DURBAN - Taste Holdings yesterday continued its freefall on the JSE, shaving off more than R15 million of its market value after announcing that it had applied for the liquidation of its food business for R450m.
Taste said yesterday that it decided to offload the business after it incurred R450m in shareholder loans.
The group said the loans were expected to be written off following an inability to find a buyer for its troubled Domino’s Pizza franchise.
It said it has already closed 55 of its corporate stores and 770 employees would be affected by the sale.
The liquidation comes after Taste announced last year that it entered into an agreement to sell the Starbucks master franchise licence for South Africa for R7m.
However, it said its luxury division and its banking facilities remain unaffected.
It said it would focus its attention on its luxury brands NWJ, Arthur Kaplan and World’s Finest Watches.
The group said chief executive Duncan Crosson and other directors were expected to meet franchisees yesterday on a way forward.
Crosson said Taste revised its strategy and decision to exit the food business in November after Domino’s loaned the group operating capital.
He said Domino's sought a prospective buyer for the franchising licence.
“However, discussions with three master franchise partners as well as various global suitors finally collapsed this week, triggering the voluntary liquidation decision,” Crosson said. “Domino’s Pizza LLC was extensively involved in finding a buyer for our licence and approached other franchisees in their global network as potential suitors. Both the holding company and ourselves shared the information and analysis with interested parties.”
Taste Holdings has tumbled more than 60 percent in the year to date, slashing its value from 14 cents in June last year to close at 2 cents yesterday.
The group said franchisees for the 16 outlets would continue trading with management providing advice and assistance where possible.
It said it had received no communication as to the date of cancellation of the franchising licence and it will retain the regional franchising licence until further notice.
At the beginning of February 2019, Taste indicated its long-term objective of management of Starbucks and Domino’s reaching earnings before interest, tax, depreciation and amortisation (Ebitda) break-even across both brands within a 36 to 40-month period after the commencement of the expansion plan, and to attain positive free cash flows, after capital expenditure, across both brands within seven to eight years from the start of the plan.
“Management estimated it required more than R700m, including the amount it had raised through a rights offer to achieve a positive cash flow and had to expand the Starbucks network to 150 to 200 outlets and Domino’s to 220 to 280,” the group said.
But in November Taste announced a revised strategy to exit the food business.