VIL - Veritas Investments Limited

[bottomfeeder]

The hound hereby offers his consulting services to Veritas or the International accounting standards board to endlessly pontificate on such intangible matters at a fee of $400,000 per annum

Unfortunately all too often intangible assets are represented by real cash.

[Snoopy]

And here we have the problem. The international accounting standards board in 2014 made the following recommendations. If the company amortised its goodwill as soon as possible, all investors would be under no apprehension as to the viability of the company. Maintaining goodwill paid on the purchase of businesses based on the return on investment creates a false sense of value. No doubt the sale of the unprofitable "better bars" included goodwill on purchase, and was only written off after the sale or after they were decided upon that they were not profitable. If they wrote off the goodwill investors would be more informed about what sort of company they are actually buying into. We should differentiate between goodwill paid on the purchase of a business and other intangible assets that have slightly more tangibility.

I find myself generally agreeing with you here Bottomfeeder. There are plenty of "name brands" that eventually reach the end of their natural lives. To assume an indefinite life for goodwill on acquired assets is perhaps as bad, IMV, as writing all the goodwill off as soon as possible. Yet there are some intangible assets out there, for example the name Coca Cola, where you might not want to bet against it having a life of several hundred years.

I don't think an asset group must be profitable to have goodwill on the balance sheet though. I think the question is, can you identify a path to eventual profitability? If you can, then that future profitability can translate to positive goodwill today.

All goodwill starts out as cash originally, as you have said. But no-one would deliberately put a whole lot of goodwill on their balance sheet unless they thought whatever deal they were making was a good deal at the time. I struggle with the idea of forcibly writing off goodwill. Isn't writing off goodwill on a 'forced schedule', effectively the same as saying that asset that the company just bought is not really worth what they just paid for it?

SNOOPY

[Beagle]

http://www.ifrs.org/Meetings/Meeting...-amortised.pdf

Fill ya boots if you're interested in the theory of all this. FWIW the hound is not a fan of any company that has a large percentage of its balance sheet stated as intangible assets, this is a warning signal as far as I am concerned and I take all goodwill and intangible asset valuation methodologies with a grain of salt.

Too often goodwill has a remarkable habit of evaporating at a rate far quicker than any previously mandated amortisation rate would suggest it might. This is especially the case when you get a change of ownership in a small private company.

Brand value of a company like AIR N.Z. sure...it has a 76 year history but that doesn't mean its necessary or appropriate to carry huge amounts of intangible assets on its balance sheet.

On the other hand the hound pontificates that a well managed company like Real Journey's in Queenstown with assets like the 104 year old Earnslaw steamship he enjoyed the other day would command a decent goodwill valuation if sold and if well managed that goodwill with its entrenched tourism position in the market might never need amortisation. Like all things it comes back to the quality of the business and quality of the management over time and in both these measurement yardsticks, Veritas fails miserably in my opinion and the realisable value of the intangible assets is probably a mere fraction of its stated value at present. Good luck to shareholders and the ANZ with this pup.

[Snoopy]

Veritas fails miserably in my opinion and the realisable value of the intangible assets is probably a mere fraction of its stated value at present. Good luck to shareholders and the ANZ with this pup.

Reading AR2016, I notice that the auditors tagged the $4.6m of goodwill on the books in relation to Nosh. But the Nosh chain is to be franchised. Add in a cumulative sales growth of 15% over three years

1.15 x 1.15 x 1.15 = 1.52 (+52%)

and everything comes good. All there written in black and white on page 29 of AR2016, so it must be true ;-P.

Total equity $8m on the balance sheet at EOFY2016. So even if they wrote off $4.6m goodwill off that, there would still be $3.4m of equity left. That is close to $1 for every New Zealander, if we get rid of a few overstayers and take a futures contract on some deaths in advance. Still HUGE MONEY coupled with a desire to survive, and positive thought!

SNOOPY

[percy]

http://www.ifrs.org/Meetings/Meeting...-amortised.pdf

Fill ya boots if you're interested in the theory of all this. FWIW the hound is not a fan of any company that has a large percentage of its balance sheet stated as intangible assets, this is a warning signal as far as I am concerned and I take all goodwill and intangible asset valuation methodologies with a grain of salt.

Too often goodwill has a remarkable habit of evaporating at a rate far quicker than any previously mandated amortisation rate would suggest it might. This is especially the case when you get a change of ownership in a small private company.

Brand value of a company like AIR N.Z. sure...it has a 76 year history but that doesn't mean its necessary or appropriate to carry huge amounts of intangible assets on its balance sheet.

On the other hand the hound pontificates that a well managed company like Real Journey's in Queenstown with assets like the 104 year old Earnslaw steamship he enjoyed the other day would command a decent goodwill valuation if sold and if well managed that goodwill with its entrenched tourism position in the market might never need amortisation. Like all things it comes back to the quality of the business and quality of the management over time and in both these measurement yardsticks, Veritas fails miserably in my opinion and the realisable value of the intangible assets is probably a mere fraction of its stated value at present. Good luck to shareholders and the ANZ with this pup.

As an investor in mainly small cap companies,and not having an accounting background,I usually strip out intangibles and goodwill from companies' balance sheets I am looking at. Sorts out the wheat from the charf very quickly.

[winner69]

Back on topic

Spose when people say that the company is at 'mercy of its bankers' it is the same as the banker saying that the company s 'well and truly rooted'

ANZ must be getting used to saying this of late

[Beagle]

ANZ gave them till February to come up with a plan for their balance sheet....ANZ exec's probably flat out till then

[Southern_Belle]

On the proverbial chopping block ...http://m.nzherald.co.nz/business/new...ectid=11752114.

Be interesting to see what happens here.
The Nosh shops tend to be poorly located especially Greenlane and Ponsonby. Poor fit outs and poorly staffed. Suppliers use stop credit to get invoices paid or have given up supplying Nosh stores. Farro have this market cornered...


Disc ...ex Supplier and spent many hours doing in store tastings at both Nosh and Farro

[winner69]

On the proverbial chopping block ...http://m.nzherald.co.nz/business/new...ectid=11752114.

Be interesting to see what happens here.
The Nosh shops tend to be poorly located especially Greenlane and Ponsonby. Poor fit outs and poorly staffed. Suppliers use stop credit to get invoices paid or have given up supplying Nosh stores. Farro have this market cornered...


Disc ...ex Supplier and spent many hours doing in store tastings at both Nosh and Farro

Of course the company disagrees with you - In a Weekend Herald advertisement, ABC Business Sales said the sales were a "great opportunity to get into a successful gourmet grocery, retail business with an excellent set-up, quality fitout, and high visibility locations. These business are well established and have a steady clientele".

They'll get franchisees - even if they are greater fools who will believe that this will be a strong franchise with a great support office

[Nasi Goreng]

I didn't even know who VIL were until yesterday. Sheesh, I don't mind small caps, say 100M+ but can this be called small cap? Value of $8M, they are micro caps really and a recipe for losing all your money.

Do they have a major investor other than the bank? Or is this a case of original owners raising some cash by IPO and it's not gone so well.