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Unaudited Interim Results for the six months ended 30 September 2012 and preference share dividend declaration
Brait SE
(Registered in Malta as a European Company)
(Registration No: SE1)
Share code: BAT ISIN: LU0011857645
Share Code: BATP ISIN: MT0000680208
("Brait", the "Company" or "Group")
Unaudited Interim Results
for the six months ended 30 September 2012
and preference share dividend declaration
Key Highlights
NAV per share 11.8% up for six-month period to ZAR 23.01
24.8% per year CAGR since 1 April 2011
Investment Solid growth, margin expansion, strong cash flow generation
portfolio Valuation uplift from operational performance no change in valuation multiples
HEPS Normalised HEPS for six-month period up 14.8% to 240 ZAR cents
Capital ZAR 1.5 billion raised from preference share issue
Term debt repaid unutilised facilities and cash of ZAR 2.8 billion for new investments
Dividends Preference share cash dividend of 135.63 ZAR cents per share declared
Key metrics Projected operating expenses at 0.8% (0.4% after fee income) of AUM
Cash and cash equivalents ratio to NAV at 4.8%
Salient features
Unaudited Unaudited
Audited six months six months Audited
year ended Restated Restated year ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2012 2011 2012 2012 2011 2012
R'm R'm R'm Note EURm EURm EURm
2 568 1 414 1 145 Investment gains 110 138 251
257 159 186 Other investment income 18 16 25
(117) (59) (63) Operating expenses (6) (6) (11)
(62) (29) (50) Finance costs (5) (3) (6)
(39) (13) (4) Taxation (1) (4)
Profit for the period/
2 607 1 472 1 214 earnings 117 144 255
(434) (434) Capital item 2 (42) (42)
2 173 1 038 1 214 Headline earnings 117 102 213
Performance measures
Net asset value per share
2 059 1 833 2 301 (cents) 215 169 201
25% 23% 25% Net asset value CAGR# N/A N/A N/A
Normalised headline
433 209 240 earnings per share (cents)* 23 21 42
Headline earnings per share
545 346 242 (cents) basic and diluted 23 34 53
Earnings per share (cents)
654 491 242 basic and diluted 23 48 64
Ordinary share dividends
per share (cents) declared
20.59 and paid 2.13
Preference share dividends
135.63 per share (cents) declared 11.03
10 534 9 188 14 998 Market capitalisation 1 372 1 083 1 030
506 506 510 Shares in issue (m) 510 506 506
(5) (10) (5) Treasury shares (m) (5) (10) (5)
501 496 505 Shares outstanding (m) 505 496 501
Weighted average shares in
399 300 502 issue (m) basic and diluted 502 300 399
2 081 1 815 2 940 Closing share price (cents) 269 214 203
# Compound Annual Growth Rate is calculated over any three-year period commencing 1 April 2011 and assuming an
opening NAV of the ZAR16.50 Rights Office Price.
* Headline earnings for the period divided by shares outstanding at period end.
Condensed Group statement of financial position
Unaudited Unaudited
Audited Restated Restated Audited
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2012 2011 2012 2012 2011 2012
R'm R'm R'm Notes EURm EURm EURm
ASSETS
11 251 8 812 12 605 Non-current assets 1 177 813 1 099
9 961 7 569 11 250 Investments 1 051 698 973
Commercial loan to Investment
1 284 1 235 1 344 Team 125 114 125
6 8 11 Property and equipment 1 1 1
543 1 700 571 Current assets 55 157 53
20 22 10 Accounts receivable 1 2 2
523 1 678 561 Cash and cash equivalents 54 155 51
11 794 10 512 13 176 Total assets 1 232 970 1 152
EQUITY AND LIABILITIES
10 321 9 099 13 094 Total equity 1 224 840 1 008
Ordinary shareholder equity and
10 321 9 099 11 624 reserves 4 1 086 840 1 008
1 470 Preference shareholder equity 5 138
1 410 1 351 34 Non-current liabilities 3 124 138
1 370 1 261 Borrowings 116 134
40 90 34 Deferred taxation 3 8 4
63 62 48 Current liabilities 5 6 6
11 794 10 512 13 176 Total equity and liabilities 1 232 970 1 152
506 506 510 Shares in issue (m) 510 506 506
(5) (10) (5) Treasury shares (m) (5) (10) (5)
Outstanding shares for NAV
501 496 505 calculation (m) 505 496 501
Net asset value per share
2 059 1 833 2 301 (cents) 215 169 201
Condensed Group statement of changes in equity
Unaudited Unaudited
Audited six months six months Audited
year ended Restated Restated year ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2012 2011 2012 2012 2011 2012
R'm R'm R'm EURm EURm EURm
Ordinary shareholders balance at
1 491 1 491 10 321 beginning of period 1 008 157 157
(16) (117) Net buyback of treasury shares/rights (11) (2)
Rights Offer and Private Placement
6 389 6 389 issue ("Transaction") 589 624
(198) (187) Transaction costs (17) (19)
2 607 1 472 1 214 Profit for the period 117 144 255
48 51 105 Translation adjustments (38) (22) (7)
(16) Ordinary dividend paid (1)
Ordinary shareholders balance at
