ANZ calls time on Veritas

The directors are working through a number of options, chairman Tim Cook says

Tim Hunter mulls reasons for ANZ’s Veritas decision

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ANZ bank has pulled the plug on Mad Butcher owner Veritas Investments, declining to renew its loan facilities when they fall due in October and November.

The company told the stock exchange the bank’s decision had cast a material uncertainty over its ability to continue as a going concern.

“The directors are working through a number of options which may include the potential sale or merger of the business units with external parties to the group, or recapitalisation and/or refinancing of the group with alternative banking arrangements, or some combination of all of these,” the company said.

Veritas directors, led by chairman Tim Cook, expressed confidence that one of the options could be executed and that the bank would support it during the process.

Veritas owes $28.5 million to the bank, of which $27.6 million falls due by November.

The announcement was contained in the company’s full-year results statement which featured a net profit from continuing operations of $4.1 million, based on revenue of $30.8 million.

Discontinued operations, including the Nosh grocery chain and some Mad Butcher stores, contributed losses of $4.9 million, producing an overall net loss of $0.8 million.

Veritas now comprises two businesses, the Mad Butcher franchise and the Better Bar Company.

Of the two, the bar business was the best performer, generating earnings before interest, tax, depreciation and amortisation of $5.9 million from revenue of $23.6 million. Veritas said all its bars were profitable and those in the viaduct/waterfront area of Auckland had strong patronage from the Lions tour and increased tourism.

The Mad Butcher franchise reported ebitda of $3.7 million from revenue of $7.2 million. There are 31 Mad Butcher stores in the group, of which Veritas owns three. Veritas managing director Michael Morton owns a further five stores, in Mt Roskill, Manukau, Upper Hutt, Napier and Dunedin.

Veritas said it had repaid debt during the year of $4.8 million.

The company’s shares last traded at 15c, valuing its equity at $6.5 million.


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36 Comments & Questions

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From $2.90 in 2013 to 14 cents today, all totally downhill and in a permanent and unbreakable downtrend. What a shambles and a lesson in total wealth destruction via a previously profitable business.

Any white knights out there want to step in where ANZ no longer will?

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The results were actually better than I expected.

And the ANZ bank debt went from 33.3 million to 28.4 million over the 12 months. Again a credible effort.

I would surmise the ANZ has lost any faith in the Directors abilities after the Nosh fiasco.

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Massive wealth destruction. Would be interesting to go back and see the metrics to justify a $2.90 share price

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It's a joke there butcher shops half of meat an overpriced .

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I agree pt chev an glen eden only decent shops they have in Auckland the company owned ones are a embrassment to them .

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Pt Chev looks nothing like a Mad Butcher it has got big dancing fruit and reminded me of Big Fresh .. to be honest it's a case of it's over unfortunately for the brand

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Scattering of cumulus clouds and the ANZ honchos are screaming for their umbrellas to be returned. Typical

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Crikey.

What sort of salary does one make as a director destroying this kind of wealth, one wonders?

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How many examples do we have of fat cat chiefs on big salaries doing a horrible job, Fonterra, Fletchers, Pumpkin Patch, Intueri, etc add as many others as you feel free, and yet because of these fat cat salaries the ordinary worker is not paid a fair wage and then need to be given govt subsidised top ups via working for families and accommodation supplements, as they struggle to keep pace with the rising costs of living.
Too many at the top are paid far too much for what they are really worth.

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How true these comments are. The question is, how long will it be allowed to continue? and when will the govt watchdogs step-up to the plate and do what they're paid to do?

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Directors Remuneration and other Benefits
The table below sets out the total remuneration received by each Director from the Group for the year ended 30 June 2016.
Name Directors Chairman Committee Salary
Fees Fees Chair Fees
Tim Cook $40,000 $70,000 $10,000
Michael Morton $271,961*
Sharon Hunter $40,000
Richard Sigley (resigned Nov 2015) $23,333
John Moore $29,166
* Salary from the Mad Butcher Business

From veritas annual report 2016

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Looks like Richard jumped off the bus just in time.

Be interesting to see what the 2017 report entails.

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So EBITDA from the bars and Mad butcher of $9.6M, and they get given 2 months by ANZ..

Most of the debt repaid presumably came from the sale of Nosh.

Should have delisted/got Overheads under control far earlier.

The $27M question is what will Morton do now? Some buying opps on the horizon

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Thanks for your comment Anon. By my estimate little of the debt repaid would have come from the Nosh sale. The 'gross' consideration for the sale was $3.98m, but this included stock of $1.06m and the assumption of trade creditor liabilities of at least $2m. The net consideration, which went towards repaying bank debt, was therefore less than $1m. 

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Interesting, the news breaks, the franchise owners are looking at empty shops, Morton is on a Media Works Funded Trip in USA while the butchers struggle to pay the bills? What's the bet there's more to this ...?

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Store owners held to ransom by failing company who wants to drag them down with them

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I just knew there was an air inevitability about this company's failure when I saw Morton's Temple of Mammon -- being constructed on Vicky Ave -- in homage to his ego. I was thinking -- Man, those hapless MB franchisees have been heavily salted for a real brining.

