Wrap Text
Unaudited interim results for the six months ended 30 September 2014 and preference 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 2014 AND PREFERENCE DIVIDEND DECLARATION
Highlights for the six months ended 30 September 2014
- NAV per share:
- 8.8% increase to R34.75 for the six month period
- 19.1% increase on comparative Sept 2013 NAV per share of R29.17
- CAGR for three years to Sept 2014:
- 23.8% on reported NAV per share
- 24.7% including bonus shares issued / cash dividend paid
- Strong operational performance of investments - solid profit growth and cash flow generation
- Dividend:
- Preference share dividend of R94.9 million (474.70 cents per share) for the six months ended 30 Sept 2014
declared on 16 Oct 2014
- Investment portfolio cash flows:
- R380 million received and R129 million invested during the six month period
- Treasury management:
- Net R381 million received from sale of treasury shares on date of inclusion in MSCI Emerging Markets Index
- R2.8 billion available cash and facilities for new investments
- Continue trading under cautionary which was released to the market on 19 Sept 2014
Salient features for the six months ended 30 September 2014
Audited Unaudited Unaudited Audited
year ended six months six months year ended
Restated^ Restated^ Restated^ Restated^
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2014 2013 2014 2014 2013 2014
R'm R'm R'm EUR'm EUR'm EUR'm
PERFORMANCE MEASURES
3 195 2 917 3 475 Net asset value (NAV) per share (cents) 244 215 220
– 10% 9% NAV per share increase for the six month period n/a n/a n/a
20% 27% 19% NAV per share increase for the twelve month period n/a n/a n/a
25% 26% 24% NAV per share three year CAGR# n/a n/a n/a
0.66% 0.66% 0.64% Operating cost: Assets Under Management (AUM)* n/a n/a n/a
0.33% 0.34% 0.37% Operating cost after fee income: AUM n/a n/a n/a
354 92 380 Cash inflow from investment portfolio 27 7 24
DIVIDENDS
31.95 – – Ordinary dividends per share paid (cents) – – 2.24
443.21 443.21 474.70 Interim Preference dividend per share declared/paid (cents) 33.3052 32.8723 32.8723
449.34 – – Final Preference dividend per share paid (cents) – – 31.5439
FINANCIAL STATISTICS
27 330 21 958 37 616 Market capitalisation 2 632 1 603 1 835
5 321 4 275 7 283 Closing ordinary share price (cents) 510 312 357
514 514 516 Ordinary shares in issue (m) 516 514 514
(5) (5) – Treasury shares (m) – (5) (5)
509 509 516 Ordinary shares outstanding (m) 516 509 509
# Compound Annual Growth Rate "CAGR"
* AUM represents the aggregate of the Group's total assets and Brait IV invested capital under management
^ Restated due to the adoption of IFRS 10 – see note 2 for further detail
Condensed group statement of financial position as at
Audited Unaudited Unaudited Audited
year ended six months six months year ended
Restated Restated Restated Restated
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2014 2013 2014 2014 2013 2014
R'm R'm R'm Notes EUR'm EUR'm EUR'm
ASSETS
17 760 16 317 18 963 Non-current assets 1 330 1 203 1 225
17 229 14 848 18 415 Investments 3 1 292 1 095 1 188
523 1 460 548 Loan receivable 4 38 107 36
8 9 – Property and equipment – 1 1
662 647 955 Current assets 67 48 45
342 75 333 Accounts receivable 23 5 23
320 572 622 Cash and cash equivalents 5 44 43 22
18 422 16 964 19 918 Total assets 1 397 1 251 1 270
EQUITY AND LIABILITIES
18 211 16 802 19 899 Total equity 1 396 1 239 1 255
16 247 14 838 17 935 Ordinary shareholder equity and reserves 6 1 258 1 094 1 120
1 964 1 964 1 964 Preference shareholder equity 7 138 145 135
164 108 – Non-current liabilities – 8 11
164 83 – Borrowings 8 – 6 11
– 25 – Deferred tax liability – 2 –
47 54 19 Current liabilities 1 4 4
47 45 19 Accounts payable and other liabilities 1 3 4
– 9 – Provisions – 1 –
18 422 16 964 19 918 Total equity and liabilities 1 397 1 251 1 270
514 514 516 Ordinary shares in issue (m) 516 514 514
(5) (5) – Treasury shares (m) – (5) (5)
509 509 516 Outstanding shares for NAV calculation (m) 516 509 509
