Mad Butcher sale solves immediate Veritas woes; future less certain

The sale of the Mad Butcher has given Veritas a healthier looking balance sheet.

Veritas, the listed food and beverage company with the dubious honour of having bought Mad Butcher for $40 million and sold it for $8m, has a healthier looking balance sheet, but is far from out of the woods yet.

The company, which was also involved in a disastrous foray into the Nosh foodstore business, which it sold in 2017, warned shareholders at the annual general meeting today it was anticipating net profit from continuing operations before significant items to be down from almost $1.5m in the June 30, 2018 year to $850,000 to $1.05m in 2019.

On the positive side, cashflows from continuing operations - seven English and Irish pubs in Auckland and one in Hamilton - could increase from $1.14m in 2018 to between $2.3m and $2.7m in 2019, Veritas chairman Tim Cook told shareholders.

A growing pub sector and tighter margin control would help, he said.

Veritas recorded a net gain of $4.8m on its balance sheet from selling Mad Butcher during the 2018 year. The company paid $40m for the meat retailer in 2013.

This helped get its liabilities down from $32m to $23m and saw its gearing ratio improve from 79 per cent to 60 per cent - still at the higher end of the risk scale.

The effective wind-back of the Veritas business also meant the company has been able to get ANZ Bank off its back. At one stage, Veritas owed ANZ $27m, but Cook said that debt had been repaid and BNZ was now the company's trading bank.

Meanwhile, it had refinanced $27.5m of credit facilities with Pacific Dawn and had a $5m undrawn facility to finance future growth.

Pacific Dawn is a wholly-owned New Zealand subsidiary of Japanese financial services group Nomura. In 2011 Nomura bought the so-called 'good bank' assets of high-profile failed lender South Canterbury Finance.

Meanwhile, at Veritas, revenue rose 1 per cent in the 2018 year to $23.8m, but underlying net profit after tax from continuing operations was down 8 per cent to just under $1.5m.

The share price, which has hardly snuck over 30 cents in the last two years and got as low as 3 cents in April, was quoted on the NZX at 10 cents per share but had not traded just before noon.