Wrap Text
Audited results for the year ended 31 March 2016 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
Bond code: WKN: A1Z6XC
ISIN: XS1292954812
("Brait", the "Company" or "Group")
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2016 AND PROPOSED BONUS SHARE ISSUE OR, ALTERNATIVELY, CASH DIVIDEND
KEY HIGHLIGHTS
- Brait's reported NAV per share at 31 March 2016 is ZAR136.27 which
represents growth of 76.7% on 31 March 2015's NAV per share of ZAR77.12
- The three year CAGR for reported NAV per share to 31 March 2016 is 72.3%
per annum (benchmark of 15% per annum); including ordinary share
dividends it is 72.6%
- Received ZAR17.7 billion investment proceeds
- Invested ZAR32.2 billion primarily in acquiring 89% of New Look, 78% of
Virgin Active and increasing the shareholding in Iceland Foods to 57%
- Brait raised GBP350 million on 18 September 2015 from the issuance of
its oversubscribed, 5-year Convertible Bond
- Brait redeemed all 20 million issued Preference Shares on 18 January
2016 at their deemed issue price of ZAR100, as well as paying the
dividend accrued to this date
- Brait proposes an ordinary share bonus issue, or alternatively, cash
dividend of ZAR1.3627 per ordinary share (76.7% increase on FY2015)
Salient features for the year ended 31 March 2016
Audited Audited Audited Audited
31 March 31 March 31 March 31 March
2015 2016 2016 2015
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PERFORMANCE MEASURES
7 712 13 627 Net asset value (NAV) per share (cents) 812 592
141% 77% NAV per share increase for the year 37% 169%
55% 72% NAV per share three year CAGR# 53% 43%
0.44% 0.53% Operating cost: Assets Under Management (AUM)* 0.53% 0.44%
0.27% 0.45% Operating cost after fee income: AUM 0.45% 0.27%
14 671 17 661 Cash inflow from investment portfolio 1 052 1 127
DIVIDENDS
77.12 136.27 Proposed/paid ordinary dividends per share (cents) 7.76 5.79
474.70 487.23 Interim preference dividend per share paid (cents) 32.1133 33.3052
479.68 302.03 Final preference dividend per share paid (cents) 18.1619 35.9842
FINANCIAL STATISTICS
43 127 86 944 Market capitalisation 5 205 3 309
8 350 16 700 Closing ordinary share price (cents) 1 000 641
516 521 Ordinary shares in issue (m) 521 516
(6) (8) Treasury shares (m) (8) (6)
510 513 Ordinary shares outstanding (m) 513 510
# Compound Annual Growth Rate "CAGR"
* AUM represents the aggregate of the Group's total assets and Brait IV invested capital under management. Using average AUM as the reference basis, FY16 operating cost
are 0.62% and net after fee income 0.52% (FY15: 0.60% and 0.36% respectively).
Summary consolidated statement of financial position as at 31 March
Audited Audited Audited Audited
31 March 31 March 31 March 31 March
2015 2016 2016 2015
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ASSETS
27 718 73 036 Non-current assets 4 352 2 129
27 144 73 036 Investments 2 4 352 2 085
574 – Loan receivable 3 – 44
13 701 4 599 Current assets 275 1 052
12 245 Accounts receivable 15 1
13 689 4 354 Cash and cash equivalents 4 260 1 051
41 419 77 635 Total assets 4 627 3 181
EQUITY AND LIABILITIES
39 369 69 872 Ordinary shareholders equity and reserves 5 4 164 3 023
1 964 – Preference shareholders equity 5 – 151
– 7 721 Non-current liabilities 460 –
– 6 621 Convertible Bonds 6 395 –
– 1 100 Borrowings 7 65 –
86 42 Current liabilities 3 7
86 42 Accounts payable and other liabilities 3 7
41 419 77 635 Total equity and liabilities 4 627 3 181
516 521 Ordinary shares in issue (m) 521 516
(6) (8) Treasury shares (m) (8) (6)
510 513 Outstanding shares for NAV calculation (m) 513 510
7 712 13 627 Net asset value per share (cents) 812 592
Summary consolidated statement of comprehensive income for the year ended 31 March
Audited Audited Audited Audited
31 March 31 March 31 March 31 March
2015 2016 2016 2015
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22 979 21 990 Investment gains 1 445 1 686
611 1 597 Other investment income 105 45
(201) (435) Operating expenses (29) (15)
(48) (971) Finance costs (63) (3)
(7) (24) Taxation (2) (1)
23 334 22 157 Profit for the year 1 456 1 712
Other comprehensive income
9 8 064 Translation adjustments (338) 208
23 343 30 221 Comprehensive income for the year 1 118 1 920
4 527 4 294 Earnings/Headline earnings per share (cents) – basic 8 283 332
4 527 4 141 Earnings/Headline earnings per share (cents) – diluted 8 272 332
Summary consolidated statement of changes in equity for the year ended 31 March
Audited Audited Audited Audited
31 March 31 March 31 March 31 March
2015 2016 2016 2015
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16 247 39 369 Ordinary shareholders' balance at beginning of year 3 023 1 120
23 334 22 157 Profit for the year 1 456 1 712
9 8 064 Translation adjustments (338) 208
– (36) Preference share issue cost allocated to Retained Earnings on redemption (2) 208
