Brait’s net asset value fell 3% in the six months to September 30, despite a robust performance by it premium international health and wellness brand, Virgin Active, although it is still losing some members in South Africa, its biggest market.
Interim results released yesterday showed Brait’s net asset value close at R6.84 at the half-year stage, compared with R7.06 at the end of the 2023 financial year.
Brait’s share price traded 4.17% lower at R2.30 on the JSE yesterday morning, indicating it is trading at an approximate 66% discount to net asset value.
Virgin Active, which makes up 65% of Brait’s assets, has operations that span South Africa, the UK, Italy and Australia.
In South Africa, Virgin Active sold 170 000 memberships in the nine months to September, net membership grew by 31 000, and it now has 606 000 members in the country. A head-office restructuring was expected to result in “significant” cost savings.
Membership terminations were elevated, largely driven by poor quality of sales in the first quarter of 2023 due to a challenging economic environment. Sales commission structures were changed and customer engagement was improved. Some key clubs were being refurbished.
There had been robust first-half membership growth in the UK, Italy and Singapore, although Australian membership remained behind expectations.
Although Brait’s management have in the past indicated a wish to list Virgin Active in time as a way to unlock shareholder value, all it would say in the results yesterday was that “the board remains focused on unlocking value for stakeholders and assessing the optimal way to achieve this”.
Brait’s carrying value for its investment in Virgin Active at September 30 was R9.9 billion (R9.05bn).
The increase in value was mainly due to Brait’s pro rata R756 million equity subscription into Virgin Active’s £50m equity rights offer in May 2023.
Brait said Virgin Active saw a “robust” operating performance across key territories over the six months as it continued to recover from the big impact of the Covid lockdown restrictions, which were finally lifted in September 2022.
Active membership increased 10% to 972 000 over the past 12 months. Virgin Active Southern Africa (VASA) debt terms were amended and extended to June 2025, which with a previously announced extension to June 2027 of the debt terms for the international business, provided a liquidity runway.
Shareholders were also injecting £60m – Brait’s participation was £6.9m – in the form of convertible preference shares to drive growth initiatives at Virgin Active.
Net third-party debt of £454m (£476m) included £20m (£22m) for costs deferred during lockdown periods.
Premier, the food and fast-moving consumer goods manufacturer that made up 24% of Brait’s assets, reported normalised headline earnings a share up by 25% year-on-year for the six months to September 30, and according to its management, it would benefit from an anticipated economic recovery through among other things, efficiencies gained in manufacturing capabilities.
New Look, the UK value fashion retailer that makes up 7% of Brait’s total assets, saw revenue and EBITDA decline by 11.3% and 28.4% respectively for the half year due to unseasonal weather, falling consumer confidence and cost of living concerns through higher inflation and interest rates.