VIL - Veritas Investments Limited

[moosie_900]

Thought we might like to start a new thread since the last one refers to SSI and on the first day of a SPP for the Mad Butcher. As we all know, Veritas has acquired the Mad Butcher and is looking to raise up to $25M in capital. Here is the announcement today:

Mad Butcher Acquisition and Offer update

Veritas advises that it is finalising its offer documentation in connection with an offer of up to a maximum of $25 million of shares (the "Offer") to part fund the acquisition of the Mad Butcher franchisor business (the "Acquisition"), and expects to register a prospectus in respect of the Offer later this week. The Offer will comprise:

(a) a retail offer, consisting of:
(i) a broker firm offer, which will be available to New Zealand resident clients of NZX Firms who have received an allocation from that NZX Firm; and
(ii) a priority pool of up to $3 million of shares, which will be available to New Zealand resident Veritas shareholders who were on Veritas' share register as at 5.00pm on 22 February 2013 and to existing Mad Butcher franchisees; and
(b) an institutional offer, which will consist of an invitation to bid for shares made to selected institutional investors in New Zealand.

Shares will be offered at an Offer price of $1.30 per share. This price represents a 14.8% premium to the volume weighted average price for the three month period prior to the announcement of the Acquisition on 20 December 2012. Veritas has commenced a bookbuild process, under which selected institutional investors and NZX Firms have been invited to lodge bids indicating the number of shares they wish to apply for under the institutional offer and the broker firm offer. The bookbuild is being undertaken by Craigs Investment Partners Limited as lead manager to the Offer. Full details regarding the Offer will be released following completion of the bookbuild and registration of the prospectus later this week. The Offer will open during April and may remain open until early May or such earlier date that Veritas may determine.

The Offer and the Acquisition are subject to Veritas shareholder approval, which will be sought at a special meeting of shareholders to be held in late April. Further details will be contained in the notice of meeting to be despatched to shareholders in early April.

For further information contact:
Mark Darrow
Chairman
Veritas Investments Limited
Phone: 021 88 88 58

As a previous VIL investor, I am interested, but I can see a big red target for the SP to hit $1.30 and stay there for quite some time from it's previous close of $1.82. Don't think people who bought in over $2 as of late will be very happy, but oh well!

[CJ]

Will be interested to hear what the growth story is.

Though I got TME completely wrong on that.

[pierre]

I might be interested - depends how many free snags they're serving up with each share - and whether they come with tomato sauce as well!

[Balance]

Have not yet read the prospectus, which I will need to download soon.

Here's the upside. Tim Cook and Mark Darrow are good guys with good reputations, and the Mad Butcher is a great retail brand running under a franchise system.

Here's the downside: Reverse listings are almost never as good as traditional IPOs. Abano is an exception, I am sure there are others.

Agree with you, STC.

Backdoor listings imply something to hide - not a good look right from day 1.

[winner69]

Interesting prospectus

In theory an easy peasy business model eh .....organise things with only a few people on the staff and clip the ticket where you can .... In MAD case 4 mill or so on 150 mil of sales by the franchisees.

MAD don't take the traditional franchise fee on all sales ...they buy and sell the meat ( nicer term than carcasses) and make 23% on the way through and leave all the risk with the franchisees


Bit of a worry that same stores sales are forecast to grow at inflation ( when they been flat for a few years) and GROWTH is coming from new stores when not one has opened for a while. I know they have been trying to get new franchisees on board but finding a butcher who has enough capital to set himself as a butchers shop is pretty hard. Don't think the welfare ..profitability or ongoing viability ...of their franchisees is listed as risk

Anyway nice prospectus ....some getting their dosh out and good on them .....punters want to invest in IPOs at the moment cause of the excitement around them ....but prospectus to glossy for me

Good luck to those who give it a go .... You'll prob be happy and if nothing else become customers

[CJ]

8. Not keen on the franchise system. The Club Physical/Jolt Stoush that played itself out shows what can happen when franchisees go awry. They have not updated Peter Leitch's page on the website to show he now has a knighthood, which is rather pertinent, I would have thought.
http://www.madbutcher.co.nz/about_the_mad_butcher/index.cfm

I'm not wildly crazy about this one, but it does seem cheap.There are hundreds of franchises in NZ and in the past 5 years, I can only think of a few issues :
- the club physical one who, incidentally, won in courtand proved that the franchisor has all the power
- Hell pizza terminating some franchisees (it was on 60 minutes and was a bit one sided)
- home acres where some guy was selling 'franchises' to asians when he wasn't really

I only skimmed the prospectus - does SIR Peter Leitch have anything to do with it anymore. I know he has sold but have they locked him in from an advertisings perspective??

Seems cheap when compared to BurgerFuel but the growth potential seems lower. How are they going to attract new franchisees?

[winner69]

A source close to the process has told me there has been heavy interest, anticipating over-subscriptions by a level of 3.

.

Excitement abounds in the market eh sparky. Everything is a sure fire winner, esp IPOs eh.

I think that even if BLT floated their icecream disk on that would be over subscribed as well

[Minerbarejet]

look at the vil chart - what do you see, moosie?
sudden death cross perhaps
I can only get a 60 ma and 180ma on asb
yikes it just dropped another 5

[Snow Leopard]

Veritas have bought half of a 'meat patty' producer:

https://nzx.com/companies/VIL/announcements/245509

sort of makes sense.

Best Wishes
Paper Tiger

[noodles]

My interest in Veritas perked up when they made their recent acquisition of the Meat Patty Business. At the time there was no sellers, so I could not enter. Since then there has been a little more liquidity. Directors have been buying as well (up to 1.45).

The thing I like about analyzing this company is that it is so simple. They have a core Business, Mad Butcher Franchise, and this other new Meat Patty Business. The financials and growth are easy to understand. They grow by expand stores (around 4 per year). They say that they have 32 proposed locations, so that is 8 more years of growth.

So lets look at the financials



PERIOD
EBITDA
eps


FY12 - actual
4,800



FY13- actual
5,900



FY14 - forecast
6,200
0.112



The first thing to note is good growth in historical EBITDA. Secondly, management reaffirmed FY14 forecast at the AGM

So at the current price ($1.30), they are on a pe of 11.5. Not really super cheap, but given historical growth, it would have a PEG < 1.

The acquisition of the patty business in Dec 2013 will add $550K NPAT in FY15. This will add 1.5c eps. It should contribute to FY14 as well, but i'll ignore it for now.

The prospectus stated that for every 4 new stores added, EBITDA would increase by 600K. This equates to 1.1c eps.

So we can now calculate FY15 eps of 11.2 + 1.5 + 1.1 = 13.8

So now we have a FY15 pe = 9.39. Starting to look cheap? And still the company will grow the following year opening 4 new stores (and so on and so on).

I think on this analysis alone, there is a good reason to buy. But I think the directors may have been buying for other reasons as well. Also in the Dec announcement...
"The purchase price for the acquisition is made up of three elements; $2.8
million in cash, $0.6 million of Veritas shares issued at $1.38 per share,
and an earn-out calculated by reference to Kiwi Pacific Foods' net profit
before tax attributable to export sales over the three years following
acquisition. Under the earn-out, the purchase price will be increased by an
amount equal to 25% of Kiwi Pacific Foods' net profit before tax attributable
to export sales in each of the three years following the acquisition."

This tells me that there is potential to supply other Burger King chains outside NZ. It is hardly blue sky stuff, but it may provide upside surprise to earnings going forward.
Anyway, I've brought some.
Usual disclaimer: This is not advice or a recommendation to buy and some of figures may be accidentally inaccurate.

[percy]

Do any posters buy your meat from Mad Butcher?
If so please comment on store presentation,service , quality of meat purchased, and value for money.

[winner69]

You probably go to real butchers like what this young woman's one - good on her for keeping the old business going

http://www.stuff.co.nz/business/small-business/9648432/A-stake-in-the-butchery-trade

I go to real butcher in Island Bay .... real meat not injected with water or whatever. Maybe I not really the MAd Butcher target market

Mad Butchers I have been in to seem pretty tidy - clean and well laid out and would you believe it full of meat and stuff all at pretty good prices. Good place to go if you want bulk sausages and meat patties for the staff bbq.

[percy]

You probably go to real butchers like what this young woman's one - good on her for keeping the old business going

http://www.stuff.co.nz/business/small-business/9648432/A-stake-in-the-butchery-trade

I go to real butcher in Island Bay .... real meat not injected with water or whatever. Maybe I not really the MAd Butcher target market

Mad Butchers I have been in to seem pretty tidy - clean and well laid out and would you believe it full of meat and stuff all at pretty good prices. Good place to go if you want bulk sausages and meat patties for the staff bbq.

Used to shop there when we lived around the corner from it.Very good meat,and excellent ham at Xmas.Did not realise it had changed hands.

[noodles]

Do any posters buy your meat from Mad Butcher?
If so please comment on store presentation,service , quality of meat purchased, and value for money.

Percy, I don't buy meat from the mad butcher. I don't bank at Heartland. And even though I buy Coke, I'm short CCL.AX.

I don't let personal preference cloud my investment decisions. I only care about earnings and the sustainability of those earnings.

[percy]

Percy, I don't buy meat from the mad butcher. I don't bank at Heartland. And even though I buy Coke, I'm short CCL.AX.

I don't let personal preference cloud my investment decisions. I only care about earnings and the sustainability of those earnings.

I try to use personal experience as much as possible,as it is the only indicator I know is right.
You look at Pumkin Patch.Hallensteins, and Postie you can judge a lot quicker, than waiting for figures to come out,how they are trading.
My wife comes home with some very nice things from Briscoes.No surprises they are doing well.
I asked about Mad Butcher as I brought a leg of lamb they had on special from their shop at the Woolston .I thought the store was a dump.It was the only time I have been in a Mad Butcher's shop. Had other posters answered my questions positively I would have then looked at the financials.Sustainable earnings will only come to any business who offer good products at fair prices in well laid out customer friendly store.Woolston store did not measure up.

[noodles]

Ok Percy. Maybe I will venture to one of those undesirable shopping areas where I can find a mad butcher.

For those worried about meat quality , they source from the same places as supermarkets.

[percy]

Ok Percy. Maybe I will venture to one of those undesirable shopping areas where I can find a mad butcher.

For those worried about meat quality , they source from the same places as supermarkets.

Surely you do not mean Mad Butcher shops are only located in "undesirable " shopping areas? lol.
ps.Their leg of lamb was just as nice as others sourced in desirable areas .

[karen1]

I shop there occasionally, picking up good specials. Particularly enjoy the pork they supply, although all else good quality too. Our local store, Tauranga, is neat and tidy, with friendly staff and good knowledge, evident if you engage in conversation with one of the butchers. I have never had an issue with product.

You might enjoy this http://www.magazinestoday.co.nz/Features/Interviews/Sir+Peter+Leitch.html which tells the story of a man who unwittingly built an empire.

My father, very fussy about his meat, was one of his earliest customers, to the Rosella Meats store in Mangere in Auckland. Dad took a real shine to the down to earth young man who owned the business, just plain Peter then. Dad shopped there for some years, because the meat offered was top quality, and he could enjoy a yarn with Peter.

In our local store, I see a lot of what Sir Peter Leitch learned in his early days showing through in the staff, and wonder if you need to comment on the website re the Woolston store.

[percy]

Thanks Karen1 for your reply and the link .
Funny how history gets changed on us? I thought it was radio personality the late Tim Bickerstaff who came up with The Mad Butcher name for Sir Peter.

[winner69]

In case they dont read this thread i have sent percy's postvto HQ? i can see HQ visiting Woolston today if they working or the Operations Manager there Monday

They seem quite keen to run consistently high standards across the franchise ....that Woolston operator will get told off

You should go back in a few weeks Percy to see if things changed .that be a god test.

[Snoopy]

For those worried about meat quality , they source from the same places as supermarkets.


What are you saying? Foodstuff's and Countdown's central butcheries supply the Mad Butcher's meat?

SNOOPY

[percy]

In case they dont read this thread i have sent percy's postvto HQ? i can see HQ visiting Woolston today if they working or the Operations Manager there Monday

They seem quite keen to run consistently high standards across the franchise ....that Woolston operator will get told off

You should go back in a few weeks Percy to see if things changed .that be a god test.

Now that I have opened my big mouth,I better try and get to visit all ChCh Mad Butcher shops.And will revisit Woolston store,situated cnr Ferry Road and Aldwins Road.
What I do love about butcher shops is all the old guys eyeing up the window displays.lol.

[winner69]

Having a look back at the prospectus I see that Ferry Rd shop is more than a butchers shop. That one and Papanui are HAarvest Marts as wel and sell vegies and other stuff - a minimarket they called it. it is said that it brings in sdditional traffic, ie more meat sales

They were going to monitor and might extend the concept to other mad stores.

Maybe the focus has gone off meat at ferry Rd and that is why Percy calls it a dump

Some would sayvstick to know what you do best and leave the combination of cabbages and sausages to the supermarkets.

[winner69]

What are you saying? Foodstuff's and Countdown's central butcheries supply the Mad Butcher's meat?

SNOOPY

Maybe the same place is the farm!

[Harvey Specter]

For those worried about meat quality , they source from the same places as supermarkets.


What are you saying? Foodstuff's and Countdown's central butcheries supply the Mad Butcher's meat?


Maybe the same place is the farm!I can confirm that all Bacon is sourced from a pig, and the steak from a cow.

The source of the sausages will be a mystery that will never be solved!

[noodles]

What are you saying? Foodstuff's and Countdown's central butcheries supply the Mad Butcher's meat?

SNOOPY
No. Mad butcher do their own butchering. Just the same approved meat suppliers. Tegal etc

[noodles]

You probably go to real butchers like what this young woman's one - good on her for keeping the old business going

http://www.stuff.co.nz/business/small-business/9648432/A-stake-in-the-butchery-trade

I go to real butcher in Island Bay .... real meat not injected with water or whatever. Maybe I not really the MAd Butcher target market

Mad Butchers I have been in to seem pretty tidy - clean and well laid out and would you believe it full of meat and stuff all at pretty good prices. Good place to go if you want bulk sausages and meat patties for the staff bbq.

An interesting view from Mad Butcher on the independent butchers (see investment statement pg 22) http://www.veritasinvestments.co.nz/files/Investment-statement.pdf

"The number of independent butcher shops in New Zealand has steadily
decreased over the last 40 years. In
1971, there were over 5,173 butchers in
New Zealand.12 In 2011, the number of
fresh meat, fish and poultry retailing
stores was 661, down from 764 stores
in 2000.13 Veritas believes that a large
proportion of this decline is attributable
to the decrease in the number of
independent butcher shops. Although
independent butcher shops typically
have a loyal local customer base, provide
expert service and offer high quality
and customised meats, in most cases,
Veritas’ view is that their inability to
purchase in bulk and therefore compete
on price is likely to lead to the continued
contraction of independent butcher
shops as a group over the longer term.
"
They go on to say...

" Independent
butcher shops, at the other end of the
spectrum, offer the flexibility to meet
consumer tastes and customer intimacy
but operate with low volumes, limited
purchasing power and limited brand
recognition"

It seems Mad Butcher has an economic moat

[warthog]

The source of the sausages will be a mystery that will never be solved!

As the hog's grandhog used to say "it's a mystery, like any good sausage!"

[winner69]

An interesting view from Mad Butcher on the independent butchers (see investment statement pg 22) http://www.veritasinvestments.co.nz/files/Investment-statement.pdf

"The number of independent butcher shops in New Zealand has steadily
decreased over the last 40 years. In
1971, there were over 5,173 butchers in
New Zealand.12 In 2011, the number of
fresh meat, fish and poultry retailing
stores was 661, down from 764 stores
in 2000.13 Veritas believes that a large
proportion of this decline is attributable
to the decrease in the number of
independent butcher shops. Although
independent butcher shops typically
have a loyal local customer base, provide
expert service and offer high quality
and customised meats, in most cases,
Veritas’ view is that their inability to
purchase in bulk and therefore compete
on price is likely to lead to the continued
contraction of independent butcher
shops as a group over the longer term.
"
They go on to say...

