Wrap Text
Unaudited interim results for the six months ended 30 September 2013
Unaudited Interim Results
for the six months ended 30 September 2013
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")
Key Highlights
- NAV per share:
- 9.5% increase to R29.17 for the six month period
- CAGR for the 2.5 year period since 1 April 2011's R16.50 Rights Offer Price:
- 25.6% on reported NAV per share
- 26.4% including bonus shares issued/cash dividend paid
- Uplift attributable to operational performance of investments solid profit growth and cash flow generation
- Preference share dividend of R88.6 million (443.21 cents per share) for the six months ended 30 September 2013
declared on 24 October 2013
- R90 million cash inflows from investment portfolio:
R12 million interest received from Premier Group
R78 million from realisations within Other Investments
- R500 million capital raised in June 2013 from perpetual preference shares tap issue
- Cash and facilities of R2.7 billion available for new investments
Performance measures
Audited Unaudited Unaudited Audited
year six months six months year
ended ended ended ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2013 2012 2013 Note 2013 2012 2013
2 664 2 301 2 917 Net asset value per share (cents) 215 215 225
27 25 26 Net asset value CAGR (%)# N/A N/A N/A
Normalised headline earnings per
579 240 215 share (cents)* 17 23 53
Earnings/Headline earnings per
581 242 216 share (cents) basic and diluted 5 17 23 53
Ordinary dividends per share
26.64 paid (cents) 2.12
17 752 14 998 21 958 Market capitalisation (R'm) 1 603 1 372 1 500
510 510 514 Ordinary shares in issue (m) 514 510 510
(5) (5) (5) Treasury shares (m) (5) (5) (5)
505 505 509 Ordinary shares outstanding (m) 509 505 505
Weighted average ordinary
shares in issue (m) basic
504 502 506 and diluted 506 502 504
Closing ordinary share
3 480 2 940 4 275 price (cents) 312 269 294
Preference dividend per share
135.63 paid 3 December 2012 (cents) 11.9903
Preference dividend per share
440.79 paid 24 June 2013 (cents) 35.0883
Preference dividend per share
443.21 declared 24 October 2013 (cents) 32.8723
# 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 Offer Price.
* Headline earnings for the period divided by ordinary shares outstanding at the end of the period.
Condensed group statement of financial position
as at 30 September
Audited Unaudited Unaudited Audited
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2013 2012 2013 2013 2012 2013
R'm R'm R'm Notes EUR'm EUR'm EUR'm
ASSETS
14 523 12 605 16 275 Non-current assets 1 200 1 177 1 226
13 114 11 250 14 806 Investments 2 1 092 1 051 1 108
1 399 1 344 1 460 Loan receivable 107 125 117
10 11 9 Property and equipment 1 1 1
618 571 689 Current assets 51 55 53
115 10 106 Accounts receivable 7 1 10
503 561 583 Cash and cash equivalents 44 54 43
15 141 13 176 16 964 Total assets 1 251 1 232 1 279
EQUITY AND LIABILITIES
14 927 13 094 16 802 Total equity 1 239 1 224 1 261
Ordinary shareholder
13 458 11 624 14 838 equity and reserves 3 1 094 1 086 1 137
Preference shareholder
1 469 1 470 1 964 equity 4 145 138 124
163 34 108 Non-current liabilities 8 3 14
141 83 Borrowings 6 12
22 34 25 Deferred tax liability 2 3 2
51 48 54 Current liabilities 4 5 4
Accounts payable and
42 39 45 other liabilities 3 4 3
9 9 9 Provisions 1 1 1
Total equity and
15 141 13 176 16 964 liabilities 1 251 1 232 1 279
510 510 514 Ordinary shares in issue (m) 514 510 510
(5) (5) (5) Treasury shares (m) (5) (5) (5)
Outstanding shares
for net asset value
505 505 509 calculation (m) 509 505 505
Net asset value per share
2 664 2 301 2 917 (cents) 215 215 225
Condensed group statement of comprehensive income
for the six months ended 30 September
Audited Unaudited Unaudited Audited
year six months six months year
ended ended ended ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept 3 31 March
