Wrap Text
Audited results for the year ended 31 March 2015 and proposed bonus share issue or, alternatively, cash dividend
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")
2015 AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2015 AND PROPOSED BONUS SHARE ISSUE OR, ALTERNATIVELY, CASH DIVIDEND
Highlights FYE 31 March 2015
NAV per share
R77.12
Increase on FY2014's R31.95 NAV per share
- 141.4%
Uplift primarily due to the realisation of Pepkor
- 7.0x cost multiple
- 69.5% IRR
3 year CAGR (benchmark of 15%)
- 55.3% on reported NAV per share
- 55.8% including bonus shares issued / cash dividend paid
Dividends
Proposed ordinary share bonus issue
(with cash dividend alternative)
- 77.12 cents per share (141.4% increase on FY2014)
Preference share dividend declared
(for the six months ended 31 March 2015)
- 479.68 cents per share (R95.9m in total)
Investment
portfolio flows
Pepkor realised on 30 March 2015
- R30.010bn total consideration received:
- R15.086bn cash
- R14.924bn value for 200m Steinhoff shares (1)
Rest of portfolio
- R746m received
- R841m invested
(1) Valued at the 30 March 2015 closing Steinhoff share price of R74.62
Virgin Active
- Brait announced on 16 April 2015 the acquisition of a c.80% interest in Virgin Active, a leading international health
club operator, for c.£682m(1)
- Brait will partner alongside an experienced management team, the founder and the Virgin Group
- Brait announced on 15 May 2015 the acquisition of a c.90% interest in New Look, a leading fast fashion
multichannel retailer operating in the value segment, for c.£780m (expected completion date of 25 June 2015)
New Look
- Brait will partner alongside an experienced management team and the founder
- New Look raised £1.2 billion in Bonds on 12 June 2015
- Proceeds raised will refinance existing debt resulting in average cost reducing from c.9.42% to 6.25%
Brait's inclusion in indices
MSCI Emerging Markets Index on 28 August 2014
FTSE / JSE Africa Series Top 40 Index on 22 June 2015
(1) Virgin Active acquisition remains subject to approval by the South African and Namibian competition authorities
Salient features for the year ended 31 March 2015
Restated^ Restated^
Audited Audited Audited Audited
31 March 31 March 31 March 31 March
2014 2015 2015 2014
R'm R'm EUR'm EUR'm
PERFORMANCE MEASURES
3 195 7 712 Net asset value (NAV) per share (cents) 592 220
20% 141% NAV per share increase for the year 169% (2%)
25% 55% NAV per share three year CAGR# 43% 9%
0.66% 0.44% Operating cost: Assets Under Management (AUM)* 0.44% 0.66%
0.33% 0.27% Operating cost after fee income: AUM 0.27% 0.33%
346 14 671 Cash inflow from investment portfolio 1 127 24
DIVIDENDS
31.95 77.12 Proposed/paid ordinary dividends per share (cents) 5.79 2.24
443.21 474.70 Interim preference dividend per share paid (cents) 33.3052 32.8723
449.34 479.68 Final preference dividend per share declared/paid (cents) 35.9842 31.5439
FINANCIAL STATISTICS
27 330 43 127 Market capitalisation 3 309 1 835
5 321 8 350 Closing ordinary share price (cents) 641 357
514 516 Ordinary shares in issue (m) 516 514
(5) (6) Treasury shares (m) (6) (5)
509 510 Ordinary shares outstanding (m) 510 509
# 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 details
Summary consolidated statement of financial position as at 31 March
Restated Restated
Audited Audited Audited Audited
31 March 31 March 31 March 31 March
2014 2015 2015 2014
R'm R'm Notes EUR'm EUR'm
ASSETS
17 760 27 718 Non-current assets 2 129 1 225
17 229 27 144 Investments 3 2 085 1 188
523 574 Loan receivable 4 44 36
8 – Property and equipment – 1
662 13 701 Current assets 1 052 45
342 12 Accounts receivable 1 23
320 13 689 Cash and cash equivalents 5 1 051 22
18 422 41 419 Total assets 3 181 1 270
EQUITY AND LIABILITIES
16 247 39 369 Ordinary shareholders equity and reserves 6 3 023 1 120
1 964 1 964 Preference shareholders equity 7 151 135
164 – Non-current liabilities – 11
164 – Borrowings 8 – 11
47 86 Current liabilities 7 4
47 86 Accounts payable and other liabilities 7 4
18 422 41 419 Total equity and liabilities 3 181 1 270
514 516 Ordinary shares in issue (m) 516 514
(5) (6) Treasury shares (m) (6) (5)
509 510 Outstanding shares for NAV calculation (m) 510 509
