Cape Town - Investment holding company Brait SE [JSE:BAT] said on Wednesday its 2015 financial year to end-March has been significant, given the value creation from the realisation of Pepkor.
Brait received a total consideration of R30.01bn on March 30 2015, comprising cash of R15.086bn and 200 million Steinhoff shares (value of R14.924bn using the March 30 2015 closing share price of R74.62).
"The group realised its 37% interest in Pepkor, generating returns of 7.0x multiple of cost and a 69.5% IRR (internal rate of return) from the acquisition date of 4 July 2011."
It said the 141.4% increase on the previous period's R31.95 net asset value per share to R77.12 was primarily due to the realisation of Pepkor.
In terms of acquisitions, Brait announced on April 16 2015 the acquisition of about 80% of Virgin Active, one of the world's leading international health club operators, for about £682m. On May 15 2015 it announced the acquisition of a circa 90% interest in New Look, a leading fast fashion multichannel retailer operating in the value segment, for around £780m.
Brait said Virgin Active is a well-positioned defensive consumer business with highly visible and predictable earnings before interest, tax, depreciation and amortisation (Ebitda), and cash generation from its subscription-based model. "Its global lifestyle brand and leadership position in the UK and South African markets provide a strong platform for growth in its chosen markets."
On New Look, Brait said its fast fashion apparel offering is positioned in the value segment, which has outperformed the overall UK clothing market for more than a decade. This has been driven by increasing demand for more affordable fashion clothing, supply chain improvements and the growing popularity of e-commerce.
"The scale and efficiency of New Look's fast fashion operating model and well-developed multichannel offering sees it well placed to execute on its growth strategies in its prioritised markets."
Brait said the £1.2bn raised in bonds by New Look last week will refinance existing debt, resulting in average cost reduction from about 9.42% to 6.25%.
These acquisitions, together with Premier, have enhanced the portfolio's defensive nature, strong cash flow generation and geographic diversification, Brait said.
Brait holds an 86.5% stake in Premier as at March 31 2015.
"Premier has traded well during its nine months to 31 March 2015, delivering on its strategy of brand building, product innovation and operational efficiencies to increase margins on its core staple foods business," Brait said.
Premier's revenue for the nine months ending March 31 2015, which includes the acquisitions of Star Bakeries and Lil-lets Group, increased 31% on the comparative period.
Group Ebitda margin improved to 9.1%, generating an increase in Ebitda of 70% for the period.
Bakeries grew bread sales volumes by 27%, largely in the informal market. Milling sales volumes grew by 4% for maize and 3% for wheat.
Premier also completed the acquisition of 68% of the shares in issue of Companhia Industrial da Matola (CIM), the leading food producing company in Mozambique with a diversified product range of market leading brands in wheat flour, maize meal, pasta, biscuits and animal feeds, during March 2015. CIM's current revenue is in excess of R1.2bn with Ebitda of R115m.
Also in March 2015, Premier concluded the acquisition of the assets of La Femme, a Durban-based tampon manufacturer, which has enabled Lil-lets to consolidate its tampon supply chain in South Africa, as well as the shares of Mr Bread Milling, an independent Eastern Cape flour miller, which facilitates Premier operating as an integrated mill-bake operation in the province.
These acquisitions were funded by Brait and are recognised in the Premier valuation at their aggregate cost of R411m.
"The acquisitions concluded in March 2015 represent both geographic and strategic opportunities to enhance profits and are well advanced in the process of integration," Brait said.
Brait said the UK food retail market continues to be challenging, leading to ongoing pressure on profits as sales growth has slowed and investment into the value proposition and marketing spend has increased.
Iceland Foods' net sales for the 2015 financial year decreased by 0.5%, with like-for-like sales down 4.4% in a market experiencing food deflation of around 3.0%.
Within the other investments portfolio, DGB demonstrated very strong Ebitda growth and cash flow generation. Southern View Finance traded well and raised capital during November 2014 to refinance a portion of existing debt as well as provide it with additional facilities for future acquisitions.
These combined factors were the primary drivers of the 62.5% increase for the year in the carrying value of this portfolio to R2.438bn (2014: R1.518bn).
Brait also proposed an ordinary share bonus issue (with cash dividend alternative) of 77.12 cents per share, an increase of 141.4% on the previous comparable period.
Brait will be included in FTSE/JSE Africa Series Top 40 Index on June 22 2015.