Wrap Text
Unaudited interim results for the six months ended 30 September 2015
Brait SE
(Registered in Malta as a European Company)
(Registration No. SE1)
Share code: BAT ISIN: LU0011857645
Share code: BATP ISIN: MT0000680208
Bond code: WKN: A1Z6XC ISIN: XS1292954812
("Brait", the "Company" or "Group")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015
Highlights: Six months ended 30 September 2015
NAV per share R123.50
- 255.4% increase on comparative 30 September 2014 NAV per share of R34.75 (12 month period)
- 60.1% increase on 31 March 2015 NAV per share of R77.12 (6 month period)
- 3 year CAGR (benchmark of 15%):
- 75.1% on reported NAV per share
- 75.3% including bonus shares issued / cash dividend paid
Investment portfolio flows
- Received R17.5 billion
- R15.8 billion proceeds from sale of Steinhoff shares (1)
- R1.7 billion proceeds from Other Investments portfolio and Premier
- Invested R27.9 billion
- Acquisition of 89% of New Look
- Acquisition of 78% of Virgin Active
- Increased shareholder loan investment in Premier to fund acquisitions
- Increased shareholding in DGB from 40% to 81%
Convertible Bond
- Brait issued an oversubscribed, five year, GBP350 million Convertible Bond on 11 September 2015
- Competitive pricing at a 2.75% coupon and 30% conversion premium
Iceland Foods
- Brait announced on 2 October 2015 the acquisition of a further 38% stake in Iceland Foods for GBP 173m (2) to be settled out of the proceeds raised from Brait's Convertible Bond
- This transaction increases Brait's stake to 57% with the founder and management retaining their 43%
Dividends
- R97.4 million preference share dividend (487.23 cents per share) for the six months ended 30 September 2015 declared on 6 November 2015
(1) The R15.8 billion aggregate proceeds from the sale of Steinhoff shares were received by 2 October 2015 and immediately applied to settle the Group's R14.2 billion debt obligations
(2) The acquisition of a further 38% of Iceland Foods remains subject to anti-trust clearance from the Irish and Maltese authorities
Salient features for the period ended 30 September 2015
Audited Unaudited Unaudited Audited
year ended six months six months year ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2015 2014 2015 2015 2014 2015
R'm R'm R'm EUR'm EUR'm EUR'm
PERFORMANCE MEASURES
7 712 3 475 12 350 Net asset value (NAV) per share (cents) 798 244 592
N/A 9% 60% NAV per share increase for the six month period 35% 11% N/A
141% 19% 255% NAV per share increase for the twelve month period 227% 13% 169%
55% 24% 75% NAV per share three year CAGR# 55% 13% 43%
0.44% 0.64% 0.45% Operating cost: Assets Under Management (AUM)* 0.45% 0.64% 0.44%
0.27% 0.37% 0.37% Operating cost after fee income: AUM 0.37% 0.37% 0.27%
14 671 380 2 467 Cash inflow from investment portfolio^ 159 27 1 127
DIVIDENDS
77.12 – – Ordinary dividends per share (cents) – – 5.79
474.70 474.70 487.23 Interim Preference dividend per share declared/paid (cents) 32.1133 33.3052 33.3052
479.68 – – Final Preference dividend per share paid (cents) – – 35.9842
FINANCIAL STATISTICS
43 127 37 616 73 148 Market capitalisation 4 744 2 632 3 309
8 350 7 283 14 050 Closing ordinary share price (cents) 911 510 641
516 516 521 Ordinary shares in issue (m) 521 516 516
(6) – (6) Treasury shares (m) (6) – (6)
510 516 515 Ordinary shares outstanding (m) 515 516 510
#Compound Annual Growth Rate "CAGR"
*AUM represents the aggregate of the Group's total assets (excluding the investment in Steinhoff realised on 2 October 2015) and Brait IV invested capital under management
^Brait received R15.010 billion on 2 October 2015 from the realisation of its investment in Steinhoff. Including these proceeds, cash inflow from investment portfolio is
R17.5 billion. Refer note 12.1 for futher detail
Summary consolidated statement of financial position as at
Audited Unaudited Unaudited Audited
year ended six months six months year ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2015 2014 2015 2015 2014 2015
R'm R'm R'm Notes EUR'm EUR'm EUR'm
ASSETS
27 718 18 963 62 500 Non-current assets 4 036 1 330 2 129
27 144 18 415 61 898 Investments 2 3 997 1 292 2 085
574 548 602 Loan receivable 3 39 38 44
13 701 955 23 038 Current assets 1 488 67 1 052
12 333 13 Accounts receivable 1 23 1
– – 15 010 Investment in Steinhoff 12 969 – –
13 689 622 8 015 Cash and cash equivalents 4,12 518 44 1 051
41 419 19 918 85 538 Total assets 5 524 1 397 3 181
EQUITY AND LIABILITIES
39 369 17 935 63 549 Ordinary shareholders equity and reserves 5 4 104 1 258 3 023
