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Veritas annual accounts tagged by auditor over Mad Butcher sale

Thursday 30th August 2018

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Veritas Investments reported a profit in 2018 due to the $6.3 million gain from selling the Mad Butcher franchise, though its auditors couldn't confirm that figure, while its only remaining business wrote down $1.2 million in goodwill and assets.

Net profit was $4.5 million in the year ended June 30, from a loss of $793,000 in 2017. The company posted a $338,600 loss from continuing operations compared to a $1.4 million profit the year before. Revenue rose 0.7 percent to $23.8 million.

The accounts come with two qualifications from the company's auditors, PricewaterhouseCoopers. First, after the Mad Butcher franchise was sold to chief executive Michael Morton for $8 million in March, the directors couldn't access underlying books and records so PwC was "unable to obtain sufficient appropriate audit evidence to support the trading results, closure costs and gain on sale" of the business and stores.

Second, the auditors disclaimed their opinion from 2017 as there wasn't enough evidence for them to determine whether they should make adjustments to the reported gain on sale figure of $6.3 million, or the trading profits for discontinued operations figure of $800,000. They couldn't determine whether they should adjust the value of the business in the 2017 accounts.

The company sold the Mad Butcher franchise to Morton for less than a quarter of the price he sold it to them in a reverse listing almost five years earlier. Cornerstone shareholder Morton left Veritas' board in June, replaced by investment banker Craig Norris. Veritas today announced that it has appointed Geoff Tuttle, chief executive of its Better Bar Company business, as group CEO. 

In June, Veritas took a $27.5 million refinancing deal with Japan's Nomura Holdings which gave the food and beverage investor enough cash to repay ANZ Bank New Zealand and a $5 million credit line to use with the investment bank's approval. 

Veritas' remaining business is The Better Bar Company, which operates eight Irish pubs and bars in Auckland and Hamilton. Today, it said The BBC's earnings before interest, tax, depreciation and amortisation was $3.7 million, from $5.9 million a year before. 

"This result reflects increased staff costs brought about by changes to minimum wage legislation and a more competitive employment market, additional provisions for maintenance (much of which had previously been deferred due to banking restrictions) and increased operating and property expenses," Veritas said. 

The company also said The BBC had written down goodwill by $613,000 and impaired fixed assets by $613,000 across two of its outlets due to increased competition cutting their potential recoverable value. The board is considering selling, rebranding or redeveloping the two outlets.

Veritas said the results reflect "a year of significant challenge, restructuring, asset sales and refinancing" and its board "has taken a proactive approach to clean up the balance sheet". 

"The board considers that the group has a clear strategy and direction for its future, with an objective of becoming the number one hospitality operator in New Zealand," it said.

Veritas shares last traded at 9 cents, up from 6 cents at the beginning of the year.


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