Brait hurt by soft UK operations
INVESTMENT company Brait saw its share price diving by more than 7 percent on the JSE yesterday after the company reported a disappointing set of results. The share price dropped to R60.89 a share and later closed 4.55 percent down at R62.51 on the JSE yesterday.
Brait, with investments in businesses like Virgin Active, Premier, Iceland Foods and other investments which include DGB, has been under pressure since the UK announced its intentions in June last year to leave the EU.
As a result, its share price has fallen by 61.08 percent in the space of one year. The share price has dropped from R156.43 a share in June 2016 to the current levels of R62.51 a share.
The UK operations, where the group has most of its investments, was dominated by levels of economic uncertainty and a weak retail environment.
The group said UK consumer confidence has been impacted during the year by the referendum on Brexit and the decision to leave the EU.
While in the UK there was a bigger decline in the group’s net asset value (NAV) a share, the impact was less in South Africa, which saw its NAV a share dropping by 5.2 percent to R78.12 by the end of March, down from R82.45 a year ago.
For the year ahead, the group wants to grow the different businesses.
Virgin Active generated a strong financial performance in 2016 with revenue and earnings before interest, tax, depreciation and amortisation for continuing operations increasing by 9 percent and 12 percent respectively for the year to end March.
The group said it remained focussed on its strategy of being the leading premium health operator in its chosen markets.
It wants to invest in growth markets in Asia and Australia.
However, the overall results were disappointing with investment losses coming in at € 978 million (R14.1 billion) for the period, as compared with investment gains of € 1.45bn in 2016.
The group further reported a loss € 1.29bn as opposed to a € 1.12bn profit reported a year ago. Headline loss per share was recorded at 202 euro cents per share against headline earnings per share of 283 euro cents per share.
In Premier Foods the group wants to invest in three new baking plants. For Iceland Foods the group intends to open between 50 and 60 stores in the UK during the 2018 financial year.
The UK retail chain New Look will see it diversifying in China. It said New Look’s cash flow generation and existing available undrawn borrowing facilities were sufficient to fund operations, capital expenditure and service the coupon on its high yield bond.
Ron Klipin, a portfolio manager at Cratos Wealth, said the results were below market expectations caused by the worse than forecast results from New Look.
The lack of confidence hurt margins, resulting in a negative impact on Brait’s profits, he said.
The Virgin Active Menlyn Maine health club is part of Brait’s investment. Virgin Active generated a strong financial performance in 2016, with revenue increasing by 9 percent.