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Mad Butcher sale solves immediate Veritas woes

Veritas, the listed food and beverage company with the dubious honour of having bought Mad Butcher for $40 million and sold it for $8 million, 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 $1.5 million in the June 30, 2018 year to $850,000 to $1.05 million in 2019.

On the positive side, cashflows from continuing operations - seven English and Irish pubs in Auckland and one in Hamilton - could increase from $1.14 million in 2018 to between $2.3 million and $2.7 million 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 $4.8 million on its balance sheet from selling Mad Butcher during the 2018 year. The company paid $40 million for the meat retailer in 2013.

This helped get its liabilities down from $32 million to $23 million and saw its gearing ratio improve from 79 percent to 60 percent - 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 $27 million, but Cook said that debt had been repaid and BNZ was now the company’s trading bank.

Meanwhile, it had refinanced $27.5 million of credit facilities with Pacific Dawn and had a $5 million 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 percent in the 2018 year to $23.8 million, but underlying net profit after tax from continuing operations was down 8 percent to just under $1.5 million.

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.

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