Veritas cuts profit guidance by 19%

Listed food and beverage investor Veritas Investments [NZX: VIL] has downgraded its full-year profit guidance by $1 million following a review of its second half performance.

The company issued a statement to the NZX today saying its net profit after tax for the year ending June 30 will likely be $4.3 million.

This is down from the $5.3 million guidance given at its half-year results announcement in February.

At the company’s annual meeting in November last year guidance for net profit after tax was given as being between $5.3 million and $5.8 million.

In a statement, Veritas says the key determinants of the full-year result will be the speed of improvements at Nosh, the performance of its Better Bar Company (BBC) sites in Hamilton and the impact of the new drink-driving legislation.

It says the Mad Butcher business continues to trade to expectations, while the Kiwi Pacific Foods joint venture is trading strongly.

Veritas says Nosh’s turnaround is progressing well, but is behind schedule.

“Extra time has been taken to carefully review the business model and execute a comprehensive plan to reinvigorate the business.

“As a result, there will be a loss recorded for this financial year, with breakeven now planned to be achieved from the second quarter of the next financial year.”

A new management team has been implemented at Nosh, Veritas says.

Regarding BBC, Veritas says new drink-driving legislation has had “some effect” on the hospitality sector.

The third quarter results were positive but a poorer last quarter has led to revised guidance.

“As with a similar experience in Australia, we do expect this to improve as the sector responds with a more comprehensive lower-alcohol and improved food offering.”

Veritas says results for the Mad Butcher franchisor business will be on target.

The first “Mini” Mad Butcher store opened in Mosgiel in April, which was proving successful, and is a model which could be rolled out at other locations.

Four Mad Butchers on the block
Veritas says there are four Mad Butcher stores held for sale, which are awaiting franchisees being identified and approved.

In March, NBR ONLINE reported Mad Butcher stores in Kapiti, Massey, Glenfield and in Rotorua all went into liquidation over a period of three weeks.

Multiple industry sources have suggested more stores were in difficulty following NBR ONLINE first reporting the story.

But Mad Butcher chief executive Michael Morton has hit out at “grossly inaccurate” claims the franchise is facing financial trouble.

Veritas has cut down the store closures as “simply a coincidence of timing.”

Earlier this month, the owner of Mad Butcher Manukau said voluntary liquidation was likely for his business after he repeatedly failed to sell the store, most recently for just $50,000.

Shares in the company have fallen 52c from late January, to 80c a share, having dropped earlier this week to 77c.