(22) (270) Net purchase of treasury shares (16) –
– 864 Convertible Bond equity reserve 57 –
(185) (254) Earnings attributed to preference shares (15) (14)
(14) (22) Ordinary dividends paid (cash election) 5 (1) (1)
39 369 69 872 Ordinary shareholders' balance at end of year 4 164 3 023
1 964 1 964 Preference shareholders' balance at beginning of year 151 135
– – Translation adjustments 19 16
– 36 Preference share issue cost 2 –
185 254 Earnings attributed to preference shares 15 14
(185) (254) Preference dividend paid (15) (14)
– (2 000) Preference share redemption (172) –
1 964 – Preference shareholders' balance at end of year – 151
Summary consolidated statement of cash flows for the year ended 31 March
Audited Audited Audited Audited
31 March 31 March 31 March 31 March
2015 2016 2016 2015
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Cash flows from operating activities:
14 400 17 438 Investment proceeds received 1 131 1 106
84 69 Fees received 5 6
113 315 Interest received 21 9
147 – Dividends received – 11
(214) (444) Operating expenses paid (29) (16)
(10) (16) Taxation paid (1) (1)
(46) (944) Finance costs paid (62) (4)
14 474 16 418 Operating cash flow before purchase of investments 1 065 1 111
(841) (32 199) Purchase of investments (2 222) (65)
13 633 (15 781) Net cash (used in)/from operating activities (1 157) 1 046
– 16 465 Proceeds from drawdown of Borrowings 1 200 –
(164) (15 365) Repayment of Borrowings (996) (13)
– 7 245 Proceeds from issue of Convertible Bonds 481 –
– (2 000) Redemption of Preference shares (109) –
– 612 Proceeds from Loan Receivable 40 –
(22) (487) Net purchase of treasury shares (32) (2)
(14) (22) Ordinary dividend paid (cash election) (1) (1)
(185) (254) Preference dividend paid (15) (14)
(385) 6 194 Net cash from/(used in) financing activities 568 (30)
13 248 (9 587) Net (decrease)/increase in cash and cash equivalents (589) 1 016
121 252 Effects of exchange rate changes on cash and cash equivalents (202) 13
320 13 689 Cash and cash equivalents at beginning of year 1 051 22
13 689 4 354 Cash and cash equivalents at end of year 260 1 051
Notes to the audited 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 in accordance with International Financial Reporting Standards (IFRS) as adopted by
the European Union, on the going concern principle, using the historical cost basis, except where otherwise indicated. These summary
consolidated financial statements are prepared in accordance with IAS 34: Interim Financial Reporting and in accordance with the framework
concepts and measurement and recognition requirements of IFRS. The accounting policies and methods of computation are consistent with
those applied in the consolidated annual financial statements for the year ended 31 March 2015.
The Group's financial statements are prepared using both the Euro (EUR) and SA Rand (R/ZAR) as its presentation currencies.
The Group's subsidiaries have one of three functional currencies: GBP, SA Rand or USD (US$). The holding company, Brait SE, and
its main consolidated subsidiaries use GBP as their functional currency in the current year. These entities used USD/ZAR as their functional
currencies in the prior year. The change was effective from 1 April 2015 and was initiated as a result of a change in the denomination of
significant funding and investment streams. The financial statements have been prepared using the following exchange rates:
2016 2015
Closing Average Closing Average
USD/ZAR 14.7678 13.7836 12.1321 11.4826
GBP/ZAR 21.2052 20.7245 17.9746 17.7794
EUR/ZAR 16.7810 15.2210 13.0196 13.6291
USD/EUR 0.8800 0.9055 0.9318 0.8425
GBP/EUR 1.2636 1.3616 1.3806 1.3045
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 is initially recognised as the present value of the future coupon and principal
payments. The discount rate used for this calculation, was the market rate on the date the bonds were issued, for similar liabilities that do not
have the equity conversion component (vanilla bonds). The equity component is the excess of the proceeds received on issuance, less the
value of the liability component recognised for the instrument.
Subsequent to its initial recognition, the liability component is measured at amortised cost using the effective interest rate method. In addition,
the conversion option classified as equity (convertible bond reserve) will remain in equity until the conversion option is exercised, in which case,
the balance recognised in convertible bond reserve will be transferred to share premium. Should the conversion option remain unexercised at
maturity date, the balance recognised in convertible bond reserve will be transferred to retained earnings. No gain or loss is recognised in profit
or loss on conversion or expiry of the conversion option.
