Stronger rand weighs on Brait’s third-quarter NAV

THE STRENGTHENING of the rand against the British pound weighed heavily on Brait’s net asset value as in the quarter to December, the investment holding firm’s net asset value (NAV) fell 21.5 percent to R82.45 from R105.06 in previous quarter to September.

The rand rose 4.88 percent against the pound during the period, strengthening to R16.95 in December, compared with R17.82 in September.

Investments by Brait, an investment holding firm, include Virgin Active, New Look, Premier and Iceland Foods, which reported mixed results for 2016.

The group said the appreciation of the rand weighed on budget retailer New Look, which dropped its carrying value 54 percent for the quarter to R8.7bn. It said the decline represented 17 percent of its total assets. New Look continued to struggle despite its revenue increasing 0.8 percent as a result of good performance outside the UK, online and in menswear.

UK sales down

Like-for-like sales declined 4.6 percent, with its UK operation recording a 4.7-percent decrease in the quarter.

Earnings before interest, tax, depreciation and amortisation (Ebitda) weakened 19.7 percent on the comparative period.

However, international sales increased 17.9 percent during the year to date, mainly attributable to the year-on-year increase in trading in China, where it had 106 stores at the end of the third quarter.

Virgin Active performed better.

Brait said for the year to December, revenue and Ebitda measured in constant currency for continuing operations increased 6 percent and 12 percent respectively on the comparative year.

Virgin Active opened 16 new clubs during the year, 13 of them in South Africa.

Virgin Active’s carrying value in rands decreased 5.7 percent for the quarter to R15.2bn, down from R16.1bn at the end of September.

Brait said Premier’s results for the six months to the end of December were excellent.

Revenue and Ebitda increased 11 percent and 10 percent respectively on the comparative period.

Premier’s carrying value of R13.2bn value represented 27 percent of Brait’s total assets at the reporting date.

Iceland Foods’s third-quarter revenue was up 7 percent, while Ebitda increased 6.1 percent on the comparative period. Its carrying value decreased 5 percent for the quarter to R7.3bn, which represented 15 percent of Brait’s total assets.

Brait received investment proceeds of R566m during the quarter: R256m from Premier and R310m from its other investments.

Ron Klipin, a senior analyst at Cratos Wealth, said Brait’s NAV declined largely as a result of the drag caused by New Look. “Brexit caused a major downturn in business confidence, investment and consumer spending, impacting on the profitability of New Look,” he said.

“As an investment holding company, the underlying value of this operation has been adjusted from a multiple of 13.8 times to 11.4 times. In addition, the stronger rand, which appreciated by 5 percent against the pound sterling over the past quarter, also had a major impact on the group’s results,” Klipin said.

“The valuation of Virgin Active remained intact, with the lion’s share of profits still coming from South Africa.”

Brait shares rose 1.34 percent on the JSE yesterday to close at R78.03.