3 195 2 917 3 475 Net asset value per share (cents) 244 215 220
Condensed group statement of comprehensive income for the six months ended 30 September
Audited Unaudited Unaudited Audited
year ended six months six months year ended
Restated Restated Restated Restated
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2014 2013 2014 2014 2013 2014
R'm R'm R'm Notes EUR'm EUR'm EUR'm
2 683 1 331 1 182 Investment gains 82 104 196
449 156 327 Other investment income 23 12 34
(143) (66) (75) Operating expenses (4) (5) (11)
(57) (5) (9) Finance costs (1) – (5)
(1) (1) – Indirect taxation – – –
14 (1) (8) Direct taxation (1) – 1
2 945 1 414 1 417 Profit for the period 9 99 111 215
16 44 (6) Translation adjustments 19 (148) (220)
2 961 1 458 1 411 Comprehensive income for the period 118 (37) (5)
545 262 259 Earnings/Headline earnings per share (cents) – basic & diluted 9 18 20 40
Condensed group statement of changes in equity for the six months ended 30 September
13 458 13 458 16 247 Ordinary shareholders' balance at beginning of period 1 120 1 137 1 137
2 945 1 414 1 417 Profit for the period 99 111 215
16 44 (6) Translation adjustments 19 (148) (220)
(5) – 381 Net sale/(purchase) of treasury shares 27 – –
(155) (66) (90) Earnings attributed to preference shares (6) (5) (11)
(12) (12) (14) Ordinary dividends paid (cash election) 6 (1) (1) (1)
16 247 14 838 17 935 Ordinary shareholders' balance at end of period 1 258 1 094 1 120
1 469 1 469 1 964 Preference shareholders' balance at beginning of period 135 124 124
495 495 – Preference share issue net of costs – 36 36
– – Translation adjustments 3 (15) (25)
155 66 90 Earnings attributed to preference shares 6 5 11
(155) (66) (90) Preference dividend paid (6) (5) (11)
1 964 1 964 1 964 Preference shareholders' balance at end of period 138 145 135
Group statement of cash flows for the six months ended 30 September
Audited Unaudited Unaudited Audited
year ended six months six months year ended
Restated Restated Restated Restated
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2014 2013 2014 2014 2013 2014
R'm R'm R'm EUR'm EUR'm EUR'm
Cash flows from operating activities:
211 71 137 Investment proceeds 10 6 15
98 40 43 Fees received 3 3 7
57 14 84 Interest received 6 1 4
83 – 147 Dividends received 10 – 6
(151) (67) (81) Operating expenses paid (6) (6) (10)
(10) (3) (6) Taxation paid – – (1)
(19) (3) (9) Interest paid – – (1)
269 52 315 Operating cash flow before investments 23 4 20
(1 805) (376) (129) Purchase of investments (9) (27) (124)
(1 536) (324) 186 Net cash from/(used) in operating activities 14 (23) (104)
(2) (1) – Acquisition of property and equipment – – –
(2) (1) – Net cash used in investing activities – – –
495 495 – Preference share issue net of costs – 36 34
1 000 – – Loan received from Fleet – – 69
(4) (52) (169) Net repayment of long term borrowings (12) (4) –
(5) – 381 Net sale/(purchase) of treasury shares 27 – –
(12) (12) (14) Ordinary dividend paid (cash election) (1) (1) (1)
(155) (66) (90) Preference dividend paid (6) (5) (11)
1 319 365 108 Net cash from financing activities 8 26 91
(219) 40 294 Net increase/(decrease) in cash and cash equivalents 22 3 (13)
46 39 8 Effects of exchange rate changes on cash and cash equivalents – 6 1
493 493 320 Cash and cash equivalents at beginning of period 22 34 34
320 572 622 Cash and cash equivalents at end of period 44 43 22
Notes to the condensed financial statements for the six months ended 30 September
1. Accounting Policies
1.1 Basis for preparation
The financial statements of the Group are prepared on the going concern principle, in accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union. These condensed financial statements are presented in accordance with IAS34: Interim Financial
Reporting. Except as detailed below (in notes 1.2 and 1.3), the accounting policies and methods of computation are consistent with those applied
in the annual financial statements for the year ended 31 March 2014.
