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