10 321 9 099 11 624 end of period 1 086 840 1 008
Preference shareholders balance
at beginning of period
1 470 Preference share issue net of costs 138
Preference shareholders balance
1 470 at end of period 138
10 321 9 099 13 094 Total equity 1 224 840 1 008
Condensed Group statement of cash flow
Unaudited Unaudited
Audited six months six months Audited
year ended Restated Restated year ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2012 2011 2012 2012 2011 2012
R'm R'm R'm EURm EURm EURm
Cash flows from operating
activities:
Operating cash flow excluding
895 982 29 purchase of investment 3 90 87
(6 450) (5 192) (71) Purchase of investments (7) (479) (630)
Net cash used in operating
(5 555) (4 211) (42) activities (4) (389) (543)
(9) Net cash used investing activities (1)
5 873 5 690 55 Net cash from financing activities 5 521 574
Net increase in cash and cash
318 1 479 4 equivalents 132 31
Effects of exchange rate changes on
33 27 34 cash and cash equivalents 3 5 2
Cash and cash equivalents at
172 172 523 beginning of period 51 18 18
Cash and cash equivalents at end
523 1 678 561 of period 54 155 51
Notes to the condensed financial statements
for the six months ended 30 September
1. BASIS FOR PREPARATION
The financial statements of the Group are prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union, on the going concern
principle, using the historical cost basis. The condensed financial statements are presented in
accordance with IAS34 (Interim Financial Reporting). The accounting policies and methods of
computation are consistent with those applied in the annual financial statements for the year
ended 31 March 2012.
The Group's financial statements are prepared using both the Euro (EUR) and SA Rand (R/ZAR)
as its presentation currencies. The Group has three functional currencies: USD (US$), GBP and
SA Rand for the respective jurisdictions in which it operates. The financial statements have been
prepared using the following spot exchange rates on 30 September 2012:
USD/ZAR 8.3119 USD/EUR 0.7776
GBP/ZAR 13.4459 GBP/EUR 1.2579
EUR/ZAR 10.6890
2. CAPITAL ITEM
As communicated in note 7 of the March 2012 Group Annual Financial Statements, following
the Group's business model change to an investment holding group, the Group's asset
management units were restructured to non-controlled investments. The remaining interests
were fair valued through the statement of comprehensive income on the loss of control in
accordance with IAS 27, resulting in a ZAR 434 million capital profit.
3. RELATED PARTIES
Trading
During the year, Group companies entered into the following transactions with related parties
who are not members of the Group;
Related party balances and transactions
Unaudited Unaudited
Audited six months six months Audited
year ended Restated Restated year ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2012 2011 2012 2012 2011 2012
R'm R'm R'm EURm EURm EURm
Statement of financial position
balances
- Commercial loan to Investment
1 284 1 235 1 344 Team 125 114 125
Profit from operations include:
(8) (3) (3) Non-executive directors fees (1)
84 27 61 Interest income 6 2 8
Statement of changes in equity
(amount charged directly to equity)
Ordinary share rights issue and
(13) (10) private placement transaction cost (1) (1)
Preference share issue transaction
(1) cost
4. ORDINARY SHARE CAPITAL AND PREMIUM
Authorised share capital
1 500 000 000 at par value of EUR0.22 per share.
Issued share capital
31 March 2012 506 200 693
Bonus share issue 3 921 654*
30 September 2012 510 122 347
Dividend
15% of ordinary shareholders elected to receive the cash alternative
* The nominal value of the bonus shares issued is accounted for in Ordinary Share Premium with no adjustment
to any other reserves in equity. The bonus share issue option was converted at 60 day Volume Weighted
Average Price (VWAP) of ZAR 22.62 per share to result in the ZAR 0.2059 dividend per share translating into
0.91026 shares for every 100 shares held.
5. PREFERENCE SHARES
Cumulative, non-participating preference shares
Authorised
20 000 000 cumulative, non-participating preference shares with a nominal value of EUR0.01 each
Issued
15 000 000 cumulative, non-participating preference shares issued at EUR 9.50/ZAR 100.00 per share
with a nominal value of EUR0.01 each on 6 August 2012.
The discretionary preference dividend is calculated on a daily basis at 104% of the SA prime
interest rate and is payable 90 days after each reporting date. Arrear preference dividends shall
accrue interest at 144% of the SA prime interest rate. The Directors are authorised to issue the
remaining five million preference shares which could raise at least ZAR 500 million.
