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Division a luxury for Taste

Companies
Durban - JSE-listed franchiser Taste Holdings on Wednesday announced it was selling its luxury goods division as it had decided to focus on building its food brands.

The company said the move would see it getting rid of stores such as Arthur Kaplan Jewellers and NWJ in a strategic restructuring that would confine its concentration on the ever-growing food business in the country.

Chief executive Carlo Gonzaga said the sale was partly motivated by the launching of Starbucks and the success it had gained from the brand.

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“The restaurants have provided us with many opportunities and we decided to focus more on the restaurants side of business,” said Gonzaga.

“The sale of the luxury brands will allow the company to settle its debt and grow the restaurants side even more.”

Gonzaga said the group would raise a R120 million rights offer, 100 percent of which had been underwritten.

He said the group would also raise equity for settling about R300 million of current debt and rolling out the international brands Domino’s Pizza and Starbucks.

“We are starting the process and we assume it will take a while to finish, but we are confident that we will find a buyer for the luxury brands.”

The luxury brands have fared well in the past and were able to report profits even though consumers have come under pressure with reduced spending.

Read also: Taste's expansion takes toll on profit

Since 2010, the luxury goods division has boosted revenue from R155 million to R570 million. In the 2010 financial year, earnings before interest, tax, depreciation, and amortisation (ebitda) was R24 million, rising to R69 million in 2016.

Taste Holdings has significantly transformed in the past three years. “Securing global licensing agreements and undertaking various other acquisitions has seen Taste shift from being a franchisor of local brands to a predominantly corporate-owned-store business with a mix of global and local brands,” said Gonzaga.

“When the move is completed it will leave Taste Holdings debt-free but with the necessary cash on hand to accelerate the rollout of its Starbucks and Domino’s restaurants.”

Gonzaga said the group now had a far clearer picture of the long-term potential for the food business after stabilising Domino’s Pizza and launching Starbucks in the past year. He said the sale would not affect the two as they had been decentralised and only shared capital allocation.

Gonzaga said the luxury goods business would operate normally during the transition. The group wanted to establish another eight to 10 Starbucks and 15 to 20 Domino’s this year.

Taste Holdings closed 0.5 percent lower on the JSE at R2.

BUSINESS REPORT

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