2013 2012 2013 2013 2012 2013
R'm R'm R'm Note EUR'm EUR'm EUR'm
2 713 1 145 1 092 Investment gains 85 110 246
488 186 164 Other investment income 13 18 46
(124) (63) (66) Operating expenses (5) (6) (11)
(59) (50) (5) Finance costs (5) (6)
(5) (1) Indirect taxation
(1) (4) (1) Direct taxation
3 012 1 214 1 183 Profit for the period 5 93 117 275
163 105 275 Translation adjustments (130) (38) (143)
Comprehensive income for the
3 175 1 319 1 458 period 37 79 132
Condensed group statement of changes in equity
for the six months ended 30 September
Ordinary shareholders' balance
10 321 10 321 13 458 at beginning of period 1 137 1 008 1 008
(2) Net buyback of treasury shares
3 012 1 214 1 183 Profit for the period 93 117 275
163 105 275 Translation adjustments (130) (38) (143)
Earnings attributed to preference
(20) (66) shares (5) (2)
(16) (16) (12) Ordinary dividends paid (1) (1) (1)
Ordinary shareholders' balance
13 458 11 624 14 838 at end of period 1 094 1 086 1 137
Preference shareholders'
1 469 balance at beginning of period 124
1 469 1 470 495 Preference share issue net of costs 36 138 134
Translation adjustments (15) (10)
Earnings attributed to preference
20 66 shares 5 2
(20) (66) Preference dividends paid (5) (2)
Preference shareholders'
1 469 1 470 1 964 balance at end of period 145 138 124
Condensed group statement of cash flow
for the the six months ended 30 September
Audited Unaudited Unaudited Audited
year year
ended six months ended six months ended ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2013 2012 2013 2013 2012 2013
R'm R'm R'm EUR'm EUR'm EUR'm
Operating cash flow before
(22) (22) (19) investments (2) (2) (1)
126 51 78 Investment proceeds 6 5 11
(386) (71) (376) Purchase of investments (27) (7) (33)
Net cash used in operating
(282) (42) (317) activities (23) (4) (23)
Net cash used in investing
(8) (9) (1) activities (1) (1)
Net cash from financing
200 55 365 activities 26 5 17
Net increase/(decrease) in cash
(90) 4 47 and cash equivalents 3 (7)
Effects of exchange rate changes
70 34 33 on cash and cash equivalents (2) 3 (1)
Cash and cash equivalents at
523 523 503 beginning of period 43 51 51
Cash and cash equivalents at
503 561 583 end of period 44 54 43
Notes to the condensed flnancial 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 IAS 34 (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 2013.
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 exchange rates at 30 September 2013:
Closing Average
USD/ZAR 10.0278 USD/ZAR 9.7366
GBP/ZAR 16.2283 GBP/ZAR 15.0327
EUR/ZAR 13.5628 EUR/ZAR 12.8164
USD/EUR 0.7394 USD/EUR 0.7597
GBP/EUR 1.1965 GBP/EUR 1.1729
2.INVESTMENTS
Given the nature of the Group's operations, investments in which the Group has significant influence, but not
control (up to 49.9% of voting rights) are accounted for at fair value through profit and loss (scoped out of
IAS 28 and into IAS 39). Changes in fair value are recognised in profit or loss in the period of change. The
Group applies a number of methodologies to determine and assess the reasonableness of the fair value,
which may include the following:
- Earnings multiple
- Recent transaction prices
- Net asset value
Listed investments are held at recent quoted transaction prices. Where the listed investment is either thinly
traded and/or the market is inactive, the valuation applied to determine carrying value is based on the
applicable unlisted investment valuation methodology set out below.
The primary valuation model utilised for valuing unlisted investee companies is the maintainable earnings
multiple model:
Maintainable earnings are derived as an average of audited historic and forecasted earnings before
interest, tax, depreciation and amortisation (EBITDA) adjusted for any non-recurring income/expenditure
from the Company's annual financial statements.
