gross profit decreased by 5% to R405 million (2018: R425 
million) as result of the reduced revenue. 

Margin improvement initiatives helped to improve the gross profit 
margin % to 42% (2018: 41%).
* The Food Division overall gross profit margin improved by 3% to 
  47% (2018:44%) as a result of our drive to reduce food costs and 
  efficiencies. This initiative included paying significant attention 
  to supply chain operations such as procurement, warehousing and 
  logistics areas.
* The reduction in the Luxury Goods Division's gross profit percentage 
  was due to lower average selling prices caused by consumers seeking 
  out deals and discounts.

Total group operating costs increased by R54 million (9%) to R677 
million (2018: R623 million). This increase resulted primarily from 
a deep dive into the business model and operating costs, which 
resulted in a restructure of the Food Division and Corporate Head 
Office to position the group and its various brands for the future.

Included in operating costs are impairments and once-off costs 
totalling R102 million (2018: R24 million) of which R58 million 
is attributable to the Food Division and R44 million to the Luxury 
Goods Division. The costs consisted mainly of impairments of R85 
million (2018: R19 million) and once-off restructuring and 
retrenchment costs of R17 million (2018: R5 million).

Excluding the impairments and once-off costs, operating costs 
decreased by R23 million (4%) to total R575 million (2018: R599 
million) which is mainly due to store closures and the 
restructuring in both the Food and Luxury Goods Divisions.

As a consequence of the decrease in sales, increased impairments 
and once-off costs incurred, the group recorded an EBITDA loss of 
R216 million (2018: R151 million), representing an increase in the 
EBITDA loss of R65 million.

The operating loss increased to R261 million (2018: R194 million) 
representing an increase in the operating loss of R67 million with 
depreciation and amortisation being largely unchanged at R45 million 
(2018: R43 million).

Investment revenue relates primarily to the Food Division and 
comprises interest charged to franchisees on conversion loans of 
R4 million and interest received on positive cash balances of 
R6 million, totalling R10 million (2018: R17 million).

Net finance costs decreased to R4.6 million (2018: R43.8 million) 
as the long-term debt was paid down in February 2018, the prior 
financial year, from the rights issue proceeds. Our current finance 
costs are for the trade facilities we have with our bankers and 
for utilisation of overdraft facilities.

The group's tax charge movements are due to deferred tax movements 
resulting from several group companies being in assessed loss 
positions. The deferred tax assets consist of temporary differences, 
that are mainly assessed losses recognised in prior periods based 
on the future outlook, specifically the generation of future taxable 
income. Although we believe in our brands and its rebound into 
profitability, we prudently decided to derecognise certain deferred 
tax assets relating to the Food Division as the required profitability 
and taxable income to support these assets will likely not be generated 
in the short term. We assess this status frequently and will 
recognise the assessed losses in the future as more certainty regarding 
the timing of taxable income becomes apparent.

Non-Controlling interest relates to a shareholding by the Luxury Goods
Division of 58% in a company that owns three NWJ stores.

Financial position commentary
Property, plant and equipment decreased as there was a pause on the 
opening of new stores whilst uneconomical stores were closed. This 
resulted in an overall net decrease in the corporate-store count and 
lower capital expenditure with the remaining stores being depreciated 
over the expected useful lives.

Impairments of R85 million (2018: R42 million) of which R45 million 
(2018: R39 million) relates to the Food Division and R40 million
(2018: R3 million) to the Luxury Goods Division.
* Food Division impairment details (R45 million):
- Maxis - R15 million. Goodwill was fully impaired due to changing 
  market conditions, but the brand is growing and showing promise 
  for the future.
- The Fish & Chip Co - R21 million. Goodwill related to the supply 
  chain was impaired due to the outsourcing of our group supply chain 
  activities.
- Domino's Pizza company owned stores - R5 million. Goodwill was 
  impaired due to the lower profitability of the acquired stores.
- Domino's Pizza franchise contribution - R3.8 million. Goodwill 
  impaired due to the lower profitability of the stores acquired.
- Domino's Pizza joining fee - R0.4 million. Goodwill impaired due 
  to the lower profitability of the stores acquired.
* Luxury Goods Division impairment details (R40 million):
- Arthur Kaplan - R39 million. Impaired due to the re-baselining of 
  profitability and growth expectation for current market conditions.
- NWJ - R1 million. Impaired due to closure of stores.

The intangible assets decrease is mainly for additional impairments in 
Domino's, specifically the franchisee conversion loans.

The deferred tax assets consist of temporary differences, that are 
mainly assessed losses recognised in prior periods based on the future 
outlook, specifically the generation of future taxable income. Although 
we believe in our brands and its rebound into profitability, we prudently 
decided to derecognise certain deferred tax assets relating to the Food 
Division as the required profitability and taxable income to support 
these assets will likely not be generated in the short term. We assess 
this status frequently and will recognise the assessed losses in the 
future as more certainty regarding the timing of taxable income becomes 
apparent.

Group current assets, excluding cash and cash equivalents, decreased 
R56 million due to improved working capital management.

Group inventories reduced by R63 million, which is largely attributable 
to the Luxury Goods Division's inventory being decreased by R57 million 
due to continued efforts to manage stockholding optimally.

Discontinued Operations
The Zebro's chicken business was disposed of, effective 1 June 2018 due 
to it being evaluated as non-core to the future direction and 
sustainability of our Food Division. The transaction is disclosed as 
discontinued operations with the loss from discontinued operations 
being R0.8 million (2018: R32.7 million loss).

Equity commentary
Changes in authorised and stated capital from 2018 is as follows:
* Authorised ordinary share capital increased by 2 000 000 000 to 
  4 000 000 000 - approved on 18 January 2019; and
* Rights issue of 1 320 000 000 shares at R0.10 - effective 
  25 February 2019.

Borrowings
The group has no long-term debt. Increases in borrowings were derived 
mainly from the bridging facility received from RVF, our major 
shareholder, whilst the rights offer process was in progress. The 
Borrowings were repaid after year-end.

Cash flow commentary
Cash and cash equivalents at the end of the financial year totalled 
R142 million (2018: R96 million).
* During the year the drain on cash utilised to fund operational 
  activities was reduced by R36 million. Cash required to fund 
  operating activities totalled R65 million (2018: R101 million).
* Cash utilised in investment activities reduced to R24 million 
  (2018: R31 million), mainly attributable to our re-evaluation of 
  the Food Division business model. Only two new Starbucks stores 
  were opened in this period while we halted further expansion to 
  focus on maintaining the existing network. 
* A successful Rights Offer during the year raised R132 million which 
  was primarily allocated to the Food Division's operation and 
  expansion plans.

Corporate information
Non-executive directors: 
GM Pattison* (Chairperson), LCH Chou*, N Siyotula*, AJ Maizey, 
TC Moodley
*Independent

Executive directors: D Pienaar (CEO), DJ Crosson, H van Eeden (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: Fluidrock CoSec (Pty) Ltd

Telephone: (011) 608 1999
Facsimile: 086 696 1270

Transfer secretaries: Computershare Investor Services Proprietary 
Limited

Sponsor: PSG Capital

These results and an overview of Taste are available at 
www.tasteholdings.co.za

Johannesburg
31 May 2019

Sponsor
PSG Capital
Date: 31/05/2019 12:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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