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Howler Veritas result has writedowns, first-half loss & looming debt maturities

Wednesday 24th February 2016

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Veritas Investments shares dropped 12 percent after the ailing food and beverage company posted a horrible first-half loss as it booked a series of impairment charges and said it plans to renegotiate its banking arrangements ahead of a looming maturity.

The Auckland-based company reported a net loss of $4.8 million, or 11.1 cents per share, in the six months ended Dec. 31 from a profit of $1.7 million, or 4.4 cents, a year earlier. That included impairment charges and other write-offs totalling $5.3 million. Earnings before interest, tax, depreciation and amortisation fell to $3.1 million from $3.3 million. 

The shares fell 4 cents to 30.5 cents, adding to the 28 percent tanking so far this year. 

Veritas warned investors last month of the downgraded earnings outlook, dropping its first-half dividend and hiring accounting firm PwC to review its operations. 

"A committee of the board is currently working with PricewaterhouseCoopers as external advisers to review the operations across all Veritas businesses to ensure the group operates on a stronger and more profitable basis for the longer term," chairman Tim Cook said. "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." 

Veritas was formed in December 2011 through a reverse sharemarket listing with the aim of acquiring high quality New Zealand retail and consumer businesses. It said it sought established businesses with strong, sustainable cash flows and considerable future growth opportunities. It bought the Mad Butcher franchisor business in May 2013, took a half share in Kiwi Pacific Foods in December 2013, acquired Nosh Food Market in September 2014 and The Better Bar Co in November that year.

The company took on bank debt to fund the Nosh and Better Bar acquisitions and had total borrowings of $35.3 million, of which $15.9 million of bank debt comes due in the coming year. 

While Veritas stayed within its banking covenants during the period, it said its current liabilities were "significantly in excess" of its current assets and the board plans to renegotiate its facilities with its main bank, ANZ Bank New Zealand. 

"It is expected that the outcome of this will be to place the group in a more sound financial position and will help ensure that it operates on a stronger and more profitable basis for the longer term," the company said. 

Veritas affirmed annual guidance for ebitda of between $8 million and $9 million and underlying net profit of $3 million to $3.5 million, down from $4.3 million in 2015.

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