3 195 7 712 Net asset value per share (cents) 592 220
Summary consolidated statement of comprehensive income for the year ended 31 March
Restated Restated
Audited Audited Audited Audited
31 March 31 March 31 March 31 March
2014 2015 2015 2014
R'm R'm Notes EUR'm EUR'm
2 683 22 979 Investment gains 1 686 196
449 611 Other investment income 45 34
(143) (201) Operating expenses (15) (11)
(57) (48) Finance costs (3) (5)
13 (7) Taxation (1) 1
2 945 23 334 Profit for the year 1 712 215
Comprehensive income for the year
16 9 Translation adjustments 208 (220)
2 961 23 343 Comprehensive income/(loss) for the year 1 920 (5)
545 4 527 Earnings/Headline earnings per share (cents) – basic and diluted 9 332 35
Summary consolidated statement of changes in equity for the year ended 31 March
13 458 16 247 Ordinary shareholders' balance at beginning of the year 1 120 1 137
2 945 23 334 Profit for the year 1 712 215
16 9 Translation adjustments 208 (220)
(5) (22) Net purchase of treasury shares (2) –
(12) (14) Ordinary dividends paid (cash election) 6 (1) (1)
(155) (185) Earnings attributed to preference shares (14) (11)
16 247 39 369 Ordinary shareholders' balance at end of the year 3 023 1 120
1 469 1 964 Preference shareholders' balance at beginning of the year 135 124
495 – Preference share issue net of cost – 36
– – Translation adjustments 16 (25)
155 185 Earnings attributed to preference shares 14 11
(155) (185) Preference dividend paid (14) (11)
1 964 1 964 Preference shareholders' balance at end of the year 151 135
Summary consolidated statement of cash flows for the year ended 31 March
Restated Restated
Audited Audited Audited Audited
31 March 31 March 31 March 31 March
2014 2015 2015 2014
R'm R'm EUR'm EUR'm
Cash flows from operating activities:
211 14 400 Investment proceeds 1 106 15
98 84 Fees received 6 7
57 113 Interest received 9 4
83 147 Dividends received 11 6
(151) (214) Operating expenses paid (16) (10)
(10) (10) Taxation paid (1) (1)
(19) (46) Interest paid (4) (1)
269 14 474 Operating cash flow before purchase of investments 1 111 20
(1 805) (841) Purchase of investments (65) (124)
(1 536) 13 633 Net cash from/(used) in operating activities 1 046 (104)
(2) – Acquisition of property and equipment – –
(2) – Net cash used in investing activities – –
495 – Preference share issue net of cost – 34
1 000 – Loan received from Fleet – 69
(4) (164) Net repayment of long-term borrowings (13) –
(5) (22) Net purchase of treasury shares (2) –
(12) (14) Ordinary dividend paid (cash election) (1) (1)
(155) (185) Preference dividend paid (14) (11)
1 319 (385) Net cash (used)/from financing activities (30) 91
(219) 13 248 Net increase/(decrease) in cash and cash equivalents 1 016 (13)
46 121 Effects of exchange rate changes on cash and cash equivalents 13 1
493 320 Cash and cash equivalents at beginning of year 22 34
320 13 689 Cash and cash equivalents at end of year 1 051 22
Notes to the summary consolidated financial statements for the year ended 31 March
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 summary consolidated financial statements are presented in accordance with
IAS 34: 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 consolidated annual financial statements for the year ended 31 March 2014.
The Group's financial statements are prepared using both the Euro (EUR/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:
2015 2014
Closing Average Closing Average
USD/ZAR 12.1321 11.4826 10.5325 10.1178
GBP/ZAR 17.9746 17.7794 17.5500 16.1108
EUR/ZAR 13.0196 13.6291 14.5028 13.5779
USD/EUR 0.9318 0.8425 0.7262 0.7451
GBP/EUR 1.3806 1.3045 1.2101 1.1866
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 ("IFRS 10") has resulted in the holding company
and certain subsidiaries being classified as Investment Entities. Subsidiaries that mainly perform an investment holding function are accounted
for as Investment Entities at Fair Value through profit and loss (Investment Entities at FVTPL). Subsidiaries that provide services to the Group or
to third parties and do not hold investments continue to be consolidated. Subsidiaries that are both investment holding and service providers are
accounted as Investment Entities at FVTPL.
