Brait is now the largest share in the diversified financial sector, except for Remgro. And with a market cap of R81bn it trades at a 10% premium to net asset value. This is unusual for a conglomerate business which would normally trade at a discount.
But the results for the year to March beat expectations. There was a 77% increase in NAV and in the dividend. Yet soon after the disposal of Pepkor to Steinhoff in 2014 many thought that it was time for Brait to unbundle and fade away. Instead, CE John Gnodde started the financial year with two transformative acquisitions, Virgin Active in April 2015, for which it paid £691m and retailer New Look, for which it paid £783m.
Brait won the best private equity investment for New Look and best M&A deal for the Virgin Active purchase at the EMEA Finance awards.
The gearing that was introduced to pay for New Look was settled after Brait sold 200m Steinhoff shares it received in part payment for Pepkor, which generated R15,6bn — an increase of 39% on the original offer’s value. Its main debt is now R6,6bn of convertible bonds and gearing is now a modest 10%.
From being primarily an entry point into Steinhoff in March 2015, which accounted for 37% of NAV with 33% from cash, Brait is now a genuinely international investor focused on retail and consumer goods and services. New Look now accounts for 45% of NAV.
This has 838 stores, with 575 in the UK, and the rest focused on China, France, Poland and Germany. It plans to open 50 new stores in China in the year to March 2017.
Gnodde says New Look goes from design to shop floor in 13 weeks, and for some products it can be as short as two weeks; 16% of sales are now generated via e-commerce.
Virgin, which accounts for 23% of NAV, has 276 clubs in 10 countries. There were 10 new clubs in Southern Africa in the past year, while 10 noncore clubs were sold or closed in Europe.