The directors decide on an appropriate group of comparable quoted companies from which to base the
current market based EV/EBITDA multiple. Adjustments for points of difference to the investee company
being valued are assessed. The resulting valuation multiple is applied to the maintainable EBITDA to
calculate the Enterprise Value (EV) for the Investee company. Below are the key valuation metrics for each
significant portfolio company. Further valuation information can be obtained from the 30 September 2013
investor presentation on the Group's website, www.brait.com
Audited Unaudited Unaudited Audited
year six months six months year
ended ended
31 30 30 30 30 31
March Sept Sept Sept Sept March
Valuation metrics used
2013 2012 2013 @ 30 Sept 2013 2013 2012 2013
R'm R'm R'm EBITDA Multiple Net Debt EUR'm EUR'm EUR'm
9 278 7 731 10 154 Pepkor (R'm) 4 023 8.0 1 996 749 721 784
Premier Group
1 463 1 253 1 885 (R'm) 454 6.5 1 353 139 117 124
Iceland Foods
1 449 1 245 1 808 (GBP'm) 228 6.5 893 133 116 122
Other
924 1 021 959 Investments varied 71 97 78
13 114 11 250 14 806 Total investments 1 092 1 051 1 108
Fair Value Hierarchy
IFRS 7 provides a hierarchy that classifies inputs used to determine fair value. Investments measured and
reported at fair value are classified and disclosed in one of the following categories:
Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 Inputs for the assets or liability that are not based on observable market data
There are no financial assets that are categorised as Level 2 and no transfers between levels in the current
or prior year.
Invest- Invest- Invest- Loans Invest-
ment in Loans at ment in ment in at Fair ment in
Securities Fair Value Securities 30 September Securities Value Securities
Level 1 Level 3 Level 3 Total 2013 Level 1 Level 3 Level 3 Total
10 154 10 154 Pepkor 749 749
594 1 291 1 885 Premier Group 44 95 139
17 1 791 1 808 Iceland Foods 1 132 133
23 539 397 959 Other Investments 2 40 29 71
Total
23 1 150 13 633 14 806 investments 2 85 1 005 1 092
3. 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 2013 510 122 347
Bonus share issue 3 510 329*
30 September 2013 513 632 676
Dividend
9% (2012: 15%) of ordinary shareholders elected to receive the cash alternative
* The par value of the bonus shares issued are accounted for in Ordinary Share Premium with no
adjustment to any other reserves in Equity. The bonus share issue was calculated at the 60-day Volume
Weighted Average Price (VWAP) of R35.29 per share to result in the R0.2664 dividend per share
translating into 0.75489 shares for every 100 shares held.
4. PREFERENCE SHARES
First issuance of 15 000 000 preference shares net of transaction costs
Tap issue of 5 000 000 preference shares net of transaction cost
Authorised
20 000 000 cumulative, non-participating preference shares with a nominal value of EUR0.01 each
Issued
20 000 000 cumulative, non-participating preference shares issued at EUR9.50/R100.00 per share with a
nominal value of EUR0.01 each
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.
5. HEADLINE EARNINGS RECONCILIATION
Audited Unaudited Unaudited Audited
year six months six months year
ended ended ended ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2013 2012 2013 2013 2012 2013
R'm R'm R'm Note EUR'm EUR'm EUR'm
3 012 1 214 1 183 Profit for the period 93 117 275
(20) Preference dividend paid 3 Dec 2012 (2)
(66) Preference dividend paid 24 June 2013 (6)
(89) Preference dividend declared 24 Oct 2013 (7)
2 926 1 214 1 094 Earnings/Headline earnings 86 117 267
6. SUBSEQUENT EVENTS
No events have taken place since 30 September 2013 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.
THE BUSINESS OF BRAIT
Brait is an investment holding company whose shares are listed on the MTF market of the Luxembourg Stock
Exchange and also on the JSE. Brait's portfolio primarily comprises holdings in privately owned businesses
operating in a range of industries.
The Board of Directors is pleased to report on the interim results for the six months ended 30 September 2013.
VALUE DRIVERS
Growth in NAV is the Company's key performance measure and the following additional factors are the other
core value drivers of the business:
- Minimal cost leakage;
- Minimal balance sheet cash drag;
- Significant cash flow within the underlying assets; and
- Predictable and consistent ordinary dividend to NAV yield.
