Veritas to book Nosh losses in annual accounts after returning to black

Veritas Investments will book after-tax losses of between $2.2-2.6 million on the sale of its upmarket Nosh supermarkets in its annual accounts, which it anticipates will bolster underlying earnings for the year, having returned to the black in the first half. The shares gained. 

The Auckland-based food and beverage investor completed the sale of its Nosh franchise to Gosh Holding on February 24, with the net proceeds going toward repaying bank debt, which was sitting at $30.5 million as at December. 31. The $3.98 million sale included about $1 million of stock, and let Veritas exit what has been a problematic investment since buying the supermarket business in 2014. Veritas valued Nosh's assets at $7 million with $2.6 million of liabilities at the December 31 balance date. 

The sale doesn't show up in Veritas's first-half accounts, released today, which show the company posted a profit of $1.2 million, or 2.78c a share, in the six months ended December 31, turning around a loss of $4.8 million, or 11.12c, a year earlier. The 2015 accounts were weighed down by a series of impairment charges and other write-offs. 

Revenue dropped 17% to $15.9 million due to the closure of underperforming Mad Butcher stores and the sale of three bars in Hamilton, with the more profitable operations helping lift earnings before interest, tax, depreciation and amortisation 11% to $4.6 million. The shares rose 11% to 30c, the highest level since September last year. 

Veritas said the latest interim accounts "showed the benefits from the actions we undertook in 2016 to improve the profits and cashflows," and the company expects annual ebitda to be between $7.9-8.5 million compared to a previous forecast of $7.4 million to $8 million. The slimmed-down business is expected to generate revenue of $26 million to $31 million, down from a previous range of $50-55 million. 

The sale of the Nosh business was part of an agreement with lender ANZ Bank New Zealand, which also wanted a capital and strategic plan delivered by today and plans concerning two of Veritas's company-owned Mad Butcher stores. The bank will conduct an interim review of Veritas by the end of March, which will include an independent review of the capital and strategic plan. 

Veritas's interest expense shrank to $863,000 in the half from $902,000 a year earlier, even as the effective interest rate rose to 5.46% from 4.83%, with bank borrowings falling to $30.5 million from $35.3 million as at Dec. 31, 2015. The company's bank debt matures in November this year. 

The company's Mad Butcher franchise, which consists of 29 franchised stores and three company-owned stores, increased earnings 11% to $2.1 million even as revenue dropped 39% to $3.9 million. Veritas said it is focusing on "ensuring profitability within each store and we are working closely with franchisees to support and maximise their performance." 

The Better Bar Company beat Veritas' target in the period, with ebitda rising 16% to $3.1 million while revenue slipped 5.5% to $12 million. 

The board didn't declare an interim dividend. 

(BusinessDesk)