1 964 1 964 1 964 Preference shareholders equity 6 127 138 151
– – 6 466 Non-current liabilities 418 – –
– – 6 466 Convertible bond 7 418 – –
86 19 13 559 Current liabilities 875 1 7
– – 13 407 Borrowings 8,12 866 – –
86 19 152 Accounts payable and other liabilities 9 1 7
41 419 19 918 85 538 Total equity and liabilities 5 524 1 397 3 181
516 516 521 Ordinary shares in issue (m) 521 516 516
(6) – (6) Treasury shares (m) (6) – (6)
510 516 515 Outstanding shares for NAV calculation (m) 515 516 510
7 712 3 475 12 350 Net asset value per share (cents) 798 244 592
Summary consolidated statement of comprehensive income for the six months ended 30 September
Audited Unaudited Unaudited Audited
year ended six months six months year ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2015 2014 2015 2015 2014 2015
R'm R'm R'm Notes EUR'm EUR'm EUR'm
22 979 1 182 18 874 Investment gains 1 355 82 1 686
611 327 79 Other investment income 6 23 45
(201) (75) (170) Operating expenses (12) (4) (15)
(48) (9) (679) Finance costs (49) (1) (3)
(7) (8) (8) Taxation (1) (1) (1)
23 334 1 417 18 096 Profit for the period 1 299 99 1 712
9 (6) 5 328 Translation adjustments (266) 19 208
23 343 1 411 23 424 Comprehensive income for the period 1 033 118 1 920
4 527 259 3 518 Earnings/Headline earnings per share (cents) – basic 9 253 18 332
4 527 259 3 501 Earnings/Headline earnings per share (cents) – diluted 9 251 18 332
Summary consolidated statement of changes in equity for the six months ended 30 September
Audited Unaudited Unaudited Audited
year ended six months six months year ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2015 2014 2015 2015 2014 2015
R'm R'm R'm Note EUR'm EUR'm EUR'm
Ordinary shareholders' balance at beginning
16 247 16 247 39 369 of period 3 023 1 120 1 120
23 334 1 417 18 096 Profit for the period 1 299 99 1 712
9 (6) 5 328 Translation adjustments (266) 19 208
(22) 381 – Net purchase of treasury shares – 27 (2)
– – 874 Convertible bond equity reserve 56 – –
(185) (90) (96) Earnings attributed to preference shares (7) (6) (14)
(14) (14) (22) Ordinary dividends paid (cash election) 5 (1) (1) (1)
39 369 17 935 63 549 Ordinary shareholders' balance at end of period 4 104 1 258 3 023
Preference shareholders' balance at beginning of
1 964 1 964 1 964 period 151 135 135
– – – Translation adjustments (24) 3 16
185 90 96 Earnings attributed to preference shares 7 6 14
(185) (90) (96) Preference dividend paid (7) (6) (14)
1 964 1 964 1 964 Preference shareholders' balance at end of period 127 138 151
Summary consolidated statement of cash flow for the six months ended 30 September
Audited Unaudited Unaudited Audited
year ended six months six months year ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2015 2014 2015 2015 2014 2015
R'm R'm R'm Note EUR'm EUR'm EUR'm
Cash flows from operating activities:
14 400 137 2 393 Investment proceeds 155 10 1 106
84 43 38 Fees received 2 3 6
113 84 120 Interest received 8 6 9
147 147 – Dividends received – 10 11
(214) (81) (181) Operating expenses paid (12) (6) (16)
(10) (6) (8) Taxation paid (1) – (1)
(46) (9) (731) Finance cost paid (47) – (4)
14 474 315 1 631 Operating cash flow before purchase of investments 105 23 1 111
(841) (129) (27 930) Purchase of investments (1 804) (9) (65)
13 633 186 (26 299) Net cash (used)/from operating activities (1 699) 14 1 046
– – 7 245 Proceeds from issuance of convertible bond 468 – –
(164) (169) 13 407 Net drawdown of borrowings 866 (12) (13)
(22) 381 – Net purchase of treasury shares – 27 (2)
(14) (14) (22) Ordinary dividend paid (cash election) (1) (1) (1)
(185) (90) (96) Preference dividend paid (6) (6) (14)
(385) 108 20 534 Net cash from/(used) in financing activities 1 327 8 (30)
Net (decrease)/increase in cash and cash
13 248 294 (5 765) equivalents (372) 22 1 016
Effects of exchange rate changes on cash and
121 8 91 cash equivalents (161) – 13
320 320 13 689 Cash and cash equivalents at beginning of period 1 051 22 22
13 689 622 8 015 Cash and cash equivalents at end of period 4 518 44 1 051
Notes to the summary consolidated 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 in accordance with International Financial Reporting Standards (IFRS) as adopted by the
European Union, on the going concern principle, using the historical cost basis. These summary consolidated financial statements are presented
in accordance with IAS34 (Interim Financial Reporting). Except as detailed below, the accounting policies and methods of computation are
consistent with those applied in the annual financial statements for the year ended 31 March 2015.