GROWTH IN NAV
Brait targets growth in its NAV per share at a compound rate of at least 15% per annum (CAGR) over any
three-year period commencing 1 April 2011 and assuming an opening NAV per share of the ZAR16.50 Rights
Offer Price. The CAGR for the increase in reported NAV for the two and a half year period to 30 September
2013 is a pleasing 25.6%. Including ordinary share bonus issues and alternative election cash dividends
paid during this period, the return CAGR over the same period to shareholders is 26.4%. The Group's NAV
per share of ZAR29.17 at 30 September 2013 represents a 9.5% increase over a six month period on the
ZAR26.64 NAV per share at 31 March 2013.
Growth in EBITDA and cash flow generation continue to be the drivers of NAV, with EV/EBITDA valuation
multiples remaining unchanged.
The Group's valuation policy is in accordance with the principles of the International Private Equity and Venture
Capital (IPEVC) guidelines and IFRS. At reporting date, the EV/EBITDA valuation multiples for the portfolio are
Pepkor at 8x; Premier Group at 6.5x; Iceland Foods at 6.5x.
The current NAV break-down is as follows:
30 Sept 30 Sept 30 Sept 30 Sept
2012 2013 2013 2012
ZAR'm ZAR'm % EUR'm EUR'm
11 250 14 806 Investments 87 1 092 1 051
7 731 10 154 Pepkor 59 749 721
1 253 1 885 Premier Group 11 139 117
1 245 1 808 Iceland Foods 11 133 116
1 021 959 Other investments 6 71 97
1 344 1 460 Loan receivable 9 107 125
561 583 Cash and cash equivalents 3 44 54
11 9 Property and equipment 1 1
10 106 Accounts receivable 1 7 1
13 176 16 964 Total assets 100 1 251 1 232
82 162 Total liabilities 12 8
83 Borrowings 6
34 25 Deferred tax liability 2 3
48 54 Current liabilities 4 5
1 470 1 964 Preference share equity 145 138
11 624 14 838 Net Asset Value 1 094 1 086
Number of issued shares ('mil excluding
505 509 treasury shares) 509 505
2 301 2 917 Net asset value per share (cents) 215 215
Key highlights of the Group's portfolio are:
- Pepkor's 27% increase in sales for its year ended 30 June 2013 was driven by competitive pricing,
improvement in stock availability across its wide footprint and through the acquisition of Harris Scarfe.
The South African operations led by Pep and Ackermans posted strong results (including EBITDA
margin expansion), with the Group's rapidly expanding Eastern Europe operations delivering a pleasing
contribution. Group EBITDA increased by a healthy 25% and cash flow generation remains strong;
- Premier Group's focus on operating efficiencies and cost control combined with benefits arising from its
medium term investment programme resulted in sales increasing by 9% and EBITDA up by 46% on the
previous year. Premier Group's strategy is to convert from a focused staple food producer to a FMCG
branded business, offering higher margin products sold through its existing customer base. The May 2013
acquisition of confectionary brands Manhattan and Super C has been successfully integrated. Shareholders
were advised on 9 October 2013 that Premier Group has entered into a transaction, subject to regulatory
approvals in South Africa to acquire Lil-lets Group, a leading international feminine hygiene brand in
South Africa and the United Kingdom (UK). In addition, all conditions have been met for Premier Group's
acquisition of five independent bakeries in the Easter Cape operating in Port Elizabeth, East London
and Mthata that trade as "Star Bakeries" and "Mister Bread". This acquisition will be effective from 1
November 2013. Lastly Brait has acquired an additional 4.5% of Premier Group through the exercise of the
existing put and call option arrangements with former Premier Group's shareholders, bringing Brait's total
shareholding to 84.5% post 30 September 2013.
- Iceland Foods has traded better than the market during the period to 14 September 2013, increasing
its YOY sales by 6.2% in a challenging UK market. EBITDA and cash generation remains on plan and
the resulting de-gearing has facilitated a further 50 bps reduction on its debt funding rates (cumulative of
100 bps since inception). The weakening Rand has also enhanced Brait's carrying value for Iceland Foods.