" Independent
butcher shops, at the other end of the
spectrum, offer the flexibility to meet
consumer tastes and customer intimacy
but operate with low volumes, limited
purchasing power and limited brand
recognition"

It seems Mad Butcher has an economic moat

I wouldn't go that far noodles. I doubt if they even see the independent butchers as a threat and in some cases would dearly love to have some of them join up.

The Mad Butcher chain is no more than 37 independent butchers who have joined a buying group. The success of Veritas depends on the success and viability of these independent butchers who have invested their capital in a expensive butchers shop and pay the rent and pay the staff and essentially take all the risk .... while the franchisor skims as much off the top as he can

Look at the financials the franchisor seems to make a 16% margin on the carcasses and gets a rebate close to 20%. Makes you wonder what price the butcher actually pays for the carcass compared to his competitors - I would hazard a guess it is not that great.

I don't know what the total sales of the butchers are (rough sums maybe $50m) and what rgeir operating profit is on that but benchmark figures would suggest about 5% before tax. What the butchers make themselves doesn't really matter to Veritas shareholders - its the $170,000 average contribution each makes to Veritas EBITDA

Maybe a moat - but only as good as the butchers themselves remain viable (say against the supermarkets) and that seems to come down to how greedy The franchisor is - skimming too much of the top and seeing butchers going broke in the process.

But as long as they remain greedy and get away with it Veritas probably a reasonable investment, but not because they have an economic or competitive moat.

[Harvey Specter]

Any economies of scale is probably offset by the franchise fee's. And they are all competing against supermarkets who have much greater economies.

[percy]

Location of any retail business including a butcher's shop is most important.
Top location usually means paying top rental.Shopping Malls are most probably the top retail location.
So are all tenants in the mall equal? NO.The major attractions like supermarket,The Warehouse,The Farmers pay a lot less rent per sq metre than the speciality stores such as Paper Plus,Chemist shop and Postie Plus.We therefore see the likes of Harvey Norman,The Mad Butcher going to destination type stores.What they save on rent they can use to attract customers.
So when a speciality store sells the same as the supermarket they have an even higher hill to climb ,as most of their customers are already going to the supermarket,and can put off making a special trip to that destination store.
Remember I have only been to The Mad Butcher once to buy a leg of lamb they had on special.I buy our steak from the butcher's shop at Barrington Mall ,yet buy all our everyday meat/chicken supplies from a supermarket.

[winner69]

But can u get one of these specials at countdown?

Reckon verItas shareholders make more on these deals than the butcher ....and that is the way it should be eh


FRESH NEW ZEALAND BONELESS BUTTERFLIED LAMB LEG
$16.99
per Kilo
WHILE STOCKS LAST
Valid from 20 January to

[noodles]

Location of any retail business including a butcher's shop is most important.
Top location usually means paying top rental.Shopping Malls are most probably the top retail location.
So are all tenants in the mall equal? NO.The major attractions like supermarket,The Warehouse,The Farmers pay a lot less rent per sq metre than the speciality stores such as Paper Plus,Chemist shop and Postie Plus.We therefore see the likes of Harvey Norman,The Mad Butcher going to destination type stores.What they save on rent they can use to attract customers.
So when a speciality store sells the same as the supermarket they have an even higher hill to climb ,as most of their customers are already going to the supermarket,and can put off making a special trip to that destination store.
Remember I have only been to The Mad Butcher once to buy a leg of lamb they had on special.I buy our steak from the butcher's shop at Barrington Mall ,yet buy all our everyday meat/chicken supplies from a supermarket.

This seems like a reasonable theory and may be a reason to bypass an investment opportunity for a startup business. However, we are dealing with a proven business. Percy, you may not be bothered to walk another 200m to the Mad Butcher, but it is clear that some are. Maybe for someone on a budget?

[percy]

This seems like a reasonable theory and may be a reason to bypass an investment opportunity for a startup business. However, we are dealing with a proven business. Percy, you may not be bothered to walk another 200m to the Mad Butcher, but it is clear that some are. Maybe for someone on a budget?

I think the reason I am not a Mad Butcher shopper is because there is not one handy to me.
As for investing in the company, I have not wanted to buy into the retail sector.I have held that view for over two years now [maybe longer].
I do not hold a retail stock.

[noodles]

I have not wanted to buy into the retail sector.I have held that view for over two years now [maybe longer].
I do not hold a retail stock.

And I think very wise approach in general. But ordering meat on-line is not yet cheaper and more convenient than at a butcher.

[noodles]

One thing I did miss out in my analysis was dividends.

Here is the dividend policy...
"Veritas’ dividend policy is to distribute between 60% and 70% of the Group’s net profit after tax.
"

So for FY15 eps of 13.8*, we could expect dps of 8.97c (assuming 65% payout ratio)

At a share price of 1.30, that gives a grossed up dividend yield of 9.6% (assuming 28% tax rate)

* eps calculation came from http://www.sharetrader.co.nz/showthread.php?9111-VIL-Veritas-Investments-Limited&p=457304&viewfull=1#post457304

[Harvey Specter]

You should only gross up 28/72 which is the max amount of imputation.

[noodles]

You should only gross up 28/72 which is the max amount of imputation.
Thanks Harvey, Fixed the original post

[winner69]

Noods - the $6.4m you show as NPAT for F14 is actually before tax. Whether this effects your eps calculation I don't know

You also don't take tax off the extra ebitda for the new stores in the future. Might make a small difference

But whatever a BU BUY BUY and only a sell when stores start going broke or they can't open as many new stores as they plan.

See they ave a company owned store waiting for an owner ....hopefully that will give them insights
,

[noodles]

Noods - the $6.4m you show as NPAT for F14 is actually before tax. Whether this effects your eps calculation I don't know

You also don't take tax off the extra ebitda for the new stores in the future. Might make a small difference

,
Thanks Winner, I've updated the column to be EBITDA. It does not affect eps as I had already taken off tax and depn for the calculation of eps. It does not affect new stores either. NPAT for FY14 is forecast as $4.2 mill.

Apologies all.

[winner69]

Dan from HQ appreciates the feedback Percy

Didn't say what he would do so its up to you to visit sometime in the future to see if ferry rd mad butcher is still a dump

Interested to hear

[percy]

Dan from HQ appreciates the feedback Percy

Didn't say what he would do so its up to you to visit sometime in the future to see if ferry rd mad butcher is still a dump

Interested to hear
Felt a bit guilty after I posted Ferry road {Wolston store} was a dump,as it was awhile ago that I went there.I went on Sunday afternoon to double check.Confirmed.!!!
Will check out other stores sometime.

[winner69]

Felt a bit guilty after I posted Ferry road {Wolston store} was a dump,as it was awhile ago that I went there.I went on Sunday afternoon to double check.Confirmed.!!!
Will check out other stores sometime.

Will that confirms it then PERCY .... Ferry Rd Mad Butcher is a dump

You won't be a customer and based on that unlikely to be a shareholder eh

Hope Dan sorts them out

I gave him the link to this thread, maybe he check in now and again

[percy]

I have just returned from visiting Mad Butcher stores in Sydenham and Blenheim Road.
Sydenham store.Not a very good location.Store front in need of a paint job.Store layout,not bad.Filthy old [not in use] TV needs cleaning.Not good in a food store.Plenty of stock at good prices.Dry goods not impressed.I was the only customer.
Blenheim Road.Store signage was very good. Bit better located than Sydenham.Store a bit dark.Plenty of stock at good prices.Dry goods not impressed.Again I was the only customer.
I mentioned dry goods.These included cat biscuits,paper towels etc.Appear to be an after thought given they were here and there.Not properly displayed.
Three stores I have visited.If I were a shareholder I would be very disappointed.

[winner69]

Percy, maybe beauty is in the eye of the beholder.

I been n the Lower Hutt store. Bright and roomy and plenty of meat at good prices. The butcher was helping out a customer with something she wanted. They apparently one of busier stores.

Wonder of they buy their cat biscuits from Masterpet. Should be dog biscuits too .....bones for the dog and his bikkies as well.

[percy]

Percy, maybe beauty is in the eye of the beholder.

I been n the Lower Hutt store. Bright and roomy and plenty of meat at good prices. The butcher was helping out a customer with something she wanted. They apparently one of busier stores.

Wonder of they buy their cat biscuits from Masterpet. Should be dog biscuits too .....bones for the dog and his bikkies as well.

Being a franchise I expect the stores vary a lot.
They would not have grown to the size they are today unless they had some very good stores.Yes roomy and plenty of meat at good prices.
A lot of non butcher products.

[warthog]

Being a franchise I expect the stores vary a lot.
They would not have grown to the size they are today unless they had some very good stores.Yes roomy and plenty of meat at good prices.
A lot of non butcher products.

If any of you VILers have been to Westmere butchers in Auckland you'd see how it is done. Customers drive from Howick to visit that shop, the hog hears.

Who wants to buy any sort of meat at any quality from premises that are not top-notch, clean, and well-presented?

Lack of presentation and attention to detail is a sign that the owners will cut corners, skimp and take chances with your health.

Not a lot of volume for VIL today!

[Harvey Specter]

Being a franchise I expect the stores vary a lot.
They would not have grown to the size they are today unless they had some very good stores.Yes roomy and plenty of meat at good prices.
A lot of non butcher products.it shouldn't vary. Look at other franchises and see consistancy - BurgerFuel, Pizza Hut etc.

[percy]

it shouldn't vary. Look at other franchises and see consistancy - BurgerFuel, Pizza Hut etc.

You are of course right.

[winner69]

So the Mad Butcher chain is just a group of independent butchers who are doing their own thing .....with the common thread of having the same name over the door, all buy their meat from the same place, charge the same and get thei advertising organised by HQ

Still could be good for Sharetraders as they skim heaps of the top on the way through.

The test of that strategy - is it sustainable?

[noodles]

So the Mad Butcher chain is just a group of independent butchers who are doing their own thing .....with the common thread of having the same name over the door, all buy their meat from the same place, charge the same and get thei advertising organised by HQ


All new stores have the new look Mad Butcher branding and retail format. I'm not sure what the plan is for existing stores. So far these new stores have not been existing butcheries. Checkout the AGM presentation for the new look. http://www.veritasinvestments.co.nz/files/AGMPresentation.pdf

[Harvey Specter]

All new stores have the new look Mad Butcher branding and retail format. I'm not sure what the plan is for existing stores. So far these new stores have not been existing butcheries. Checkout the AGM presentation for the new look. http://www.veritasinvestments.co.nz/files/AGMPresentation.pdfYes - I imagine that the new owners will turn this into a proper franchise system as opposed to a group of businesses combining for efficiencies of scale.

Under a proper franchise, you will get kicked out if you dont perform to the standards. Google on Hell Pizza to see how nasty it can get when a Franchisor wants to get ride of a franchisee.

[winner69]

Harvey - you could become an operator ... maybe not as you don't have experience in catching falling knives.

Mad Butcher there's METHOD in the madness
by Mad Butcher, last updated on 11th December 2013

The Mad Butcher is everywhere, it seems – but one of New Zealand’s best-known brands plans to double the number of outlets



There are few New Zealand companies that truly justify the use of the word ‘iconic’ but The Mad Butcher is one. When Peter Leitch opened his first butcher’s shop in Mangere in 1971, he could hardly have foreseen that the strange brand he based on a remark by a mate in a pub would go on to be one of the best-known in the country. Today, The Mad Butcher is a household name with 36 stores around the country, 7 million customers per year and a listing on the New Zealand Stock Exchange. It is also, of course, one of New Zealand’s best-known home grown franchises.

These days, while Peter – now Sir Peter – Leitch remains on the payroll as brand ambassador, the company is run by Michael Morton, who has been CEO for 12 years. Michael remains the majority shareholder after the business listed on the NZAX earlier this year and has a huge amount of franchise experience. He was the operations manager of Eagle Boys before joining Restaurant Brands, moving up to the role of general manager of Pizza Hut.

‘This is an unusual franchise in that our franchisees produce the whole product – they don’t just defrost and heat things, or assemble ingredients to order,’ Michael explains. ‘Each carcase comes in whole and the butcher on site is responsible for breaking it down skilfully into all the right cuts to sell profitably. It’s a high volume, low margin business and it’s vital to get it right. For that reason, most of our franchisees are themselves qualified butchers with practical experience. If you’re a non-butcher, you’d have to have a qualified butcher as manager and that changes the figures. It’s not impossible, but you’d need more capital so you have less debt at the outset.’

The total investment required is around $400,000 +gst. ‘We help suitably-qualified people to find funding, and all the leading banks are supportive – they know just how good a business this can be,’ says Michael. ‘And part of the investment can be funded by lending against plant and equipment, which reduces the ingoings considerably.’

Part Of The Community

To help them make the transition into their own business, The Mad Butcher franchisees are fully trained in the business and operating systems that ensure they can make the most of their investment. There’s ongoing support from an experienced team and then, of course, there’s the buying power that comes from being part of New Zealand’s largest independent chain of butchers. All this is backed up by massive TV, radio and national and local press advertising, all centrally co-ordinated to enable franchisees to focus on their local customers and keep them coming back. Weekly specials, recipes and cooking tips are all provided, too.

‘We want franchisees who are out the front talking to their customers, engaging them, helping them to create delicious meals,’ says Michael. ‘Hard-working, honest people who make things happen. And, of course, they need to become a real part of their local community, whether they’re supporting sausage sizzles for the scouts or getting involved with a local sports team. It’s all part of creating that buzz that makes The Mad Butcher such a trusted brand.’

37 New Locations

In the past few months, that branding has seen some changes as The Mad Butcher prepares to become even bigger. ‘We have identified 37 new locations where we’d like to open new stores, which will mean doubling the size of the company,’ Mike explains. ‘Many of our franchisees bought shares in the company when it was floated and we told them that we’d look to open four new stores a year until we reach our goal. Well, we’re opening Invercargill and New Plymouth in the next six weeks alone so we might do better than that this year.’

As part of the growth, The Mad Butcher is also broadening its appeal. The company is changing its tag line to ‘New Zealand’s Butcher’ and increasingly pushing quality local product and high standards. ‘As we expand into new areas, so we want to appeal to the widest possible cross-section of people,’ Michael says. ‘We have great people, great products and great prices, and we want our franchisees to reap the benefits of that as we grow.’

By ‘benefits’, Michael means establishing secure, profitable businesses. ‘This is a cash business from day one and can be very profitable, but only as long as you get those margins right – that’s critical. But The Mad Butcher has 42 years of experience behind it and that’s something we know very well.

‘We have a number of new locations coming up that we’d like to find the right people for, and sometimes existing outlets come up for sale too. If you’re interested in joining one of the country’s most successful franchises and you have the necessary ability, contact me – I’d love to hear from you.’

This advertorial is taken from Franchise New Zealand magazine Volume 22 Issu

http://www.franchise.co.nz/article/1749

[winner69]

Harvey - you could become an operator ... maybe not as you don't have experience in catching falling knives.

Mad Butcher there's METHOD in the madness
by Mad Butcher, last updated on 11th December 2013

The Mad Butcher is everywhere, it seems – but one of New Zealand’s best-known brands plans to double the number of outlets



There are few New Zealand companies that truly justify the use of the word ‘iconic’ but The Mad Butcher is one. When Peter Leitch opened his first butcher’s shop in Mangere in 1971, he could hardly have foreseen that the strange brand he based on a remark by a mate in a pub would go on to be one of the best-known in the country. Today, The Mad Butcher is a household name with 36 stores around the country, 7 million customers per year and a listing on the New Zealand Stock Exchange. It is also, of course, one of New Zealand’s best-known home grown franchises.

These days, while Peter – now Sir Peter – Leitch remains on the payroll as brand ambassador, the company is run by Michael Morton, who has been CEO for 12 years. Michael remains the majority shareholder after the business listed on the NZAX earlier this year and has a huge amount of franchise experience. He was the operations manager of Eagle Boys before joining Restaurant Brands, moving up to the role of general manager of Pizza Hut.

‘This is an unusual franchise in that our franchisees produce the whole product – they don’t just defrost and heat things, or assemble ingredients to order,’ Michael explains. ‘Each carcase comes in whole and the butcher on site is responsible for breaking it down skilfully into all the right cuts to sell profitably. It’s a high volume, low margin business and it’s vital to get it right. For that reason, most of our franchisees are themselves qualified butchers with practical experience. If you’re a non-butcher, you’d have to have a qualified butcher as manager and that changes the figures. It’s not impossible, but you’d need more capital so you have less debt at the outset.’