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 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 can be obtained from the 31 March 2016 investor presentation on the Group's
website, www.brait.com.
2015 2016 2016 2015
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– 34 869 New Look 2 078 –
– 17 579 Virgin Active 1 048 –
8 241 11 637 Premier 693 633
1 259 7 181 Iceland Foods 428 97
15 206 – Steinhoff – 1 168
2 438 1 770 Other investments 105 187
27 144 73 036 Investments 4 352 2 085
Valuation metrics at 31 March 2016
Maintainable 3rd Party
EBITDA Multiple Net Debt
New Look (GBP'm) 227 13.3x 1 083
Virgin Active (GBP'm) 135 11.0x 408
Premier (R'm) 1 125 12.7x 1 946
Iceland Foods (GBP'm) 151 8.8x 731
Other Investments varied
Fair Value Hierarchy
IFRS 13 Fair Value Measurement provides a hierarchy that classifies inputs employed to determine fair value. Investments measured and reported at
fair value are classified and disclosed in one of the following categories:
Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices).
Level 3 Inputs for the asset or liability that are not based on observable market data
There are no financial assets that are categorised as Level 2 in the current or prior year. All Level 3 investments have been valued using a maintainable
earnings multiple model.
Investments Investments Total Investments Investments Total
Level 1 Level 3 Level 1 Level 3
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– 34 869 34 869 New Look – 2 078 2 078
– 17 579 17 579 Virgin Active – 1 048 1 048
– 8 911 8 911 Premier – 531 531
– 7 181 7 181 Iceland Foods – 428 428
1 1 452 1 453 Other investments – 87 87
1 69 992 69 993 Investments at Fair Value – 4 172 4 172
2 726 Premier shareholder funding 162
317 Other investments shareholder funding 18
3 043 Investments at Amortised Cost 180
73 036 Total investments 4 352
2015 2016 2016 2015
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3. Loan Receivable
1 672 1 841 Loan to Fleet Holdings Ltd (Fleet) 110 128
(1 098) (1 841) Loan from Fleet (110) (84)
574 – Net loan to Fleet – 44
The loans both bear interest at the 3 month Johannesburg Inter Bank
Acceptance Rate ("JIBAR") plus 3.45%, with the right to roll up interest.
The loans both mature on 4 July 2021.
In November 2015, Fleet refinanced the remaining loan owing to Brait with
The Standard Bank of SA Limited and FirstRand Bank Limited (Lenders). Brait
has provided the Lenders to Fleet with an indemnity for the amount owing.
Brait holds collateral in the form of pledged Brait shares for the indemnification.
4. CASH AND CASH EQUIVALENTS
13 689 4 354 Balances with banks (1) 260 1 051
3 034 172 – ZAR cash 10 233
178 69 – USD cash 5 14
10 477 4 113 – GBP cash 245 804
(1)Cash placed across five banks, each having an investment grade credit rating
2015 2016 2016 2015
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5. Share Capital and Premium
Authorised ordinary share capital
1 500 000 000 at par value of EUR0.22 per share.
Issued ordinary share capital
31 March 2015 516 490 019
Bonus share issue 4 134 816
31 March 2016 520 624 835
Preference share capital
The company has 20 000 000 authorised preference share capital.
In January 2016 the Company redeemed all 20 000 000 issued preference shares.
Dividend
(14) (22) 6% 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 with no adjustment to any other reserves in Equity. The bonus share
issue option was converted at the 60 day Volume Weighted Average Price
(VWAP) ending 29 May 2015 of R90.97 per share. This resulted in the R0.7712
dividend per share translating into 0.84775 shares for every 100 shares held.
2015 2016 2016 2015
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6. CONVERTIBLE BOND
– 6 621 On 18 September 2015 Brait received GBP350 million from the issuance of its 395 –
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 volume weighted average price 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
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 conversion option has
been recognised directly in equity. The liability for the bonds is accounted for at
amortised cost using an effective interest rate of 5.51%.
The Bonds listed on the Open Market (Freiverkehr) segment of the Frankfurt
Stock Exchange on 15 October 2015.
7. BORROWINGS
– 1 100 The loan from FirstRand Bank Limited (acting through its Rand Merchant 65 –
Bank division) and The Standard Bank of South Africa Limited (acting through
its Corporate and Investment Banking Division) is Rand denominated, bears
interest at Jibar plus 2.5% repayable quarterly, with a right to rollup. The current
R6.4 billion revolving facility expires in July 2017.
The new committed revolving facility will have a term of four years and comprises
the aggregate of a ZAR8.5 billion tranche and a GBP75 million tranche from
JP Morgan Chase Bank, N.A., London branch.