6. SUBSEQUENT EVENTS
No events have taken place since 30 September 2012 and the date of the release of this report
which would have a material impact on either the financial position or operating results of the
Group.
RESULTS COMMENTARY
THE BUSINESS OF BRAIT
Brait is a listed investment company that focuses its investments in primarily privately owned
businesses. The Group also has interests in management companies that oversee traditional
private equity funds.
INTERIM RESULTS
The Board of Directors is pleased to report to the Company's shareholders on the interim
results on the back of strong operational performance from it's main portfolio assets, namely
Pepkor, Premier Foods and Iceland Foods for the six months ended 30 September 2012.
Key highlights for the period include:
- Net Asset Value ("NAV") per share increased by 11.8% to ZAR23.01 for the period (2011:
11.1%), and 39.5% up since the change in its business model on 4 July 2011;
- Achieved NAV compound annual growth rate ("CAGR") of 25% compared to a 15% target over any
three year-period;
- Successful raising of ZAR1.5 billion permanent capital through a preference share issue;
- Strong ungeared balance sheet following repayment of term debt;
- Cash and cash equivalents kept at 4.8% of NAV against a benchmark of 25% or below;
- Bonus share issue (with a cash dividend alternative) paid in August 2012 resulting in 85%
take up of bonus shares;
- Preference share dividend of 135.63 ZAR cents per share declared for the period; and
- Normalised headline earnings per share up 14.8% to 240 ZAR cents (2011: 209 ZAR cents).
VALUE DRIVERS
The Directors believe that the following factors are the core value drivers for the business:
- Growth in NAV;
- Minimal cost leakage;
- Minimal balance sheet cash drag;
- Significant cash flow within the underlying assets; and
- Predictable and consistent dividend to NAV yield.
A summary of Brait's results as measured by these key value drivers is as follows:
GROWTH IN NAV
Brait aims to grow its NAV per share at a CAGR of at least 15% per annum (CAGR) over any
three-year period commencing 1 April 2011 and assuming an opening NAV of the ZAR16.50
Rights Offer Price. The Group exceeded this key performance measure for the period.
The Group's NAV per share of ZAR23.01 at 30 September 2012 represents an 11.8% increase
for the six month period and translates into a 25% CAGR since 1 April 2011.
Consistent with the prior reporting period, the Directors are pleased to indicate that the NAV
increase is attributable primarily to EBITDA growth and cash flow generation within investee
companies with no change in EV/EBITDA valuation multiples.
The Group's valuation policy is in accordance with the principles of the International Private
Equity and Venture Capital (IPEVC) guidelines and IFRS. At the reporting date, the EV/EBITDA
valuation multiples for the portfolio are Pepkor at 8x; Premier Foods at 6.5x and Iceland Foods
at 6.5x.
The current NAV break-down is as follows:
31 March 30 September 30 September 31 March
2012 2012 2012 2012
R'm R'm % EURm EURm
9 961 11 250 Investments 86 1 051 973
6 701 7 731 Pepkor 59 721 655
1 191 1 253 Premier Foods 10 117 116
998 1 245 Iceland Foods 9 116 97
584 551 Private equity fund investments 4 53 57
384 398 Other investments 3 37 38
103 72 Asset Management Units (AMU) 1 7 10
6 11 Property and equipment 1 1
1 284 1 344 Commercial loan to Investment Team 10 125 125
20 10 Accounts receivable 1 2
523 561 Cash and cash equivalents 4 54 51
11 794 13 176 Total assets 100 1 232 1 152
1 473 82 Total liabilities 8 144
1 370 Borrowings 134
40 34 Deferred tax liability 3 4
63 48 Current liabilities 5 6
1 470 Preference share equity 138
10 321 11 624 NAV attributable to ordinary shareholders 1 086 1 008
Number of issued shares ('mil excluding
501 505 treasury shares) 505 501
2 059 2 301 Net asset value per share (cents) 215 201
Key highlights of the Group's portfolio are:
- Pepkor posted strong results for its year ended 30 June 2012, headlined by a 17% revenue
increase, healthy margins and high EBITDA to cash conversion;
- Premier Foods exceeded its financial targets for the last six months of its reporting period to
30 June 2012, driven by increasing margins whilst increasing market share;
- Iceland Foods has traded in line with expectations for the six months ended
30 September 2012, despite tough UK market conditions. The weakening Rand also
had a positive impact on the carrying value of Iceland Foods for the period under review;
- Cash and cash equivalents have largely remained the same due to proceeds from the
preference share issue being applied to retire term debt.