The total investment required is around $400,000 +gst. ‘We help suitably-qualified people to find funding, and all the leading banks are supportive – they know just how good a business this can be,’ says Michael. ‘And part of the investment can be funded by lending against plant and equipment, which reduces the ingoings considerably.’

Part Of The Community

To help them make the transition into their own business, The Mad Butcher franchisees are fully trained in the business and operating systems that ensure they can make the most of their investment. There’s ongoing support from an experienced team and then, of course, there’s the buying power that comes from being part of New Zealand’s largest independent chain of butchers. All this is backed up by massive TV, radio and national and local press advertising, all centrally co-ordinated to enable franchisees to focus on their local customers and keep them coming back. Weekly specials, recipes and cooking tips are all provided, too.

‘We want franchisees who are out the front talking to their customers, engaging them, helping them to create delicious meals,’ says Michael. ‘Hard-working, honest people who make things happen. And, of course, they need to become a real part of their local community, whether they’re supporting sausage sizzles for the scouts or getting involved with a local sports team. It’s all part of creating that buzz that makes The Mad Butcher such a trusted brand.’

37 New Locations

In the past few months, that branding has seen some changes as The Mad Butcher prepares to become even bigger. ‘We have identified 37 new locations where we’d like to open new stores, which will mean doubling the size of the company,’ Mike explains. ‘Many of our franchisees bought shares in the company when it was floated and we told them that we’d look to open four new stores a year until we reach our goal. Well, we’re opening Invercargill and New Plymouth in the next six weeks alone so we might do better than that this year.’

As part of the growth, The Mad Butcher is also broadening its appeal. The company is changing its tag line to ‘New Zealand’s Butcher’ and increasingly pushing quality local product and high standards. ‘As we expand into new areas, so we want to appeal to the widest possible cross-section of people,’ Michael says. ‘We have great people, great products and great prices, and we want our franchisees to reap the benefits of that as we grow.’

By ‘benefits’, Michael means establishing secure, profitable businesses. ‘This is a cash business from day one and can be very profitable, but only as long as you get those margins right – that’s critical. But The Mad Butcher has 42 years of experience behind it and that’s something we know very well.

‘We have a number of new locations coming up that we’d like to find the right people for, and sometimes existing outlets come up for sale too. If you’re interested in joining one of the country’s most successful franchises and you have the necessary ability, contact me – I’d love to hear from you.’

This advertorial is taken from Franchise New Zealand magazine Volume 22 Issu

http://www.franchise.co.nz/article/1749

[winner69]

http://www.stuff.co.nz/southland-times/business/8857442/Mad-Butcher-coming


Mad Butcher and Vegie Boys together in Invercargill

[percy]

Store visit.Main North Road and Nortcote Road.
Location;Excellent.
Parking;Excellent;
Store signage;Very good.
Store Layout.Very good.
Product presentation.Very good.Nice to see properly displayed dry-goods.
The store was busy.Activity breeds activity.
Meat product.I was too busy being delighted it such a successful store I didn't look.!!!
What a nice surprise.Was nearly not going to go in, as other stores had put me off,so was pleased I did.!!

[Jay]

But did you actually buy anything percy to help the shareprice along
Disc: Do not hold any and in the main do not buy from them either, but am associated with a sports club that gets a good deal on their sausages and bread from the local store for the weekly BBQ to raise funds.
Haven't been into the store since it has been rebranded to the Black and whatever else, so cannot comment on the store, so really why did I bother posting this - Don't answer!

[winner69]

But did you actually buy anything percy to help the shareprice along
Disc: Do not hold any and in the main do not buy from them either, but am associated with a sports club that gets a good deal on their sausages and bread from the local store for the weekly BBQ to raise funds.
Haven't been into the store since it has been rebranded to the Black and whatever else, so cannot comment on the store, so really why did I bother posting this - Don't answer!

because 'getting a good deal on the sausages and bread' for the sports club bbq is a valuable community service ...... and generates heaps of goodwill

And from a shareholder perspective that's good because the butcher carries the cost (of the deal) while HQ probably still gets full price for the carcass

Shareholders cant lose eh - and even get the warm fuzzies giving stuff away cheap

[Harvey Specter]

because 'getting a good deal on the sausages and bread' for the sports club bbq is a valuable community service ...... and generates heaps of goodwillMaybe but that goodwill hasn't resulted in any sales to Jay!

[Jay]

Quite true winner and HS

However, my closest store does appear to do good business from seeing people heading in every time I drive past or are in the vicinity (Glen Innes Store) considering there is a Pak N save not far from there

[psychic]

Jay. Go in. Life is too short to be eating supermarket sausages... :)

[noodles]

This is good for Mad Butcher
https://www.facebook.com/BoycottCountdown

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11201787

[kiora]

This is good for Mad Butcher
https://www.facebook.com/BoycottCountdown

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11201787

BUT I have heard The Mad Butcher gets most of its beef from Australia. Is this true ? :scared:

[kiora]

BUT I have heard The Mad Butcher gets most of its beef from Australia. Is this true ? :scared:

Maybe not true as on their Website states NZ Quality Mark certified beef & Lamb (Beef & Lamb NZ states has to be of NZ origin) so where did that rumour come from ???

[Sideshow Bob]

There are time-to-time when beef comes into NZ from Australia (and sometimes Argentina) normally dependent on relative pricing, seasonality, supply etc. in recent times with high slaughter in Australia, particularly with drought, quite a bit of cheaper Australian beef has been coming in.

My 'beef' is that often in supermarkets country of origin is not labelled and not compulsory. But probably a lot more into restaurants etc.

On pork, about half of NZ's consumption is imported. Would think a lot for ham and sausages would likely be imported.

[winner69]

Mad Butcher just plodding along or something ...and shareprice drifts down ...to 116

Salt topped up at 130 and became a SS ...ouch, hope they weren't averaging down

Percy and his visits a few months ago didn't fire up the price either

[noodles]

Mad Butcher just plodding along or something ...and shareprice drifts down ...to 116

Salt topped up at 130 and became a SS ...ouch, hope they weren't averaging down

Percy and his visits a few months ago didn't fire up the price either

In the half year results, management said they are on target for FY14 forecasts.

However, without a catalyst, it appears the stock is just drifting down on low volume.

Directors and Salt both buying in 1.30/1.40's. These buyers have not to be seen for a while. Perhaps there are some issues?

Percy didn't like the stores or the shares.

I have to admit that I have been watching closely. I see value.

[percy]

Dead meat.!!!!!

[noodles]

Dead meat.!!!!!
Effective downgrade today. Their Mad butcher business is not performing to forecast. That meat is starting to smell a bit.

[percy]

Effective downgrade today. Their Mad butcher business is not performing to forecast. That meat is starting to smell a bit.

Just looked at their chart.
Not a nice picture for any one holding.

[winner69]

Just follow the PE and business performance. Reckon we'll see under $1 and a target PE of 10-12. And to think I chucked in dosh to get VIL started! I'll be back one day though :)

Who did the report noodles?

The company themselves did the update so must be true

https://www.nzx.com/files/attachments/194193.pdf

[winner69]

Mad Butcher caught telling porkies ......

http://www.stuff.co.nz/business/industries/10077581/Mad-Butcher-denies-telling-porkies

OMG .....we import more pork from Canada then any other country ....moosemeat next on spec at MB?

[winner69]

Jeez down to 105 before noodles bought a few off a keen seller at 108.

Amazing how the news of acquiring a pattie outfit bumped the price up over Xmas to its previous highs, But been downhill ever since and the profit warning has put a few more off

Not much trading but outlook looks bleak

Financiers owning a franchise hardly ever works - too much skimmed of the top to keep the poor tranchisees / store owners competitive

[noodles]

Jeez down to 105 before noodles bought a few off a keen seller at 108.

Amazing how the news of acquiring a pattie outfit bumped the price up over Xmas to its previous highs, But been downhill ever since and the profit warning has put a few more off

Not much trading but outlook looks bleak

Financiers owning a franchise hardly ever works - too much skimmed of the top to keep the poor tranchisees / store owners competitive

Not me buying.

It is a prime case of not following insiders. Directors were buying up to 1.40.

It is still on my watchlist, but not in my portfolio.

[winner69]

What's our PE target with VILs growth prospects? 12 to 13 would be mine, currently on ~15. SP of 90ish feasible then? Not a good look when insiders are buying and no ine follows suit, but it can only go so low with regard to tasty looking div yield and EPS!

But long term is it a viable model .... an inflated corporate structure and greedy shareholders making the operators poorer and poorer as they become less competitive

[winner69]

I don't know, I haven't kept totally on top of VIL financially. Is there an inflated corporate structure and poorer operators now? I thought there would have more expansion by now imho though.

Expansion a bit slow because it is hard to find butchers who a few hundred thou to set up a butchers shop and to take on lease liabilities while mortgaging themselves to the hilt

Don't grow on trees these sort of people

And if they do get that far when they do due diligence probably look at how much is left in it for them after the franchiser takes their cut and this turns them off.

From paddock to consumer too much "fat" in the middle to make this a sustainable business model in a very competitive market. My view only.

But in the meantime VIL shareholders will get a divie, no matter the viability of the individual operators

[percy]

Expansion a bit slow because it is hard to find butchers who a few hundred thou to set up a butchers shop and to take on lease liabilities while mortgaging themselves to the hilt

Don't grow on trees these sort of people

And if they do get that far when they do due diligence probably look at how much is left in it for them after the franchiser takes their cut and this turns them off.

From paddock to consumer too much "fat" in the middle to make this a sustainable business model in a very competitive market. My view only.

But in the meantime VIL shareholders will get a divie, no matter the viability of the individual operators

Pretty well sums it up.!!

[winner69]

Those who love bargains, ie see value, still buying.

Salt that is

Good on them

[winner69]

Salt first disclosure average 130

Today's disclosure 2nd 1% average about 120

[winner69]

Napier franchise for sale
http://www.trademe.co.nz/business-farming-industry/businesses-for-sale/retail/other/auction-741082813.htm

A butcher needs a lot of dosh to take on one these

[percy]

Retailers change focus.
ZEL.growth will come from increased coffee sales rather than petrol.
Whitcoulls see their focus in future in gifts rather than books.
Postie Plus, under Ron Boskell, saw growth in cheap watches etc rather than clothes.
But The Mad Butcher lives up to their name with focus now on cheap milk.Will we see them offer a loaf of bread for 50 cents?!

[winner69]

Percy .....you need to start selling p&l chops as part of the book deal

[percy]

Percy .....you need to start selling p&l chops as part of the book deal

You are on to it.!!! lol.

[Beagle]

Retailers change focus.
ZEL.growth will come from increased coffee sales rather than petrol.
Whitcoulls see their focus in future in gifts rather than books.
Postie Plus, under Ron Boskell, saw growth in cheap watches etc rather than clothes.
But The Mad Butcher lives up to their name with focus now on cheap milk.Will we see them offer a loaf of bread for 50 cents?!

Maybe the Mad Butcher is not so mad after all. People are starting to wonder, how come its all over the news the dramatic fall in prices for the Dairy sector but my retail milk price hasn't changed ?
Can you imagine the uproar if oil prices dropped 40% but it wasn't passed on an the pump...but somehow because its our own Dairy sector they get a free pass, how is that reasonable to consumers ?
Surely there are grounds for the Commerce Commission to be looking into this ?

[percy]

Maybe the Mad Butcher is not so mad after all. People are starting to wonder, how come its all over the news the dramatic fall in prices for the Dairy sector but my retail milk price hasn't changed ?
Can you imagine the uproar if oil prices dropped 40% but it wasn't passed on an the pump...but somehow because its our own Dairy sector they get a free pass, how is that reasonable to consumers ?
Surely there are grounds for the Commerce Commission to be looking into this ?

You may have a point there Roger,but I see them selling cheap milk as an admission, that the supermarkets with the $1 loaves of bread, have taken their customers.No customers,no meat sales.Cheap milk is a desperate attempt to retain customers.In fact it will most probably turn out to be an extremely expensive "lost leader".Supermarkets match it,then watch out !!!

[Sideshow Bob]

The $2 for 2L of milk is only until this weekend. They have said is is a loss leader, but looking after consumers, blah blah. No doubt hoping to sell a few Kgs of mad butcher sausies.

Believe some of the supermarkets which a MB is proximity matched the deal.

[percy]

The $2 for 2L of milk is only until this weekend. They have said is is a loss leader, but looking after consumers, blah blah. No doubt hoping to sell a few Kgs of mad butcher sausies.

Believe some of the supermarkets which a MB is proximity matched the deal.
Thanks for your post Sideshow Bob.
Tough business to be in.!

[winner69]

Great result for VIL

That should put a rocket under the share price. The results make a mockery of the $1 something shareprice

Should be heading for that 130 to 140 mark again

Good shareholders doing well, bet you lot of the franchisees are struggling, but that's the nature of the game eh.

[stoploss]

You may have a point there Roger,but I see them selling cheap milk as an admission, that the supermarkets with the $1 loaves of bread, have taken their customers.No customers,no meat sales.Cheap milk is a desperate attempt to retain customers.In fact it will most probably turn out to be an extremely expensive "lost leader".Supermarkets match it,then watch out !!!
1 pound for four litres ........, milk in NZ is way over priced .Starting to join that other commodity we have in only ever going up in price despite demand - electricity ...

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11313569

[noodles]

Great result for VIL

That should put a rocket under the share price. The results make a mockery of the $1 something shareprice

Should be heading for that 130 to 140 mark again

Good shareholders doing well, bet you lot of the franchisees are struggling, but that's the nature of the game eh.
lol. Every time I read one of your posts, I need to work out if you are taking the piss. Clearly you are on this one...

Or maybe not. They did reach forecast. They are on a historical pe of 8.5. And they have had a tough second half because of high beef and lamb prices. They have even stated that things are looking up. Tasty dividend yield. Crickey, maybe I need to consider buying in again?

NO! Someone slap me.

That's better.

The the only reason they reached forecast was because of the acquisition. They failed to open 4 stores. They have given no guidance on opening more in FY15. Their focus now seems to be on acquisitions.

[winner69]

lol. Every time I read one of your posts, I need to work out if you are taking the piss. Clearly you are on this one...

Or maybe not. They did reach forecast. They are on a historical pe of 8.5. And they have had a tough second half because of high beef and lamb prices. They have even stated that things are looking up. Tasty dividend yield. Crickey, maybe I need to consider buying in again?

NO! Someone slap me.

That's better.

The the only reason they reached forecast was because of the acquisition. They failed to open 4 stores. They have given no guidance on opening more in FY15. Their focus now seems to be on acquisitions.

There business model is essentially to get the franchisees to sell as much as they can. That way VIL get there cut on the carcass purchases on the way through and a cut of all non meat sales. No blood on the VIL hands, just dirty fingers from counting the cash.

Take as much from the franchisees without causing too many to go broke is the optimum return for shareholders

Even that cheap milk the franchisees sold VIL probably collected a few cents while the franchisee sold at a cost.

So if meat sales are struggling what else can we get them sell. So expanding into veggies, condiments and all sorts of things helps VIL income. But if a Mad Butcher shop looks more like a 4 Square they might have problems.

Worry that Mad Butcher store numbers not going to plan but hard to find butchers with enough capital or ability to front up and set up a new shop.

Going into making patties is aligned to meat but a bit outside the business model. Making stuff has its inherent risks and I'd different to just collecting a cut on everything on the way through. No doubt they charge their franchisees more than enough to make the patties division quite a profit centre.

Nice clean business, just get the franchisees to do all the hard yakka

[noodles]

There business model is essentially to get the franchisees to sell as much as they can. That way VIL get there cut on the carcass purchases on the way through and a cut of all non meat sales. No blood on the VIL hands, just dirty fingers from counting the cash.

If they were so evil, there would be no stores. They are a buying group. Franchisees get the advantage of marketing and low cost meat.

HEDGING
Mad Butcher performs poorly when meat prices are high.
PGW perform well when meat prices are high.
Perhaps Mad Butcher is a natural hedge to PGW???