2015 2016 2016 2015
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8. HEADLINE EARNINGS RECONCILIATION
23 334 22 157 Profit for the year 1 456 1 712
(95) (98) Interim Preference dividend paid (5) (7)
(96) (60) Final Preference dividend paid (3) (7)
23 143 21 999 Earnings/Headline Earnings 1 448 1 698
511 512 Weighted average ordinary shares in issue (m) – basic 512 511
4 527 4 294 Earnings/Headline Earnings per share (cents) – basic 283 332
23 143 21 999 Earnings/Headline Earnings 1 448 1 698
– 189 Earnings adjustment for Bond interest saved if Bonds converted to shares 12 –
23 143 22 188 Diluted earnings/Headline earnings 1 460 1 698
511 536 Weighted average ordinary shares in issue (m) – diluted (1) 536 511
4 527 4 141 Earnings/headline earnings per share (cents) – diluted 272 332
(1)All ordinary shares underlying the Bonds are treated as dilutive and weighted from issue of
the Bonds on 11 September 2015
9. RELATED PARTY BALANCES
Transactions between the Company and its subsidiaries that have been
eliminated on consolidation are not disclosed in this note. Transactions between
the Company and its subsidiaries are disclosed in the Company's separate
financial statements. During the year, Group companies entered into the following
transactions with related parties who are not members of the Group.
Profit from operations include:
(9) (17) Non-executive directors' fees (1) (1)
(4) (5) Professional fees – M Partners S.a r.l – –
(1) (1) Professional fees – Maitland International Holdings Plc – –
2015 2016 2016 2015
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10. CONTINGENT LIABILITIES AND COMMITMENTS
10.1 Contingencies
69 – Sureties (1) – 5
397 – Guarantees (1) – 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.
Fleet Indemnity – see note 3
466 – Total contingencies – 35
10.2 Commitments
– 8 340 Convertible Bond commitments 497 –
– 204 – Coupon payment due within one year 12 –
– 714 – Coupon payments due between one and five years (2) 43 –
– 7 422 – Prinicipal settlement due in five years (2) 442 –
(2)The coupon payment 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 for the two years to
18 September 2020 will not be payable.
114 117 Private equity funding commitments 7 9
Rental commitments (Malta and Mauritius)
2 2 – Within one year – –
3 3 – Between one and five years – –
119 8 462 Total commitments 504 9
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.
11. POST BALANCE SHEET EVENTS
No events have taken place between 31 March 2016 and the date of the release of this report, which would have a material impact on either the
financial position or operating results of the Group.
Auditor's opinion
These summary consolidated financial statements for the year ended 31 March 2016 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.
The auditor's report does not necessarily report on all of the information contained in this announcement. Shareholders are therefore advised that in order
to obtain a full understanding of the nature of the auditor's engagement they should obtain a copy of that report, together with accompanying financial
information from the Company's registered office.
A copy of the auditor's report on the summary consolidated financial statement 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 on the Group's results for the financial year ended 31 March 2016.
VALUE DRIVERS
Growth in NAV is the Group's key performance measure together with the following additional factors 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 comparing the current ZAR136.27 to previous reporting periods is as follows:
Reporting date Reported NAV Period % increase
per share
31 March 2015 ZAR77.12 12 months 76.7%
30 September 2015 ZAR123.50 6 months 10.3%
Brait reported a NAV per share of ZAR136.34 for its third quarter ended 31 December 2015. This included carrying values for the Group's GBP denominated
assets translated into the Group's ZAR presentation currency using that period's closing GBP/ZAR exchange rate of ZAR22.80. Had the GBP/ZAR exchange rate
at 31 March 2016 remained unchanged at ZAR22.80, rather than strengthening to its actual close of ZAR21.21, Brait's reported 31 March 2016 NAV would have
been ZAR144.25.
Brait's valuation policy is to reference the EV/EBITDA valuation multiple on an 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 15.1x 13.3x
Virgin Active 11.0x 13.6x 13.7x
Premier 12.7x 13.0x 12.7x
Iceland Foods 8.8x 10.0x 9.8x
The discounts to peer average multiples at reporting date are:
Discount to:
Valuation
Peer average: Peer average:
multiple used
3 year trailing spot
New Look 13.3x 12% -
Virgin Active 11.0x 19% 20%
Premier 12.7x 2% -
Iceland Foods 8.8x 12% 10%
The Nav breaks-down is as follows:
31 March 31 March 31 March 31 March
2015 2016 2016 2015
ZAR'm ZAR'm % EUR'm EUR'm
27 144 73 036 Investments 94 4 352 2 085
- 34 869 New Look 45 2 078 -
- 17 579 Virgin Active 23 1 048 -
8 241 11 637 Premier 1 15 693 633
1 259 7 181 Iceland Foods 9 428 97
2 438 1 770 Other investments 2 105 187
15 206 - Steinhoff - - 1 168
574 - Loan receivable - - 44
13 689 4 354 Cash and cash equivalents 6 260 1 051
12 245 Accounts receivable - 15 1
41 419 77 635 Total assets 100 4 627 3 181
86 7 763 Total liabilities 463 7
- 1 100 Borrowings 65 -
- 6 621 Convertible bond 395 -
86 42 Accounts payable 3 7
1 964 - Preference share equity - 151
39 369 69 872 Net asset value 4 164 3 023
Number of issued ordinary shares
510.50 512.75 ('mil‚ excluding treasury shares) 512.75 510.50
7 712 136.27 Net asset value per share (cents) 812 592
Key highlights for the Group's investment portfolio are:
– New Look's revenue and EBITDA for its financial year ended 26 March 2016 increased (in GBP) by 5.4% and 7.0% on FY2015 respectively.