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 (£/GBP) and SA Rand for the respective jurisdictions in which it operates. The financial statements
have been prepared using the following exchange rates:
30 September 2014 31 March 2014 30 September 2013
Closing Average Closing Average Closing Average
USD/ZAR 11.2846 10.6564 10.5325 10.1178 10.0278 9.7366
GBP/ZAR 18.2964 17.8637 17.5500 16.1108 16.2283 15.0327
EUR/ZAR 14.2536 14.3628 14.5028 13.5779 13.5628 12.8164
USD/EUR 0.7917 0.7419 0.7262 0.7451 0.7394 0.7597
GBP/EUR 1.2836 1.2437 1.2101 1.1866 1.1965 1.1729
1.2 Adoption of new and revised standards and interpretations
In the current period, all the new and revised standards and interpretations issued by the International Accounting Standards Board ("IASB") and
the IFRS Interpretations Committee ("IFRIC") of the IASB, as adopted by the European Union, that are relevant to the Group's operations and
effective for annual reporting periods commencing on 1 April 2014 have been adopted. Their adoption has not had a significant impact on the
presentation of the financial statements, except as described below.
The adoption of the investment entity exemption in IFRS 10: Consolidated Financial Statements has resulted in the holding company and certain
subsidiaries being classified as Investment Entities. Subsidiaries that solely perform an investment holding function are accounted for as Investment
Entities at Fair Value through profit and loss (Investment Entities at FVTPL). Subsidiaries that are both investment holding and service providers
continue to be consolidated in accordance with IFRS 10.
Under the transitional provisions of IFRS 10, the change in accounting for those subsidiaries now measured at FVTPL is treated retrospectively.
The resulting restatements to the prior periods are set out in the Restatement note (see note 2). These restatements do not result in any change to
the Group's Net Asset Value per share or Shareholder Equity reported for the prior periods.
1.3 Principles of consolidation
1.3.1 Accounting for subsidiaries, joint ventures and associates
An investee is a subsidiary where the Group is exposed to, or has rights to, variable returns from its involvement with that investee and has
the ability to affect those returns through its power over the investee. In accordance with IFRS 10:
- Subsidiaries that are not Investment Entities are consolidated by the Group (Consolidated Subsidiaries)
- Subsidiaries that solely perform an investment holding function are exempt from consolidation and are measured at FVTPL in terms of
IAS 39: Financial Instruments: Recognition and Measurement (Investment Entities at FVTPL). Changes in fair value are recognised in
profit or loss in the period of change.
- Subsidiaries that perform both an investment holding function and provide services are consolidated (Consolidated Investment Entities).
Investees in which the Group has significant influence, but not control, are accounted for at FVTPL (scoped out of IAS 28: Investments in
Associates and Joint Ventures and into IAS 39). Changes in fair value are recognised in profit or loss in the period of change.
1.3.2 Basis of consolidation for Consolidated Subsidiaries and Consolidated Investment Entities
On acquisition date, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values. Any excess
of acquisition cost over fair value of the identifiable net assets acquired, is recognised as goodwill. Any shortfall in the acquisition
cost below the fair value of the identifiable net assets acquired (ie discount), is credited to profit and loss in the period of acquisition.
Minority shareholders are stated at their proportion of the fair value of the assets and liabilities recognised.
The results of Consolidated Subsidiaries and Consolidated Investment Entities acquired or disposed of during the period are included in
the statement of comprehensive income from their effective date of acquisition up to their effective date of disposal. Where necessary,
adjustments are made to the financial statements of Consolidated Subsidiaries and Consolidated Investment Entities to align their policies
with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
2 Restatement
Under the transitional provisions for the adoption of IFRS 10, the comparative disclosures for Investment Entities at FVTPL are required to be applied
retrospectively. The Group's valuation methodology remains unchanged. The impact to the Group of the resulting restatements to the prior period are
set out below. As the restatements are not considered significant, with no change to the Group's key reporting metric of Net Asset Value per share or
Shareholder Equity previously reported, their effect is shown for the 30 September 2013 and 31 March 2014 comparative periods only.
