Veritas meets forecasts and increases dividend

Veritas Investments Limited (NZX:VIL.NZ - News) has reported a full year EBITDA of $6.3m and net profit after tax (NPAT) of $4.3 million in line with earlier market guidance and the forecast in the Investment Statement dated 28 March 2013.

Veritas confirms a fully imputed full year dividend of 8.16 cents per share ($3.047 million), resulting in a final dividend payment of 4.22 cents per share representing an 11% increase on the forecast full year dividend.

This result was achieved on the basis of a different contribution across business units to that set out in the FY2014 forecast due to slower than anticipated sales in the Mad Butcher business over an unseasonal summer period, offset by a positive contribution from the Kiwi Pacific Foods joint venture interest.

Veritas acquired the Mad Butcher business in May 2013 and a 50% share in Kiwi Pacific Foods in December 2013.

Mad Butcher results

Mad Butcher CEO Michael Morton says Veritas was particularly pleased with the final quarter’s results from the Mad Butcher business following a difficult summer trading period.

"As previously mentioned it has been a tough retail environment with protein shortages and increased competition from supermarkets. By adapting our marketing approach and quickly taking advantage of opportunities resulting from market changes that opened up pork supply, we were able to deliver value to our customers, helping to drive sales for the franchise stores and finishing the year off strongly," Morton says.

Gross margin for the year ended 30 June 2014 was $7.8m versus the prior year of $7.4m. The protein shortages in red meat drove up pricing and changed customer purchasing habits meaning carcass revenue was down on forecast. However, rebate income from white meat was up, partially offsetting the gross margin impact. The slower than expected summer trading and delays in new store openings did result in the gross margin being lower than forecast.

Three of the four planned stores were opened in the year, the fourth in Nelson has been delayed to November 2014 due to building consent issues.

The Mad Butcher business contributed $6.3 million EBITDA ($4.2 million NPAT) to the group for the financial year.

Kiwi Pacific Foods

Our new investment in Kiwi Pacific Foods has already started to contribute positively to the Group contributing $0.25m after tax for the seven months and we will now build on those results and look for growth in export markets in the years ahead. The business is tracking to plan. We are enjoying working with our Joint Venture partner Antares Restaurant Group which holds the New Zealand Burger King franchise.

Dividend

In line with the interim dividend in February 2014 the Board has now approved increased fully imputed full year dividend payments of 70% of NPAT resulting in a full year dividend of $3.047m. This is an 11% increase on the forecast full dividend of $2.66m.

The record date for the final dividend is 12 September 2014 and payment date is 26 September 2014.

Chairman Mark Darrow commented, "After a difficult mid part of the year we were very pleased at how strongly the Mad Butcher business finished the year, as well as the initial contribution from Kiwi Pacific Foods that saw us achieve the profit levels outlined in our capital raising prospectus. It has been very satisfying for the Group to achieve the last two years of forecasted results and I thank management and my fellow Directors for all their hard work."

The Year Ahead

Darrow said, "The Board has completed a lot of work around investment strategy and acquisition activity is positive with new opportunities frequently being presented. Our focus is adding other food service related businesses to the Group.

"Earlier in the year we appointed CFO Adrienne Roberts, previously CFO of Charlie’s Group, to ensure we have the right level of resources to continually appraise and evaluate acquisition opportunities as they come along and ensure we are selective with what we bring in to the Group. "We will update the market if and when any opportunity is realised."

At this stage, no guidance on the expected FY15 result will be made to the market. A more detailed presentation will be made at the shareholders Annual General Meeting scheduled for 5 November 2014.