Veritas profit drops; smaller dividend

Food and beverage investor Veritas Investments [NZX: VIL] posted a 23% drop in annual profit and will pay a smaller dividend as it wrestles with integrating its Nosh Food Market and Better Beer Co acquisitions.

Net profit fell to $3.34 million, or 8.17c per share, from $4.35 million, or 11.72c, a year earlier.

While revenue for the Auckland=based company soared to $45.7 million from $10.9 million on the Nosh and BBC acquisitions, transactions costs, higher property expenses and a rising interest bill kept a lid on earnings.

Underlying profit fell 4.3% to $4.3 million, meeting the downgraded guidance Veritas gave in May.

The board declared a final dividend of 1.066c per share, payable on September 25 with a September 11 record date, taking the annual payout to 3.766 cents, less than half the 8.16 cents paid in 2014.

"Although this is a lower level of dividend (50% of profit for the year) than in previous financial years (70% of profit for the year), the board considers that this level of dividend is prudent, having taken into account the working capital needs for the company and the potential need to fund further growth in our business over the short to medium term, especially in our Nosh Food Markets business as it expands," the company says.

The shares fell 1.6% to 60c and have slumped about 51% this year.

In June, Veritas said it expects 2016 profit will rise to between $5.3-5.5 million, a level it thought it would be at in the financial year just ended before cutting guidance.

Veritas funded the Nosh and BBC acquisitions through debt, and had total debt of $37.3 million as at June 30, up from $2.8 million a year earlier. The debt has boosted the company's interest expense to $1.2 million from just $88,000 in 2014.

The company's $11.4 million of current assets, including cash and receivables was less than the $12.2 million of current liabilities, though the board prepared the statements as a going concern with cashflow forecasts expected to provide "adequate resources to continue operations."

Veritas generated an operational cash outflow of $783,000 in the year, compared to a cash inflow of $3.1 million in 2014.

The company's Mad Butcher franchise posted flat earnings before interest, tax, depreciation and amortisation of $6.4 million on an 11% lift in sales to $12.1 million, and its Kiwi Pacific Foods joint venture contributed earnings of $726,000, up from $415,000 a year earlier.

The Nosh segment added revenue of $18.4 million, while posting an ebitda loss of $1.2 million, while the BBC business generated earnings of $3 million on sales of $15.1 million.

(BusinessDesk)