The Group's financial statements are prepared using both the Euro(EUR/EUR) and SA Rand (R/ZAR) as its presentation currencies. The Group's
subsidiaries have one of three functional currencies: USD (US$), GBP (GBP/GBP) or SA Rand. The holding company, Brait SE, and its main
operating subsidiaries use GBP as their functional currency. The financial statements have been prepared using the following exchange rates:
30 September 2015 31 March 2015 30 September 2014
Closing Average Closing Average Closing Average
USD/ZAR 13.8550 12.5479 12.1321 11.4826 11.2846 10.6564
GBP/ZAR 20.9555 19.3389 17.9746 17.7794 18.2964 17.8637
EUR/ZAR 15.4846 13.9290 13.0196 13.6291 14.2536 14.3628
USD/EUR 0.8948 0.9008 0.9318 0.8425 0.7917 0.7419
GBP/EUR 1.3533 1.3884 1.3806 1.3045 1.2836 1.2437
1.2 Compound financial instruments
The Convertible Bonds issued in September 2015 are convertible into a fixed number of Brait ordinary shares. These Bonds are accounted for
as compound financial instruments. The liability component of the compound instrument is initially recognised as the present value of the future
coupon and principal payments. The discount rate used is a market rate for similar liabilities that do not have the equity conversion component
(vanilla bond). The equity component of the compound instruments is the excess of the proceeds received on issuance less the value of the
liability component recognised for the instrument.
Subsequent to initial recognition, the liability component is measured at amortised cost using the effective interest rate method. The equity
component is not re-measured except on conversion or at maturity.
Except for the accounting for compound financial instruments detailed above, all other accounting policies and methods of computation for
financial assets, financial liabilities and equity instruments are consistent with those applied in the annual financial statements for the year ended
31 March 2015.
Notes to the summary consolidated financial statements
for the six months ended 30 September (continued)
2. 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 the carrying value is based on the applicable unlisted investment 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 three year trailing
average multiple of the comparable quoted companies, is adjusted for points of difference, where required, to the portfolio company being valued.
The peer average spot multiple at reporting date is also considered. 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, including information on put rights of minorities, can be obtained
from the 30 September 2015 investor presentation on the Group's website, www.brait.com.
Audited Unaudited Unaudited Audited
year ended six months six months year ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2015 2014 2015 2015 2014 2015
R'm R'm R'm EUR'm EUR'm EUR'm
– – 32 371 New Look 2 091 – –
– – 16 298 Virgin Active 1 053 – –
8 241 3 862 9 804 Premier 633 271 633
1 259 1 400 1 829 Iceland Foods 118 98 97
15 206 – – Steinhoff – – 1 168
2 438 1 607 1 596 Other Investments 102 113 187
– 11 546 – Pepkor (realised at 30 March 2015) – 810 –
27 144 18 415 61 898 Investments 3 997 1 292 2 085
Investment in Steinhoff (190 million shares at
– – 15 010 2 October 2015 realisation value of R79.00 per share) 969 – –
Notes to the summary consolidated financial statements
Valuation metrics at 30 September 2015
Maintainable 3rd Party
EBITDA Multiple Net Debt
New Look (GBP'm) 220 13.3x 1 101
Virgin Active (GBP'm) 132 10.8x 421
Premier (R'm) 1 009 12.6x 2 114
Iceland Foods (GBP'm) 150 8.0x 739
Other Investments varied
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 assests 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 periods.
Level 1 Level 3 Loans at Total 30 September 2015 Level 1 Level 3 Loans at Total
amortised amortised
cost cost
R'm R'm R'm R'm EUR'm EUR'm EUR'm EUR'm
– 15 548 16 823 32 371 New Look – 1 004 1 087 2 091
– 1 534 14 764 16 298 Virgin Active – 99 954 1 053
– 7 415 2 389 9 804 Premier – 479 154 633
– 1 804 25 1 829 Iceland Foods – 116 2 118
2 1 298 296 1 596 Other Investments – 83 19 102
2 27 599 34 297 61 898 Investments – 1 781 2 216 3 997
– 15 010 – 15 010 Investment in Steinhoff (1) – 969 – 969
(1) Steinhoff is classified as a Level 3 investment as the 190 million shares are valued at the 2 October 2015 realisation value of R79.00 per share.
Audited Unaudited Unaudited Audited
year ended six months six months year ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2015 2014 2015 2015 2014 2015
R'm R'm R'm EUR'm EUR'm EUR'm
3. Loan Receivable
1 672 1 595 1 753 Loan to Fleet Holdings Ltd (Fleet) 113 112 128
(1 098) (1 047) (1 151) Loan from Fleet (74) (74) (84)
574 548 602 Net loan to Fleet 39 38 44
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 were repayable on
4 July 2016. The borrower has exercised its option; and
the lender has agreed, to extend the term for a further five
years to 4 July 2021.
Shares pledged by Fleet are subject to a joint and several
pledge to both the Group and the Lenders who financed
the loan from Fleet (The Standard Bank of SA Limited and
FirstRand Bank Limited, trading through its Rand Merchant
Bank division).
4. Cash and cash equivalents
13 689 622 8 015 Balances with banks (1) 518 44 1 051
3 034 459 94 – ZAR cash 7 33 233
178 163 97 – USD cash 6 11 14
10 477 – 7 824 – GBP cash 505 – 804
(1)
Brait received net proceeds of c.R1.6 billion from the realisation
of its investment in Steinhoff net of the settlement of Group
borrowings on 2 October 2015. Including these net proceeds,
Cash and cash equivalents are R9.618 billion. Refer note 12.1 for
further details
Cash is placed across five banks with an investment grade credit
rating
Audited Unaudited Unaudited Audited
year ended six months six months year ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2015 2014 2015 2015 2014 2015
R'm R'm R'm EUR'm EUR'm EUR'm
5. Share Capital and Premium
Authorised share capital
1 500 000 000 at par value of EUR0.22 per share.
