After the decision was approved, the board was approached by Simon Wallace asking for a further shareholder meeting to reconsider his proposal to recapitalise the company and have it continue as a listed shell company. At the annual meeting, held on December 23, 2011, Wallace was elected to the board along with Mark Darrow and Tim Cook. The existing directors resigned immediately following the meeting.
Salvus was now a listed shell with three new directors and minimal cash to fund its activities.
Wallace was appointed managing director and the new chairman Mark Darrow was quoted as saying: "We look forward to bringing to the market an exciting investment opportunity during 2012."
In February 2012, the company changed its name to Veritas Investments. The name appears to come from Roman mythology, in which Veritas was the goddess of truth, a daughter of Saturn, and the mother of Virtus.
The company has had the following capital raisings and purchases since then:
•It had a two-for-one pro rata rights issue in June 2012 at 2c a share that raised $747,000.
•In January 2013, the company had a share consolidation whereby shareholders received one new share for every 25 shares held.
•Four months later Veritas raised $25m from the public through the issue of shares at $1.30 each. At the same time, it acquired the Mad Butcher franchise business from Michael Morton for $40m.
•The $40m acquisition price comprised $20m cash and $20m worth of Veritas shares at $1.30 each.
•In December 2013, Veritas purchased 50 per cent of Kiwi Pacific Foods Limited, a manufacturer and supplier of meat patties for local and international markets. The purchase price was a combination of cash and Veritas shares worth $3.4m.
•Veritas acquired Nosh in September 2014 for $1.3m and two months later it purchased The Better Bar Company (BBC) for $29.3m. The latter purchase price comprised $30.6m of goodwill and $1.3m of net liabilities. BBC had 11 hospitality sites in Auckland and Hamilton, including well-known brands such as The Cav, O'Hagan's, Doolan Brothers and Danny Doolans.Meanwhile, as these acquisitions were being made there were frequent board changes.
Wallace resigned in January 2013, shortly after the Mad Butcher acquisition was announced. On the same day, Phil Newland and Stefan Preston joined the Veritas board.
Newland was a director for only nine months and Preston 22 months.
Shane McKillen joined the board after the successful takeover of The Mad Butcher in May 2013 but left 16 months later.
Mark Darrow resigned in June 2015 and was replaced as chairman by Tim Cook. Finally, Richard Sigley, who was a shareholder of The Better Bar Company, became a director in November 2014 but was gone 12 months later.
The current Veritas board comprises: chairman Cook, Sharon Hunter, John Moore and Morton.
The company's acquisition strategy has not produced its anticipated results.
The Mad Butcher's revenue for the 12 months to June 2014 was $30.0m compared with the prospectus forecast of $35.8m, although it achieved ebitda (earnings before interest, tax, depreciation and amortisation) of $6.3m, compared with the prospectus forecast of $6.2m.
The company blamed the disappointing sales figures on "the unseasonal summer weather".
Group ebitda increased to $8.1m for the June 2015 year, mainly because of the acquisition of the Better Bar Company, but additional costs soared from $0.2m to $3.0m (see accompanying table).
These costs were predominantly acquisition expenses, depreciation and amortisation and interest costs. These interest charges were associated with an increase in borrowings from $2.8m to $37.3m to fund the purchase of The Better Bar Company and assumed the borrowings that the hospitality company had from Lion -- Beer, Spirits and Wine (NZ).
The June 2016 year was a huge setback for Veritas, with additional costs soaring from $3.0m to $9.2m. The main components of the June 2016 year figure were a $2.9m write-off associated with the closure of Kiwi Pacific Foods, a loss of $340,000 on the sale of three underperforming bars in Hamilton and $2.4m of write-offs related to the Mad Butcher business and other restructuring costs.
These write-offs were included in the additional costs line, rather than the ebidta figures.
The result for the first half of the June 2017 year showed a slight improvement, although it did not include the loss on the sale of Nosh in February, which is expected to be in the range of $2.2m to $2.6m after tax.
The result noted that the market for the Mad Butcher "has been competitive with supply shortages creating challenges around product choice and pricing" but the "Better Bar Company exceeded its targets for the period".
Veritas' poor share price performance has been primarily due to the disappointing performance of most of its acquisitions, with the exception of The Better Bar Company.
In addition, the company has $30.5m of bank borrowings maturing in the period to November 2017. Veritas will have to refinance this loan as it doesn't appear to have sufficient realisable assets to meet this obligation.
Mad Butcher founder Sir Peter Leitch did a fantastic job with the company, but standalone butcher stores are finding it increasingly difficult to compete against the big supermarket chains.
Thus, the board and management of Veritas have missed the big new food trends as they have invested in old-world food businesses whereas many new-age food businesses have performed extremely well in recent years. These include meal kit companies, My Food Bag for example, and companies that produce healthy and natural foods.
It is particularly disappointing that Nosh, which could have been Veritas' breakthrough to modern food trends, has failed to fire.
Ironically, shareholders of Salvus Strategic Investments suffered much lower losses than shareholders of Veritas Investments,
Salvus raised $20.1m from the public and returned $17.3m in cash following the liquidation of the company's share portfolio.
Veritas raised $25m from the public four years ago but these shares are now worth only $3.65m.
This substantial decline in shareholder value has been a major disappointment because there are a limited number of food-related companies listed on the NZX.
Blue Apron
Last week's column covered the IPO of US company Blue Apron, which had an indicative issue price of US$15 to US$17 a share. This valued the meal kit company between US$2.8 billion and US$3.2b.
The IPO price was reduced to US$10 a share this week, valuing the company at US$1.9b, following concerns that the merged Amazon.com/Whole Foods Market group will have an aggressive meal kit offering.
Blue Apron lists on the New York Stock Exchange next Thursday.
• Brian Gaynor is an executive director of Milford Asset Management and was a director of Salvus Strategic Investments from March 2010 to December 2011.
