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Veritas planning to franchise Nosh stores

NZN 5/04/2016 Jonathan Underhill

Veritas Investments, which took first-half impairments against the value of some businesses and is planning to renegotiate its debt facilities, plans to use a franchise model for its Nosh Food Market stores, the same strategy it uses for its Mad Butcher outlets.

Veritas has eight existing Nosh stores, including two already operating as franchises.

If successful, the franchise blueprint could be used to open new Nosh stores in other parts of New Zealand, the Auckland-based company said in a statement.

"The franchising of Nosh stores has always been part of our vision since we acquired the business 18 months ago," said chairman Tim Cook.

"After a comprehensive review and restructure of operations we are now well positioned to roll out the franchise model for the existing Nosh stores."

In February, Veritas posted a first-half loss of $4.8 million, reflecting impairment charges and other write-offs totalling $5.3m against the Kiwi Pacific Foods joint venture now being wound down, unprofitable company-owned Mad Butcher stores, a loss on the sale of its underperforming Hamilton bars and other costs.

Cook said in the first-half report that while Nosh had achieved profitability for the month of December, "it failed to achieve budget in the preceding two months" and "significant efforts" were being made to improve its gross margin.

Veritas acquired Nosh in September 2014 for about $1.3m and has since recorded gains on acquisition in its income statements of about $1m. Nosh revenue fell 32 per cent to about $12.5m in its latest half, for a loss on an earnings before interest, tax, depreciation and amortisation basis of about $1m.

Cook declined to give details of likely franchise terms or the targets it would need to achieve. The offer is being made through a business broking firm.

Veritas bought the Mad Butcher franchisor business in May 2013.

Its shares rose 8.7 per cent to 25 cents, valuing the company at $10.8m, and have dropped 74 per cent in the past 12 months.

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