2.1 Restatement impact on condensed group statement of financial position
The IFRS 10 adjustments to cash and cash equivalents reflect the aggregate cash position held by the Group's Investment Entities at FVTPL.
Previously, these cash balances were consolidated with the rest of the Group's cash holdings. Post the adoption of IFRS 10, these cash
balances now form part of the fair value recognised for these Investment Entities at FVTPL in the Investment line of the Group's statement of
financial position.
Previously IFRS 10 IFRS 10 Previously
reported Adjustment Restated Restated Adjustment reported
R'm R'm R'm 31 March 2014 EUR'm EUR'm EUR'm
17 211 18 17 229 Investments 1 188 1 1 187
339 (19) 320 Cash and cash equivalents 22 (1) 23
(1) 1 – Deferred tax liability – – –
17 549 – 17 549 Total for above items 1 210 – 1 210
Previously IFRS 10 IFRS 10 Previously
reported Adjustment Restated Restated Adjustment reported
R'm R'm R'm 30 September 2013 EUR'm EUR'm EUR'm
14 806 42 14 848 Investments 1 095 3 1 092
583 (11) 572 Cash and cash equivalents 43 (1) 44
106 (31) 75 Accounts receivable 5 (2) 7
15 495 – 15 495 Total for above items 1 143 – 1 143
2.2 Restatement impact on condensed group statement of comprehensive income
The Group's investment in Iceland Foods is denominated in GBP. Resulting foreign exchange rate gains and losses were previously recognised in
comprehensive income as translation adjustments. The subsidiary that holds the investment in Iceland Foods is classified as an Investment Entity
at FVTPL. As a result, foreign currency exchange rate gains and losses are restated and now recognised as part of investment gains in profit for the
period. This results in a corresponding restatement of Earnings/Headline earnings per share.
Previously IFRS 10 IFRS 10 Previously
reported Adjustment Restated Restate Adjustment reported
R'm R'm R'm 31 March 2014 EUR'm EUR'm EUR'm
2 348 335 2 683 Investment gains 196 23 173
452 (3) 449 Other investment income 34 – 34
(144) 1 (143) Operating expenses (11) – (11)
(44) – (44) Finance costs and taxation (4) – (4)
2 612 333 2 945 Profit for the year 215 23 192
349 (333) 16 Translation adjustments (220) (23) (197)
2 961 – 2 961 Comprehensive income (5) – (5)
480 65 545 Earnings/Headline earnings per share (cents) 40 5 35
Previously IFRS 10 IFRS 10 Previously
reported Adjustment Restated Restated Adjustment reported
R'm R'm R'm 30 September 2013 EUR'm EUR'm EUR'm
1 092 239 1 331 Investment gains 104 19 85
164 (8) 156 Other investment income 12 (1) 13
(66) – (66) Operating expenses (5) – (5)
(7) – (7) Finance costs and taxation – – –
1 183 231 1 414 Profit for the period 111 18 93
275 (231) 44 Translation adjustments (148) (18) (130)
1 458 – 1 458 Comprehensive income (37) – (37)
216 46 262 Earnings/Headline earnings per share (cents) 20 3 17
2.3 Restatement impact on Group statement of cash flows
The change to the Group's reported cash and cash equivalents arises from the reclassification discussed in note 2.1 above.
Previously IFRS 10 IFRS 10 Previously
reported Adjustment Restated Restated Adjustment reported
R'm R'm R'm 31 March 2014 EUR'm EUR'm EUR'm
219 (8) 211 Investment proceeds 15 – 15
99 (1) 98 Fees received 7 – 7
(152) 1 (151) Operating expenses paid (10) – (10)
(11) 1 (10) Taxation paid (1) – (1)
(367) – (367) Total for unaffected cash flow items (24) – (24)
(212) (7) (219) Net decrease in cash and equivalents (13) – (13)
48 (2) 46 Effects of exchange rates changes on cash 1 8 (7)
503 (10) 493 Cash and cash equivalents at beginning of year 34 (9) 43
339 (19) 320 Cash and cash equivalents at end of year 22 (1) 23
Previously IFRS 10 IFRS 10 Previously
reported Adjustment Restated Restated Adjustment reported
R'm R'm R'm 30 September 2013 EUR'm EUR'm EUR'm
78 (7) 71 Investment proceeds 6 – 6
41 (1) 40 Fees received 3 – 3
(68) 1 (67) Operating expenses paid (6) – (6)
(4) – (4) Total for unaffected cash flow items – – –
47 (7) 40 Net increase in cash and cash equivalents 3 – 3
33 6 39 Effects of exchange rate changes on cash 6 8 (2)
503 (10) 493 Cash and cash equivalents at beginning of period 34 (9) 43
583 (11) 572 Cash and cash equivalents at end of period 43 (1) 44
3. Investments
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 the carrying value is based on the applicable unlisted investment valuation methodology set out below.