Issued share capital
31 March 2015 516 490 019
Bonus share issue 4 134 816
30 September 2015 520 624 835
Dividend
6% of ordinary shareholders elected to receive the cash
(14) (14) (22) alternative (2) (1) (1)
*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 option
was converted at 60 day Volume Weighted Average Price
(VWAP) of R90.97 per share to result in the R0.7712
dividend per share translating into 0.84775 shares for
every 100 shares held.
Audited Unaudited Unaudited Audited
year ended six months six months year ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2015 2014 2015 2015 2014 2015
R'm R'm R'm EUR'm EUR'm EUR'm
6. Preference shareholders equity
1 964 1 964 1 964 Authorised 127 138 151
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 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.
Brait announced on 9 November 2015 its intention to
obtain authority from its shareholders for the proposed
redemption and delisting of its 20 000 000 issued
preference shares. Refer note 12.3 for further details.
Audited Unaudited Unaudited Audited
year ended six months six months year ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2015 2014 2015 2015 2014 2015
R'm R'm R'm EUR'm EUR'm EUR'm
7. Convertible bond
– – 6 466 On 18 September 2015 Brait received GBP350 million 418 – –
from the issuance of its five year unsubordinated,
unsecured convertible bonds (Bonds). The Bonds carry a
fixed coupon of 2.75% per annum payable semi-annually
in arrears. The fixed conversion price of GBP7.9214 per
ordinary share represents a 30% premium to the VWAP
of Brait's ordinary shares between launch and pricing
on 11 September 2015. Using this conversion price,
the Bonds will convert into 44,184,109 ordinary shares
(8.5% of Brait's current issued share capital) on exercise
of bondholders conversion rights. In the event that the
bondholders have not exercised their conversion rights,
the Bonds are settled at par value in cash on maturity.
Brait has a soft call to early settle the Bonds at their par
value after 9 October 2018 if the value of the ordinary
shares underlying the Bonds is equal to or exceeds
GBP130,000 for more than 20 of the 30 consecutive
trading days up to 9 October 2018.
The Bonds listed on the Open Market (Freiverkehr)
segment of the Frankfurt Stock Exchange on
15 October 2015.
Audited Unaudited Unaudited Audited
year ended six months six months year ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2015 2014 2015 2015 2014 2015
R'm R'm R'm EUR'm EUR'm EUR'm
– – 13 407 8. Borrowings 866 – –
At 30 September 2015 the loan from First Rand 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 3.8%. This loan was
settled in full on 2 October 2015 with the proceeds from
the sale of shares in Steinhoff, refer note 12.1 for further
detail. Following this settlement, the facility available
is R6.4 billion at an interest rate of JIBAR plus 2.5%
maturing on 4 July 2016, with an option to extend for a
further five years.
Audited Unaudited Unaudited Audited
year ended six months six months year ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2015 2014 2015 2015 2014 2015
R'm R'm R'm EUR'm EUR'm EUR'm
9. Headline earnings reconciliation
23 334 1 417 18 096 Profit for the period 1 299 99 1 712
(95) (95) – Preference dividend paid December – (7) (7)
(96) – – Preference dividend paid June – – (7)
– – (97) Preference dividend declared 6 November 2015 (6) – –
23 143 1 322 17 999 Earnings/Headline earnings 1 293 92 1 698
511 510 512 Weighted average ordinary shares in issue (m) – basic 512 510 511
4 527 259 3 518 Earnings/headline earnings per share (cents) – basic 253 18 332
23 143 1 322 17 999 Earnings/Headline earnings 1 293 92 1 698
Earnings adjustment for Bond interest saved if Bonds
– – 12 converted to shares 1 – –
23 143 1 322 18 011 Diluted Earnings/Headline earnings 1 294 92 1 698
511 510 515 Weighted average ordinary shares in issue (m) – diluted (1) 515 510 511
4 527 259 3 501 Earnings/headline earnings per share (cents) – diluted 251 18 332
(1) All ordinary shares underlying the Bonds are treated as dilutive
and weighted from issue of the Bonds on 11 September 2015
Audited Unaudited Unaudited Audited
year ended six months six months year ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March
2015 2014 2015 2015 2014 2015
R'm R'm R'm EUR'm EUR'm EUR'm
10. Related Parties
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. During
the period, Group companies entered into the following
transactions with related parties who are not members of
the Group:
Profit from operations include:
(9) (4) (5) Non-executive directors fees – – (1)
(4) (1) (1) Professional Fees–M Partners S.a.r.l – – –
(1) (1) (1) Professional Fees–Maitland International Holdings Plc – – –
Audited Unaudited Unaudited Audited
year ended six months six months year ended
31 March 30 Sept 30 Sept 30 Sept 30 Sept March
2015 2014 2015 2015 2014 2015
R'm R'm R'm EUR'm EUR'm EUR'm
11. CONTINGENT LIABILITIES AND COMMITMENTS
11.1 Contingencies
69 33 – Sureties (1) – 2 5
397 1 389 – Guarantee (1) – 97 30
(1)Sureties and guarantees were in respect of the lenders to Chamber Lane
Properties and Southern View Finance Limited (SVF) and were released on
the Group's realisation of these investments.
