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Portfolio update, the completion of Brait’s debt facility refinance, sale of DGB and update on governance matters
BRAIT SE
(Registered in Malta as a European Company)
(Registration No. SE1)
Share code: BAT ISIN: LU0011857645
Bond code: WKN: A1Z6XC ISIN: XS1292954812
LEI: 549300VB8GBX4UO7WG59
("Brait", the "Company" or the "Group")
PORTFOLIO UPDATE, THE COMPLETION OF BRAIT’S DEBT FACILITY REFINANCE, SALE
OF DGB AND UPDATE ON GOVERNANCE MATTERS
PORTFOLIO UPDATE
Shareholders are referred to the announcement published on the website of the Luxembourg
Stock Exchange ("LuxSE") and released on the Stock Exchange News Service ("SENS") of the
Johannesburg Stock Exchange ("JSE") on 24 March 2020, which set out an update as to the
various impacts that Coronavirus has had on each portfolio company and key interventions
implemented in mitigation thereof.
Portfolio company management teams continue to assess the impact of the Coronavirus and
develop strategies to mitigate its impact. Significant progress has been made on safeguarding the
health and safety of staff and customers. Where appropriate we have instituted cost reduction
strategies to deal with the impacts of the virus. Engagement with key stakeholders continues
across our portfolio universe to ensure appropriate actions are instituted given the changed
operating environment.
Virgin Active
While health clubs across all territories remain closed as part of those governments’ initiatives to
limit the spread of the virus, certain territories are now at relatively advanced stages of allowing
clubs to re-open. The health and safety of staff and customers will remain Virgin Active’s key focus
as it begins the process, in adherence with respective government directives, of re-opening its
clubs in those territories. Prior to the territory lockdowns, the company had put in place extensive
cleaning and sanitisation procedures to ensure that the clubs were a safe place for its members
and staff. Once clubs can be safely re-opened, the focus will be on ensuring that clubs continue to
institute these and additional measures to safeguard the health and wellness of members and
staff.
Virgin Active has rolled out digital content to its members over various platforms, and in some
instances the general public, in order to retain contact with its membership base, thereby
remaining relevant in their daily lives and building on its digital strategy already envisioned prior to
the current crisis. Virgin Active continues to assess the revenue generating opportunities from
these offerings. This strategy has positively impacted on the brand, added value to existing
members and increased reach to new customers.
Virgin Active has been a beneficiary of the government support programs available in the various
jurisdictions and has implemented measures to significantly reduce operating costs and
discontinue all but essential capital expenditure to preserve cash reserves. On average, cash
operating costs during closure are approximately a third of budget.
Virgin Active’s shareholders have approved a contingent capital injection of GBP20 million, of
which Brait’s pro-rata share is GBP16 million, to enable Virgin Active to navigate appropriately
through the current exceptional circumstances. The company is also in discussions with its lenders
regarding covenant waivers and the upsizing of the existing European / Asia Pacific debt facility to
provide additional liquidity headroom to operate through the period of closure.
Premier
Premier’s strong operational performance during the second half of its prior financial year ending
March 2020 has continued with the business benefitting from strong customer demand, improved
performance in its Mozambique business and volume recovery at its Cape Town bakery.
Management continue to monitor the impact of the Coronavirus on the business and the key focus
remains the health and safety of its staff and customers. The business repaid R150 million of
Brait’s shareholder funding during March 2020.
Iceland Foods
The food retail sector in the United Kingdom has continued to experience strong sales, particularly
in the frozen food category. Iceland Foods has been a significant beneficiary of this. Management
have continued to focus on ensuring continuity of the supply chain to ensure customer demand
can be met. The UK government’s announcements of relief from business rates and taxes
continue to provide support to the company.
New Look
In line with other clothing retailers in the UK, New Look closed its stores from 21 March 2020, with
trading continuing through its online and Third Party E-commerce businesses. The UK
government’s announcements of relief from business rates and taxes and government subsidies
for salaries for affected staff continue to provide support to the company.
Conclusion
All of the portfolio companies have proactively implemented plans to mitigate the impact of the
Coronavirus. In some instances this is focused on reducing costs, preserving cash and maximizing
liquidity through this difficult period. In other cases, the challenge is to ensure the portfolio
companies can deliver demand for their customers in a safe and healthy manner.
The longer term impact of the Coronavirus on the global economy and each business remains
uncertain. Globally valuation multiples have fallen sharply and short term profitability in some
businesses has been impacted materially. Both of these impacts will affect the valuation of the
Brait portfolio as at 31 March 2020.
SALE OF DGB
All of the conditions relating to the sale of the Group’s 91.3% shareholding in portfolio company
DGB have now been fulfilled. The sale is largely in line with the carrying value applied in the
Group’s interim results.
THE REFINANCING OF BRAIT’S DEBT FACILITY
Brait completed the refinancing of its revolving credit facility held by its subsidiary Brait Mauritius
Limited ("BML") (the "BML RCF") effective 31 March 2020. The key terms of the refinanced facility
are unchanged from those disclosed in Brait’s Rights Offer Circular of 27 January 2020. The R6.3
billion facility, with agreed reductions as Brait de-gears, has a three-year tenor to 31 March 2023.
Interest at a rate of JIBAR plus 4.6 per cent applies, with the margin decreasing as utilisation
reduces. Covenants remain NAV based and have been set with sufficient headroom for short term
volatility, with the facility continuing to be secured on a senior basis by the assets of BML.
GOVERNANCE MATTERS
The Company is at an advanced stage of engaging with new directors to replace the four current
Board members not standing for re-election. The proposed board members will be put to
shareholders for approval at the Annual General Meeting to be held in Malta before the end of
August 2020 (the "AGM").
There has been a significant focus on reducing the Brait operational costs. Given the impact of the
Coronavirus, senior executives at Ethos Private Equity (the "Advisor") have undertaken salary
sacrifices as a consequence of which, the Advisor has voluntarily reduced its advisory fee for the
April – June 2020 quarter by 25%. In addition, the Brait Board members have volunteered a
reduction of their directors’ fees by 25% for the quarter.
The proposed re-domiciliation of the Company’s registered office from Malta to Mauritius is
progressing, with the intention to propose this to shareholders at the AGM. This will lead to a
further decrease in operating costs for Brait.
Shareholders are advised that Brait intends to release its 31 March 2020 year end results during
the course of the week beginning 22 June 2020.
San Gwann, Malta
13 May 2020
Brait´s primary listing is on the Euro MTF market of the Luxembourg Stock Exchange and its
secondary listing is on the exchange operated by the JSE Limited.
Sponsor:
Rand Merchant Bank, a division of FirstRand Bank Limited
Date: 13-05-2020 10:30:00
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