Brait, the investment holding company, said net asset value declined 8% to R6.52 a share for the year to March 31, but it refinanced debt to provide a runway to monetise its Virgin Active and New Look assets, for shareholders.
The owner of Virgin Active health clubs, the New Look fashion store chain in the UK and of a large shareholding in JSE-listed fast moving consumer goods manufacturer Premier, in 2020 changed its strategy to the monetisation of its assets.
Since this change, Brait had realised disposal proceeds of R9.1 billion, which was mostly used to repay the revolving credit facility.
“This strategy has not changed. The three-year extensions to the maturities of the bonds … provide runway for all stakeholders to benefit from the continued recovery in Virgin Active and New Look in addition to the growth in Premier, which also provides Brait with the optionality to choose the earliest optimal exit window for each asset,” Brait said at the release of its annual results yesterday.
Brait’s available cash and facilities were R1.5bn as at March 31. It recapitalised its debt due to the unforeseen effects of Covid on Virgin Active and New Look – the timeline to realise value from these assets had to be extended, the company said.
The terms of the recapitalisation include the three-year extension of the maturities of the bonds to December 2027, combined with a partial R900 million repayment funded from the placement of 15 million Premier shares in March 2024.
Other terms included a R1.5bn rights offer, which shareholders must vote for in July, and the lifting of a revolving credit facility limit from R600m to R1bn.
Recapitalisation proceeds retained by Brait would be used for general working capital purposes, potential investment in existing portfolio companies and/or repayment of group debt over time.
Virgin Active, which comprises 67% of Brait’s assets, continued with its operational turnaround with all territories now earnings before interest, tax, depreciation and amortisation (Ebitda) positive.
A “robust operating performance” across key territories saw 10% average yield enhancements across the portfolio. Its annualised earnings “run rate” before Ebitda of £80m (R1.8bn), up from £33m as at September 30, 2023.
Southern Africa, which comprised 34% of Virgin Active group revenue, grew membership 16% year-on-year with net membership growth of 26 000 members and active members increasing to 630 000.
In Italy, comprising 28% of Virgin Active revenue, revenue was 23% up with net membership growth of 11 000 members increasing the active membership base to 189 000.
In the UK, comprising 24% of revenue, revenue for the four months was up 13%, with net membership up by 9 000 members increasing the active membership base to 139 000.
Brait’s unrealised carrying value for its investment in Virgin Active at March 31 was R10.28bn (R9.05bn).
Premier continued to outperform operationally by increasing Ebitsa 19% to R2.1bn due to strong growth in all the operating units driven by efficiencies, margin management and service level excellence. Premier made up 18% of Brait’s assets.
Premier’s MillBake business, comprising 84% of its revenue, continued its strong momentum despite challenging economic conditions.
New Look, which made up 7% of Brait’s assets, maintained profitability which reflected management focus on gross margin retention, cost control and overall business optimisation and efficiencies.
Its £100m term debt was refinanced in October to October 2026 with increased flexibility of a revolving credit facility and covenants set to provide operating headroom. The carrying value for the investment in New Look was R982m (R931m).
BUSINESS REPORT