Veritas affirms annual earnings guidance, says Nosh turnaround expected next year

See also: Mad Butcher raises hackles at Veritas AGM

Veritas Investments [NZX: VIL] expects to turn around its struggling gourmet supermarket chain, Nosh Group, in the second quarter of 2016, and affirmed its annual profit guidance as it sells off poorly performing assets from its BBC acquisition.

The food and beverage investor is "comfortable it will remain on track to meet guidance as released on June 24, 2015," which indicated a 2016 profit of between $5.3-5.5 million, compared with a 2015 profit of $3.3 million, according to presentation slides accompanying speeches at today's annual meeting in Auckland.

That performance includes improving sales at its Nosh chain, which it bought last year for $1.3 million, and Veritas expects it will deliver positive earnings before interest, tax, depreciation and amortisation in the second quarter of 2016. Nosh posted an ebitda loss of $1.2 million on revenue of $18.4 million in the 10 months ended June 30.

Chairman Tim Cook told shareholders the group's figures in the first quarter were in line with expectations, and the second quarter was a more profitable one.

"It is the second quarter which includes the leadup to Christmas and the summer and barbecue season which is really important for our business," Mr Cook said. "We will issue a statement about the second quarter trading when figures are finalised late in January."

Veritas bought Better Bar Company, which operates gastro bars in Auckland and Hamilton, in November 2014, and yesterday said it entered into a conditional agreement to sell BBC's three central Hamilton bars, which Cook earlier said had "continued to underperform" as changes in drink-driving regulations caused uncertainty for the business.

"Early indications were that consumers adopted a conservative approach to the new rules, which cause negative fluctuations," he said. "However, it now appears that consumers are learning to live within the new limits, and the industry has responded with innovative new low and mid-strength alcohol options."

Veritas shares rose 2.5% to 41c, and have dropped 68% over the past 12 months.

Mr Cook said uninformed negative media comment had contributed to the fall, along with market negativity around the BBC acquisition and governance changes within the company. In September, Mr Cook was appointed independent chairman, while director Richard Sigley announced his intention to resign.

"The decline in the share price has been particularly disappointing and, based on the fundamentals, our performance, and our recent guidance in respect of the current year, appears to your board to be significantly out of proportion to our trading results and potential," Mr Cook said. "You can be assured that your board and management are working hard to increase sales and profitability, and to see the share price respond accordingly."

(BusinessDesk)