466 1 422 – Sureties and guarantees – 99 35
11.2 Commitments
– – 8 343 Convertible Bond commitments 539 – –
202 –Coupon payments due within one year 13
807 –Coupon payments due between one and five years (2) 52
7 334 –Principal settlement due in five years (2) 474
(2)The coupon payments due amounts reflect the semi-annual coupons payable in
arrears over the Bond's five year term. The principal settlement due amount is
only payable in the event that the bondholders have not exercised their
conversion rights. Brait has a soft call to early settle the Bonds at their par value
after 9 October 2018 if the value of the ordinary shares underlying the Bonds is
equal to or exceeds GBP130,000 for more than 20 of the 30 consecutive trading
days up to 9 October 2018. If the soft call is exercised, coupons from
18 September 2018 to 18 September 2020 will not be payable.
114 102 117 Private equity funding commitments 8 7 9
Rental commitments (Malta and Mauritius)
2 2 2 – Within one year – – –
3 1 3 – Between one and five years – – –
119 105 8 465 Total commitments 547 7 9
11.3 Other
The Group has rights and obligations in terms of shareholder or purchase
and sale agreements relating to its present or former investments.
12. Post-balance sheet events
12.1 Steinhoff realisation and settlement of Borrowings
On 2 October 2015, the remaining 190 million Steinhoff shares were sold at R79.00 per share, which approximated the 30-day VWAP on the
preceding day. The R15.010 billion proceeds received were immediately applied to settle the Group's drawn borrowings. This resulted in net
proceeds of R1.6 billion.
On an aggregate basis, the 200 million Steinhoff shares realised R15.8 billion and settled Group borrowings of R14.2 billion.
For enhanced disclosure, a pro-forma Statement of Financial Position is provided. This includes the net R1.6 billion proceeds received on
2 October 2015 in cash and cash equivalents.
Unaudited Pro-forma Pro-forma Pro-forma Pro-forma Unaudited
six months adjustments adjustments six months
30 Sept 30 Sept 30 Sept 30 Sept 30 Sept 30 Sept
2015 2015 2015 2015 2015 2015
R'm R'm R'm EUR'm EUR'm EUR'm
ASSETS
62 500 – 62 500 Non-current assets 4 036 – 4 036
61 898 – 61 898 Investments 3 997 – 3 997
602 – 602 Loan receivable 39 – 39
23 038 (13 407) 9 631 Current assets 622 (866) 1 488
13 – 13 Accounts receivable 1 – 1
15 010 (15 010) – Investment in Steinhoff – (969) 969
8 015 1 603 9 618 Cash and cash equivalents 621 103 518
8 015 – 8 015 Balances at banks 518 – 518
– 1 603 1 603 Disposal of Steinhoff net of borrowings 103 103 –
85 538 (13 407) 72 131 Total assets 4 658 (866) 5 524
Unaudited Pro-forma Pro-forma Pro-forma Pro-forma Unaudited
six months adjustments adjustments six months
30 Sept 30 Sept 30 Sept 30 Sept 30 Sept 30 Sept
2015 2015 2015 2015 2015 2015
R'm R'm R'm EUR'm EUR'm EUR'm
EQUITY AND LIABILITIES
63 549 – 63 549 Ordinary shareholder equity and reserves 4 104 – 4 104
1 964 – 1 964 Preference shareholder equity 127 – 127
6 466 – 6 466 Non-current liabilities 418 – 418
6 466 – 6 466 Convertible bond 418 – 418
13 559 (13 407) 152 Current liabilities 9 (866) 875
13 407 (13 407) – Borrowings – (866) 866
152 – 152 Accounts payable and other liabilities 9 – 9
85 538 (13 407) 72 131 Total equity and liabilities 4 658 (866) 5 524
521 – 521 Ordinary shares in issue (m) 521 – 521
(6) – (6) Treasury shares (m) (6) – (6)
515 – 515 Outstanding shares for NAV calculation (m) 515 – 515
12 350 – 12 350 Net asset value per share (cents) 798 – 798
12.2 Acquisition of additional interest in Iceland Foods
Brait further announced on 2 October 2015 the acquisition of a further 38% of Iceland Foods, subject to anti-trust clearance from the Irish
and Maltese authorities. The acquisition cost of GBP172.9 million will be funded from the proceeds of Brait's Bond issuance. This transaction
will increase Brait's stake in Iceland Foods to 57% and is in line with Brait's strategy of holding majority stakes in market leading sizeable
unlisted companies.
12.3 Proposed redemption and delisting of preference shares
Brait announced on 9 November 2015 a proposed amendment to its Memorandum of Association, to allow for the 20,000,000 cumulative,
non-participating, Preference Shares to be redeemed and delisted at the option of the Company, if the Board or a duly authorised committee
thereof believes such redemption is in the best interests of the Company. The Directors also proposed that shareholders provide the Company with
the authority to buy back up to seventy five percent (75%) of the preference shares. The Company considers that given the surplus liquidity arising
from the disposal of its Steinhoff shareholding and the recent issuance of the GBP350 million convertible bond, it is in the best interests of the
Company to give the Directors the flexibility to effect the redemption and delisting of all of the Preference Shares currently in issue or buy back up to
75% of the preference shares when, in their discretion, the timing is appropriate for such steps. The circular containing full details of the terms, and
incorporating a notice for the Extraordinary General Meeting and necessary resolutions to be approved by shareholders, was sent to both ordinary
and preference shareholders on 9 November 2015.
