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Net asset value (“NAV”) update for the third quarter ended 31 December 2015 (Q3 FY2016)
Brait SE
(Registered in Malta as a European Company)
(Registration No.SE1)
Share code: BAT ISIN: LU0011857645
Bond Code: WKN: A1Z6XC ISIN: XS1292954812
("Brait", "the Company")
NET ASSET VALUE ("NAV") UPDATE FOR THE THIRD QUARTER ENDED 31
DECEMBER 2015 (Q3 FY2016)
Shareholders of the Company are advised that:
- NAV per share increased by 10.4% to ZAR136.34 for the quarter
ended 31 December 2015 (30 September 2015: ZAR123.50 per
share).
- NAV per share of ZAR136.34 reflects an increase of 120.1% for
the twelve months ended 31 December 2015 (31 December 2014:
ZAR61.96 per share) and a three-year CAGR to 31 December 2015
of 76.7%.
- Inclusive of the ordinary share dividends paid to date, the
three-year CAGR to 31 December 2015 is 77.0%.
- Valuation multiples for Brait’s investments remain unchanged.
- New Look has traded well in its third quarter ended 26
December 2015 and the company continues to execute well on
its strategic initiatives. Revenue and EBITDA (in GBP) from
continuing operations are up 5.6% and 6.4% year to date
("YTD") on the comparative period respectively. New Look
brand like-for-like sales are +4.5% YTD, driven by strong
product ranges and the benefit of the Concept store
refurbishment programme, which has now been rolled out to 422
stores. Additional delivery options and improved
functionality have driven Own Website sales growth of 34.7%
YTD. Third Party E-commerce sales increased by 32.7% YTD,
predominantly attributable to the growth in volume of
business with key partnerships. UK Womenswear market share
has increased by 0.3% to 6.3%. Expansion continues in China
with over 80 stores now open (30 September 2015: 52 stores)
and on track to have 85 by 31 March 2016. During the third
quarter, two more standalone Menswear stores were opened in
the UK. The four standalone Menswear stores now in operation
continue to exceed expectations, with a further 20 standalone
Menswear stores planned for FY2017. The group’s total estate
closed the third quarter at 862 stores. Cash flow generation
remains strong. New Look is valued at the reporting date
using an EV/EBITDA multiple of 13.3x, which represents a
discount of 12% (30 September 2015: 10% discount) to its peer
group’s three year trailing average multiple of 15.0x.
Applying the closing GBP/ZAR exchange rate of ZAR22.80, New
Look’s carrying value has increased by 14% for the quarter to
ZAR36.8 billion, which represents 47% of Brait’s total
assets.
- Virgin Active has traded well through to 31 December 2015 on
a constant currency basis and it continues to generate strong
cash flows. Club openings are ahead of target and with a
number of exciting growth opportunities in Africa and Asia
Pacific in particular, Virgin Active is strategically on
plan. Virgin Active is valued at the reporting date using an
EV/EBITDA multiple of 10.8x, which represents a discount of
20% (30 September 2015: 20% discount) to its peer group’s
three year trailing average multiple of 13.5x. Applying the
closing GBP/ZAR exchange rate of ZAR22.80, Virgin Active’s
carrying value has increased by 12% for the quarter to
ZAR18.2 billion, which represents 23% of Brait’s total
assets.
- Premier traded well during the quarter and has recorded a
pleasing set of half year results, which include the
contribution from Premier’s Mozambique subsidiary (CIM)
acquired with effect from 1 July 2015. Revenue was up 21% YTD
on the comparative period in a difficult macro-economic
climate. Sales prices and margins were well managed with
EBITDA growing by 27% YTD. The new Blue Ribbon packaging
launch in November 2015 and marketing campaign have been well
received by the market. Bread volumes for the six months to
December 2015 have grown 5.5% on the comparative period. The
Milling division has experienced a difficult market
environment as a result of significant increases in grain
prices due to the severe drought, depreciation of the Rand
and the effect of wheat import tariffs. Premier has
contracted local supply of its required maize volumes beyond
2016 to mitigate the risk of white maize shortages given the
crop outlook. Premier entered the drinking maize (Mageu)
category using its Iwisa brand in October 2015. The product
was launched mainly in retail and convenience stores. The
Groceries division has performed well with Confectionary
enjoying strong growth, enhanced by the listing of 17 new
products. Premier’s most recent acquisition, CIM, has been
successfully integrated and recorded strong results for the
half year. Brait increased its shareholding in Premier to
91.1% (30 September 2015: 90.3%) through the exercise of put
and call option agreements. Premier is valued at the
reporting date using an EV/EBITDA multiple of 12.6x, which
represents a discount of 2% (30 September 2015: 0% discount)
to its peer group’s three year trailing average multiple of
12.8x. Premier’s carrying value has increased by 5.8% for the
quarter to ZAR10.4 billion, which represents 13% of Brait’s
total assets.
