Brait ready to reshape its balance sheet
Brait – the owner of Premier Foods, Virgin Active, UK retailer Iceland and struggling UK clothing group New Look – said it intended to undertake an equity capital raise of between R5.25bn and R5.6bn. This would comprise a fully underwritten rights offer of R5.25bn and a specific issue of shares of up to R350 million at the rights offer price.
Brait bought New Look for £780m (R14.85bn) and now values the company at zero. Brait is struggling to turn around the UK retailer as shoppers defect to trendier online fashion sellers.
Christo Wiese, Brait’s largest shareholder, is investing up to R1bn in the rights issue, demonstrating his commitment to Brait.
Ethos Capital has committed to invest R1.35bn in Brait as part of an equity capital.
Ethos Private Equity will become the adviser to Brait at a materially lower cost to the existing advisory contract.
Brait chairperson Jabu Moleketi said the deal represented a positive step forward and a holistic solution for Brait following extensive discussions to reduce the debt on its balance sheet.
“We have a portfolio of distinctive, financially strong and cash generative investments and have today outlined a way forward that involves a strategic change of direction, and the introduction of Ethos,” Moleketi said.
Brait said it would move from its existing strategy of a long-term investment holding company to a new strategy that would focus on maximising value through the realisation of its existing assets in the portfolio over the next five years and returning capital to shareholders.
“This strategy, in place since 2011, has been to drive growth and value creation via its portfolio of sizeable, unlisted businesses in the broad consumer sector, while targeting growth in net asset value and the realisation of its assets at the appropriate time,” the group said.
John Gnodde, the chief executive of Brait SA, will step down after 25 years with the group.
The group said after the recapitalisation a new board will be constituted and this will be proposed to shareholders for approval at the annual general meeting to be held in July 2020.
Brait also released results for the six months to the end of September, reporting a loss of R1.48bn, compared with a loss of R3.39bn last year.
The group’s net asset value a share declined to R38 a share compared to R41.80 last year.
The group said Virgin Active reported a 4.3 percent increase in revenue. Earnings before interest, tax, depreciation and amortisation (Ebitda) increased by 6.6percent.
Virgin Active opened five new clubs and had three closures in South Africa. At the end of September, the group had 240 clubs with 1.26 million members across 8 countries.
At Premier, revenue declined by 7 percent during the six months, due to challenging market conditions.
Sales at Iceland Foods increased by 2.4 percent, driven by the opening of new stores.
New Look reported a 13.6 percent decline in revenue, impacted by the reduced UK store estate following company voluntary agreement closures. Its Ebitda was down by 31.8 percent.
Nesan Nair, a senior portfolio manager at Sasfin Securities, said Brait indicated earlier that they were looking to reshape their balance sheet. “But the R5.6bn is a lot of money to ask shareholders to chip in,” Nair said.
Brait shares closed 11.82 percent lower at R14.55 on the JSE on Wednesday.