[winner69]

If they were so evil, there would be no stores. They are a buying group. Franchisees get the advantage of marketing and low cost meat.

HEDGING
Mad Butcher performs poorly when meat prices are high.
PGW perform well when meat prices are high.
Perhaps Mad Butcher is a natural hedge to PGW???

Didn't say evil ....I said take as much as they can without the franchisees going broke. Maximise your return.

Yes a buying group. They do the organising and all that but it appears as if 'rebates' are quite high which leaves franchisees margins a bit thin. Franchisees would have be better off they go together and formed a cooperative and shared the $5m profit or whatever it was amongst themselves.

Good model for shareholders .....can never really go broke and keeps churning out the cash

Interesting abbreviation re PGW/VIL

[Sideshow Bob]

Mad Butcher performs poorly when meat prices are high.
PGW perform well when meat prices are high.
Perhaps Mad Butcher is a natural hedge to PGW???

Would see domestic meat prices heading one way. Beef prices in the US going crazy - grinding prices up around 35% in the 3 months in the US, China still growing (albeit with the usual Chinese issues), lamb supply shrinking, and many would say the dollar overvalued and potential for a fall.

[noodles]

Well I did not expect this. Nosh is a good store, but I struggle to see too much in the way of synergies with their other businesses. Just the meat department.

Clearly they don't make any money as there are no profit mentioned. The buy price is "not material". Maybe that is because they have so much debt. No mention of being eps acreditive.

Pretty poor release in my opinion. Gives me no way of working out if it is positive from a financial perspective.

[etrader]

Well I did not expect this. Nosh is a good store, but I struggle to see too much in the way of synergies with their other businesses. Just the meat department.

Clearly they don't make any money as there are no profit mentioned. The buy price is "not material". Maybe that is because they have so much debt. No mention of being eps acreditive.

Pretty poor release in my opinion. Gives me no way of working out if it is positive from a financial perspective.

Nosh was basically taken over last year 84 percent by a wealthy businessman to bail out the debt then and their stores are looking so empty as it is there's only one way they will go and that will be meat meat meat.

They're responsible for the debt and they probably paid no more than $2 mill for the rest.

[Balance]

Well I did not expect this. Nosh is a good store, but I struggle to see too much in the way of synergies with their other businesses. Just the meat department.

Clearly they don't make any money as there are no profit mentioned. The buy price is "not material". Maybe that is because they have so much debt. No mention of being eps acreditive.

Pretty poor release in my opinion. Gives me no way of working out if it is positive from a financial perspective.

Fact that they release it well after market close on a Friday tells you all you want to know - not a deal they want to shout from the roof top.

Something smells and it's not the discarded meat in the rubbish bin.

[etrader]

Looks like a good buy for VIL

[Balance]

Nosh were heading for liquidation again after the latest bail out. They sold for 1.7 mill plus liabilities and stock. Mad butcher possibly might turn this around but the former CEO totally stuff this business. It's a non material transaction to takeover 7 leases

Thanks for that.

[boofters]

Thanks for that.

This is a watch this space for me. Interestng if they decide to turn mad butcher shops into NOSH where it makes sense..and even vice versa.
My wife spends enough at the dominion road NOSH and every time I've been there it's busy. Get some economies of scale going and surely this fits well in the food retail landscape?
They have also picked up the Black Rock meat brand used within NOSH. Now they can make it all centrally and distribute...
very interesting I reckon...good luck to them, will take a punt on any further dip.

[winner69]

Naughty Sharetraders mentioned in article

"The Veritas board are aware that confidential details of the purchase have been discussed in share trading forums," the company said.


http://www.stuff.co.nz/dominion-post/business/10475956/Veritas-buys-Nosh-for-1-8-million

[Harvey Specter]

Another acquisition : http://www.nbr.co.nz/article/veritas-buys-bar-owner-312m-4th-purchase-18-months-shares-jump-165051

Whats their plan. I dont see any synergies with their purchases unless they are planning to get efficiencies on the supply chain side of things. Or are they just empire building.

[boofters]

this is bizarre...or is it clever vertical integration?!....these guys have kahoona's, and the BBC owners will have nice new boats

[BFG]

Perhaps Mr Darrow plays SimCity/Age of Empires/Command & Conquer a wee bit too much

:D :D :D :D :D :D

[noodles]

The AGM dealt with FY15 earnings on pg.27
eps=15c-16.66c. Assuming Nosh is zero profit in FY16, then the uplift comes from the BBC acquisition. If we take the midpoint (15.8c) and current share price of 1.25, we end up with a pe=7.9.
However, that does not tell the full story because those estimates are for just 7 months of BBC. Now if if annualise the BBC eps, we end up with an eps=.185, pe=6.75

If they continue to pay 70% dividend, we would end up with a net div yield of 9.6% (take note BIRMANBOY)

FY16 should see the addition of "material earnings" from Nosh.

Can someone find me another stock on an annualised pe = 6.75 and and div yield = 9.6?

[percy]

The AGM dealt with FY15 earnings on pg.27
eps=15c-16.66c. Assuming Nosh is zero profit in FY16, then the uplift comes from the BBC acquisition. If we take the midpoint (15.8c) and current share price of 1.25, we end up with a pe=7.9.
However, that does not tell the full story because those estimates are for just 7 months of BBC. Now if if annualise the BBC eps, we end up with an eps=.185, pe=6.75

If they continue to pay 70% dividend, we would end up with a net div yield of 9.6% (take note BIRMANBOY)

FY16 should see the addition of "material earnings" from Nosh.

Can someone find me another stock on an annualised pe = 6.75 and and div yield = 9.6?

I note VIL share price has not performed since they listed.
Do they have a record of achieving their projections?

[noodles]

I note VIL share price has not performed since they listed.
Do they have a record of achieving their projections?

Well they technically made their FY14 forecast, BUT
1. This was aided by the acquisition of Kiwi Pacific. The excuse was high red meat prices affecting Mad Butcher
2. They failed to meet the number of new stores opened
3. On the plus side, they did beat dividend

[percy]

Well they technically made their FY14 forecast, BUT
1. This was aided by the acquisition of Kiwi Pacific. The excuse was high red meat prices affecting Mad Butcher
2. They failed to meet the number of new stores opened
3. On the plus side, they did beat dividend

A bit of a mixed bag then.
Running an up market tucker supplier and a number of bars may take a great deal more expertise.They haven't exactly proved to be great operators at their core business "The Mad Butcher,"
Will they "franchise" the Nosh shops, and the bars?

[noodles]

A bit of a mixed bag then.
Running an up market tucker supplier and a number of bars may take a great deal more expertise.They haven't exactly proved to be great operators at their core business "The Mad Butcher,"
Will they "franchise" the Nosh shops, and the bars?
Percy,
I understand that Michael Morton was initially managing Nosh, but they have now hired someone. Currently there is one franchised store, but they are yet to state their future operating model.

The bars are continuing to be managed by the former management team. They have taken VIL shares as part payment. This gives me some comfort. I don't think this is really a franchise opportunity.

Their takeover of Kiwi Pacific seems to be gong well. They have won a contract to supply Carls Jnr. Have you seen how big those patties are?

[percy]

The Carl's Jnr supply contract should provide growth as Carl Jnr expands.
The bar's management team taking VIL shares as part payment must be positive.
Just can't help but thinking of when Michael Hill tried shoes.!!

[winner69]

Hope Mad Butcher head office read this ...some franchisees are struggling I believe while the franchisor gets all the goodies

http://www.smh.com.au/business/retail/how-pie-face-cooked-its-own-goose-20141128-11vbpq.html

[percy]

Hope Mad Butcher head office read this ...some franchisees are struggling I believe while the franchisor gets all the goodies

http://www.smh.com.au/business/retail/how-pie-face-cooked-its-own-goose-20141128-11vbpq.html

Winner69.Thanks for the link.
Frightening article.So easy to see why people brought the franchises,Aussie's love their pies. Most would have borrowed against their homes to do so.
They will most probably not only loose their income,but their home too.

[winner69]

Winner69.Thanks for the link.
Frightening article.So easy to see why people brought the franchises,Aussie's love their pies. Most would have borrowed against their homes to do so.
They will most probably not only loose their income,but their home too.

Always a tough life being a franchisee - they generally borrow to set up and then take all the risks and pay the wages and rents and give the franchisor their cut and then hope enough to feed their own kids. All the time the franchisor generally doesn't lose.

Why I posted that article here is that i know of one Mad Butcher in that predicament and no doubt a few others. Veritas cannot afford to get greedy else they don't have a businesss.

[percy]

Always a tough life being a franchisee - they generally borrow to set up and then take all the risks and pay the wages and rents and give the franchisor their cut and then hope enough to feed their own kids. All the time the franchisor generally doesn't lose.

Why I posted that article here is that i know of one Mad Butcher in that predicament and no doubt a few others. Veritas cannot afford to get greedy else they don't have a businesss.

Not only Veritas who should not get greedy,a number of landlords have unrealistic views on rent.
As a side bar I note often people like WHS and even SCY develop their own stores,see what sort of rents the store can pay,then sell the development off showing the returns a property investor requires.
The other problem is when someone like Pie Face comes next door to you, and pays huge rent.If you are unlucky and get caught with a rent revue before they go broke,your rent goes up to their level.After they have gone broke you are left trying to pay the inflated rent.

[janner]

a number of landlords have unrealistic views on rent.


Correct percy..
Have personal experience with that scene.. 9 years a 3x3x3 lease at a fair price.. With fair increases..
Owner sold.
Enter a genuine Oyeh Vey Shylock.. ( Lawyer ). Asking a 40% increase..
I moved..
There followed a succession of tenants.. With the building being on the market at 50% above original sum paid..

Greed knows no bounds.. !!..

Must get some more HNZ :-))))

[noodles]

Can someone find me another stock on an annualised pe = 6.75 and and div yield = 9.6?

No one replied? Must be the best value stock on the NZX then:)

[janner]

No one replied? Must be the best value stock on the NZX then:)

For how long :-)))

I think that was the main theme ..

[percy]

No one replied? Must be the best value stock on the NZX then:)

Yeah Right.!
Must be in that case.!!!!

[noodles]

Always a tough life being a franchisee - they generally borrow to set up and then take all the risks and pay the wages and rents and give the franchisor their cut and then hope enough to feed their own kids. All the time the franchisor generally doesn't lose.

Why I posted that article here is that i know of one Mad Butcher in that predicament and no doubt a few others. Veritas cannot afford to get greedy else they don't have a businesss.
A grand total of zero Mad Butcher stores closed during 2014

[winner69]

A grand total of zero Mad Butcher stores closed during 2014

I didn't say broke .... just not making a decent living after paying the bills and the interest on the loans. He reckons the franchisor has made out of him than he has made himself ..... and his hourly rate is less than $10 an hour

Maybe there will be some casualties in 2015

But never mind as long as those butchers keep selling meat you as a shareholder can't lose eh .... that's why VIL best investment on the NZX

Maybe the odd one in 2015 then

[noodles]

I’ve been working on estimates for Veritas earnings and dividends for the next couple of years. For me, earnings, earnings growth, and dividends are the key drivers of share prices.

There is some heavy number crunching, but you can drop to the bottom for the summary.

Actual FY14
EBITDA 6,293
NPAT 4,353
eps= .121
Dividend 8.16c Imp Credits 3.17c Gross Yield @$1.28 = 8.85%

Annualised FY14
There were a couple of items that meant that FY15 does not reflect annualised earnings.


Kiwi Pacific foods contributed $250K for the six months of ownership. For FY15, and without any growth, it should contribute 500k. This is an increase of NPAT(and EBITDA) of $250k
3 new mad butcher stores were opened in 2014. Each store makes VIL an additional $150K of EBITDA, and $100K in NPAT. I’m going to assume that only 50% of those store earnings were earned in FY14. Therefore, we can add another 150K *3 * 50% =$225K of EBITDA and 100K *3 * 50% =$150K of NPAT.


Now we can calculate FY14 additional Annualised EBITDA $250K+225K=$475K
Annualised NPAT$250K+150K=$400K

EBITDA 6,293 +475= 6,768K (a)
NPAT 4,353+400=4,753K
eps 4753/37,342,332=.127
This gives us forecasted FY15 profit figures if there is no growth.

Forecast FY15
Since the close of FY14 there have been 2 new acquisitions


Nosh. No profit projection have been given from management. However, they did say at the AGM...“The business plan is to be materially profitable from FY16.” I take this to mean that there will be little or no profit in FY15. Annual revenue is currently $25m. Perhaps we might see NPAT of $1m in FY16. This is pure finger in the air stuff.
BBC (Better Bar Company). Details of the purchase were given at the AGM. Net Purchase price $31.2 m. EBITDA multiple c.x5. There for Annualised EBITDA = $6.24m. For FY15, there will only be 7months contribution. This equates to 7/12*6.24= $4m (b)





Management gave forecasts at the AGM as follows






Existing FY2014


Combined FY2015






Low


High




Revenue


29972


71000


78000




EBITDA


6293


10600


11700




NPAT


4353


6300


7000




EPS


12.09


15


16.66




DPS 70%


8.16


10.5


11.67




DPS 60%


6


9


10






If we take the FY14 Annualised EBITDA(a) and add the 7 month contribution of BBC(b), we get 6,768K +4,000K=10768K. This is very close to the Combined Low of the management forecast. If we add in some acquisition costs, you could almost say that the Low of the forecast range assumes that there is no organic growth in the rest of the business. So I’m confident that management are being cautious in their low estimate. We could also assume that the High value includes some growth across Mad Butcher and Pacific Foods. We know a know from the AGM that Mad Butcher has opened another store and carcass and rebate margins are up. Additionally Kiwi Pacific has won the Carls Junior contract to supply patties.
In any case, I think for the purpose of estimate FY15 Forecast, we should use the midpoint of the ranges for EBITDA, NPAT, and DPS.

EBITDA (10600+11700)/2=11,150K
NPAT (6300+7000)/2= 6,650K
Dividend (10.5+11.67+9+10)/4=10.3 Imp Credits 4c Gross Yield @$1.28 = 11.17%

Annualised FY15
FY15 does not reflect annualised earnings of BBC as only 7 months were included. FY16 should add EBITDA 6,240-4,000=2,400 . To calculate the NPAT contribution, I’ve simply taken the ratio of EBITDA to NPAT for the FY15 LOW figure and applied it to the EBITDA uplift
FY16 NPAT=(6300/10600)*2400=1,426K

EBITDA 11,150 + 2,400= 13,550K
NPAT 6,650 + 1,426 = 8,076K
EPS = 8,076,000/44306618=18.2c

At the current share price of 1.28c, we get a pe= 6.9. We should expect that FY16 will provide a result at least as good as this. The annualised FY15 assumes no additional acquisitions or organic growth.



Forecast FY16
Up till now, all my estimates have been from management guidance and estimated impact of the BBC acquisition. For FY16, it is a matter of working out what the base earnings are and work out where some growth may come from. Therefore, any projections are very subjective.

FY16 Growth:


Organic Growth in Mad Butcher and Pacific Foods. During FY15, management are forecasting organic growth of around $350K. This is calculated this using the midpoint of the difference between the high and low estimate (7000-6300)/2. I’ve assumed the same growth.
Nosh. As discussed above. NPAT of $1m
BBC. I’m assuming they can open a new bar each year. They currently have 7 bars contributing Annualised EBITDA = $6.24m. This equates to NPAT = (6300/10600)*6240/7=530K


FY16 NPAT = 8,076 + 350 +1000 + 530 = $9,956
EPS = 9,956,000/44306618=22.4c
At the current share price of 1.28c, we get a pe= 5.7.