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As expected target Morton - you don't think he's sitting on massive losses with his retained shareholding!!! I'm sure he's just thrilled.

I'm picking he rues the day he agreed to tip his profitable business into this after all the advisors etc put a proposition to him. Grow your business they said! Double your money they all said ! We've done this before they said!

Tim Cook is hardly master of much these days - his last few appointments are hardly memorable

Where is Mark Darrow - no longer with the company and his role with the Board was to find acquisitions..... yep Nosh was his baby, and look what happened there - no doubt Darrow pitched the Nosh purchase to the Board to get them convinced and over the line. Darrow is hardly clean in any of this!

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Morton is an experienced businessman. He just saw $$$ signs and went ahead with the deal. He will be OK though as he is a shareholder in many other companies and has trusts.

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what do you think of this sir peter!!!
A comment once made by you was, if i did not think my son in-law michael morton was the man to take this company into the future i would never of sold it to him. my my he is doing a great job bet your proud of him.
maybe he needs to take a word out of your book and take a good hard look at himself in the mirror!!
how many lives has this man distroyed.

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So it turns out that the only entity in the country that is worse at picking winners than Callaghan and Powerhouse is actually...the ANZ...

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I bet 3 months ago that about now would see the end of this shambles.
Leitch should be so proud of Morton and his daughter.
Both a couple of jerks when it comes to running a business.
This is not the first example of back patting that has gone wrong.
How in heavens name could these people destroy so much wealth and potential in such a short time....or has morton and the daughter salted it all away with the intention of letting everyone else carry the can......I wonder.

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At the last Veritas AGM, Michael Morton did not speak at all, even when questions were directed to him. Red flag on leadership right there!
Members who read the Shareholders Association Scrip magazine report nearly a year ago would have known that this company was a train wreck, with the engine and first carriage already off the tracks!
John Hawkins
NZSA Chairman

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Probably because he nearly came to blows with a shareholder at the 2015 AGM, so was being 'handled' by the minders. Hard to work out who is running the place, but maybe that's the problem. Rudderless. Nosh was a tiny business in context of the group, but what a monumental train wreck.

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I know theyve had a couple of shocker years with losses from Nosh, Write down of KiwiPac, and terrible press over some non-performing Butchers, but is it all bad? It seams to me they have dealt with those and are now in a position to move forward. Ebitda from continuing operations was 8.2million. Surely based on that, another bank will loan them the $30 mill they need to pay ANZ back so they can keep operating. And if they can achieve the same Ebitda again, they will be looking at around $4mill NPAT which should see market cap rise from $6.5mill

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That's not how banks think. They will never step up to a new lend where another bank has cold feet, as they know the threshold for an existing lender to not renew the facility is pretty high, and that it usually takes a severe loss of confidence in management to bring that about. It's a bit like life insurance - once you've been declined by one insurer you need to declare it, and no-one else will touch you with a bargepole.

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And the banks owe a few billion to the parents over the ditch that they urgently need back

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Is it just me or is it slightly unclear from their NZX release how long they have to raise the cash for repayment. Is it $27.6m by November THIS YEAR? and then the remaining $0.9m by Nov 2019? If this is true, how can they possibly do a deal in the next 2-3 months?

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Crackity, you seem to forget that the debt repayment amount is in part due to 'Old Nosh Group' Creditors still being owed $1.9m - which ONG palmed off to New Nosh without any legal right to do so; and clearly have no intention to 'put right.'
Are we expected to believe that is just a coincidence that New Nosh is owned by a Limited Partnership company - so its directors and shareholders are invisible to all bar the Companies Office?
So now ONG have won their case for New Nosh to pay the creditors - but hey ho there is no money - are ONG/Veritas directors now guilty of professional negligence by accepting such a worthless deal?
No doubt many creditors who made up the $1.9m owed to ONG are also suppliers to Mad Butcher or Better Bar Group - so either wont pursue for fear of jeopardising these relationships, or have been offered a 'deal' for ongoing supply in return for not pursuing Stat demands on ONG?
Where is the FMA, SFO and NZSA in all this? The whole thing stinks.

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They are a shambles waiting to be sorted.
ANZ are just the people to see to that they are very well experienced at shutting up businesses for whatever reason or for no reason at all

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He has bought a new Ford Ranger for his wife?????

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Well that's positive for a start! Given their financial position, it would make sense to trade down....

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It would be interesting to know whether the ANZ would publicly rule out selling their debt position. Especially given its recently come to light that they were shopping their Intueri position around. It seems as though that was the straw the broke the camel's back at Intueri, and could well be the same here?

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Directors looking at a number of options..... yeah right. The MB franchisees should tell Veritas to naff off and form their own buying group.

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If i had a dollar for every bit of rubbish that come from tim cook and michael morton i could take the funding over from ANZ

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Incredible to see Matt Goodson as the 20th largest shareholder in Veritas (p55 of 2016 Annual Report). Another terrible investment decision...hasn't he or his fund been in almost every poor investment this year?

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