Veritas says failure of four Mad Butcher franchisees 'coincidence of timing'

Veritas Investments, the food and beverage investor, has responded to media reports about the financial health of its Mad Butcher brand by saying the liquidation of four of its franchisee-operated budget meat outlets this year is "coincidence".

Since the start of the year the Massey, Glenfield, Rotorua and Kapiti Mad Butcher stores have all been placed into liquidation, and all but Rotorua have been taken back into Veritas ownership, the Auckland-based company said in a statement. The affected stores were franchise operations, with the closures "primarily due to the personal circumstances or property lease issues", Veritas said.

"Franchisee changes are not unusual and these recent changes are simply a coincidence of timing," Veritas said. "For the record, Veritas currently owns the Invercargill, Glenfield, Kapiti, Henderson and Massey stores. As stated in the company's half year update, ownership of stores as a transitional arrangement is a normal part of franchisor activity."

There are 40 Mad Butcher stores across New Zealand, of which 35 are operated by franchisees.

The company reiterated that its franchisor business was tracking to target, and that there "have been no material changes to the operation of the franchisor business since the issue of the interim report" in February. The National Business Review, citing industry sources, has reported that more Mad Butcher stores are in financial difficulty, which chief executive Michael Morton last week called "grossly inaccurate".

In February, Veritas reported a 16 percent decline in first-half profit to $1.7 million as acquisition costs mounted during a buying spree, and warned annual earnings may be at the low end of guidance depending on how its new businesses perform. Revenue jumped 89 percent to $27.4 million. Of that, the Mad Butcher business lifted revenue 14 percent to $16.6 million.

Veritas bought the Mad Butcher business in May 2013 in what was effectively a reverse listing, having sold its assets and returned capital to shareholders. The NZX-listed food and beverage business has been on the acquisition path ever since, buying half of meat patty supplier Kiwi Pacific Foods in December 2013, the gourmet-supermarket chain Nosh Food Market in September and its latest purchase, Better Bar Co, which has 11 bars in Auckland and Hamilton last November.

Shares of Veritas rose 1.1 percent to 90 cents, and have fallen some 29 percent since the start of the year.