For the dividend, I’ll assume 65% payout ratio
Dividend 22.4*.65=14.56 Imp Credits 5.7c Gross Yield @$1.28 = 16.25%


Fy15 normalised eps growth = (18.2 - 12.7)/12.7=45%
Fy16 eps growth = (22.4 -18.2)/18.2=23%


Financial Takeaways
FY14 Historical Dividend Yield 8.85%
FY15 Forecast Dividend Yield 11.17%
FY16 Forecast Dividend Yield 16.3%

FY15 Annualised pe = 6.8
FY16 forecast pe=5.7

Fy15 normalised eps growth = (18.2 - 12.7)/12.7=45%
Fy16 eps growth = (22.4 -18.2)/18.2=23%


Risks


The biggest risk for me is Nosh. Supermarkets and Farro competition will mean margins will be important. Clearly it was unsuccessful before. How will Veritas make it successful? Massive execution risk.
Mad Butcher. High red meat prices are bad for the company. It has clearly slowed down the rollout of new stores. Are franchisee’s struggling? Will stores close?
BBC. I know some of the bars that they own. They have been around for a while they seem a bit stale to me. I guess they are well managed and make a buck. Perhaps the fact that they aren't the latest and greatest bars, mean they aren't trying to attract the fickle cool crowd that move to the next cool place. Unlike Nosh, management are on board and have a significant stake in Veritas.


Summary
I don’t think I’ve ever come across a stock with such attractive metrics: High growth, low pe, high dividend yield. What is more impressive is that the high dividend yields are using just a 65% payout ratio. Even with the above risks, I hold VIL.

I don’t think it is correct to give a target price as it would imply that I’m recommending you buy VIL. I am merely highlighting the financial metrics. Please do your own research.

[percy]

Noodles.
Thank you for sharing your research with us.
I appreciate the hard work you have put into this.
I read the ASM presentation, which made sense to me,and added to your analysis of the company I can see why you are so excited about their future prospects.
I must also thank you for pointing out "The Risks".
I have tried to add to your reputation but had the following come up; "you must spread some Reputation around before giving it to Noodles again".
So would other kind posters add to Noodles reputation on my behalf.

[winner69]

Ha ha .....I gave Percy the reputation instead of noodles as Percy requested.

You deserve a green tick Percy as well

Noodles now got a reputation as well


We all love each other tonight

[percy]

Thank you.!!!??
Back to normal in the new year?? lol.

[percy]

"SMELL THE MONEY"......................
The VIL share price has just gone through "THE GOLDEN CROSS".
The Golden Cross is considered an important technical indicator of a long term market trend.
It has gone through both the 50 day EMA moving average [$1.21], and the 200 day EMA moving average [$1.21] and has finished the week at a healthy $1,28.

[BFG]

Great post noodles, thanks for it!

Always been happy that this was my very first cap raise foray and helped to get the company up and running. I will be back one day before it gets too expensive I hope! :)

[percy]

Great post noodles, thanks for it!

Always been happy that this was my very first cap raise foray and helped to get the company up and running. I will be back one day before it gets too expensive I hope! :)

You said the same on another thread a couple of days ago.
Don't miss the train on this one.!!!!! lol.

[noodles]

"SMELL THE MONEY"......................
The VIL share price has just gone through "THE GOLDEN CROSS".
The Golden Cross is considered an important technical indicator of a long term market trend.
It has gone through both the 50 day EMA moving average [$1.21], and the 200 day EMA moving average [$1.21] and has finished the week at a healthy $1,28.
Thanks Percy,
Yes, I must admit I tend to overlook the technicals sometimes.
Here is a chart with your golden cross highlighted
6616

[BFG]

You said the same on another thread a couple of days ago.
Don't miss the train on this one.!!!!! lol.

Which one?!?!

[percy]

Which one?!?!

Post #4098 Heartland thread.

[BFG]

Post #4098 Heartland thread.

Haha yes that's right. A portfolio made up of HNZ, VIL, DPC & PGW, you'd think I was 80 years old or something!

Disc - don't own any of the aforementioned stocks but would heartily buy them up if I was a little (lot) more risk averse!

[percy]

Haha yes that's right. A portfolio made up of HNZ, VIL, DPC & PGW, you'd think I was 80 years old or something!

Disc - don't own any of the aforementioned stocks but would heartily buy them up if I was a little (lot) more risk averse!

What do you mean,you do not own any the fantastic Percy excitement stocks !!!!!
The dividends drive me to new heights of blissful happiness too.!!!!

[noodles]

Ha ha .....I gave Percy the reputation instead of noodles as Percy requested.

You deserve a green tick Percy as well

Noodles now got a reputation as well


We all love each other tonight
Thanks Winner and the others who gave me a star.

I welcome any comment on the content. There are a few assumptions that could be challenged.

[KiwiGekko]

Nice research Noodles, thanks for sharing your work here.

I am working up some research of my own here & I have started with BBC. One thing I have been wondering about is what effect the new liquor (drink driving) laws might have on the bars? My uninformed opinion is that this might push punters towards the suburbs and away from "town" (in some instances) - but also that consumption will go down.

Thoughts?

[noodles]

You mean the drink driving laws? I guess the law would be a negative for the bars. I had not considered this previously.

In my opinion there are multiple risks with this investment. Add this to the list.

From a valuation perspective, you need to ask yourself if you are being compensated for these risks.

[winner69]

You mean the drink driving laws? I guess the law would be a negative for the bars. I had not considered this previously.

In my opinion there are multiple risks with this investment. Add this to the list.

From a valuation perspective, you need to ask yourself if you are being compensated for these risks.

They not gay bars are they? I understand they steadily closing down as internet takes over

[Beagle]

Nice research Noodles, thanks for sharing your work here.

I am working up some research of my own here & I have started with BBC. One thing I have been wondering about is what effect the new liquor (drink driving) laws might have on the bars? My uninformed opinion is that this might push punters towards the suburbs and away from "town" (in some instances) - but also that consumption will go down.

Thoughts?

Excellent point. Given the change is quite significant you'd have to figure it will have a material effect on people's spend at bars, clubs and restaurants especially when you take into account the fact that a fairly significant percentage of people already arrive pre-loaded with a couple / few under their belt. I've just been busy helping my nephew who has been determined to buy a restaurant in Auckland. He paid far too much for a small establishment that was losing money, (against my advice). Signed up the agreement without me seeing it, (against my advice), signed without a due diligence clause, (again, you guessed it, against my advice). Just back from London working at michelin star restraint this and leading establishment that for the last four years. Early 30's absolutely full of confidence and can't be told a thing....just the sort of client I really need lol. I doubt this change in alcohol limit even entered his mind and he's in the business, or will shortly be.

[percy]

I have been told the best way to make good money is to open either a bar or restaurant.
I have also been told the easiest way to lose a lot of money is to open a bar or restaurant.
May I wish your nephew well.
May pay to get your fees up front Roger.!!!!!!

[BFG]

Not all of us that age can't be told anything Rog. I'm sure you could give me some top tips I'd act on! Sounds like the nephew would have been better buying up VIL large and getting a stable chefing job for income and VIL divies/capital growth as top ups to it!

[Beagle]

I have been told the best way to make good money is to open either a bar or restaurant.
I have also been told the easiest way to lose a lot of money is to open a bar or restaurant.
May I wish your nephew well.
May pay to get your fees up front Roger.!!!!!!

Ha, what fees, its uncle can you help me with this and that and the other and then ignores all the advice I gave him, go figure...


Not all of us that age can't be told anything Rog. I'm sure you could give me some top tips I'd act on! Sounds like the nephew would have been better buying up VIL large and getting a stable chefing job for income and VIL divies/capital growth as top ups to it! He probably would mate.

[BFG]

Ha, what fees, its uncle can you help me with this and that and the other and then ignores all the advice I gave him, go figure...

He probably would mate.

See, we're not all that stupid ;)

[Southern_Belle]

I merchandise a product in Nosh stores Auckland. Christmas has been embarrassingly slow for them. Farro so busy with queues at checkout. Also i take time to talk to department managers who have hung in there when moral was low before the sale. Lot of change promised with takeover but small if any change happening and key staff are leaving.

Hopefully things turn around but seems very slow if at all.

[KiwiGekko]

The effects of the new drink driving laws are something I have been taking a keen interest in. Here is an article backing up what I suspected back in December: http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11391015 - it will be very interesting to see how much impact this change has on the Better Bar Company and ultimately VIL. O'Hagans mentioned in the artcle is one of the bars owned by the BBC. I guess wait and see...

Out of interest are there any other companies with investments in Hospitality on the NZX that might be affected?

Disc: Not holding, just like the odd beverage.

[winner69]

Molly Malones in Wellington went bust the other day

Will need to go to Kitty's now. Green Man seems to have odd strange clientele

[KiwiGekko]

Molly Malones in Wellington went bust the other day.

Ah good point, yeah I am not sure if that is because of this change though? Wellington has good public transport - I think maybe that bar has been on the decline for a while. I have popped my head in once or twice a year for the past 3 years and it has always seemed quiet compared to some of the more Craft Beer establishments.

[bunter]

I’ve been working on estimates for Veritas earnings and dividends for the next couple of years. For me, earnings, earnings growth, and dividends are the key drivers of share prices.

There is some heavy number crunching, but you can drop to the bottom for the summary.




Management gave forecasts at the AGM as follows






Existing FY2014


Combined FY2015






Low


High




Revenue


29972


71000


78000




EBITDA


6293


10600


11700




NPAT


4353


6300


7000




EPS


12.09


15


16.66




DPS 70%


8.16


10.5


11.67




DPS 60%


6


9


10





Financial Takeaways
FY14 Historical Dividend Yield 8.85%
FY15 Forecast Dividend Yield 11.17%
FY16 Forecast Dividend Yield 16.3%

FY15 Annualised pe = 6.8
FY16 forecast pe=5.7

Fy15 normalised eps growth = (18.2 - 12.7)/12.7=45%
Fy16 eps growth = (22.4 -18.2)/18.2=23%



I bought some VIL after the above, and placed another order today because the price reached a new high.

One concern for me is this is a tiny company (MCAP 60m ish) and not very liquid. It'll be first against the wall in a crash.
Another is the assets are not very high quality - bars, butchers etc. Seems to me they depend on someone on the shop floor living and breathing the business, in each outlet.

If it's going to thrive IMO it will need to scale up somehow, buying better quality assets, using the cashflow of its existing businesses to support this.
Nosh and BBL IMO are not better quality assets.

So good management is needed. The management has been quite active; remains to be seen how much good the activity does.

Does anyone have any thoughts on the quality of VIL's management? Notably, two directors left last year to 'pursue other [and better] business interests.'

IMO such companies as VIL deserve a decent discount.
You're facing higher trading costs - margins and slippage, for one thing; plus the difficulty of getting out.

My raw system valuation is $2.24. I've only bought a small amount and am a skittish holder.

[Beagle]

Another is the assets are not very high quality - bars, butchers etc. Seems to me they depend on someone on the shop floor living and breathing the business, in each outlet.

Okay I'll just throw this out there for debate. When the cat's away the mice will play and in my experience there sort of establishments are best owned by owner operators who are hands on.
Unless there's someone there running the thing with genuine skin in the game...

Noodles / anyone else, this is your opening to debate whether corporate ownership is really appropriate for bars restraunts and other similar small establishments.
My former boat partner has a very successful inner city restaurant...tried buying another one and appointing a manager and it all turned to s@&t.
He has closed circuit monitoring systems to manage staff's propensity to nick liquor / money / food...anything else they can readily uplift.
I am open to be convinced that corporatisation of a bunch of such small business's is a good idea... please proceed to do so.

Looking at the long term track record of this company...it seems to have been very successful...at destroying shareholder wealth. Cheap forecasted PE suggests the market is highly sceptical of managements ability to deliver returns and / or is questioning if E can be reliably estimated.

Anyone heard any interesting anecdotal information on how the lower blood alcohol limit is affecting patronage ? People drinking less, eating more or just drinking at home / friends places and crashing on the couch ?

[noodles]

Okay I'll just throw this out there for debate. When the cat's away the mice will play and in my experience there sort of establishments are best owned by owner operators who are hands on.
Unless there's someone there running the thing with genuine skin in the game...

Noodles / anyone else, this is your opening to debate whether corporate ownership is really appropriate for bars restraunts and other similar small establishments.
My former boat partner has a very successful inner city restaurant...tried buying another one and appointing a manager and it all turned to s@&t.
He has closed circuit monitoring systems to manage staff's propensity to nick liquor / money / food...anything else they can readily uplift.
I am open to be convinced that corporatisation of a bunch of such small business's is a good idea... please proceed to do so.

Anyone heard any interesting anecdotal information on how the lower blood alcohol limit is affecting patronage ? People drinking less, eating more or just drinking at home / friends places and crashing on the couch ?
As with the Mad Butcher business, the bar business(BBC) was already corporatised when it was purchased by Veritas and it has a track record. This is not a new business model. The management are continuing to manage operations. They have consideration skin in the game as they have been issued vendor shares.

Clearly there are risks. The drink driving laws being one of many. Tell me a listed company that does not have risk associated with it. I have accepted those risks and own shares as I believe the valuation has more than factored them in.

[Beagle]

None is the short answer. What PE did they buy the BBC business on and Mad butcher on mate ?

[noodles]

I bought some VIL after the above, and placed another order today because the price reached a new high.

One concern for me is this is a tiny company (MCAP 60m ish) and not very liquid. It'll be first against the wall in a crash.
Another is the assets are not very high quality - bars, butchers etc. Seems to me they depend on someone on the shop floor living and breathing the business, in each outlet.

If it's going to thrive IMO it will need to scale up somehow, buying better quality assets, using the cashflow of its existing businesses to support this.
Nosh and BBL IMO are not better quality assets.

So good management is needed. The management has been quite active; remains to be seen how much good the activity does.

Does anyone have any thoughts on the quality of VIL's management? Notably, two directors left last year to 'pursue other [and better] business interests.'

IMO such companies as VIL deserve a decent discount.
You're facing higher trading costs - margins and slippage, for one thing; plus the difficulty of getting out.

My raw system valuation is $2.24. I've only bought a small amount and am a skittish holder.
I think you make some good points and agree with your points(except management). Are BBC and Nosh good buys? Time will tell. I think the replacement directors are just fine.

[Beagle]

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11391015

Opps I missed this posted above. As I posted in late December I expected there would be a material effect and its quite clear there has been.
One thing that getting to know Eliot well, (former boat partner) taught me was that margins in the hospitality business are much finer than you would think after factoring in ALL the costs, (not talking about gross margins here). From memory his net profit before tax was only 8% of turnover, excl his owner salary. He once quipped a 10% drop in his weekly turnover of $50K is all it takes for him to go backwards after drawing his usual reasonably modest owners drawings. Interesting that VIL bought the bar business a few days before the new alcohol limits came into effect using mostly bank debt. Hmmm... I hope they got it dirt cheap. The other thing is several owners have told me that alcohol is where the real money is in cafe's and restaurants so if you take away say 10-15% of the high margin part of the business that would be a serious worry. If I was a shareholder that Herald article would really worry me.

[bunter]

Elsewhere I think Noodles said BBC was on a price:EBITDA ratio of 6.5. It came with $3m of debt IIRC.
This was from a meeting - couldn't find the 6.5 figure in the NZX announcements.

Likewise, no idea how much Nosh was / is losing but prepared to bet it WAS losing money.
Actually - why didn't Veritas tell its shareholders how much Nosh was losing - afraid we couldn't handle the truth?!

Again IIRC I think the Nosh urchase and working cap needs were funded by a $5m loan.
One thing Veritas seems to be good at is getting money out of banks.

Management will be key to deciding if this is the start of a glorious retail company that will dominate the NZ retail landscape for decades to come - or not.

I read a piece on one of the guys (Michael Morton) a year or so ago and on the strength of that one article thought he sounded like a good businessman.

Does anyone have better-grounded opinions?
Who's running things - is it Mark Darrow?

[Beagle]

Thanks, I'll be interested to follow this one for a while to see if they can prove that these acquisitions are EPS accretive.

[noodles]

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11391015

Opps I missed this posted above. As I posted in late December I expected there would be a material effect and its quite clear there has been.
One thing that getting to know Eliot well, (former boat partner) taught me was that margins in the hospitality business are much finer than you would think after factoring in ALL the costs, (not talking about gross margins here). From memory his net profit before tax was only 8% of turnover, excl his owner salary. He once quipped a 10% drop in his weekly turnover of $50K is all it takes for him to go backwards after drawing his usual reasonably modest owners drawings. Interesting that VIL bought the bar business a few days before the new alcohol limits came into effect using mostly bank debt. Hmmm... I hope they got it dirt cheap. The other thing is several owners have told me that alcohol is where the real money is in cafe's and restaurants so if you take away say 10-15% of the high margin part of the business that would be a serious worry. If I was a shareholder that Herald article would really worry me.

