VIL
27/01/2016 08:34
FORECAST
PRICE SENSITIVE
REL: 0834 HRS Veritas Investments Limited
FORECAST: VIL: Veritas provides updated market outlook and profit guidance
NZX Release
27th January 2016
Veritas provides updated market outlook and profit guidance
The Board of Veritas Investments Limited (NZX:VIL) announces that overall
trading in the second quarter ended 31 December 2015 has been disappointing
and below budget, which will impact on the Group's six-month and annual
results.
Accordingly, a committee of the Board is currently working with PWC as
external advisers to review the operations across all VIL businesses to
ensure the Group operates on a stronger and more profitable basis for the
longer term.
Interim Results Update
While specific commentary is provided below for each business unit, the Group
as a whole experienced highly competitive market conditions during the first
half of FY16 with adverse weather conditions impacting on the second quarter
results. While the interim results for the Group will be released by the end
of February, subject to audit review, EBITDA for the six months ended 31
December 2015 is likely to be in the range of $3.0m-$3.1m and Underlying NPAT
will be in the range of $0.9m-$1.0m.
Updated Outlook and Market Guidance
Our previous market guidance was for the Group to achieve EBITDA of
$10.5m-$11m and Underlying NPAT of $5.3m-$5.5m for FY16. Given the trading
results for the first six months of FY16, the Board believes it is
appropriate to update the guidance for the full year to EBITDA of $8m-$9m and
Underlying NPAT of $3.0m-$3.5m.
The Board has also made a preliminary assessment of the carrying values of
assets and has resolved to recognise asset impairments and other writedowns
of $5.4m as a result of a number of factors. These include $3m for the
carrying value of Kiwi Pacific Foods due to uncertainty surrounding the
arbitration outcome; the already announced loss on sale of the
underperforming Hamilton bars of $0.3m; the current review of unprofitable
Mad Butcher stores owned by VIL and other restructuring costs of $2.1m.
Mad Butcher
The majority of Mad Butcher stores are trading profitably and the brand
continues to be a major contributor to the Group's profitability. Currently,
there are five VIL-owned stores in the network that, in spite of extensive
support from the franchisor, have consistently failed to achieve budgets for
a number of reasons, including location and the inability to find
appropriately qualified and experienced franchisees. Two of these stores give
indications of potential successful turnaround but the Board believes that
the other three stores should be considered impaired assets and is
considering a range of options for these stores.
Nosh
Nosh achieved profitability for the month of December although it failed to
achieve budget in the preceding two months. Weekly gains are being
experienced in customer traffic and VIP sign-up. Significant efforts are
being made around gross margin, cost control and increasing sales and the
Board is confident of a continuing track towards business profitability over
the next six months. At the end of August 2015, a new store was opened in
Pakuranga, Auckland, which is still in its establishment phase to build a
regular and loyal client base. Also, our shareholding in Nosh Constellation
Drive was sold to the existing JV partner in November 2015 to establish the
second fully franchised Nosh outlet, the other being Mt Manganui.
Better Bar Company
All outlets traded profitably and materially to budget for the quarter ended
31 December 2015. We advised the market of the sale of three underperforming
Hamilton bars in December, which will impact positively on the long term
profitability of the Better Bar Company. Some redevelopment of existing sites
is taking place to enhance the customer experience including additional space
in the two high profile Viaduct Harbour outlets, Danny Doolans and O'Hagans.
Kiwi Pacific Foods
The market has previously been advised of the arbitration outcome. We also
advised the market that we are appealing the arbitrator's decision, and this
matter is scheduled to be heard before the Courts in the coming months.
However, given the uncertain outcome of such appeal and the potential for the
arbitration outcome to materially affect the NPAT results for Kiwi Pacific
Foods, the Board believes it is prudent to recognise a significant impairment
to the carrying value of the business whilst continuing to actively seek an
outcome that retains value for the shareholders.
VIL CEO Search
The Board is continuing to actively seek a suitable candidate for the role of
CEO of VIL, taking into account any considerations raised by the PWC
operational review.
Interim Dividend
The Board has decided that no interim dividend will be declared for the half
year ended 31 December 2015.
For further information, contact: Tim Cook
021 764 401
[email protected]
About Veritas Investments Limited
Veritas Investments is an NZX Main Board-listed investment company focusing
in the Food and Beverage, Franchise and Hospitality sectors. The shell
company was formed in December 2011 and made its first acquisition of the Mad
Butcher franchisor business in May 2013 through a reverse acquisition
transaction. A further investment was made in December 2013 for 50% of Kiwi
Pacific Foods Limited. In September 2014 Veritas acquired the Nosh Food
Market business. In November 2014 Veritas acquired The Better Bar Company
group business.
www.veritasinvestments.co.nz
End CA:00276847 For:VIL Type:FORECAST Time:2016-01-27 08:34:36