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
Given the nature of the Group's operations, all portfolio investments are accounted for at FVTPL in terms of IAS 39: Financial Instruments:
Recognition and Measurement (IAS 39), irrespective of whether they are subsidiaries, joint ventures or associates as explained below.
Subsidiaries are entities that the Group controls by being exposed to, or having rights to, variable returns from its involvement with that
entity and, where the Group has the ability to affect those returns through its power over the entity.
The Group subsidiaries consist of entities that:
i. hold portfolio investments;
ii. provide services to third parties and related companies; and
iii. do both (i) and (ii).
Subsidiaries classified as (i) or (iii) are classified as Investment Entities under IFRS 10. Investment Entities are exempt from consolidation
and measured at FVTPL in terms of IAS 39. Changes in fair value, primarily driven by revaluation of portfolio investments, are recognised
in profit and loss in the period of change. Subsidiaries classified as (ii) are not Investment Entities and continue to be consolidated
("Consolidated Subsidiaries").
Where the Group does not have control, but has significant influence, these are classified as associates. The group does not have any
joint ventures. Given the nature of the Group's operations, associates 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
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 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 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 year are
set out below. As the restatements are not considered to be 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 31 March 2014 comparative period only.
2.1 Restatement impact on summary consolidated 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 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
2.2 Restatement impact on summary consolidated 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 year. The results in a corresponding restatement of Earnings/Headline earnings per share.
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
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/(loss) (5) – (5)
480 65 545 Earnings/Headline earnings per share (cents) 40 5 35
2.3 Restatement impact on summary consolidated 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.
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 cash equivalents (13) – (13)
48 (2) 46 Effects of exchange rates 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
3. Investments
The Group applies a number of methodologies to determine and assess the reasonableness of fair value, which may include the following:
- Earnings multiple
- Recent transaction prices
- Net asset value
- Price to book multiple
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 with reference to the mix of prior year audited and latest available current year forecast EBITDA per the portfolio company,
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, 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. Further valuation information can be obtained from the
31 March 2015 investor presentation on the Group's website, www.brait.com.
Restated Restated
Audited Audited Audited Audited
31 March 31 March 31 March 31 March
2014 2015 Valuation metrics used @ 31 March 2015 2015 2014
R'm R'm EBITDA Multiple Net Debt EUR'm EUR'm
11 145 – Pepkor – 768
– 15 206 Steinhoff (200 million shares at 31 March 2015 closing price of R76.03 per share) 1 168 –
3 053 8 241 Premier (R'm) 829 12.3 3 187 633 211
1 513 1 259 Iceland Foods (GBP'm) 150 7.5 756 97 104
1 518 2 438 Other Investments Varied 187 105
17 229 27 144 Total investments 2 085 1 188
Fair Value Hierarchy
IFRS 13 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 quoted prices) or
indirectly (i.e. derived from quoted 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.
Level 1 Level 3 Total Total Level 1 Level 3
R'm R'm R'm 31 March 2015 EUR'm EUR'm EUR'm
15 206 – 15 206 Steinhoff 1 168 1 168 –
– 6 252 6 252 Premier 480 – 480
– 1 238 1 238 Iceland Foods 95 – 95
5 2 150 2 155 Other Investments 166 – 166
15 211 9 640 24 851 Investment in equity instruments# 1 909 1 168 741
# Excludes loan investments. The amortised costs valuation for investment loans approximate fair value as these loans are at market related rates.
Restated Restated
Audited Audited Audited Audited
31 March 31 March 31 March 31 March
2014 2015 2015 2014
R'm R'm EUR'm EUR'm
4. LOAN RECEIVABLE
1 523 1 672 Loan to Fleet Holding Ltd (Fleet) 128 104
(1 000) (1 098) Loan from Fleet (84) (68)
523 574 Net loan to Fleet 44 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 31 March 2015 were 92.3 million (2014:
92.3 million). The closing Brait share price of R83.50 on 31 March 2015 results in
a cover ratio on the R1 672 million/EUR128 million loan of 461% (2014: 300%).
5. CASH AND CASH EQUIVALENTS
320 13 689 Balances with banks 1 051 22
161 3 034 – ZAR cash 233 11
159 178 – USD cash 14 11
– 10 477 – GBP cash(1) 804 –
(1) Cash placed across five banks with an investment grade credit rating.
Audited Audited Audited Audited
31 March 31 March 31 March 31 March
2014 2015 2015 2014
R'm R'm EUR'm EUR'm
6. 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 2 857 293*
31 March 2015 516 489 969
Dividend
(12) (14) 8% of ordinary shareholders elected to receive the cash alternative (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 Authorised 151 135
20 000 000 cumulative, non-participating perpetual 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 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.