Not all is bad in the hospitality industry
http://tvnz.co.nz/business-news/hospitality-helps-drive-up-services-sector-6224205

However, we have had a great summer. Full year results may give us the best picture and the impact of the driving laws.

Roger, I take all your points. Thanks for keeping us well informed.

[noodles]

There should be some good discussion at "The Cav" (a veritas owned bar) for the Auckland sharetrader meeting
http://www.sharetrader.co.nz/showthread.php?10134-Auckland-Meeting-27th-February&p=528404&viewfull=1#post528404

[KiwiGekko]

He once quipped a 10% drop in his weekly turnover of $50K is all it takes for him to go backwards after drawing his usual reasonably modest owners drawings. Interesting that VIL bought the bar business a few days before the new alcohol limits came into effect using mostly bank debt. Hmmm... I hope they got it dirt cheap. The other thing is several owners have told me that alcohol is where the real money is in cafe's and restaurants so if you take away say 10-15% of the high margin part of the business that would be a serious worry. If I was a shareholder that Herald article would really worry me.

Yup. This article concerned me (which is why I posted it a few weeks back) and I wasn't aware of the short time difference between VIL buying BBC and the new drink driving laws coming into effect. Thanks for that observation, Roger.

Without sounding like a broken record - the article is not just speaking about the industry as a whole, but about O'Hagan's - so not only is this law affecting bars, but you have a direct quote on its effect on one of the BBC bars.

Noodles has done his homework so has factored these risks in but it is worth mentioning, especially given how long VIL has owned this part of their business that the results might disappoint.

I will continue to watch (and comment) with interest, but personally would not invest in this stock as it stands.

[KiwiGekko]

There should be some good discussion at "The Cav" (a veritas owned bar) for the Auckland sharetrader meeting
http://www.sharetrader.co.nz/showthread.php?10134-Auckland-Meeting-27th-February&p=528404&viewfull=1#post528404

Yes, gutted I can't make it. Hopefully you all buy plenty of beers to help make up the shortfall from the new drink driving laws eh? ;)

[Beagle]

There should be some good discussion at "The Cav" (a veritas owned bar) for the Auckland sharetrader meeting
http://www.sharetrader.co.nz/showthread.php?10134-Auckland-Meeting-27th-February&p=528404&viewfull=1#post528404
Yep, sorry mate I jumped the gun a bit, couldn't resist :)

[bunter]

Bailed out of this (with difficulty - thin market) for a small profit. Felt uneasy about the management (did more research), size and liquidity, and the BBC / Nosh acquisitions.

[bryndlefly]

sooo..... announcing a "solid half year result" results in the shareprice dropping 7%. My brain hurts.

HALFYR: VIL: Veritas announces solid half year result

VIL
26/02/2015 08:49
HALFYR
PRICE SENSITIVE
REL: 0849 HRS Veritas Investments Limited

HALFYR: VIL: Veritas announces solid half year result

NZX release
26 February 2015

Veritas announces solid half year result, confirms 70% dividend.

Highlights

- Half year revenue increase of 89 per cent.
- NPAT of $1.7m for the half year after acquisition costs.
- Full 70 per cent interim dividend declared at 2.7cents per share.
- Nosh Food Markets business (Nosh) acquired and turnaround plan being
implemented.
- Nosh General Manager, Rod de Vries appointed.
- The Better Bar Company group business (BBC) acquired. Some risk resulting
from legislative changes.
- 40th Mad Butcher store opened in Nelson.
- Mad Butcher operating to plan despite supply and price pressures.
- Kiwi Pacific Foods operating above target.

Veritas Investments Limited (NZX:VIL) announces an unaudited net profit after
tax (NPAT) of $1.7m for the six months ended 31 December 2014. The result
includes one-off net costs of acquiring both the Nosh and BBC businesses.

Revenue of $27.4m for the six month period was an increase of 89 per cent
from the previous year ($14.5m) boosted by the addition of Nosh in September
2014 and BBC in late November 2014.

Business Trading

Mad Butcher
The Mad Butcher opened its 40th Store in Nelson in November 2014. The
business is tracking to targets although there is some pressure from the
tight supply of product and price pressures. Wholesale red meat prices in
particular have been at elevated levels and for longer peak periods, fueled
by increased export demand.

As noted in the Financial Statements, Veritas has retained ownership of the
Invercargill store and any sale process relating to that store has been
postponed until revenues have grown. Mad Butcher also owns the Onehunga and
Henderson stores which are now being actively marketed for re-sale. Ownership
of stores as a transitional arrangement is a normal part of franchisor
activity.

Kiwi Pacific Foods
The joint venture with the Burger King franchisor Antares Restaurant Group is
going well and ahead of plan. The combination of winning several new supply
contracts and better procurement processes are making a positive contribution
to the business.

Nosh Food Market
Nosh was acquired in September 2014 and is a turn-around business that was
distressed at the time of purchase and that was reflected in a purchase price
below net assets. The Board is pleased with progress and the business is
showing positive signs of improvement.

Rod de Vries was appointed General Manager for Nosh and commenced in January
2015. The Veritas Board says Nosh is marginally behind in its turn-around
plan and expects to make a small loss in the turnaround period.

The supply logistics plan will be finalised during the next few months and
that is expected to materially reduce operating costs. The customer offering
has improved markedly. Nosh aims to open a new store in Pakuranga around July
2015 and has secured a high profile site on Pakuranga Road, a major arterial
road directly opposite Pakuranga Plaza.

The Better Bar Company
The Better Bar Company was acquired on 28 November 2014 and one month's
trading has been included in the half year results. The business is
immediately profitable and will be a material contributor to the Veritas
Group. The Auckland metro sites are operating above plan. The Hamilton sites
that were acquired by the vendors in late 2014 are operating below plan. The
three Hood Street sites are all relatively new including the iconic 'Good
Home' site. A marketing campaign commences in late February 2015 to launch
the bar precinct which is anticipated to lift business and profile.

BBC operates in a highly regulated industry and the new drink-driving
legislation that came in to force on 1 December 2014 has had an impact on the
business, particularly affecting suburban areas. While a known risk, there
has been a larger than expected adverse effect right across the hospitality
sector and the business is closely monitoring how that settles down over time
and actively working on counter strategies. The industry overall has been
slow to react with low alcohol beer and wine alternatives and these industry
strategies are now being brought forward.

Forecast
The Veritas Board has reviewed the forecast for the full financial year
ending 30 June 2015 and estimates performance at the lower end of the range
as indicated in the pro-forma forecasts at the annual general meeting on 25
November 2014. The key determinants of the full year result will be the speed
at which the Nosh business improves, performance of the Hamilton BBC sites
and the medium term effect of the new drink-driving legislation. The Board
will keep the market appraised later in the year.

Dividend
The Veritas Board has declared a fully imputed interim dividend of 2.7 cents
per share. This represents a dividend payout of 70 per cent of NPAT, at the
top of the dividend policy range.

The record date for the interim dividend is 16 March 2015 and will be paid on
30 March 2015.

For and on behalf of the Board
Mark Darrow, Chairman, Veritas Investments Limited

About Veritas Investments Limited
Veritas Investments is a NZX Main Board-listed investment company focusing in
the Food and Beverage sector. The shell company was formed in December 2011
and made its first acquisition of the Mad Butcher franchisor business in May
2013 through a reverse acquisition transaction. A further investment was
made in December 2013 for 50% of Kiwi Pacific Foods Limited. In September
2014 Veritas acquired the Nosh Food Market business. In November 2014 Veritas
acquired The Better Bar Company group business.
www.veritasinvestments.co.nz

[Snow Leopard]

sooo..... announcing a "solid half year result" results in the shareprice dropping 7%. My brain hurts....

...The Better Bar Company...
...BBC operates in a highly regulated industry and the new drink-driving
legislation that came in to force on 1 December 2014 has had an impact on the
business, particularly affecting suburban areas. While a known risk, there
has been a larger than expected adverse effect right across the hospitality
sector and the business is closely monitoring how that settles down over time
and actively working on counter strategies. The industry overall has been
slow to react with low alcohol beer and wine alternatives and these industry
strategies are now being brought forward.

Forecast
The Veritas Board has reviewed the forecast for the full financial year
ending 30 June 2015 and estimates performance at the lower end of the range
as indicated in the pro-forma forecasts at the annual general meeting on 25
November 2014. The key determinants of the full year result will be the speed
at which the Nosh business improves, performance of the Hamilton BBC sites
and the medium term effect of the new drink-driving legislation. The Board
will keep the market appraised later in the year...

Maybe?

Best Wishes
Paper Tiger

[Beagle]

Excellent point. Given the change is quite significant you'd have to figure it will have a material effect on people's spend at bars, clubs and restaurants especially when you take into account the fact that a fairly significant percentage of people already arrive pre-loaded with a couple / few under their belt.


Drink driving limit change effect - As predicted on 23 December 2014. Probably a fundamental change in consumer behaviour rather than something that is ever fixable IMO.

[KiwiGekko]

Drink driving limit change effect - As predicted on 23 December 2014. Probably a fundamental change in consumer behaviour rather than something that is ever fixable IMO.

Yep, according to the report today it seems to be affecting the suburbs more than central bars. I would have thought the opposite given in the suburbs you can always wander home. It will be interesting to see how the sports clubs (which have done well out of bar revenue historically and are regional) fare with the new laws over the upcoming winter season.

I have discussed this with some friends and we summised (after a few beers) that a 10 minute walk or a $10 taxi fare is probably a fair catchment pool for a beer after work now. Outside of that it would have to be a special occasion or have good public transport. I haven't gone as far as modelling the suburbs cos frankly I did enough research to see VIL wasn't something I wanted to invest in at present... Maybe someone else has some other thoughts here?

[Harvey Specter]

I have discussed this with some friends and we summised (after a few beers) that a 10 minute walk or a $10 taxi fare is probably a fair catchment pool for a beer after work now.But you have to get there as well so does that make it $20 taxi? Was that factored in. Also it means all your friends must be within the same catchment.

That's why I think CBD is less effected than suburbs - large catchment of people already there (dont have to pay to get there and back) plus you are already in the same area as your friends/colleagues, plus the CBD is one of the few areas where public transport works (or if you cant be bothered waiting, an Uber/taxi).

[Beagle]

One of the strategies used in Australia to counter this is to focus on food - witness the advent of the "gastro pub". Big name chefs, fancy fitouts, good food at reasonable prices, it takes the focus off booze and getting drunk as a form of entertainment. It also helps reduce the drunken violence and expensive security required to manage the preloaded idiots. These pubs are very popular, and by all accounts, very profitable. In fact, its getting hard to find an old school pub left in Melbourne that hasnt been turned into one. Sadly, half the pubs in NZ are still nothing but beer barns or ones that look like a RSL club (with crappy food to match).

To a large extent they're already doing that. http://doolanbrothers.co.nz/
Anecdotal evidence. I've been on a serious health kick this summer which has involved an inordinate amount of salads from my local Wendy's at Lynfield which is right adjacent to Doolan Brothers pub and I've noticed it a LOT quieter there in recent months than usual. I've tried the food and beverage at Doolan's a couple of times and its pretty good stuff, not brilliant but definitely good. I honestly think this is going to be far harder to fix than company management imagine, (if its fixable at all). I suspect people are tending to get on the turps more with their mates at home and sleeping it off on the couch.

[KiwiGekko]

But you have to get there as well so does that make it $20 taxi? Was that factored in. Also it means all your friends must be within the same catchment.

That's why I think CBD is less effected than suburbs - large catchment of people already there (dont have to pay to get there and back) plus you are already in the same area as your friends/colleagues, plus the CBD is one of the few areas where public transport works (or if you cant be bothered waiting, an Uber/taxi).

It was factored in, although admittedly I would need to retrace the conversation and beverage consumption to remember the details precisely. ;)

I also think your assessment on why CBD bars are not as badly affected vs suburban bars makes a lot of sense.

Cheers,

[Beagle]

Okay but massive capex to get the fit-out to a much higher level and would it be in sync with the theme of the existing establishment or are they risking asking customers for more money ?

In the absence of Snoopy I've had a quick beagle sniff of the accounts of my own.

According to projections of this "transformational acquisition" https://nzx.com/companies/VIL/announcements/258060 the directors touted a forward guidance range of $6.3 - 7.0m after tax equal to a range of 15 - 16.6 cps.
So how are they going after their "apparent surprise" as to difficulties imposed by the new drink drive regulations.
Earnings are $1.75m after tax after accounting for acquisition costs totalling $775K before tax, (crickey there's some well paid due diligence there !!!!!), so normalised we'd have $2.31m after tax. (annualised $4.62m)
Directors are now talking about the lower end of the guidance range but call me a realist if you like but I struggle to see, (given the above mentioned change is taking them by surprise), how they're going to get there ?
Sure they have plans to turn around this and turn around that but as well all know the best laid plans of mice and men...
So let's be conservative and call this as annual expected earnings after tax of double the normalised first half, so we get annualised earnings of $4.62m on issued shares of 44.3m = normalised EPS of 10.42 cps. Apply an appropriate PE for this small company that recognises its somewhat chequered track record, very high leverage and poor interest cover ratio and very limited share liquidity to get to wherever you see fair value ?

[noodles]

O
According to projections of this "transformational acquisition" https://nzx.com/companies/VIL/announcements/258060 the directors touted a forward guidance range of $6.3 - 7.0m after tax equal to a range of 15 - 16.6 cps.
So how are they going after their "apparent surprise" as to difficulties imposed by the new drink drive regulations.
Earnings are $1.75m after tax after accounting for acquisition costs totalling $775K before tax, (crickey there's some well paid due diligence there !!!!!), so normalised we'd have $2.31m after tax. (annualised $4.62m)
Directors are now talking about the lower end of the guidance range but call me a realist if you like but I struggle to see, (given the above mentioned change is taking them by surprise), how they're going to get there ?
Sure they have plans to turn around this and turn around that but as well all know the best laid plans of mice and men...
So let's be conservative and call this as annual expected earnings after tax of double the normalised first half, so we get annualised earnings of $4.62m on issued shares of 44.3m = normalised EPS of 10.42 cps. Apply an appropriate PE for this small company that recognises its somewhat chequered track record, very high leverage and poor interest cover ratio and very limited share liquidity to get to wherever you see fair value ?
Only one months trading of BBC is included in the result. So it is not really correct to double the normalised first half.
The result also included a 600K gain on purchase of Nosh. That will lower your normalised profit as well

[noodles]

Drink driving limit change effect - As predicted on 23 December 2014. Probably a fundamental change in consumer behaviour rather than something that is ever fixable IMO.
Given the recent company forecast, it appears that the good folk on sharetrader were correct on this one. Thanks Roger and other's for raising it.

[noodles]

There were a few things to be concerned about the result today
1. Guidance lowered
2. Dividends that were promised in the AGM do not appear reasonable for FY15 as they are including acquisition costs in their Dividend calculations
3. Nosh is behind schedule and is costing money
4. The new drink driving laws are having a big impact
5. The newer suburban bars are struggling.
6. Mad Butcher was down on last year

[Beagle]

Only one months trading of BBC is included in the result. So it is not really correct to double the normalised first half.
The result also included a 600K gain on purchase of Nosh. That will lower your normalised profit as well

Good point mate although on a quick glance at the presentation surrounding the purchase I thought I noticed as part of the acquisition EV accrued from 3 November, (settlement 28 November), which I took to interpret that trading since 3 November accrued to VIL, maybe I got the wrong end of the stick but either way you're quite right that it includes only a very short period of trading within that 6 month period. (Not sure why I didn't realise that yesterday...I must be getting old :)

My thoughts on my morning walk today were that the purchase at 5 times EDITDA given the known circumstances surrounding the drink driving law change...I really think they paid too much for it.
Maybe 4 times EBITDA with the possibility to earn-out another multiple, (subject to 12 months subsequent trading and depending on the impact of the law change), would have been more appropriate...certainly it would appear that way now. Either way they used a ton of debt for this acquisition which means this isn't a stock doesn't suit my reasonably conservative risk profile.