Review of operations
The Board of Directors is pleased to report to shareholders on the Group's interim results for the six months ended 30 September 2015.
KEY HIGHLIGHTS
-Brait's reported NAV per share at 30 September 2015 is ZAR123.50; which represents growth of 255.4% over the past twelve months and an increase
of 60.1% on 31 March 2015's NAV per share of ZAR77.12
-3 year CAGR for reported NAV per share to 30 September 2015 of 75.1% per annum (benchmark of 15%); including ordinary share dividends it
is 75.3%
-Completed the acquisition of New Look and Virgin Active
-Brait raised GBP350 million on 18 September 2015 from the issuance of its oversubscribed, five year Convertible Bond
-Within the Other Investments portfolio: divested Southern View Finance (SVF) and Chamber Lane Properties; and increased our shareholding in DGB
to 81%
-Divested the Steinhoff shareholding and settled the Group's borrowings on 2 October 2015
-Announced on 2 October 2015 the acquisition of a further 38% of Iceland Foods for GBP172.9 million, which will increase Brait's shareholding to 57%.
This transaction remains conditional on anti-trust clearance from the Irish and Maltese authorities
-The Sunday Times ranked Brait first in the JSE Top-40 Index Companies and seventh in the Top-100 Companies, based on share performance for the
5 year period ended 31 August 2015
VALUE DRIVERS
Growth in 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
The growth in NAV per share, when compared to the more recent reporting periods is as follows:
Reported NAV
Reporting date per share Period % increase
30 September 2014 ZAR34.75 12 months 255.4%
31 March 2015 ZAR77.12 6 months 60.1%
30 June 2015 ZAR80.34 3 months 53.7%
Brait's valuation policy is to reference the EV/EBITDA valuation multiple on a historical basis for each of its investments to their peer group's trailing three
year average multiple. At reporting date, the EV/EBITDA historical valuation multiples used are:
Valuation Peer average: Peer average:
multiple used 3 year trailing spot
New Look 13.3x 14.8x 15.3x
Virgin Active 10.8x 13.5x 14.2x
Premier 12.6x 12.6x 15.0x
Iceland Foods 8.0x 9.9x 10.4x
The discounts to peer average multiples at reporting date are:
Discount to Discount to
Valuation peer average: peer average:
multiple used 3 year trailing spot
New Look 13.3x 10% 13%
Virgin Active 10.8x 20% 24%
Premier 12.6x – 16%
Iceland Foods 8.0x 19% 23%
The NAV break-down is as follows:
30 Sept 30 Sept 30 Sept 30 Sept
2014 2015 2015 2014
ZAR'm ZAR'm % EUR'm EUR'm
18 415 61 898 Investments 86 3 997 1 292
– 32 371 New Look 45 2 091 –
– 16 298 Virgin Active 22 1 053 –
3 862 9 804 Premier 14 633 271
1 400 1 829 Iceland Foods 3 118 98
11 546 – Pepkor – – 810
1 607 1 596 Other investments 2 102 113
548 602 Loan receivable 1 39 38
622 9 618 Cash and cash equivalents# 13 621 44
333 13 Accounts receivable – 1 23
19 918 72 131 Total assets 100 4 658 1 397
19 6,618 Total liabilities 427 1
– – Borrowings# – –
– 6 466 Convertible bond 418 –
19 152 Accounts payable and provisions 9 1
1 964 1 964 Preference share equity 127 138
17 935 63 549 Net asset value 4 104 1 258
516 515 Number of issued ordinary shares ('mil‚ excluding treasury shares) 515 516
3 475 12 350 Net asset value per share (cents) 798 244
#In the interest of enhanced disclosure, the September 2015 reported values in the NAV break-down and commented on hereafter include the 2 October 2015 post balance
sheet event relating to the sale of 190 million Steinhoff shares for ZAR15.010 billion and settlement of borrowings, which resulted in net proceeds of ZAR1.6 billion.
Refer to note 12.1.
Key highlights for the Group's investment portfolio are:
The six months to 30 September 2015 have focused on driving returns across the investment portfolio:
- Brait acquired 89% of New Look on 26 June 2015, at a cost of GBP783 million. Brait utilised its ZAR gearing facilities to fund this acquisition at an
average exchange rate of ZAR18.39. New Look's sales and EBITDA for the six months ended 30 September 2015 increased by 5.9% and 5.1% on
the comparative period respectively. New Look brand like-for-like sales for this six month period are +4.9%, with own website sales growth of 37.9%.
The store rollout in China is ahead of plan with 52 stores in operation in China at reporting date (September 2014: 13 stores). Leases have been
signed to increase New Look's store footprint in China to 85 stores by 31 March 2016. The group added a net 29 stores during the 12 month period
to 30 September 2015 (3.6% growth), closing with 832 stores in operation (September 2014: 803 stores). Cash flow generation remains strong with
operating cash flow post capex (excluding exceptional items) at 74.2% of EBITDA. New Look is valued at reporting date using an EV/EBITDA multiple
of 13.3x, which represents a discount of 10% to the peer group's three year trailing average multiple of 14.8x and a 13% discount to spot. Applying the
closing GBP/ZAR exchange rate of ZAR20.96, New Look's carrying value is ZAR32.4 billion, which represents 45% of Brait's total assets.