Restated Restated
Audited Audited Audited Audited
31 March 31 March 31 March 31 March
2014 2015 2015 2014
R'm R'm EUR'm EUR'm
8. Borrowings
Loan from FirstRand Bank Limited (trading through its Rand Merchant Bank
division) and The Standard Bank of South Africa Limited is Rand denominated,
bears interest at Johannesburg Inter Bank Acceptance Rate (JIBAR) plus 2.5%
and interest is repayable quarterly, with a right to rollup. The facility amount
outstanding is repayable on maturity of the facility on 4 July 2016, with an
option to extend for a further 5 years. This facility is secured by Group Assets.
The facility outstanding balance was repaid on 31 March 2015 from the cash
164 – consideration received from the Pepkor realisation. – 11
9. HEADLINE EARNINGS PER SHARE
2 945 23 334 Profit for the year 1 712 215
(89) (95) Interim Preference dividend paid (7) (7)
(90) (96) Final Preference dividend declared/paid (7) (7)
2 766 23 143 Earnings/Headline Earnings 1 698 201
507 511 Weighted average ordinary shares in issue (m) – basic & diluted 511 507
545 4 527 Earnings/headline earnings per share (cents) – basic & diluted 332 40
Audited Audited Audited Audited
31 March 31 March 31 March 31 March
2014 2015 2015 2014
R'm R'm EUR'm EUR'm
10 CONTINGENT LIABILITIES AND COMMITMENTS
10.1 Contingencies
33 69 Sureties 5 3
1 024 397 Guarantees(1) 30 71
(1) The guarantee total of EUR30 million/R397 million is provided to the lenders to
Southern View Finance Limited in order to reduce the interest paid on certain tranches
of its borrowings. The guarantees in respect of the Pepkor SPV (2014: EUR33 million/
R472 million) were released on disposal of the Group's interest in Pepkor.
1 057 466 Total contingencies 35 74
10.2 Commitments
111 114 Private equity funding commitments 9 8
Rental commitments (Malta and Mauritius)
2 2 – Within one year – –
3 3 – Between one and five years – –
116 119 Total commitments 9 8
10.3 Other
The Group has rights and obligations in terms of shareholder or purchase and
sale agreements relating to its present or former investments.
Audited Audited Audited Audited
31 March 31 March 31 March 31 March
2014 2015 2015 2014
R'm R'm EUR'm EUR'm
11. RELATED PARTY BALANCES
Transactions between the Company and its subsidiaries have been eliminated
on consolidation or on fair value of subsidiaries and are not disclosed in this
note. Transactions between the Company and its subsidiaries are disclosed
in the Company's separate financial statements. Following the change in
shareholding of the Group's contracted Corporate Advisor on 1 April 2014,
the loan receivable from Fleet is no longer classified as a related party balance.
During the year, Group companies entered into the following transactions with
related parties who are not members of the Group:
Profit from operations include:
(8) (9) Non-executive directors' fees (1) (1)
– (4) Professional fees – M Partners S.à r.l – –
(1) (1) Professional fees – Maitland International Holdings Plc – –
12. NON-ADJUSTING POST-BALANCE SHEET EVENTs
– Brait announced on 16 April 2015 the proposed acquisition, subject to the approval of the South African and Namibian competition authorities,
of a c.80% interest in Virgin Active, one of the world's leading international health club operators, for c.GBP682 million. The acquisition cost will
increase at a rate of 5% per annum from 31 December 2014 (the effective date of acquisition) to closing and be reduced by certain pre-acquisition
expenses. Brait will fund the acquisition cost using cash on hand.
– Brait announced on 15 May 2015 the acquisition of a c.90% interest in New Look, a leading fast fashion multichannel retailer operating in the
value segment of the UK clothing and footwear market with a growing international presence. The estimated purchase consideration payable by
Brait of c.GBP780 million takes into account transaction costs, but may be adjusted up or down depending on actual transactions costs. Brait will
fund the purchase consideration using facilities and cash on hand. This acquisition is unconditional and the date of completion is 25 June 2015.
– Gearing facilities increased post year end to R16.5 billion to facilitate funding of the New Look and Virgin Active acquisitions.
AUDITOR'S OPINION
These summary consolidated financial statements for the year ended 31 March 2015 have been audited by Deloitte Audit Limited who expressed an
unmodified opinion thereon. The auditor also expressed an unmodified opinion on the annual consolidated financial statements from which these summary
consolidated financial statements were derived.