[winner69]

VIL fell off the watchlist and just saw the current share price.

WTF is going on noodles? That's some drop from a month ago.

[noodles]

VIL fell off the watchlist and just saw the current share price.

WTF is going on noodles? That's some drop from a month ago.
See post 172. No longer holding.

[winner69]

See post 172. No longer holding.

You sell ..... just as I put back on watchlist

As long as they keep screwing the Mad Butcher franchisees good cash flow coming through .....as long as doesn't go down the bar and fancy food gurgler

[noodles]

You sell ..... just as I put back on watchlist
Good luck. Keep an eye on the debt levels.

[winner69]

. More Mad Butcher stores closed


NBR article but only for those who pay the outrageously priced sub. Mine has lapsed

Headlines says enough ........not surprising if you read my previous posts.

No doubt all will be revealed in due course.

Hope greedy shareholders haven't ruined the lives of some hardworking butchers

[winner69]

No wonder the share price collapsed to 89 cents on Thursday

Glad you out noodles ......good timing eh

[noodles]

No wonder the share price collapsed to 89 cents on Thursday

Glad you out noodles ......good timing eh
It was nothing to do with timing and all about the poor half year result. I am not the type to hold onto stocks that don't perform.
I do have that NBR subscription. It is not a pretty article.

[winner69]

You sell ..... just as I put back on watchlist

As long as they keep screwing the Mad Butcher franchisees good cash flow coming through .....as long as it doesn't go down the bar and fancy food gurgler

The NBR article says more stores ....obviously more than 1. I wonder how many more is?

Maybe what said is the cause, just speculation.

Mad Butcher franchise model not really sustainable. Franchisor gets his cut no matter how hard the poor franchisee is doing it. Good for the franchisor until the franchisee goes out of business. Trouble now for VIL might be attracting new franchisees to open stores, ouch.

I see another train wreck coming up. Just like pumpkin patch, cavalier and teamtalk. Save me please. I seem to have a morbid fascination with impending train wrecks. At least it gives one the ability to recognise potential train wrecks before they happen.

[winner69]

Mad Butcher website still says 40 stores

Maybe mischievous reporting by NBR?

[noodles]

Mad Butcher website still says 40 stores

Maybe mischievous reporting by NBR?

It appears that when a Mad Butcher store goes into liquidation, Head Office (VIL) takes it over to keep it running. They will then try to sell it off. However, it appears that there has been a bit of a run of liquidations of late. Four of them in a month (according to NBR).

[percy]

It appears that when a Mad Butcher store goes into liquidation, Head Office (VIL) takes it over to keep it running. They will then try to sell it off. However, it appears that there has been a bit of a run of liquidations of late. Four of them in a month (according to NBR).

Often a franchise group [ I am thinking Paper Plus] negotiates a store lease.It is in the groups' name.
Therefore the ongoing lease liability is the groups'.
It would appear this is the case with Mad Butcher.
I would expect the same would be the case for Harvey Norman stores,Mitre 10 and any number of franchise or Co-Op opperations.
The problem often for a franchisee,is when they go to sell their [sometimes] successful business,they need the 'group' to approve the buyer before they will let the new frachisee take over the lease.I have heard of businesses being 'sold',but the deal has not gone through,because the franchisor did not approve the new owner.
The worst case of a franchisee having a 'hard' contract is perhaps Caterpillar dealers,as Caterpillar can cancel the agreement without reason!!!
Yum Brands refused to approve new owners for KFC stores in Aussie.Noodles,perhaps you can update me with how that played out?

[winner69]

Percy, I think the Mad Butcher leases are with the franchisees.

VerItas reported lease commitments of only $125,000 in their last FY accounts of which $85,000 was due in the next year. Probably the HQ lease but definitely doesn't suggest they have any other lease commitments. Might be completely wrong though.

The Mad Butcher franchisee I know has the lease in his name. All part of HQ minimising risk and exposures.

[winner69]

It appears that when a Mad Butcher store goes into liquidation, Head Office (VIL) takes it over to keep it running. They will then try to sell it off. However, it appears that there has been a bit of a run of liquidations of late. Four of them in a month (according to NBR).

Not desirable but a good way to learn how hard it is for an operators to make a buck.

Look at Note 6 in the 2014 Annual Report to see how much Invercargill lost as a company operated store.

[percy]

Percy, I think the Mad Butcher leases are with the franchisees.

VerItas reported lease commitments of only $125,000 in their last FY accounts of which $85,000 was due in the next year. Probably the HQ lease but definitely doesn't suggest they have any other lease commitments. Might be completely wrong though.

The Mad Butcher franchisee I know has the lease in his name. All part of HQ minimising risk and exposures.

It would therefore appear to me they are possibly unwise taking over the leases.
Unless offcourse they are sure they can sell the franchise,or run it at a profit.
I would think the example of the Invercargill store's losses,shows the dangers of running them as a company store,even it is hoped to be for a short period of time.
A lot of danger signals with this company.
I did buy a holding on 15/12/2014, which I sold on 30/12/2014 for a $50 loss.I was just uncomfortable with the business model.Farro Fresh appeared to be a far superior business than Nosh;then I had doubts about the pubs,and have never really been convinced about The Mad Butcher.The more research I did the less I liked it.I have just worked out that the loss by holding the 7,000 shares would have grown to $2380.I was lucky,again.!

[noodles]

I did buy a holding on 15/12/2014, which I sold on 30/12/2014 for a $50 loss.I was just uncomfortable with the business model.Farro Fresh appeared to be a far superior business than Nosh;then I had doubts about the pubs,and have never really been convinced about The Mad Butcher.The more research I did the less I liked it.I have just worked out that the loss by holding the 7,000 shares would have grown to $2380.I was lucky,again.!
Percy, Not luck. You just knew when to fold'em.

[noodles]

Often a franchise group [ I am thinking Paper Plus] negotiates a store lease.It is in the groups' name.
Therefore the ongoing lease liability is the groups'.
It would appear this is the case with Mad Butcher.
I would expect the same would be the case for Harvey Norman stores,Mitre 10 and any number of franchise or Co-Op opperations.
The problem often for a franchisee,is when they go to sell their [sometimes] successful business,they need the 'group' to approve the buyer before they will let the new frachisee take over the lease.I have heard of businesses being 'sold',but the deal has not gone through,because the franchisor did not approve the new owner.
The worst case of a franchisee having a 'hard' contract is perhaps Caterpillar dealers,as Caterpillar can cancel the agreement without reason!!!
Yum Brands refused to approve new owners for KFC stores in Aussie.Noodles,perhaps you can update me with how that played out?
Collins foods(CKF.AX) operate QLD, WA, and NT stores in Australia. They have been opening new stores. Unsure about the other states.

[Beagle]

The NBR article says more stores ....obviously more than 1. I wonder how many more is?

Maybe what said is the cause, just speculation.

Mad Butcher franchise model not really sustainable. Franchisor gets his cut no matter how hard the poor franchisee is doing it. Good for the franchisor until the franchisee goes out of business. Trouble now for VIL might be attracting new franchisees to open stores, ouch.

I see another train wreck coming up. Just like pumpkin patch, cavalier and teamtalk. Save me please. I seem to have a morbid fascination with impending train wrecks. At least it gives one the ability to recognise potential train wrecks before they happen.

I think that explains why any astute investor watches train wrecks as they happen. There's no pill to cure this so called ill because its not wrong. You learn what not to do in business and what to watch out for before the next train wreck starts. In hindsight buying on 5 times EBITDA three days before one of the biggest changes in drink driving laws in decades using all bank debt to do it and leveraging the **** out of the balance sheet is certainly going to be a transformational acquisition for the company just like the directors claimed. I predict it'll end just like the movie Silver Streak and if you don't know how that movie ended then get it out of the back release of your local video store or download it and that'll fill in a couple of hours of your Easter holiday break :)

[dodgy]

Hi all,
Getting new store owners is not difficult. Purchasing a business even if you eventually go broke seems to confer residency pending citizenship in this country, a model that seems to be full on in the fruit/veg/dairy/lawns sectors. And with immigration going ballistic, I can only assume that unlike Australia where you actually have to be successful in the business, this will continue to be fertile ground. Any ideas?
Regards and happy holidays
-dodgy ( currently not an owner/shareholder)

[Sideshow Bob]

The NBR reports that at least 8 stores have gone into liquidation since October 2012, 5 in the last 7 months, and 4 since the 11th of March.

It mentions the Glenfield, Massey, Kapiti and Rotorua stores. Kapiti owed $850k, Glenfield had been unprofitable for a while but was being worked on with the franchisor, and Rotorua had closed owing $423k with the owner having some health problems.

But apparently Mosgiel is going to be in line for the Mad Mad Mad Butcher!

Less shops to milk their 7% off........

[Beagle]

Last week the Aussie Butcher chain had rump steak for $9.99 per kilo. My wife bought 10 kilo's bless her heart. (I'm not sure whether she's suggesting something feeding me all that red meat but perhaps I'd better not go there lol). When was the last time you saw rump steak at that price ? It was branded as New Zealand rump steak but do N.Z. consumers care if it comes from Aussie or N.Z. ?? At this sort of price is it any wonder the Mad Butcher stores are struggling ? It was pretty good steak too, not chewy or tough.

[dingoNZ]

Rump steak is often on sale at new world for that price. Its often Aussy steak though

[winner69]

Rump steak is often on sale at new world for that price. Its often Aussy steak though

Slice the new world rump steak for stir fry and even in the hottest of woks amazing amount of juices comes out .... Oh **** that's the water pumped into it.

Not my cooking ....decent rump from real butcher across the road and stir fry honky dory.

Real butcher has real meat and cool sausages. He the butcher that Air New Zealand pilots rush around to get their sausages and take them back to Auckland. Don a good bloke and tells me a real good butcher will always do well.

[Sideshow Bob]

Not sure if supermarkets would be 'pumping' water into their steak.....

But....

Many meat companies use what they call 'spray chill' which when the carcass is cooling, there is a fine mist that replaces the natural evaporation which happens with heat loss. They can't add weight, but just replace what is lost.

The difference between a supermarket and butcher MAY be that the supermarket is buying individual cuts (eg rumps or strip loins) in VP bags. So the meat is 'wet-ageing' in the bag, and could last up to 100 days, dependent on storage temperature. It allows them to run specials on rumps and just buy a heap of rumps that they need.

The butcher MAY be buying whole beef quarters, which will gradually dry out over a few days and evaporate excess moisture, naturally which doesn't happen in a vacuum bag. Butchers would butcher themselves, and sell in natural proportions. Would expect supermarkets probably have more 'knife hands' rather than butchers and the larger ones probably some slicing machines.

I'm always very dubious of 'marinated' products. The marinade might be 10-15% powder and 85-90% water - so a great way to add 'value' and increase the weight at a lower price input. Especially with a needle marinated to pump it in, and add the weight. Also helps turn an average piece of meat to a better eating product.

[Beagle]

The NBR reports that at least 8 stores have gone into liquidation since October 2012, 5 in the last 7 months, and 4 since the 11th of March.

It mentions the Glenfield, Massey, Kapiti and Rotorua stores. Kapiti owed $850k, Glenfield had been unprofitable for a while but was being worked on with the franchisor, and Rotorua had closed owing $423k with the owner having some health problems.

But apparently Mosgiel is going to be in line for the Mad Mad Mad Butcher!

Less shops to milk their 7% off........
And don't forget it doesn't stop there. Franchisee's usually have to pay a marketing levy on top of that which is commonly 2-3% of gross sales so the poor buggers are paying circa 10% off the top of gross sales before they even start paying rent and wages. I think the price of red meat this summer has had a lot to do with people buying less. Hoki fillets are often available for $9.99 per kilo, then there's chicken which is what I think a lot of families are now turning too as a food staple alternative. This and people staying home and drinking with friends because of the new strict drink driving laws and its all a recipe for tough times for the heavily debt laden VIL.

[Sideshow Bob]

They probably also have to pay ViL prompt for their purchases Roger, and then string out their suppliers as long as possible for their payment.

But that is like any franchise situation.

Mention about red meat prices, often something like Hellers sausages are around $17/kg at the local suppie!

[winner69]

All honky dory at Mad Butcher. No worries. Just a storm in a teacup and a bit of sensationalism from the NBR

https://www.nzx.com/files/attachments/210941.pdf

But I bet they not happy with owning and operating 5 stores.

Noodles, I still have on watch list .....maybe 80 cents one day?

[noodles]

All honky dory at Mad Butcher. No worries. Just a storm in a teacup and a bit of sensationalism from the NBR

https://www.nzx.com/files/attachments/210941.pdf

But I bet they not happy with owning and operating 5 stores.

Noodles, I still have on watch list .....maybe 80 cents one day?
The NZX release did address the bad debt expense. If I were a shareholder, that would be my immediate concern. Longer term, you would have to wonder if this is a trend rather than a coincidence.

[Beagle]

Shame they haven't updated how they're coping with other problems in other parts of their business. (Doolan's pub in Lynfield still looks very quiet whenever I drive past that way).

[Sideshow Bob]

Their pubs sell Tui right??

All the MB closures are just a coincidence? Yeah righ....

[Beagle]

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11391015

Opps I missed this posted above. As I posted in late December I expected there would be a material effect and its quite clear there has been.
One thing that getting to know Eliot well, (former boat partner) taught me was that margins in the hospitality business are much finer than you would think after factoring in ALL the costs, (not talking about gross margins here). From memory his net profit before tax was only 8% of turnover, excl his owner salary. He once quipped a 10% drop in his weekly turnover of $50K is all it takes for him to go backwards after drawing his usual reasonably modest owners drawings. Interesting that VIL bought the bar business a few days before the new alcohol limits came into effect using mostly bank debt. Hmmm... I hope they got it dirt cheap. The other thing is several owners have told me that alcohol is where the real money is in cafe's and restaurants so if you take away say 10-15% of the high margin part of the business that would be a serious worry. If I was a shareholder that Herald article would really worry me.

Ouch...down from $1.30 all the way to 85 cents since making that post on 4 February. Anyone who took notice and got out should be well pleased to have avoided the substantial carnage.

[noodles]

Another article in the NBR today and another slide of the share price. They seem to be correlated.

[winner69]

Even Chris Lee rubbishes VerItas in his weekly note.

He agrees with me - Franchising 40 stores seemed okay, for a private franchisor, but to believe the margins achieved could match investor, franchisee and customer expectations, was and is difficult. Some one of those three will find the rewards are far too low he says

We know who the losers will be eh. They take all the risk and in a lot cases no gain by the sounds of it .....while VerItas makes a margin the meat and keeps the $5m rebates from suppliers.

Good or shareholders .......so why is the share price falling?

[Beagle]

Even Chris Lee rubbishes VerItas in his weekly note.

He agrees with me - Franchising 40 stores seemed okay, for a private franchisor, but to believe the margins achieved could match investor, franchisee and customer expectations, was and is difficult. Some one of those three will find the rewards are far too low he says

We know who the losers will be eh. They take all the risk and in a lot cases no gain by the sounds of it .....while VerItas makes a margin the meat and keeps the $5m rebates from suppliers.

Good or shareholders .......so why is the share price falling?

See post #203 original quote 4 February and see the link contained therein.

Doesn't take much of a change in social behaviour, (people skipping after works drinks or reducing or having them at work instead), and these pubs start losing money.
Even worse, some of their newly acquired pubs in Hamilton weren't even making money in the first place IIRC.
And of course the real game changer...that massive acquisition was well and truly priced OTT and paid for using mostly bank debt.
Add this train wreck to your other's on your watchlist, CAV, PPL, KMD e.t.c.

[winner69]

Expansion underway .......with 'mini' mad butchers near mother stores

https://www.nzx.com/files/attachments/211348.pdf

Good move

Roger, do they need 'mini' pubs near where people live?

Near your place but NIMBY

[Sideshow Bob]

Expansion underway .......with 'mini' mad butchers near mother stores

https://www.nzx.com/files/attachments/211348.pdf

Good move

Roger, do they need 'mini' pubs near where people live?

Near your place but NIMBY

The Mosgiel store use to be a Export Meat Warehouse branded store. I would guess they would do all of their butchering and packing at the Dunners store and just deliver out there. Low cost/overheads.