- Brait acquired 78% of Virgin Active on 16 July 2015, at a cost of GBP691 million. The acquisition was funded using the Pepkor ZAR proceeds, at an
average exchange rate of ZAR18.39. Virgin Active's revenue for the 9 months ending 30 September 2015, measured in constant currency, increased
3% on the comparative period with EBITDA increasing by 12%. EBITDA margins expanded from 19.5% to 21.3%, driven by higher trading EBITDA
at a club level following the disposal of 9 underperforming clubs. Year to date, Virgin Active has opened 10 new clubs (South Africa 6, Europe 1 and
3 in Asia Pacific) and has acquired 3 clubs in central Milan, Italy. Virgin Active is valued at reporting date using an EV/EBITDA multiple of 10.8x, which
represents a discount of 20% to the peer group's three year trailing average multiple of 13.5x and a 24% discount to spot. Applying the closing
GBP/ZAR exchange rate of ZAR20.96, Virgin Active's carrying value is ZAR16.3 billion, which represents 22% of Brait's total assets.
- Brait increased its shareholding in Premier to 90.3% (HY2015: 84.9%), as a result of the exercise of the final put and call option agreements with
former Premier shareholders. Premier's revenue for its financial year ending 30 June 2015 increased 14% on FY2014 with EBITDA margin expanding
from 7.4% to 9.7%, generating an increase in EBITDA of 49% for the year. Bakeries improved pricing and grew like-for-like bread sales volumes by
8%, largely in the informal market. Milling sales volumes grew by 2% for maize and 1% for wheat. Premier's sugar confectionary business, part of its
Groceries division, grew revenue by 36% in FY15. Premier's acquisition of Companhia Industrial Da Matola (CIM), the leading food producing company
in Mozambique, was integrated during July 2015. The acquisitions made during FY15 – CIM, La Femme and Mr Bread Milling – have been recognised
in the September 2015 valuation of Premier on an earnings basis (previously carried at cost). These acquisitions were funded through an increase in
shareholder loans provided by Brait. Premier's capital expenditure programme, which primarily relates to expanding capacity, is funded through its own
operational cash flows. Premier is valued at reporting date using an EV/EBITDA multiple of 12.6x which is the peer group's three year trailing average
multiple and is a 16% discount to spot. Premier's carrying value at 30 September 2015 is ZAR9.8 billion, which represents an increase of 154% on
30 September 2014's ZAR3.9 billion and a 19% increase on 31 March 2015's ZAR8.2 billion.
- Iceland Foods' sales for its 24 weeks ending 11 September 2015 decreased by 0.3% on the comparative period, with like-for-like sales down 2.5%
in a market experiencing food deflation of c.1.7%. The EBITDA margin of 5.0% is broadly in line with the comparative period, with strong performance
at the Gross Profit level and cost savings on store wages offset by increased marketing spend. Frozen continues to perform well, while grocery and
chilled categories remain very competitive with price still a key driver. The group added a net 4 stores during the 24 weeks ending 11 September 2015
including 2 Food Warehouse stores. At period end, the group had a total of 876 stores (which includes 8 Food Warehouse). Free cash flow generation
remains on plan. Iceland Foods is valued at reporting date using an EV/EBITDA multiple of 8.0x, which represents a discount of 19% to the peer
group's three year trailing average multiple of 9.9x and a 23% discount to spot. Applying the closing GBP/ZAR exchange rate of ZAR20.96 (HY2015:
ZAR18.30) Iceland Food's carrying value of ZAR1.8 billion reflects an increase of 31% on 30 September 2014's ZAR1.4 billion and a 45% increase on
31 March 2015's ZAR1.3 billion.
- Whilst the carrying value for the Other Investments portfolio is largely unchanged compared to HY2014, there have been a number of movements
within the portfolio during HY2015: (i) ZAR1.6 billion proceeds were received from the realisation of the Group's investments in SVF and Chamber Lane
Properties; (ii) Brait increased its investment in DGB from 40% to 81%; and (iii) DGB demonstrated strong growth and cash flow generation during its
financial year ended 30 June 2015.
Post balance sheet events
- As per Brait's announcement on 2 October 2015, the 200 million Steinhoff shares were divested through block trades for a total consideration of
ZAR15.8 billion, all of which was received by 2 October 2015. These proceeds were immediately applied to settle the gearing facility of ZAR14.2 billion
that funded the acquisition of New Look, resulting in a remaining cash balance of ZAR1.6 billion.
- Brait also announced on 2 October 2015 the acquisition of a further 38% of Iceland Foods, subject to anti-trust clearance from the Irish and Maltese
authorities. The acquisition cost of GBP172.9 million will be funded from the proceeds of Brait's recent convertible bond issuance. This transaction
will increase Brait's stake in Iceland Foods to 57% and is in line with Brait's strategy of holding majority stakes in market-leading sizeable unlisted
companies.