A copy of the auditor's report on the summary consolidated financial statements and of the auditor's report on the annual consolidated financial
statements are available for inspection at the Company's registered office, together with the financial statements identified in the respective
auditor's reports.
Review of operations
The Board of Directors is pleased to report to shareholders the Group results for the financial year ended 31 March 2015.
VALUE DRIVERS
Growth in Net Asset Value (NAV) is the Group's key performance measure with the following additional factors together comprising the 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 over any three-year period. The Compound Annual Growth Rate
(CAGR) for the increase in reported NAV for the three years to 31 March 2015 is 55.3%. Including ordinary share bonus issues and alternative election
cash dividends paid during this period, the return CAGR over the same period to shareholders is 55.8%. The Group's NAV per share of ZAR77.12 at
31 March 2015, represents a 141.4% increase on the ZAR31.95 at 31 March 2014.
During the year under review, Brait has changed the reference multiple for the Premier and Iceland Foods valuations to the trailing three year peer average
multiple, in order to better align the reported NAV with the market, whilst retaining cognizance of Brait's long term investment horizon. At reporting date,
the EV/EBITDA valuation multiples used are 12.3x for Premier (representing the peer group's trailing three year average multiple) and 7.5x for Iceland
Foods (discount of 21% to the peer group trailing three year average multiple of 9.5x). For comparison, peer group average EV/EBITDA multiples at
reporting date are 14.6x for Premier and 10.7x for Iceland Foods.
The reported NAV break-down is as follows:
Restated# Restated#
Audited Audited Audited Audited
31 March 31 March 31 March 31 March
2014 2015 2015 2014
ZAR'm ZAR'm % EUR'm EUR'm
17 229 27 144 Investments 66 2 085 1 188
11 145 – Pepkor – 768
– 15 206 Steinhoff 37 1 168 –
3 053 8 241 Premier 20 633 211
1 513 1 259 Iceland Foods 3 97 104
1 518 2 438 Other investments 6 187 105
523 574 Loan receivable 1 44 36
320 13 689 Cash and cash equivalents 33 1 051 22
8 – Property and equipment – 1
342 12 Accounts receivable 1 23
18 422 41 419 Total assets 100 3 181 1 270
211 86 Total liabilities 7 15
164 – Borrowings – 11
47 86 Accounts payable and provisions 7 4
1 964 1 964 Preference share equity 151 135
16 247 39 369 Net asset value 3 023 1 120
509 510 Number of issued ordinary shares ('mil‚ excluding treasury shares) 510 509
3 195 7 712 Net asset value per share (cents) 592 220
# The March 2014 reported values have been restated as a result of the current year adoption of IFRS 10 Consolidated Financial Statements. No impact on reported NAV per
share; reclassifications are not material.
Key highlights for the Group's investment portfolio are:
- During the 2015 financial year, the Group realised its 37% interest in Pepkor, generating returns of 7.0x multiple of cost and a
69.5% IRR from the acquisition date of 4 July 2011. In terms of the sale agreement, Brait received a total consideration of ZAR30.010 billion on 30 March
2015, comprising cash of ZAR15.086 billion and 200 million Steinhoff shares (value of ZAR14.924 billion using the 30 March 2015 closing share price
of ZAR74.62). Steinhoff has provided Brait an underpin for these 200 million shares through a guaranteed minimum price of ZAR57 per share until
30 March 2016. The 31 March 2015 closing share price for Steinhoff was ZAR76.03, resulting in a year-end carrying value of ZAR15.206 billion.
- Brait announced on 16 April 2015 the acquisition of c.80% of Virgin Active, subject to the approval by the South African and Namibian competition
authorities. Virgin Active is one of the world's leading international health club operators. Virgin Active has demonstrated a strong financial track
record which includes (i) a 10 year CAGR for revenue and EBITDA of 22% and 20% respectively; (ii) a high degree of earnings visibility; and (iii) strong
cash flow generation. Furthermore, Virgin Active has exciting growth prospects in both emerging and developed markets. Brait will invest alongside
an experienced management team, the founder and the Virgin Group The acquisition cost of c.GBP682 million will be funded from the Pepkor
cash proceeds.
- Brait announced on 15 May 2015 the acquisition of c.90% of New Look, a leading fast fashion multichannel retailer operating in the value segment of
the UK clothing and footwear market with a growing international presence. The completion date for this acquisition is expected to be 25 June 2015.
