Fast food and jewellery group Taste Holdings says it will resume rolling out new Starbucks coffee shops and Domino’s Pizza outlets, following the approval of its R132m rights offer by its shareholders on Friday.

In November Taste said that it  was holding off on rolling out new stores as a way to preserve cash. This decision was announced with the release of its results for the half-year to end-August that showed it incurred an operating loss of R87m and generated a negative cash flow of R33.9m from operating activity.

These results came despite it getting R398m from a rights offer in February 2018, bringing the amount of money it  has raised from shareholders to  more than R1bn over the past few years. The money from that rights issue was used to pay off R270m in debt.

CEO Tyrone Moodley said Taste always planned to roll out new stores but he wanted to fully understand the group before going ahead with expansion. Moodley took over from co-founder and CEO Carlo Gonzaga soon after the Sean Riskowitz-backed Riskowitz Value Fund (RVF) became the company’s controlling shareholder. RVF took a 66% holding in the group after underwriting  the rights offer in 2018.

Money in the bank

Taste chair Grant Pattison said as soon as the rights offer  is processed, which  will be 45 days from Friday’s general meeting, the group  will have the necessary funding it needs to continue with its expansion. “It will commence the moment the money is in the bank. It’s an underwritten rights issue [by RVF] so we will get the money.”

The group also has access to a R200m loan facility, also provided by RVF. Moodley said it has so far used R11m from this facility.

The rights offer came in for criticism from some market watchers as it  will not only dilute its shareholders by doubling the group’s share capital to 4-billion issued shares, at 10c a share, but the stock is also issued at a discount to its market price. The offer  is also much lower than the 90c a share of the previous rights offer made just a year ago.

Taste shares have ranged from a high of 85c in January  2018, to a low of 20c before the announcement of the latest capital raising attempt. It closed at 13c on Friday, giving it a market capitalisation of R117m.

Pattison said the pricing of the rights issue  is fair given the level at which it is trading, and the share’s illiquidity. 

The offer also sparked fears that it would likely push up RVF’s holding to  more than 90%, meaning it can delist the group despite the objection of minority shareholders if it wants to. According to the JSE’s listing requirements, a company must have a free float of at least 20% of its shares. 

Pattison said the rights offer  is not part of a stealth delisting of the group, and though the board  has debated the issue, it  has decided that the company  is best left listed.