The Group applies a number of methodologies to determine and assess the reasonableness of fair value for unlisted investments, which may include
the following:
- Earnings multiple
- Recent transaction prices
- Net asset value
- Discounted cash flow
- Price to book multiple
The primary valuation model utilised for valuing unlisted investee companies is the maintainable earnings multiple model.
Maintainable earnings are derived with reference to the mix of prior year audited and latest available current year forecast earnings before interest, tax,
depreciation and amortisation (EBITDA), adjusted for any non-recurring income/expenditure. As the year progresses so the weighting is increased
towards the portfolio company's forecast.
The directors decide on an appropriate group of comparable quoted companies from which to base the EV/EBITDA multiple. The average multiple
of the comparable quoted companies, derived as at the date of valuation, is adjusted for points of difference to the portfolio company being valued.
The equity valuation takes consideration of the portfolio company's net debt/cash on hand as per its latest available financial results. Below are the
key valuation metrics for each significant portfolio company. Further valuation information can be obtained from the 30 September 2014 investor
presentation on the Group's website, www.brait.com
Audited Unaudited Unaudited Audited
year ended six months six months year ended
Restated Restated Restated Restated
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2014 2013 2014 Valuation metrics used @ 30 Sept 2014 2014 2013 2014
R'm R'm R'm EBITDA Multiple Net Debt EUR'm EUR'm EUR'm
11 145 10 154 11 546 Pepkor (R'm) 4 410 8.0 1 082 810 749 768
3 053 1 885 3 862 Premier (R'm) 764 7.5 2 947 271 139 211
1 513 1 808 1 400 Iceland Foods (GBP'm) 184 6.5 793 98 133 104
1 518 1 001 1 607 Other Investments varied 113 74 105
17 229 14 848 18 415 Total investments 1 292 1 095 1 188
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 took place in the current or prior period.
Level 1 Level 3 Total Total Level 1 Level 3
R'm R'm R'm 30 September 2014 EUR'm EUR'm EUR'm
– 11 546 11 546 Pepkor 810 – 810
– 2 388 2 388 Premier 168 – 168
– 1 380 1 380 Iceland Foods 97 – 97
11 1 313 1 324 Other Investments 93 1 92
11 16 627 16 638 Investment in equity instruments # 1 168 1 1 167
# Excludes loan investments
Audited Unaudited Unaudited Audited
year ended six months six months year ended
Restated Restated Restated Restated
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2014 2013 2014 2014 2013 2014
R'm R'm R'm EUR'm EUR'm EUR'm
4. Loan Receivable
1 523 1 460 1 595 Loan to Fleet Holdings Ltd (Fleet) 112 107 104
(1 000) – (1 047) Loan from Fleet (74) – (68)
523 1 460 548 Net loan to Fleet 38 107 36
Both loans bear interest at the 3 month Johannesburg Inter
Bank Acceptance Rate (JIBAR) plus 3.45%, with the right to
roll up interest. The loans are repayable at the end of their term
(4 July 2016) with an option to extend for a further five years.
Shares pledged by Fleet are subject to a joint and several
pledge to both the Group and Lenders who financed the loan
from Fleet (The Standard Bank of SA Limited and FirstRand
Bank Limited, trading through its Rand Merchant Bank division).
The pledged shares at 30 September 2014 were 92.9 million
(Sept 2013: 91.6 million) The closing Brait share price of
R72.83 on 30 September 2014 results in a cover ratio on the
R1,595 million/EUR112 million loan of 424% (Sept 2013: 266%).