New Look Brand like-for-like sales for FY2016 are +3.6%, UK like-for-like sales are +3.4%, with own website sales +27.9% and 3rd
Party E-commerce sales +41.8%. UK growth was driven by (i) strong product ranges; (ii) on-going improvements in product handwriting
and brand identity; (iii) the continued roll-out of the Concept store refurbishment programme and (iv) further investment and improvements
to the design, content and functionality of its transactional website at newlook.com and new mobile application. Encouraged by the strong
reaction to the improving menswear range, particularly from 3rd Party E-commerce customers, New Look accelerated its plans during the year
opening its first six standalone menswear stores in the UK. Menswear is now also available alongside womenswear in around 200 stores,
where stronger visual merchandising and the introduction of menswear specialists to the in-store teams, has helped drive sales. New Look
sustained a stable gross profit margin of 52.7%. During FY2016, New Look added "Gross Profit Margin Improvement" as its sixth strategic
focus initiative, aiming to achieve a significant and sustainable improvement in gross margin going forward. The store rollout in China
continues with strong like-for-like sales performance from stores that have traded for more than 12 months. At year end, there are 85
stores, spread across 20 provinces and 40 cities, in operation in China (FY2015: 19 stores). Across the group, the total number of stores
increased to 838 (FY2015: 809 stores), with total space advancing by 1.5% to 5,442,000 sq ft (2015: 5,363,000 sq ft). More than half of the
entire store portfolio has now been converted to the new successful ' Concept' format. Cash flow generation is strong with operating cash
flow pre tax, post capex, at 68.7% of EBITDA. New Look is valued at reporting date using an EV/EBITDA multiple of 13.3x, which represents a
discount of 12% to the peer group's three year trailing average multiple of 15.1x and is at the peer group's average spot multiple. Applying
the closing GBP/ZAR exchange rate of ZAR21.21, New Look's carrying value is ZAR34.9 billion, which represents 45% of Brait's total assets.
The Newn Look FY2016 debt investor presentation is available on www.brait.com.
– Virgin Active's revenue for its financial year ended 31 December 2015, measured in constant currency, increased by 4% on FY2014. EBITDA
increased by 15.0%, reflecting growth across all territories, with EBITDA margin expanding from 19.4% to 21.6%. Total clubs increased by 9
to 276, following (i) the opening of three new Collection clubs in Europe; (ii) 10 new clubs opened in Southern Africa, including 4 entry
level Virgin Active RED clubs (7 operating at year-end) and the first club in Botswana; (iii) three new clubs opened in Asia Pacific; (iv)
the July 2015 acquisition of three clubs, rebranded to Virgin Active, at prime sites in central Milan; and (v) the divestment of 10 non-core
clubs in Europe. Total membership grew by 3% to 1.47 million. Net bank debt to EBITDA decreased from 2.7 times in FY2014 to 2.5 times. Virgin
Active is committed to product innovation and the continual search for new ways to help members become and stay active. Highlights for 2015
include the international roll out of a gym floor based high energy training zone The Grid; the introduction of boutique classes such as
ballet-inspired Barre; Virgin Active's second ever high-altitude-training studio at the Walbrook Club in central London (one of its two
new premium UK Collection clubs); and specialist training with partner Tough Mudder in several key markets. Virgin Active is valued at
reporting date using an EV/EBITDA multiple of 11.0x, which represents a discount of 19% to the peer group's three year trailing average
multiple of 13.6x and a 20% discount to spot. Applying the closing GBP/ZAR exchange rate of ZAR21.21, Virgin Active's carrying value is
ZAR17.579 billion, which represents 23% of Brait's total assets.
Virgin Active's recent announcements to the market:
> 20 May 2016: Virgin Active believes the Asian market has enormous
scope for its premium, high-end fitness clubs and its globally
recognisable brand gives it a head start in securing iconic
locations. Building on the success of its first four clubs in
Thailand and Singapore, Virgin Active plans to significantly
increase its presence in South East Asia, investing from existing
resources up to GBP150 million in the region over the next six
years. The intention is to open up to 20 clubs in Thailand
(currently three) and between 8 and 10 clubs in Singapore
(currently one). Virgin Active is also exploring expansion in
other key Asian markets.