- Brait announced on 9 November 2015 a proposed amendment to its Memorandum of Association to allow for the 20 000 000 cumulative,
non-participating Preference Shares to be redeemed and delisted at the option of the Company, if the Board or a duly authorised committee thereof
believes such redemption is in the best interests of the Company. The Directors also proposed that shareholders provide the Company with the
authority to buy back up to seventy five percent (75%) of the preference shares. The Company considers that given the surplus liquidity arising from
the disposal of its Steinhoff shareholding and the recent issuance of the GBP350 million convertible bond, it is in the best interests of the Company
to give the Directors the flexibility to effect the redemption and delisting of all of the Preference Shares currently in issue or buy back up to 75% of the
Preference Shares when, in their discretion, the timing is appropriate for such steps. The Circular containing full details of the terms, and incorporating
a notice for the Extraordinary General Meeting and necessary resolutions to be approved by shareholders, was sent to both ordinary and preference
shareholders on 9 November 2015.
Low cost to AUM ratio
Operating expenditure for the six month period of ZAR170 million represents an annualised ratio of 0.45% to AUM (HY2015: 0.64%) 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% (HY15: 0.37%).
Minimal balance sheet cash drag
The Group targets minimal cash holdings on balance sheet to avoid diluting overall returns. Cash and cash equivalents at 15.1% of NAV (HY2015: 3.5%)
are well within the Group's benchmark maximum of 25% of NAV. Cash and cash equivalents of ZAR9.6 billion include: (i) the GBP350 million convertible
bond proceeds raised on 18 September 2015 and (ii) the net ZAR1.6 billion that the Group received on 2 October 2015, which resulted from the sale of
Steinhoff shares and settlement of borrowings. Assuming the acquisition of the further 38% of Iceland Foods for GBP172.9 million, using the closing
GBP/ZAR rate of ZAR20.96, cash and cash equivalents would reduce to 9.4% of NAV.
Significant cash flow within the underlying assets
Brait's net investment inflows of ZAR17.5 billion comprises:
(i) ZAR15.8 billion from the sale of 200 million Steinhoff shares which was all received by 2 October 2015; (ii) ZAR1.6 billion proceeds from the Other
Investments portfolio, which related to the sale of SVF and Chamber Lane Properties; and (iii) ZAR0.1 billion interest received from Premier.
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.
These include 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 ZAR77.12 NAV per share, relating
to the year ended 31 March 2015, was paid on 11 August 2015. 94% of shareholders elected to receive bonus shares, with 6% electing to receive cash.
This resulted in issued share capital, net of treasury shares, increasing from 510.5 million to 514.6 million.
GROUP FUNDING POSITION
On 18 September 2015 Brait received GBP350 million from the issuance of its unsubordinated, unsecured convertible bonds due on 18 September 2020
(Bonds). The Bond Offering was oversubscribed and will carry a fixed coupon of 2.75% per annum payable semi-annually in arrears. The fixed conversion
price of GBP7.9214 per share was set at a 30.0% premium to the volume-weighted average price of Brait's ordinary shares between launch and pricing
on 11 September 2015. Using this share price, the Bonds will convert into 44.184 million shares (8.5% of Brait's current issued share capital) on exercise
of bondholder conversion rights. The Bonds listed on the Open Market (Freiverkehr) segment of the Frankfurt Stock Exchange on 15 October 2015.
In terms of IAS 32 (Financial Instruments: Presentation), the Bond is a compound instrument. The liability component is recognised initially as
GBP308.3 million. This represents the present value of the principal and coupon payments over the Bond's five year term, discounted at a market related
rate for a vanilla bond. The residual GBP41.7 million is recognised as an equity reserve. At each reporting date during the term of the Bond, the liability
component is remeasured to reflect the unwind of discount. This will result in the liability at the maturity date being recognised at the Bond's face value of
GBP350 million.
The Group remains adequately capitalised with sufficient cash and sizeable 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 6 November 2015 an interim preference dividend of ZAR4.8723/EUR0.321133 per share for the six months ended 30 September 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, 9 November 2015.
GROUP OUTLOOK
- New Look has seen strong trading across all its channels, providing momentum to further develop and deploy its five pillar strategy in a disciplined and
sustainable manner in order to facilitate strong growth whilst maintaining focus on its existing operations;
- Virgin Active's solid performance for the 9 month period ending 30 September 2015 is characterised by continued revenue management and margin
enhancement. The new club rollout pipeline, UK premiumisation programme and acquisition opportunities together provide a strong growth platform;
- Premier produced another strong set of results for its financial year ended 30 June 2015 (EBITDA has grown by an average of 40% per annum since
FY11) and continues to deliver on its strategy of brand building, through producing consistent quality and product innovation as well as operational
efficiencies. Including the acquisition of CIM, Premier's EBITDA is in excess of ZAR1 billion and its core brands are well positioned to compete in their
respective markets;
- Iceland Foods continues to generate strong cash flows, remaining competitive on price, whilst driving innovation and the Power of Frozen to
differentiate its product offering. Brait is excited about increasing its shareholding to 57% and partnering alongside Iceland Food's founder and
management team in taking the business into its next chapter.
This has been a productive, return focused period for Brait both in terms of acquisitions and divestitures within its investment portfolio and capital
management. With its strong balance sheet, Brait is well placed for new deals to complement its well-positioned portfolio.
For and on behalf of the Board
PJ Moleketi
Non-Executive Chairman
17 November 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: 17/11/2015 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
