Salvaging value at Taste Holdings, which backed the expansion of global brands Starbucks and Domino’s Pizza in SA, is not going to easy — it may even be impossible for some unfortunate shareholders.
Consider this damning statistic: over the past five years, Taste raised more than R1bn from shareholders in rights issues and other capital-raising exercises. The group’s market value on the JSE now ranges between R44m and R66m — which is less than half the value of the fund-raising exercise held in February. That’s a serious roasting.
One might argue that the ruling share price (down 90% over the past year) is a pessimistic assessment of Taste’s recovery prospects. However, the pending sale of Domino’s won’t garner much enthusiasm with the brand’s margins sliced up by the ongoing “pizza war”.
Domino’s sales for the six months to end August were crimped by R10m to R141m with four stores closed and no new stores opened. This is not exactly the most appetising pitch to potential buyers.
The slim chance for salvaging some value appears to lie in the jewellery segment. Not too long ago, this segment was put up for sale by Taste, but ironically now looks a far more viable option than fast food.
The jewellery segment is not exactly a glistening gem. Revenue declined by 2% to R217m — but the gross profit margin fattened from 37% to 40%. This meant gross profit shifted up 7% to R86m, and earnings before interest, taxes, depreciation, and amortisation (ebitda) edged back into the black to the tune of R300,000.
Clearly it’s going to be a long struggle for viability at Taste, and it may also be some time before punters nibbling optimistically at 2c and 3c find any reassurance around value restoration
The ANC’s idiomatic approach to investment ideology
There’s a little-known but entirely appropriate idiom that applies to the involvement of the state in SA business.
The “dead hand” of government is described by various dictionaries as the stopping or slowing of progress by the oppressive influence of government policies.
SA finds itself in an odd position of having an essentially free market, capitalist business system overlaid with the Marxist, centralised state model of the ruling ANC.
No matter that the past 25 years have shown the ideology adopted by the ANC is hopelessly inadequate to manage an economy in a modern, dynamic work environment, the party has stuck to its guns. The ANC’s dead hand lies heavy on the economy and the results are clear. The economy is moribund and unemployment is at critical levels.
The ANC claims to listen to inputs as it formulates regulations, but time and again the feedback is limited acknowledgment of outside thinking — as manifested when gazetted.
For some ministers, such as mineral resources and energy minister Gwede Mantashe, to claim that their department has provided much sought-after regulatory certainty, is a little disingenuous.
Regulatory certainty is one thing — but making sure the regulations are good, market-friendly and designed to lure investment is another thing entirely, and one that continually escapes the ANC as it relentlessly foists its ideology on the country and its faltering economy.
Mining laws have become increasingly prescriptive, making more demands on companies’ limited financial resources to offset the ANC’s failings in local governance and rising social unrest and unhappiness in communities.
While President Cyril Ramaphosa talks gamely of attracting investments and adjusting policies, the party behind him and which ultimately decidies the shape of the economy is firmly mired in a centralist, outdated ideology that does not encourage inflows or growth.
It’s time for the ANC to lift its dead hand off the private sector and instead serve the role of an astute regulator, rather than that of a participant.
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