5. Cash and cash equivalents
320 572 622 Balances with banks 44 43 22
161 314 459 – ZAR cash 33 24 11
159 258 163 – USD cash 11 19 11
Audited Unaudited Unaudited Audited
year ended six months six months year ended
Restated Restated Restated Restated
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2014 2013 2014 2014 2013 2014
R'm R'm R'm EUR'm EUR'm EUR'm
6. 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 2014 513 632 676
Bonus share issue 2 857 343*
30 September 2014 516 490 019
Dividend
(12) (12) (14) 8% of ordinary shareholders elected to receive the cash alternative (1) (1) (1)
* The par value of the bonus shares issued are accounted for in Ordinary
Share Premium. The August 2014 bonus share issue was converted at
60 day Volume Weighted Average Price (VWAP) of R52.62 per share
translating into 0.60718 shares for every 100 shares held.
7. Preference shares
1 964 1 964 1 964 Authorised 138 145 135
20 000 000 cumulative, non-participating preference shares with a
nominal value of EUR0.01 each.
Issued
20 000 000 cumulative, non-participating perpetual preference
shares issued at EUR9.50/R100.00 per share with a nominal value
of EUR0.01 each, with a primary listing on the LuxSE and secondary
listing on the JSE.
The discretionary preference dividend is calculated on a daily basis
at 104% of the SA Prime interest rate and is payable after each
reporting date. Arrear preference dividends shall accrue interest at
144% of the SA Prime interest rate.
Audited Unaudited Unaudited Audited
year ended six months six months year ended
Restated Restated Restated Restated
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2014 2013 2014 2014 2013 2014
R'm R'm R'm EUR'm EUR'm EUR'm
8. Borrowings
164 83 – Loan from First Rand Bank Limited (trading through its Rand – 6 11
Merchant Bank division) and The Standard Bank of South Africa
Limited is Rand denominated, bears interest at Johannesburg
Inter Bank Acceptance Rate (JIBAR) plus 2.7% and interest is
repayable semi-annually, with a right to rollup. The facility amount
outstanding is repayble on maturity of the facility on 4 July 2016,
with an option to extend for five years.
9. Headline earnings reconciliation
2 945 1 414 1 417 Profit for the period 99 111 215
(89) (89) – Preference dividend paid December 2013 – (7) (7)
(90) – – Preference dividend paid June 2014 – – (7)
– – (95) Preference dividend declared 16 October 2014 (7) – –
2 766 1 325 1 322 Earnings/Headline earnings 92 104 201
507 506 510 Weighted average ordinary shares in issue (m) – basic & diluted 510 506 507
545 262 259 Earnings/Headline earnings per share (cents) – basic & diluted 18 20 40
Audited Unaudited Unaudited Audited
year ended six months six months year ended
Restated Restated Restated Restated
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2014 2013 2014 2014 2013 2014
R'm R'm R'm EUR'm EUR'm EUR'm
10. Contingent liabilities and commitments
10.1 Contingencies
33 38 33 Sureties 2 3 3
1 024 836 1 389 Guarantees* 97 62 71
* R495 million/EUR35 million (2013: R428 million/EUR32 million) of the guarantee
total is provided to the lenders to the Pepkor SPV. The remaining
R894 million/EUR62 million relates to a guarantee provided to the lenders
to the Financial Services Cluster. These guarantees are provided in order
to reduce the interest paid by these entities on certain tranches of
their borrowings.
1 057 874 1 422 Sureties and guarantees 99 65 74
10.2 Commitments
111 118 102 Private equity funding commitments 7 9 8
Rental commitments
2 4 2 – Within one year – – –
3 10 1 – Between one and five years – 1 –
116 132 105 Total commitments 7 10 8
10.3 Other
The Group has rights and obligations in terms of shareholder or
purchase and sale agreements relating to its present and former
investments.
Audited Unaudited Unaudited Audited
year ended six months six months year ended
Restated Restated Restated Restated
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2014 2013 2014 2014 2013 2014
R'm R'm R'm EUR'm EUR'm EUR'm
11. Related Parties
Trading balances
During the period, Group companies entered into the following
transactions with related parties who are not members of the Group
Related party balances and transactions
Statement of financial position balances
523 1 460 548 – Loan receivable 38 107 36
Profit from operations include:
(8) (4) (4) – Non-executive directors fees – – (1)
124 61 25 – Interest income 2 4 9
12. Cautionary announcement and subsequent events
A cautionary announcement was released to the market on 19 September 2014. The Group continues to trade under the cautionary announcement as
at the reporting date. No events have taken place since 30 September 2014 and the reporting date, which would have a material impact on either the
financial position or operating results of the Group.