New Look has in excess of 800 stores operating in 21 countries and a fast growing e-commerce platform which includes its own online platform as well
as partnering with third party e-commerce retailers. According to Kantar Worldpanel, for the 24 weeks ending March 2015, New Look has the leading
UK market share in the under 35's womenswear category and is number two overall in womenswear. New Look has demonstrated double digit EBITDA
growth in recent years, solid cash flow generation and has strong growth prospects in France, Germany, Poland and China which is a priority market.
Brait is partnering with an experienced and proven management team who are reinvesting with the founder's family interests alongside Brait for c.10%
shareholding. The acquisition cost of c.GBP780 million will be funded using facilities and cash on hand. New Look raised a £1.2 billion on 12 June 2015,
with proceeds used to refinance its existing debt resulting in the average cost thereof (pre-FX hedging) reducing from c.9.42% to 6.25%.
- Premier's revenue for the nine months ending 31 March 2015, which includes the acquisitions of Star Bakeries and Lil-lets Group, increased 31%
on the comparative period. Group EBITDA margin improved to 9.1%, generating an increase in EBITDA of 70% for the period. Bakeries grew bread
sales volumes by 27% (c.9% like-for-like), largely in the informal market. Milling sales volumes grew by 4% for maize and 3% for wheat. During
March 2015, the acquisition of 68% of the shares in issue of Companhia Industrial da Matola S.A. ("CIM") was completed. CIM is the leading food
producing company in Mozambique with a diversified product range of market leading brands in wheat flour, maize meal, pasta, biscuits and animal
feeds. CIM's current revenue is in excess of ZAR1.2 billion with EBITDA of ZAR115 million. Also in March 2015, Premier concluded (i) the acquisition
of the assets of La Femme, a Durban based tampon manufacturer, which has enabled Lil-lets to consolidate its tampon supply chain in South
Africa; and (ii) the shares of Mr Bread Milling (Pty) Ltd, an independent Eastern Cape flour miller, which facilitates Premier operating as an integrated
mill-bake operation in the province. These acquisitions were funded by Brait and are recognised in the Premier valuation at their aggregate cost of
ZAR411 million. Brait continues to exercise existing put and call agreements with former shareholders, holding 86.5% of Premier at 31 March 2015
(FY2014: 84.6%). The strong operational performance, combined with the change in valuation multiple to that of the peer group's three year trailing
average, resulted in the carrying value for Premier increasing by 169.9% for the year to ZAR8.241 billion (2014: ZAR3.053 billion).
- The UK food retail market continues to be challenging, leading to continued pressure on profits as sales growth has slowed and investment into the
value proposition and marketing spend has increased. Iceland Foods' net sales for FY2015 decreased by 0.5%, with like-for-like sales down 4.4%
in a market experiencing food deflation of c.3.0%. Reported FY2015 EBITDA of GBP150.2 million reflects a 25.7% downgrade on FY2014's GBP202.2 million.
Free cash flow (post capex) of GBP160 million reflects an 8.8% increase on FY2014's GBP147 million, which translates into a significantly improved EBITDA
cash conversion ratio of 106.7% (FY2014: 72.8%). When recognizing the positive effect from the weakening of the GBP/ZAR exchange rate to ZAR17.97 (FY2014:
ZAR17.55) and the change in valuation multiple discussed earlier, Iceland's carrying value has decreased by 16.8% for the year to ZAR1.259 billion
(2014: ZAR1.513 billion).
- Within the other investments portfolio, DGB demonstrated very strong EBITDA growth and cash flow generation. Southern View Finance ("SVF") traded well and raised
capital during November 2014 to refinance a portion of existing debt as well as providing it with additional facilities for future acquisitions. These combined
factors were the primary drivers of the 62.5% increase for the year in the carrying value of this portfolio to ZAR2.438 billion (2014: ZAR1.518 billion).
Low cost to AUM ratio
Operating expenditure for the year of ZAR201 million represents a favourable ratio of 0.44% to AUM (FY2014: 0.66%) compared to the target of 0.85%
or less. Net operating costs after fee income of ZAR121 million to AUM is 0.27% (FY2014: 0.33%). Using average AUM as the reference basis, operating
costs are 0.60% and net after fee income 0.36% (FY2014 using average AUM: 0.72% and 0.36% respectively).