- Iceland Foods continues to pursue a strategy designed to
differentiate its business and stabilize financial
performance, within what remains a deflationary and intensely
competitive market place. Key areas of focus have been the
launch of many new ranges of premium quality frozen
ingredients and prepared foods, the development of its
exclusive Slimming World range into one of the UK’s leading
frozen brands and an upgrade and reposition of its fresh
produce offer. The roll-out of the successful Food Warehouse
store format continues and Iceland has improved its own brand
packaging and in-store point of sale presentation across its
whole estate. These initiatives have helped strengthen gross
profit and stabilize EBITDA despite the continued impact of
negative like-for-like sales. Sales (in GBP) for the 40 weeks
ended 1 January 2016 decreased by 0.8% on the comparative
period, with like-for-like sales down 2.7% in a market
experiencing food deflation. The EBITDA margin of 5.2% is in
line with the comparative period. The group added a net six
stores year to date in the UK, including five Food Warehouse
stores. At period end the group had a total of 881 stores,
which includes 11 Food Warehouse stores. Free cash flow
generation, post capital expenditure, remains strong at 83%
of EBITDA. As communicated on 19 November 2015, Brait
increased its shareholding in Iceland Foods from 18.7% to
57.1%, at a cost of GBP173.8 million. This increase in
shareholding is the main reason for the 220% increase in ZAR
carrying value for the quarter. Iceland Foods is valued at
the reporting date using an EV/EBITDA multiple of 8.0x, which
represents a discount of 20% (30 September 2015: 19%
discount) to its peer group’s three year trailing average
multiple of 10.0x. Applying the closing GBP/ZAR exchange rate
of ZAR22.80, Iceland Foods’ carrying value is ZAR5.9 billion,
which represents 7% of Brait’s total assets.
- In addition to the strong operational performance across the
portfolio, the ZAR carrying values for Brait’s GBP
denominated investments have benefitted from the GBP
strengthening against the ZAR.
- Brait’s Loan Receivable was repaid by Fleet Holdings Limited
("Fleet") on 30 November 2015, following Fleet’s refinance of
the ZAR612 million owed to Brait.
- The decrease in Brait’s cash during the quarter is largely
attributable to the acquisition of the further 38.4% of
Iceland Foods for GBP173.8 million.
- The increase in the ZAR carrying value of Brait’s GBP
denominated Convertible Bond is largely attributable to the
GBP strengthening against the ZAR.
- The decrease in the number of issued ordinary shares is a
result of treasury share purchases during the quarter.
- Post balance sheet event: As reported to the market on 19
January 2016, Brait redeemed all of its 20 million issued
preference shares at their deemed issue price of R100 per
share on 18 January 2016 as well as paying the accrued
dividend to this date. The preference shares were
subsequently delisted.
- Brait continues to explore alternative sources of funding to
enhance flexibility and efficiency.
Brait NAV Analysis:
31-Dec-15 30-Sep-15 31-Dec-14
R'm R'm R’m
Investments 72,834 61,898 32,869
New Look 36,789 32,371 -
Virgin Active 18,191 16,298 -
Premier 10,371 9,804 4,123
Iceland Foods 5,856 1,829 999
Pepkor - - 25,732
Other investments 1,627 1,596 2,015
Loan receivable - 602 561
Cash and cash equivalents 6,204 9,618 879
Accounts receivable 12 13 23
Total Assets 79,050 72,131 34,332
Borrowings - - (705)
Convertible bond (7,078) (6,466) -
Accounts payable (120) (152) (33)
Total liabilities (7,198) (6,618) (738)
Preference share equity (1,964) (1,964) (1,964)
Net Asset Value 69,888 63,549 31,630
Number of issued shares ('mil)
excluding treasury shares 512.6 514.6 510.5
Net asset value per share (ZAR) 136.34 123.50 61.96
The financial information on which this announcement is based has
not been reviewed and reported on by the Company’s external
auditors. The respective New Look and Iceland Foods Q3 FY2016 bond
investor presentations are available at www.brait.com
Malta
10 February 2016
Brait’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)
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