REVIEW OF OPERATIONS
The Board of Directors is pleased to report on the interim results for the six months ended 30 September 2014.
Value drivers
Growth in Net Asset Value (NAV) is the Company's key performance measure and the following additional factors are the other core value drivers of
the business:
– Low cost to Assets Under Management (AUM) ratio;
– Minimal balance sheet cash drag;
– Significant cash flow within the investment portfolio; and
– Predictable and consistent ordinary dividend to closing 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. The CAGR for the increase in
reported NAV for the three years to 30 September 2014 is 23.8%. Including ordinary share bonus issues and alternative election cash dividends paid during
this period, the return CAGR over the same period to shareholders is 24.7%. The Group's NAV per share of ZAR34.75 at 30 September 2014, represents an
8.8% increase for the six month period and a 19.1% increase on the comparative 30 September 2013 NAV per share of ZAR29.17.
Growth in EBITDA and cash flow generation of investee companies continue to be the primary drivers of NAV.
At this reporting date, the EV/EBITDA valuation multiples are unchanged for Pepkor at 8x and Iceland Foods at 6.5x. The EV/EBITDA valuation multiple for
Premier has changed from 6.5x to 7.5x as a function of recognizing Premier's FY2014 acquisitions on an earnings basis and the level of discount to Premier's
listed peer group that has prevailed over the past eighteen months. The respective discount to peer average multiples at 30 September 2014 are Pepkor
(at 42%), Premier (at 48%) and Iceland Foods (at 29%).
The current NAV breakdown is as follows:
30 Sept 30 Sept 30 Sept 30 Sept
2013 2014 2014 2013
ZAR'm ZAR'm % EUR'm EUR'm
14 848 18 415 Investments 92 1 292 1 095
10 154 11 546 Pepkor 58 810 749
1 885 3 862 Premier 19 271 139
1 808 1 400 Iceland Foods 7 98 133
1 001 1 607 Other investments # 8 113 74
1 460 548 Loan receivable 3 38 107
572 622 Cash and cash equivalents # 3 44 43
9 – Property and equipment - – 1
75 333 Accounts receivable # 2 23 5
16 964 19 918 Total assets 100 1 397 1 251
162 19 Total liabilities 1 12
83 – Borrowings – 6
79 19 Accounts payable and provisions 1 6
1 964 1 964 Preference share equity 138 145
14 838 17 935 Net asset value 1 258 1 094
509 516 Number of issued ordinary shares ('mil‚ excluding treasury shares) 516 509
2 917 3 475 Net asset value per share (cents) 244 215
# The September 2013 reported values have been restated as a result of the adoption of IFRS 10 Consolidated Financial Statements
KEY HIGHLIGHTS OF THE GROUP PORTFOLIO ARE:
- Pepkor's sales for its year ended 30 June 2014 are up 16% on FY2013. EBITDA margin increased to 11.5% (FY2013: 11.2%), resulting in EBITDA
increasing by 18% on FY2013. The Group added a net 292 retail outlets during FY2014 (9% growth) closing with 3,710 stores in operation. Free cash
flow generation remains strong, facilitating Pepkor paying a dividend at the end of June 2014 of ZAR615 million (Brait received ZAR228 million).
- Premier's core operations (milling and baking) traded well during its financial year to June 2014. Sales increased 24% on FY2013 with EBITDA margin
expanding from 6.7% to 7.4%, generating an increase in EBITDA of 36% on FY2013. Bakeries grew volumes by 6%, mostly in the informal market
and milling performed well in the face of volatile commodity prices. Premier's November 2013 acquisitions (Star Bakeries and Lil-lets) and June
2014's acquisition of Ngwane Mills in Swaziland, have been successfully integrated and performing according to plan. From 30 September 2014,
these acquisitions are recognised in Brait's valuation on an earnings basis (previously carried at cost). Brait continues to exercise existing put and call
agreements with former shareholders, holding 84.9% of Premier at 30 September 2014.