Minimal balance sheet cash drag
The Group targets minimal cash holdings on balance sheet to avoid diluting overall returns. The cash consideration from the sale of Pepkor of ZAR15.1
billion was received on 30 March 2015. ZAR2.1 billion was immediately applied to settling the Group's drawn borrowings. The Group's cash and
equivalents position at year-end of ZAR13.689 billion represents 33% of total assets (FY2014: 2%). This cash position will normalize to a level similar to
that of the prior year, once payment for the Virgin Active and New Look acquisitions has been made.
Significant cash flow within the underlying assets
Brait received net investment cash inflows of ZAR14.671 billion during the year comprising: (i) ZAR15.086 billion cash consideration received on realisation
of Pepkor; (ii) less ZAR1.161 billion settlement of Pepkor SPV gearing; and (iii) portfolio inflows of ZAR746 million.
Predictable and consistent ordinary dividend to NAV yield
The Group's policy is an ordinary bonus share issue or 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. The Board has proposed a bonus share issue (with a cash dividend alternative) of 1% of NAV equal to 77.12 ZAR cents/5.89 EUR cents
(FY2014: 31.95 ZAR cents/2.24 EUR cents). Further details regarding the bonus share issue with cash dividend alternative can be found below. In August
2014, 92% of shareholders elected to receive bonus shares, resulting in issued share capital (net of treasury shares) increasing to 510.5 million shares at
year end.
GROUP FUNDING POSITION
Brait will fund the acquisition of Virgin Active using Pepkor cash proceeds. In anticipation of the New Look acquisition, the Group has increased its debt
facilities and will fund this purchase cost through a combination of debt and cash on hand.
The Group remains adequately capitalised with sufficient cash and low cost facilities. The Group continues to explore new sources of funding through
raising cheaper and more permanent forms of capital to achieve a more efficient capital structure.
PREFERENCE DIVIDEND DECLARED
The Board declared on 29 May 2015 a preference dividend of ZAR4.7968/EUR0.359842 per share for the period from 1 October 2014 to 31 March 2015.
The issued cumulative, non-participating preference share capital at the date of this declaration is 20 000 000 preference shares of EUR0.01 each.
A separate announcement setting out the salient dates was released to the market on Monday, 1 June 2015.
PROPOSED BONUS SHARE ISSUE OR, ALTERNATIVELY, CASH DIVIDEND
The Board has proposed a bonus share issue of new, fully paid, ordinary Brait Shares with a par value of EUR0.22 each ("New Shares") in proportion to
the shareholding of each respective shareholder in Brait, payable to shareholders recorded in the register on the Friday, 7 August 2015 (the "Bonus Share
Issue"). Shareholders will be entitled, in respect of all or part of their shareholding as of Friday, 7 August 2015 (the "Record Date"), to elect to receive a cash
dividend of 77.12 ZAR cents/5.89 EUR cents per ordinary share (the "Cash Dividend Alternative") held in lieu of all or part of the New Shares to which they
would have been entitled, which will be paid only to those shareholders whose election forms to receive the Cash Dividend Alternative, in respect of all or
part of their shareholding are received by the transfer secretaries on or before 12:00 p.m. on the Record Date. The Bonus Share Issue and Cash Dividend
Alternative are, however, subject to shareholder approval at the Company's AGM on 22 July 2015. If all shareholders receive New Shares, an approximate
aggregate number of 4 378 544 New Shares are expected to be issued. If all shareholders elect to receive the Cash Dividend Alternative, this would
amount to an aggregate of ZAR398 317 064 / EUR29 880 578 for the financial year ending 31 March 2015.
Shareholders not electing to receive the Cash Dividend Alternative in respect of all or part of their shareholding will, without any action on their part, be
issued with New Shares in accordance with their shareholding pursuant to the Bonus Share Issue.
The number of New Shares to which shareholders will be entitled pursuant to the Bonus Share Issue will be determined by such shareholder's
shareholding in Brait as of 7 August 2015 in relation to the ratio that 77.12 ZAR cents bears (5.89 EUR cents) bears to ZAR90.97, being the 60-day volume
weighted average price ("VWAP") of ordinary Brait shares on the Luxembourg Stock Exchange ("LuxSE") and the Johannesburg Securities Exchange
("JSE") during the trading period ending on Friday, 29 May 2015. This conversion ratio amounts to 0.84775 New Shares per 100 Brait shares held
by the shareholder at the Record Date. Fractions and fractional entitlements are not possible due to various corporate law and listing requirements.
Accordingly, where a shareholder's entitlement to New Shares calculated in accordance with the above formula gives rise to a fraction of an ordinary share,
such fraction of an ordinary share will be rounded up to the nearest whole number where the fraction is greater than or equal to 0.5 and rounded down to
the nearest whole number where the fraction is less than 0.5.