Minimal cost leakage
A key objective of the Group is to have an efficient cost structure as this maximises shareholder
returns. Following the 60% decrease in operating costs reported for the year ended
31 March 2012, the Group has continued to maintain a flat cost structure. Operating
expenditure for the period of ZAR63 million (2011: ZAR59 million) represents an annualised
ratio of 0.79% to Assets Under Management ("AUM"), against a target of 0.85% or less. The
annualised net operating costs ratio to AUM after fee income for the period is 0.42%.
Minimal balance sheet cash drag
The Directors believe that the Group should ideally have minimal cash on the balance sheet
given that cash returns are significantly less than the Group's investment target returns
and weigh down overall returns. Cash and cash equivalents at 30 September 2012 are 4.8% of
NAV, well within the benchmark of 25% or less. Cash and cash equivalents are invested in
low risk instruments that reduce term and liquidity risks for the Group.
Significant cash flow within the underlying assets
The Directors believe it is critical to demonstrate regular cash flow within the underlying
investments as this evidences superior quality of earnings. The investments currently held by the
Company are cash generative with a high earnings-to-cash conversion ratio.
Predictable and consistent ordinary dividend to NAV yield
The Group's ordinary dividend policy is a dividend to NAV yield of 1% 2.5% per annum to
be paid either in cash or by a bonus share issue. Dividends are considered annually when the
results for each year are published. The extent of any dividends is determined relative to net
operating cash flows and to the proceeds received on the realisation of loans and investments
from time to time and which are not earmarked for new projects or required for liquidity.
For the period under review, a bonus share issue (with a cash dividend alternative) of 1% of
NAV (20.59 ZAR cents per share) was paid out in August 2012, with 85% of shareholders
electing to receive bonus shares.
GROUP FUNDING POSITION
The successful raising of the ZAR1.5 billion preference shares on 6 August 2012 was the main
funding highlight for the Group. The issue was oversubscribed, with over ZAR2 billion's worth
of applications received for the ZAR1 billion to ZAR1.5 billion target issue. The final issue size
of ZAR1.5 billion demonstrates the Company's commitment to raising efficient capital while
minimising the impact of excess cash on its balance sheet.
The Directors believe that the preference shares complement the Group strategy by matching
its long investment horizon, lowering the cost of capital while avoiding dilution to ordinary
shareholders.
The proceeds from the preference shares were wholly applied against the term debt while
retaining all Brait's facilities for future acquisitions. As a result, the Group has at least ZAR2.8
billion in cash and available facilities to fund future investment opportunities.
The Directors believe that the Group is not only adequately but efficiently funded in a manner
that maximises returns to its shareholders. It is the Group's aim to continue to explore
alternative sources of funding to achieve funding flexibility and a more efficient capital structure.
PREFERENCE SHARE CASH DIVIDEND
Following the successful listing of the Company's preference shares on 6 August 2012, notice
is hereby given that the Directors have declared an interim gross cash dividend of 135.63 ZAR
cents (115.2855 ZAR cents net of dividend withholding tax) per preference share for the period from
6 August 2012 to 30 September 2012.
A dividend withholding tax of 15% will be applicable to all shareholders who are not exempt
from such tax.
The issued share capital at the declaration date is EUR112,376,916.34 divided into 510 122 347
ordinary shares and 15 000 000 preference shares.
The salient dates for the preference share dividend will be as follows:
Last day of trade to receive a dividend Friday, 23 November 2012
Shares commence trading "ex" dividend Monday, 26 November 2012
Record date Friday, 30 November 2012
Payment date Monday, 03 December 2012
Share certificates may not be dematerialised or rematerialised between Monday, 26 November
2012 and Friday, 30 November 2012, both days inclusive.
Shareholders who receive their dividends in Euro are advised that the interim dividend is
11.9903 Euro cents per share, and has been determined using the Rand/Euro exchange rate in
Malta at 12:00 on 25 October 2012.
Non-resident shareholders registered on the Luxembourg register who prefer their dividends
to be paid in Euro, are advised to inform their CSDPs/brokers accordingly and provide their
banking details to their CSDPs/brokers by the required deadline in terms of their agreements
entered into with their CSDPs/brokers.
GROUP OUTLOOK
The defensive nature of the portfolio has enabled strong growth in a tough macro environment.
The Directors believe that the business is well positioned on the back of a strong portfolio and a
robust balance sheet.
For and on behalf of the Board
Phillip Jabulani Moleketi
Non-Executive Chairman
31 October 2012
Directors (all non-executive)
PJ Moleketi (Chairman)*, AC Ball*, CD Keogh##, RJ Koch##, CS Seabrooke*, R Schembri+,
HRW Troskie**, SJP Weber#, Dr CH Wiese*
+ Maltese; # Luxembourgish; ## British; ** Dutch; * South African
Brait is primarily listed on the Euro MTF market of the Luxembourg Stock Exchange and
secondarily listed on the JSE.
Brait SE
Registration No: SE1
SPONSOR
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Date: 31/10/2012 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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