> 14 June 2016: Following the acquisition by Brait, Virgin Active's
strategy has been built around a focus on operating and developing
prime sites in metropolitan hubs in its key geographies. The sale
of 35 of its non-core UK clubs to Nuffield Health, a not-for-
profit healthcare organisation, is an acceleration of this
strategy. The UK business will now be focussed on London, the
South East and other metropolitan areas, and will be organised
around three core proposition pillars: (i) high-end Collection
clubs, (ii) big family clubs, and (iii) racquets clubs. The
transaction is expected to complete in the next few months, when
existing members and club staff will transfer to Nuffield Health.
The proceeds from the sale will be directed to up-weighting its
club upgrade and new club rollout programmes, together with M&A
growth. As part of this, Virgin Active plans to upgrade a further
10 London clubs into its high end "Collection" group of clubs,
adding to the 11 in the UK and 17 worldwide.
– Premier's revenue for the nine months ended 31 March 2016, which
includes the acquisitions made in FY2015, increased by 32% on the
comparative period. Group EBITDA margin improved to 10.5%, generating an
increase in EBITDA of 41% for the period. Bakeries bread sales volumes
increased by 7% on the comparative period, largely in the informal
market. Against a difficult market environment as a result of
significant increases in grain prices due to the severe drought, Rand
depreciation and the effect of the wheat import tariff, the Milling
division has focussed on managing its margins and costs and improving
its milling efficiencies. As part of its strategy to enter new
categories through innovation, Premier commissioned an extrusion plant
at the Kroonstad maize mill in January 2016, which has enabled it to
enter the Ready-to-Eat breakfast cereal market. In March 2016, Premier
launched an instant maize porridge range under its Iwisa, Nyala and Top
Score brands, as well as a high protein, multi-grain cereal under a new
brand "Thrive". Premier's Grocery division, which comprises Sugar
confectionary, Lil-lets and CIM (the leading food producing company in
Mozambique) has traded well. In particular, the Sugar confectionary
division continued its focus on innovation having more than doubled its
product offering since its acquisition in May 2013. Lil-lets' backward
integration into tampon manufacturing in South Africa, has been a
success and its efforts to expand into new markets in China and the
Middle East are on track. In its first period of inclusion in Premier's
results, CIM has performed well and is trading in line with Premier's
investment case, in Rands, despite the challenges caused by
macroeconomic factors negatively affecting Mozambique. Premier's capital
expenditure programme has continued according to plan in the current
year, with R977 million being invested to: (i) install the new breakfast
facility; (ii) purchase the site housing the Durban operations; (iii)
commission a state-of-the-art wheat mill in Durban; (iv) complete a new
bakery line in Durban to replace the line damaged by a fire in the prior
year; and (v) complete the programme to own its milling and baking
vehicle fleet. Furthermore, Brait increased its shareholding in Premier
to 91.1% (FY2015: 86.5%), through the exercise of put and call option
agreements. Premier is valued at reporting date using an EV/EBITDA
multiple of 12.7x which represents a discount of 2% to the peer group's
three year trailing average multiple of 13.0x and is at the peer group's
average spot multiple. Premier's carrying value is ZAR11.6 billion
(FY2015: ZAR8.2 billion) which represents 15% of Brait's total assets
(FY2015: 20%).
– The UK Grocery market remains challenging with price deflation again
being a key factor. Iceland Foods' sales for its 52 weeks ending 25
March 2016 decreased by 0.8% on FY2015. Like-for-like sales of -2.7%
represented an improvement of 1.7% on the previous year. The 5.6% EBITDA
margin is consistent with the prior year, with EBITDA of GBP150.5m +0.2%
on FY2015. The "Power of Frozen" marketing campaign and an extensive
programme of new product development, including Iceland's exclusive
Slimming World range of frozen prepared meals, have supported a strong
performance in Iceland's frozen category. A number of senior
appointments have been made to strengthen Iceland's product development
capabilities still further, and to increase expertise in the non-frozen
categories. Iceland has achieved strong growth in the expanding UK
online food sales market, leveraging its pioneering expertise in home
delivery, which it has offered since 1996, and its unique offer of free
delivery for a GBP35 minimum spend. In February 2016, Iceland Foods was
voted the top UK online supermarket retailer in the annual customer
satisfaction survey by consumer organization "Which?". The Food
Warehouse frozen-led warehouse concept was launched by Iceland in 2014
to cater for the trend of shoppers opting to do large scale shops at
' out of town' retail parks, and it has continued to deliver ahead of
plan. Six Food Warehouse stores were opened during FY2016, ending the
year with 12 operating in the UK. Free cash flow post capital
expenditure of GBP87 million represents an EBITDA cash conversion ratio
of 58%. Capital expenditure for the year of GBP62 million (FY2015: GBP29
million) included a new EPOS system, installation of LED store lighting
across the estate, investment in the refurbishment of the manufacturing
business, and new stores and refits. The group added a net 9 stores
during the year, closing with a total of 881 stores, which includes 864
stores in the UK. As communicated on 19 November 2015, Brait increased
its shareholding in Iceland Foods from 19% to 57.1%, partnering
alongside the founder and other senior management whose shareholdings
remained unchanged at 42.9%. Iceland Foods is valued at reporting date
using an EV/EBITDA multiple of 8.8x, which represents a discount of 12%
to the peer group's three year trailing average multiple of 10.0x and a
10% discount to spot. Applying the closing GBP/ZAR exchange rate of
ZAR21.21 (FY2015: ZAR17.97) Iceland Food's carrying value of ZAR7.2
billion (FY2015: ZAR1.3 billion) represents 9% of Brait's total assets
(FY2015: 3%). The Iceland Foods FY2016 debt investor presentation is
available on www.brait.com.