Minimal cost leakage
Operating expenditure for the six month period of ZAR66 million (5% increase on HY2013) represents an
annualised ratio of 0.66% to AUM (FY2013: 0.68%) compared to the target of 0.85% or less. The annualised
net operating costs ratio to AUM after fee income for the period is 0.34% (FY2013: 0.34%).
Minimal balance sheet cash drag
The Group maintains minimal cash holdings on its balance sheet to avoid diluting overall target returns.
Cash and cash equivalents at 3.9% of NAV (HY2013: 4.8%) are well within the Group's benchmark maximum
of 25% of NAV. Credit facilities of R2.7bn are in place to fund future new investments.
Significant cash flow within the underlying assets
The main assets held by the Group continue to generate high earnings-to-cash conversion ratios. Operating
cash flows (post capex, before interest and tax paid) as a percentage of EBITDA for respective FY2013 are
Pepkor 65%; Premier Group 46% and Iceland Foods 87%. In addition, Brait received investment cash inflows
of ZAR90 million during the period comprising ZAR78 million from realisations within Other Investments and
ZAR12 million from the servicing of interest by Premier Group.
Predictable and consistent ordinary dividend to NAV yield
The Group's policy is a bonus share issue with an alternative cash election offer. The target is a dividend/NAV
yield of 1% 2.5% per annum. Bonus shares and dividends are considered annually when the results for each
year are published. The extent of any bonus shares and cash dividends are determined relative to net operating
cash flows which includes proceeds received on the realisation of loans and investments from time to time and
which are not earmarked for new projects. During the six month period under review, a bonus share issue (with
a cash dividend alternative) of 1% of ZAR26.64 NAV per share, relating to the year ended 31 March 2013, was
paid out in August 2013, with 91% of shareholders electing to receive bonus shares and 9% cash.
GROUP FUNDING POSITION
Following the successful placement of 15 million cumulative, non-participating preference shares on 6 August
2012, the Directors placed the remaining 5 million unissued Preference Shares in June 2013(the Tap Issue') by
way of private placement to select investors at a R100 par value per share.
The net proceeds raised from this Tap Issue were applied to settle the Group's drawn borrowings at the time,
thus fully restoring the Group's committed facilities, with the remaining balance advanced as a shareholder loan
to Premier Group for acquisition funding.
The Directors believe that the Group is both adequately and efficiently funded with cash and facilities of
R2.7 billion available for new investment opportunities. Alternative sources of funding to enhance flexibility and
efficiency continue to be explored.
PREFERENCE DIVIDEND DECLARED
The Directors have declared on 24 October 2013 an interim preference dividend of ZAR4.4321/EUR 0.328723
per share for the six months ended 30 September 2013. The issued cumulative, non-participating preference
share capital at the date of this declaration is 20 000 000 preference shares of EUR0.01/ZAR100 each.
A dividends withholding tax of 15% will be applicable to all shareholders who are not exempt from such tax.
If dividends tax does apply, the net dividend will be ZAR3.767285/EUR 0.279415.
The salient dates are as follows:
EVENT 2013
Last day to trade to receive a dividend Friday, 22 November
Shares commencing trading "ex-dividend" Monday, 25 November
Record date Friday, 29 November
Payment date Monday, 2 December
Share certificates may not be dematerialised or rematerialised, nor may transfers between the Luxembourg and
South African registers take place between Monday, 25 November 2013 and Friday, 29 November 2013, both
days inclusive.
Non-resident preference 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
Pepkor continues to perform well by leveraging off its strong brands and extensive distribution platform.
The Premier Group has improved its operational efficiencies while widening its product offering through
acquisitive growth. Iceland Foods continues to perform according to plan. The defensive nature of the portfolio
continues to be borne out and enhanced by the strong cash generation and growing geographic spread.
For and on behalf of the Board
Phillip Jabulani Moleketi
Non-Executive Chairman
29 October 2013
Directors (all non-executive)
PJ Moleketi (Chairman)*, CD Keogh##, RJ Koch##, Dr LL Porter##, CS Seabrooke*, HRW Troskie**, Dr CH Wiese*
##British **Dutch *South African
The Company is primarily listed on the Euro MTF market of the LuxSE and secondarily listed on the JSE.
Brait SE
Registration No: SE1
SPONSOR
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
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