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Veritas confirms profit forecast; increases dividend

For NZX & Media Release
27 February 2014

Veritas confirms profit forecast; increases dividend

Highlights

•          Full year forecast on track
•          Dividend increased to 70% of NPAT for FY14
•          Interim Dividend of 3.94 cents per share
•          New acquisition Kiwi Pacific Foods settling in well, new GM appointed
•          Mad Butcher Store openings on target
•          Retail environment tough and experiencing  product shortages, but product opportunities identified

Veritas Investments Limited (NZX:VIL) is increasing its forecast dividend for the 2014 financial year from 60 per cent of net profit after tax (NPAT) to 70 per cent of NPAT on the back of a solid forecast and higher cash holdings.

The Auckland-based investment group today announced its unaudited half year result for the six months ended 31 December 2013. Veritas is on track to meet the profit forecast for the 2014 financial year set out in its Investment Statement dated 28 March 2013.

Trading
For the six months ended 31 December 2013, Veritas reported EBITDA[1] of $2.8m against a full year forecast of $6.2m while NPAT was $2.0m, compared to the full year forecast of $4.2m. Revenue for the six months was $14.5m, compared to the full year forecast of $35.8m, noting a higher level of rebate based business in the product mix.  While trading initially experienced a slower start for the first quarter, total revenue contribution of $3.9m for the full 6 months was in-line with forecasts.

Acquisition of joint venture interest in Kiwi Pacific Foods
On 20 December 2013, Veritas announced an investment in Kiwi Pacific Foods Limited, a manufacturer and supplier of meat patties for local and international markets. The remaining 50% of Kiwi Pacific Foods is owned by Antares Restaurant Group Limited, which holds the Burger King franchise in New Zealand. 

Kiwi Pacific Foods owns and operates a Ministry for Primary Industries (MPI) approved meat patty production facility in Auckland, employing 14 staff and with a preferred supplier arrangement with Antares. The purchase price had three elements; $2.8m in cash, $0.6m of Veritas shares issued at $1.38 per share and an earn-out calculated by reference to export profits over the three years following acquisition.

Veritas also acquired the rights to manage Kiwi Pacific Foods’ operations on behalf of its shareholders.  From the 2015 financial year, Veritas expects Kiwi Pacific Foods to contribute around $0.6m of NPAT per annum to the Veritas group.

Following the acquisition, Kiwi Pacific Foods has appointed Gus Crawford as General Manager. Mr Crawford, who joins the business in March 2014, has more than 20 years’ experience in meat processing including seven years as general manager for ANZCO Prepared Foods, a key food supplier to McDonalds.

Mad Butcher CEO Michael Morton says the Kiwi Pacific Foods acquisition is settling in well.

“We were delighted to secure Gus Crawford with his wealth of experience to run the Kiwi Pacific Foods business for us. We see good potential for increasing export sales and will work closely with our joint venture partner Antares to develop overseas markets. These are exciting times for Kiwi Pacific Foods.”

Regarding further acquisitions Chairman Mark Darrow added: “We continue to look for further complementary investments. While we continue to actively look at a number of businesses, we are not currently in any advanced discussions.

“The Board is working very hard with the investment strategy to ensure any further acquisitions meet the criteria of growing shareholder value in the long term without materially affecting dividend streams.”

Mad Butcher Stores
As forecast, the Mad Butcher business is on track to open four new franchised stores in the year ending 30 June 2014. In the six months under review, Mad Butcher has opened new stores in Invercargill, Kapiti and New Plymouth. Management is now working on a Nelson store which it hopes to open by mid-year. In Invercargill, Mad Butcher has taken initial ownership of the store while a franchisee is being inducted.

Dividend
The Veritas Board has declared a fully imputed interim dividend of 3.94 cents per share. This represents an increase on the forecast dividend from 60% of NPAT to 70% of NPAT. Subject to cash requirements for acquisition opportunities, the Board expects to maintain this increased dividend payment ratio for the final dividend in respect of the 2014 financial year.

Mark Darrow commented: “Based on the strong cash position of the Group, we are comfortable to increase the dividend for the year from 60 per cent to 70 per cent of NPAT within the band of our dividend policy.”

The record date for the interim dividend is 14 March 2014 and the interim dividend will be paid on 28 March 2014.

Trading environment
Mad Butcher CEO Michael Morton expects both risks and opportunities in the short term.

“We are seeing a shortage of protein available following the 2013 drought and higher meat exports both contributing to domestic supply shortages.

“We are operating in a tougher retail environment from the points of view of both competitive activity and consumer spend. We do see opportunities with the change in pork meat regulations driving better supply and lower pricing in the fresh pork sector.

“We are also looking at other supply opportunities to mitigate local shortages. Our relationship with key suppliers is important and we continue to be very well supported by them,” Mr Morton says.

ENDS

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