- Iceland Foods' sales for the 12 weeks to 20 June 2014 increased by 3.2% on the comparative period. While cash generation remains on plan, the
challenging UK market conditions have resulted in margin pressure, resulting in a downgrade to EBITDA. The positive effect of the GBP/ZAR exchange
rate weakening from ZAR17.55 at 31 March 2014 to ZAR18.30 at 30 September 2014 has largely mitigated this.
Low cost to AUM ratio
Operating expenditure for the six-month period of ZAR75 million represents an annualised ratio of 0.64% to AUM (HY2014: 0.66%) compared to the target
of 0.85% or less. The annualised net operating costs ratio (after fee income) to AUM for the period is 0.37% (HY2014: 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 3.5% of NAV
(HY2014: 3.9%) are well within the Group's benchmark maximum of 25% of NAV.
Significant cash flow within the underlying assets
Operating cash flows (post capex, before interest and tax paid) as a percentage of EBITDA are Pepkor 69%; Premier 22% and Iceland Foods 84%.
In addition, Brait received investment cash inflows of ZAR380 million during the period comprising: ZAR228 million dividend income from Pepkor (Pepkor
paid a total dividend of ZAR615 million during June 2014); ZAR79 million from the servicing of interest by Premier and ZAR73 million from realisations within
the Other Investments portfolio.
Predictable and consistent ordinary dividend to NAV yield
The Group's policy is an ordinary bonus share issue or cash dividend of 1% to 2.5% of closing NAV. 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 or required for
liquidity. During the six month period under review, a bonus share issue (with a cash dividend alternative) of 1% of ZAR31.95 NAV per share, relating to the
year ended 31 March 2014, was paid out in August 2014, with 92% of shareholders receiving bonus shares and 8% electing cash.
Group funding position
Coinciding with Brait's entry into the MSCI Emerging Markets Index, the Group increased liquidity in its stock and sold treasury shares. Part of the
ZAR381 million net proceeds received was applied to pay down the Group's drawn borrowings and fund Premier's acquisition of Ngwane Mills.
The Directors believe that the Group's ungeared balance sheet with cash and facilities available for investment of ZAR2.8 billion sees it well placed.
PREFERENCE DIVIDEND DECLARED
The Directors have declared on 16 October 2014 an interim preference dividend of 474.696 ZAR cents/33.3052 EUR cents per share for the six months ended
30 September 2014. The issued cumulative, non-participating preference share capital at the date of this declaration is 20 000 000 preference shares
of ZAR100 each.
A dividend 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 403.4916 ZAR cents/28.30942 EUR cents per share.
The salient dates are as follows:
EVENT 2014
Last day to trade to receive a dividend Friday, 21 November
Shares commencing trading "ex-dividend" Monday, 24 November
Record date Friday, 28 November
Payment date Monday, 1 December
Share certificates may not be dematerialised or rematerialised, nor may transfers between the Luxembourg and South African registers take place between
Monday, 24 November 2014 and Friday, 28 November 2014, 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 produced a strong set of FY2014 results given the prevailing economic environment: South Africa is the group's underpin with its significant
footprint and product offering aimed at customers in the lower Living Standards Measures (LSM's); Eastern Europe continues its aggressive store
roll-out adding 102 retail stores (23% growth) during the year in Poland and neighbouring countries; Africa generated strong growth in sales (up 40%) and
improved margins; Australia remains a challenging environment given the poor state of the lower-end discretionary retail market. A number of significant
changes have been made and early signs of their positive impact are visible as progress is made on Australia's three-year plan;
- Premier traded well in its FY2014 delivering on its strategy of operational efficiencies and consistent quality which enhanced margins on its core staples
business. The acquisitions completed during the year have been integrated and the business starts its FY2015 well placed to leverage these higher
margin products across its deep distribution platform;
- Iceland Foods continues to generate strong cash flows and management is alert and proactive in dealing with the challenging UK environment.
The defensive nature of the portfolio continues to be borne out and enhanced through the generation of strong cash flow and growing geographic spread.
A cautionary announcement was released to the market on 19 September 2014. The Group continues to trade under the cautionary announcement as at
the reporting date.
For and on behalf of the Board
Phillip Jabulani Moleketi
Non-Executive Chairman
22 October 2014
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
Brait SE
Registration No: SE1
Sponsor
Rand Merchant Bank (a division of FirstRand Bank Limited)
Date: 22/10/2014 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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