– Within the Other Investments portfolio: (i) ZAR1.6 billion proceeds were
received primarily from the realisation of the Group's investments in
Southern View Finance and Chamber Lane Properties; (ii) Brait increased
its investment in DGB from 40% to 81%; and (iii) DGB continues to
demonstrate strong growth and cash flow generation, with its last twelve
months EBITDA up 17% to ZAR170 million. These combined factors resulted
in the carrying value of this portfolio of ZAR1.8 billion (FY2015:
ZAR2.4 billion).
Low cost to AUM ratio
Operating expenditure for the year of ZAR435 million represents a ratio of
0.53% to AUM (FY2015: 0.44%) compared to the target of 0.85% or less. The
net operating costs ratio, after fee income, to AUM for the year is 0.45%
(FY2015: 0.27%). Using average AUM as the reference basis, operating costs
are 0.62% (FY2015: 0.60%) and net after fee income are 0.52% (FY2015:
0.36%).
Minimal balance sheet cash drag
The Group targets minimal cash holdings on balance sheet to avoid diluting
overall returns. The Group's cash and equivalents position at year-end of
ZAR4.4 billion represents 6.2% of NAV which is well within the benchmark
maximum of 25% of NAV.
Significant cash flow within the underlying assets
Brait's net investment inflows of ZAR17.7 billion comprises: (i) ZAR15.8
billion from the sale of 200 million Steinhoff shares; (ii) ZAR1.6 billion
proceeds from the Other Investments portfolio, which related primarily to
the sale of Southern View Finance and Chamber Lane Properties; (iii)
ZAR223 million interest on shareholder loans received from Premier and
(iv) ZAR26 million relating to the receipt of the Iceland Foods loan
claim.
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.
The Board has proposed a bonus share issue (with a cash dividend
alternative) of 1% of NAV equal to 136.27 ZAR cents/7.76 EUR cents
(FY2015: 77.12 ZAR cents/5.79 EUR cents). This represents an increase of
76.7% on FY2015. Further details regarding the bonus share issue with cash
dividend alternative can be found below. In August 2015, 94% of
shareholders elected to receive bonus shares, with 6% electing to receive
cash. At 31 March 2016, issued ordinary share capital, net of treasury
shares, is 512.75 million shares (FY2015: 510.50 million shares).
CONVERTIBLE BOND
Brait received GBP350 million on 18 September 2015, from the issuance of
its unsubordinated, unsecured convertible bonds (Bonds). The Bonds have a
five year term and 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 accordance with IAS 32 (Financial Instruments: Presentation), the
Bonds' liability component is measured at reporting date as GBP312
million. Applying the closing GBP/ZAR exchange rate of ZAR21.21, results
in the Bonds' translated carrying value of ZAR6.6 billion.
PREFERENCE SHARES
The Group completed the redemption of its 20 million issued preference
shares at their deemed issued price of ZAR100.0 per preference share on
18 January 2016. The accrued dividend to this date of ZAR3.02 (ZAR2.57 net
of dividend withholding tax) per preference shares was paid and the
preference shares were subsequently delisted from both the LuxSE and the
JSE.
GROUP FUNDING POSITION
The Group is in the process of increasing its existing ZAR6.4 billion
committed revolving facility, which matures during July 2017. The new
committed revolving facility will have a term of four years and comprises
the aggregate of a ZAR8.5 billion tranche and a GBP75 million tranche.
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 Friday, 12 August 2016 (the
"Bonus Share Issue"). Shareholders will be entitled, in respect of all or
part of their shareholding as of Friday, 12 August 2016 (the "Record
Date"), to elect to receive a cash dividend of 136.27 ZAR cents/7.76 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 20 July 2016. If all shareholders receive New Shares, an
approximate aggregate number of 4,497,886 New Shares are expected to be
issued. If all shareholders elect to receive the Cash Dividend
Alternative, this would amount to an aggregate of ZAR709,455,463 /
EUR40,400,487 for the financial year ending 31 March 2016.