[Beagle]

Expansion underway .......with 'mini' mad butchers near mother stores

https://www.nzx.com/files/attachments/211348.pdf

Good move

Roger, do they need 'mini' pubs near where people live?

Near your place but NIMBY

I suppose they have to try something...better than going down the gurgler without a fight.

[winner69]

Wonder if verItas will go the other way with mad butcher and open a couple of 'flag ship' super stores, like 'big box' butchers - the Bunnings or Mitre 10 Mega of butchers,

Right place in Auckland would set the world alight. Mrs Roger would be taking home a lad of $8 rump

[Sideshow Bob]

Here's one for sale....

http://www.trademe.co.nz/business-farming-industry/businesses-for-sale/retail/other/auction-875969297.htm

[winner69]

Nosh could well under Rod

http://www.stuff.co.nz/business/68165618/nosh-boss-looking-for-a-slice-of-the-action


Previous experience has taught him "that decisions around a board room table and a strategic plan don't amount to a whole lot if you don't get that message through and motivating a team at the shop floor".

[winner69]

Not very well written but I think its a profit downgrade.

Guidance once was $5.3m to $5.8m then revised to $5.3m and now I think it says it will be $4.3m

Oops

https://www.nzx.com/files/attachments/214020.pdf

[noodles]

Not very well written but I think its a profit downgrade.

Guidance once was $5.3m to $5.8m then revised to $5.3m and now I think it says it will be $4.3m

Oops

https://www.nzx.com/files/attachments/214020.pdf

Deworsification at play here. They would be in a much stronger position if they just held onto the mad butcher business. Holders should be watching debt levels.

[Beagle]

Paying five times EDITDA for the better bar pub chain three days before the new drink drive laws came into effect does not appear to have been a well researched or well considered decision.
Directors should have done far more international research into the effects such a significant change to the drink drive laws would have on people's drinking habits. Most people I know still have very little clue on what's a safe level to drink too so are playing this very conservatively and changing their drinking habits quite significantly.
Shareholders would do well to consider if they want to stay invested in a company with directors managing their affairs when they can't get such a fundamental transaction right when it should have been obvious to a blind man without a cane.
I expect the actual profit result to under-shoot this latest downgrade. The trend is definitely not your friend with this poorly managed pup.

[Rep]

Paying five times EDITDA for the better bar pub chain three days before the new drink drive laws came into effect does not appear to have been a well researched or well considered decision.
Directors should have done far more international research into the effects such a significant change to the drink drive laws would have on people's drinking habits. Most people I know still have very little clue on what's a safe level to drink too so are playing this very conservatively and changing their drinking habits quite significantly.
Shareholders would do well to consider if they want to stay invested in a company with directors managing their affairs when they can't get such a fundamental transaction right when it should have been obvious to a blind man without a cane.
I expect the actual profit result to under-shoot this latest downgrade. The trend is definitely not your friend with this poorly managed pup.

Depends if the purchase price has an earnout component as failure to achieve targets may result in the deferred compensation being written back

[Beagle]

Depends if the purchase price has an earnout component as failure to achieve targets may result in the deferred compensation being written back

I don't recall that it did which is really surprising seeing as this is common practice with these sort of acquisitions. As I suggested a while back, four times EBITDA with the ability to earn out another multiple would appear to have been a far more reasonably structured deal than paying a very fulsome price just before such a major sea-change in the drink drive laws. I can't have confidence in directors who appear to have displayed a fundamental lack of understanding of the risks such an acquisition conferred as well as an inability to structure a bespoke deal to appropriately accommodate the specific risk. Just as well the vendors of the bar chain got some shares, principles of natural justice playing themselves out ? I expect the down-trend to continue.
I've seen plenty of brand building advertisements on T.V. trying to sure-up the Mad Butcher chain's brand value.

[Rep]

I don't recall that it did which is really surprising seeing as this is common practice with these sort of acquisitions. As I suggested a while back, four times EBITDA with the ability to earn out another multiple would appear to have been a far more reasonably structured deal than paying a very fulsome price just before such a major sea-change in the drink drive laws. I can't have confidence in directors who appear to have displayed a fundamental lack of understanding of the risks such an acquisition conferred as well as an inability to structure a bespoke deal to appropriately accommodate the specific risk. Just as well the vendors of the bar chain got some shares, principles of natural justice playing themselves out ? I expect the down-trend to continue.
I've seen plenty of brand building advertisements on T.V. trying to sure-up the Mad Butcher chain's brand value.

DISC - I'm not a holder of VIL but I had a quick look through their interim report at 31 Dec 2014.

Firstly - BBC Transaction
The BBC consideration was $20.4m cash, $7.8m shares and $3.0m of contingent consideration for a total of $31.2 million. As the identifiable net assets amounted to negative $0.8m there was over $32.0 million of goodwill booked at acquisition. The shares were issued at a strike price of $1.12 per share (current SP $0.77 ~ $5.362m market value for the shares issued).

There isn't anything mentioned with respect to the multiples of the annualised EBITDA.

Normally share issues for a transaction are held in escrow for a period (possibly the same as the contingent earnout period) and assuming that the contingent consideration isn't met - then the current consideration is worth about $25.8m to the vendors. That's also assuming failure to meet the contingent consideration target doesn't further adversely affect the SP.

Secondly - Brand Ads
With most franchised businesses, the individual franchisees will be paying a royalty as well as making a contribution to advertising. The master franchisor, if they hold stores will also make a contribution, and these need to be spent on advertising. These will usually be a mix of media but those TVC and Radio Ads will reflect that the store operators contribute and expect to obtain a return from the advertising contributions.

[winner69]

The way the price is falling it will be joining Cavalier and patch really down in the dumps

Bet you glad you got out noodles

[Beagle]

Yep, heading down quickly to join the other ones in the barking club. PPL CAV and now VIL look very vulnerable to their excessive level's of bank debt.

If I could place a bet on at least one of these three failing within 18 months it'd be a big one. Yep, Noodles should be very pleased his friends helped him see the light and dodge getting infected with a multitude of fleas from this mongrel. Bet my last dollar there's another downgrade coming...as sure as night follows day.

[winner69]

Chairman packs a sad and steps down later this year ...... and share price rockets up 7% ..... like it

Maybe the market believe this bit “I remain an enthusiastic, supportive and acquiring shareholder and see FY16 as the year the Veritas Group shows the potential it has through the performance of the four business units, after the recent settling in period”, said Mark.

[BIRMANBOY]

w69...68 to 72 and 2 sales is hardly "rocketing up"...but its all relative. If he had farted in public probably would have had the same effect:p
Chairman packs a sad and steps down later this year ...... and share price rockets up 7% ..... like it

Maybe the market believe this bit “I remain an enthusiastic, supportive and acquiring shareholder and see FY16 as the year the Veritas Group shows the potential it has through the performance of the four business units, after the recent settling in period”, said Mark.

[Beagle]

Chairman packs a sad and steps down later this year ...... and share price rockets up 7% ..... like it

Maybe the market believe this bit “I remain an enthusiastic, supportive and acquiring shareholder and see FY16 as the year the Veritas Group shows the potential it has through the performance of the four business units, after the recent settling in period”, said Mark.

What a load of PR crap. Biggest Rat jumping ship before it sinks would be how I'd call it. How long before they're for all intents and purposes effectively trading at the behest of their bankers ?

[winner69]

Do we believe all this
https://www.nzx.com/files/attachments/215498.pdf

Full marks for being so upfront on where the year ahead is meant to go. Well done VerItas.

[Beagle]

They probably had to articulate their plan to keep the bank happy. Yes potentially believable BUT with a market cap of only $30m and with very high level's of debt this company is highly leveraged and vulnerable.
PE is about 6 if you accept their 2016 forecast at face value...seems low but is probably about right considering their chequered track record. They are vulnerable to any deterioration in economic conditions as people will eat fancy food and drink less if there's less disposable income. Recent activity suggests Mad Butcher chain is vulnerable with higher cost structure making it not especially attractive for franchisee's. A risky punt at the current price in my opinion. You like horse racing Winner, maybe this is punters paradise for you :D

[winner69]

A risky punt at the current price in my opinion. You like horse racing Winner, maybe this is punters paradise for you :D

Hell no Roger, not yet

Talking of punting loose too often and the horse goes to the knackers yard - does the Mad Butcher sell horse meat?

[Beagle]

Hell no Roger, not yet

Talking of punting loose too often and the horse goes to the knackers yard - does the Mad Butcher sell horse meat?

LOL, they probably will be soon.

[kiwidollabill]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11482026&ref=nzhbiz_tw

"I'm extremely disappointed with the share price performance because it's not driven off any good fundamentals. A lot of the reason the share price has come back has been stories in the NBR and that type of thing." - Acting chairman Tim Cook

[noodles]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11482026&ref=nzhbiz_tw

"I'm extremely disappointed with the share price performance because it's not driven off any good fundamentals. A lot of the reason the share price has come back has been stories in the NBR and that type of thing." - Acting chairman Tim Cook
I think missing earnings forecasts is pretty fundamental. I can't believe they would blame the nbr. They will be blaming sharetrader next. laughable.

[Beagle]

I think missing earnings forecasts is pretty fundamental. I can't believe they would blame the nbr. They will be blaming sharetrader next. laughable.

Yes it sure is. Bottom line as we've discussed before, they overpaid for the Better Bar Company and woefully misread the implications of the lower alcohol limits.
Blaming the media for their problems is pathetic. I wouldn't mind betting a beer you're glad I talked you out of this pup :)

[gv1]

But one thing is true..its because of them the meat price is reasonable. I never pay high price until its on special. Once I went to Chch, I was shocked to pay $40 kg for lamb. Here in Akld I never paid more than $15 kg.

[kiwidollabill]

But one thing is true..its because of them the meat price is reasonable. I never pay high price until its on special. Once I went to Chch, I was shocked to pay $40 kg for lamb. Here in Akld I never paid more than $15 kg.

I find a bit of the opposite. Have found the quality of the meat is pretty sub par, lucky that there are some excellent local butchers who provide good quality cuts at a similar price. Be aware that the pork that the mad butcher chain supplies does not come from NZ farms.

[Harvey Specter]

Yes it sure is. Bottom line as we've discussed before, they overpaid for the Better Bar Company Nosh was a basket case too and from discussions with those in the M&A industry, no one would touch them.

[gv1]

I find a bit of the opposite. Have found the quality of the meat is pretty sub par, lucky that there are some excellent local butchers who provide good quality cuts at a similar price. Be aware that the pork that the mad butcher chain supplies does not come from NZ farms.
I didn't say I buy from them...its because of MB, the prices are reasonable, otherwise supermarkets etc would be charging higher prices if no competition

[Hoop]

The Chart suggests the 7th November acquisitions announcement resulting in a knee jerk upward swing was a good time for some powerful players to get out.

Since then, we had a 1/2 yr announcement which included these new acquisitions effecting the forecast and Mr Market has and continues to show it's displeasure to VIL

http://i458.photobucket.com/albums/qq306/Hoop_1/VIL%2016072015.png (http://s458.photobucket.com/user/Hoop_1/media/VIL%2016072015.png.html)

[winner69]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11482026&ref=nzhbiz_tw

"I'm extremely disappointed with the share price performance because it's not driven off any good fundamentals. A lot of the reason the share price has come back has been stories in the NBR and that type of thing." - Acting chairman Tim Cook

Most of those things have been said here on Sharetrader

Shareholders of VIL should be proud of their company defending themselves this. The shareholders should not be worried as long as VIL keep screwing the franchises they will be doing OK. Three bates and othe allowances keep rolling in,even if the poor operator has to sell meat at loss.

All risk with the operators - VIL just take their cut - shareholders win.

As long as most of the stores survive it's all honky dory.

Mean cruel world sometimes

[gv1]

Maybe govt should prerequisite foreign home buyers to buy MB franchise first, boy that will have great turn around.

[Beagle]

The Chart suggests the 7th November acquisitions announcement resulting in a knee jerk upward swing was a good time for some powerful players to get out.

Since then, we had a 1/2 yr announcement which included these new acquisitions effecting the forecast and Mr Market has and continues to show it's displeasure to VIL

http://i458.photobucket.com/albums/qq306/Hoop_1/VIL%2016072015.png (http://s458.photobucket.com/user/Hoop_1/media/VIL%2016072015.png.html)

Ugliest chart I've seen for ages.

[Balance]

Ugliest chart I've seen for ages.

Even more ugly is the exChairman selling shares after stating that he was a buyer! He did buy 5,000 shares in 2015 to show his confidence but sold 122,500 shares. He also mentioned a share buyback in Nov 2014 AGM as shares were undervalued. Have to take careful note of this type of directors and management behavior. Contrast with THL and SCL where directors and management simply buy and let their buying speak for themselves.

[Plutus]

https://www.nzx.com/companies/VIL/announcements/269241

Second half dividend 1.066 cps down over 60% from the interim at 2.7cps, even though they added a cash generating business. Prudent or short of cash ? More analysis when the Annual Report is out, me thinks to see what the drag is.

[Beagle]

https://www.nzx.com/companies/VIL/announcements/269241

Second half dividend 1.066 cps down over 60% from the interim at 2.7cps, even though they added a cash generating business. Prudent or short of cash ? More analysis when the Annual Report is out, me thinks to see what the drag is.

Its now a very highly leveraged business earning less money that before. People should take note of Balance's post #239 above and draw their own conclusions about that sort of director behaviour.

[winner69]

Obviously wasnt paying attention but they seemed to pay an awful lot for hose bars

And $40m debt seems horrendous

Note the Mad Butcher stores they own (classified as assets for sale) lost money ....wonder how they convince a butcher to borrow heaps and buy his own personal store

[Beagle]

Obviously wasnt paying attention but they seemed to pay an awful lot for hose bars

And $40m debt seems horrendous

Note the Mad Butcher stores they own (classified as assets for sale) lost money ....wonder how they convince a butcher to borrow heaps and buy his own personal store

Probably they dress this "opportunity" up with all the usual techniques of trying to sell mutton as lamb.
You know the ones
Unlimited earning potential
Be you own boss and "cut" your own path,
We're here to "support" you every step of the way with "proven" systems procedures and support
Did we forget to mention "unlimited income potential"

[Plutus]

[QUOTE

Note the Mad Butcher stores they own (classified as assets for sale) lost money ....[/QUOTE]

Good spot - if Mad Butcher can't run profitable stores how do they expect others to. I see in NBR that Manukau just got bought back by the CEO - how does that work?

[winner69]

Roger, here's a job forvyou

https://www.nzx.com/companies/VIL/announcements/271924

[Beagle]

Not for all the tea in China mate. Sad indictment that troubles run deep in this company.

[whatsup]

Roger, here's a job forvyou

https://www.nzx.com/companies/VIL/announcements/271924

usually indicates that there are problems aplenty.

[Plutus]

usually indicates that there are problems aplenty.

Two directors and the CFO inside 4 months - Neither director replaced yet, and no Execs now at listed company level ? Maybe ex-Hellaby man John Williamson is looking for a challenge..... just sayin'

[Beagle]

Two directors and the CFO inside 4 months - Neither director replaced yet, and no Execs now at listed company level ? Maybe ex-Hellaby man John Williamson is looking for a challenge..... just sayin'

It looks ominous when you put it that way doesn't it !

[boofters]

It looks ominous when you put it that way doesn't it !

the purchase of better bar company did it for me..No interest what so ever in a company buying bars with debt...there will be more to that story sometime in the future I'm sure -- > very SCF like IMO

[Beagle]

the purchase of better bar company did it for me..No interest what so ever in a company buying bars with debt...there will be more to that story sometime in the future I'm sure -- > very SCF like IMO

I am sure you will see the irony in this extract from their news release of 28 November last year. Note that the SP is now well under half what it was a year ago.

"The BBC opportunity is a game changer for Veritas and the board believes it
will add significant scale and diversification to Veritas' current business.
It is expected to materially increase shareholder value, and we also expect
the acquisition to increase investor interest in Veritas," Mr Darrow says.

I see Countdown are selling a 24 pack of Tui this week for $31 :)

[Crackity]

I see Countdown are selling a 24 pack of Tui this week for $31 :)

yeah but then you have to drink it Rog :)