A circular and an election form will be sent to all shareholders on Friday, 26 June 2015 containing full details of the Bonus Share Issue and Cash
Dividend Alternative.
The rationale for the Bonus Share Issue is to afford shareholders the opportunity to increase their shareholding in Brait and retain the Company's flexibility
on cash holdings.
The Bonus Share Issue and the Cash Dividend Alternative may have tax implications for shareholders.
The receipt of New Shares by South African resident shareholders should not be classified as a dividend or a foreign dividend for South African tax
purposes and hence dividends tax should not be levied on the New Shares. For those South African resident shareholders electing the Cash Dividend
Alternative in lieu of the New Shares, such amount will be regarded as a foreign dividend, but may be subject to South African dividends tax at the rate of
15%, unless an exemption as set out in the South African income tax legislation applies.
If dividends tax does apply, the net dividend will be 65.5520 ZAR cents per share.
Shareholders are therefore encouraged to consult with their professional advisors should they be in any doubt as to the appropriate action to take.
The issued ordinary share capital at the date of this announcement is 516 489 969 ordinary shares of EUR0.22 each.
The salient dates are as follows:
EVENT 2015
Announcement of the applicable ratio, based on the 60-day volume weighted average price ending on Friday 29 May 2015,
released on the LuxSE and JSE Wednesday, 17 June
Bonus share circular and form of election posted to shareholders on: Friday, 26 June
AGM approving the Bonus Share Issue/Cash Dividend Alternative on: Wednesday, 22 July
Last day to trade in order to be eligible for the Bonus Share Issue or, alternatively, the Cash Dividend Alternative on: Friday, 31 July
Ordinary shares trade "ex" the Bonus Share Issue/Cash Dividend Alternative on: Monday, 3 August
Last day for election forms to receive the Cash Dividend Alternative instead of the Bonus Share Issue to reach the Transfer
Secretaries by 12:00pm on: Friday, 7 August
Record Date in respect of the Bonus Share Issue/Cash Dividend Alternative on: Friday, 7 August
Share Certificates and dividend cheques posted, CSDP/participant/broker accounts credited/updated and New Shares listed
on the LuxSE and JSE on: Tuesday, 11 August
Share certificates may not be dematerialised or rematerialized, between close of business Friday, 31 July 2015 and Friday,
7 August 2015, both days inclusive.
Please note that the New Shares to be issued in terms of the Bonus Share Issue may not be traded until Tuesday, 11 August 2015.
GROUP OUTLOOK
- Premier has traded well during its nine months to 31 March 2015, delivering on its strategy of brand building, product innovation and operational
efficiencies to increase margins on its core staple foods business. The acquisitions concluded in March 2015 represent both geographic and strategic
opportunities to enhance profits and are well advanced in the process of integration;
- Virgin Active is a well-positioned defensive consumer business with highly visible and predictable EBITDA and cash generation from its subscription
based model. Its global lifestyle brand and leadership position in the UK and South African markets provide a strong platform for growth in its chosen
markets;
- New Look's fast fashion apparel offering is positioned in the value segment, which has outperformed the overall UK clothing market for more than
a decade. This has been driven by increasing demand for more affordable fashion clothing, supply chain improvements and growing popularity
of e-commerce. The scale and efficiency of New Look's fast fashion operating model and well-developed multichannel offering sees it well placed to
execute on its growth strategies in its prioritised markets;
- Iceland Foods continues to generate strong cash flows. FY2015 saw substantial focus on the proposition including enhanced innovation and improved
packaging to differentiate the product offering. This, coupled with increased marketing spend and a stringent focus on costs to affirm its value offering
should position the business well for the expected continued challenging UK food retail sector.
The 2015 financial year has been significant given the value creation from the realisation of Pepkor. Virgin Active and New Look represent exciting
acquisitions for the Group going forward and together with Premier, enhance the portfolio's defensive nature, strong cash flow generation and geographic
diversification.
For and on behalf of the Board
PJ Moleketi
Non-Executive Chairman
17 June 2015
Directors (all non-executive)
PJ Moleketi (Chairman)*, AS Jacobs##, CD Keogh##, Dr LL Porter##, CS Seabrooke*, HRW Troskie**, Dr CH Wiese*
## British **Dutch *South African
The Company’s primary listing is on the Euro MTF market of the Luxembourg Stock Exchange and its secondary listing is on the Johannesburg Stock Exchange.
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 17/06/2015 07:08:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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