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 8 August 2016 in relation to the ratio that
136.27 ZAR cents bears (7.76 EUR cents) bears to ZAR157.73, being the 60-
day volume weighted average price ("VWAP") of ordinary Brait shares on the
Luxembourg Stock Exchange ("LuxSE") and the Johannesburg Stock Exchange
("JSE") during the trading period ending on Friday, 27 May 2016. This
conversion ratio amounts to 0.86394 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
down to the nearest whole number with the fraction being paid in cash,
irrespective of whether the shareholder has completed a cash election form
or not. The fraction paid in cash will be deemed a cash dividend and
treated as such for tax purposes. The fraction rate will be announced on
Thursday, 11 August 2016.
A circular and an election form will be sent to all shareholders on
Friday, 24 June 2016 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 115.8295 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
520 624 835 ordinary shares of EUR0.22 each.
The salient dates are as follows:
EVENT 2016
Announcement of the applicable ratio, based on the
60-day volume weighted average price ending on Friday
27 May 2016, released on the LuxSE and JSE Tuesday, 14 June
Bonus share circular and form of election posted to
shareholders on: Friday, 24 June
AGM approving the Bonus Share Issue/Cash Dividend
Alternative on: Wednesday, 20 July
Last day to trade in order to be eligible for the
Bonus Share Issue or, alternatively, the Cash
Dividend Alternative on: Monday, 8 August
Ordinary shares trade "ex" the Bonus Share Issue/Cash
Dividend Alternative on: Wednesday, 10 August
Announcement of fraction rate Thursday, 11 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, 12 August
Record Date in respect of the Bonus Share Issue/Cash
Dividend Alternative on: Friday, 12 August
Share Certificates and dividend cheques posted,
CSDP/participant/broker accounts credited/updated and
New Shares listed on the LuxSE and JSE on: Monday, 15 August
Share certificates may not be dematerialised or rematerialised, between
close of business Wednesday, 10 August 2016 and Friday, 12 August 2016,
both days inclusive.
Please note that the New Shares to be issued in terms of the Bonus Share
Issue may not be traded until Monday, 15 August 2016.
GROUP OUTLOOK
- New Look produced a strong financial and operational performance in
2016, continuing its focus on consistent delivery and investment across
its strategic initiatives in a disciplined and sustainable manner, to
facilitate long term growth. Whilst the immediate outlook for UK
retailing is more challenging than it has been for some time, New Look
is confident in its strategy and ability to execute it;
- Virgin Active generated a strong financial performance in 2015 and
remains focussed on its strategy of being the leading premium health
operator in its chosen markets. The company is well placed for growth,
with (i) a deep pipeline of club openings in Southern Africa; (ii) plans
to accelerate the premiumisation of a streamlined UK estate; (iii)
exciting opportunities for expansion in Asia-Pacific and (iv) continued
investment in innovation;
- Premier continues to deliver on its strategy of brand building, through
producing consistent quality offerings and product innovation as well as
operational efficiencies. Premier's core brands are well positioned to
compete in their respective markets;
- Iceland Foods' core business has stabilized. Continued strong cash flow
generation, targeted marketing campaigns, accelerating the roll out of
Food Warehouse stores, investing in people and online sales remain the
key strategies on which management is focussed to drive growth.
This has been another productive, return focussed year for Brait. The
capital raised from the realisation of Pepkor at the close of FY2015, was
effectively deployed during the first half of the current financial year in
acquiring New Look and Virgin Active. Recently, at the EMEA Finance's
Achievement Awards 2015, held in London, Brait was awarded 'Best Private
Equity Investment' for New Look and 'Best M & A Deal' for Virgin Active.
Both these assets have produced solid results in their respective financial
years and are performing in accordance with the original investment plan. The
second half of the year was characterised by (i) the successful debut
GBP350 million Convertible Bond issuance, which listed on the Open Market
segment of the Frankfurt Stock Exchange in October 2015; and (ii) increasing
the shareholding in Iceland Foods to 57%, which resulted in the Group holding
majority stakes across its four core investments. Brait continues to explore
new pools of capital to enhance its capital structure and ensure that it is
well placed for new opportunities to complement its portfolio.
For and on behalf of the Board
PJ Moleketi
Non-Executive Chairman
14 June 2016
Directors (all non-executive)
PJ Moleketi (Chairman)*
JC Botts^
AS Jacobs##
Dr LL Porter##
CS Seabrooke*
HRW Troskie**
Dr CH Wiese*
##British
^American
**Dutch
*South African
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)
Date: 14/06/2016 07:07:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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