Johannesburg - Brait, the owner of UK chains New Look, Virgin Active and Iceland Foods, in a trading update said yesterday that its net asset value slid 3.2 percent in the first quarter as Brexit introduced “foreign exchange rate and equity market volatility”.
The investment holding firm’s share slid 4.52 percent to close at R116.96 yesterday.
Brait said with the UK voting to leave the EU during the quarter, it was expected the move would affect performance.
Ron Klipin, a portfolio manager at Cratos Capital, said: “The update was very disappointing, with strong headwinds caused by major currency depreciation of the pound against the rand following Brexit.”
Pound weakness
Brait said net asset value (NAV) per share declined to R131.94 a share for the first quarter to end June as a result of the pound weakening 7.5 percent against the rand. Brait’s NAV per share was R136.27 a share in the quarter to end March.
Brait said the NAV per share of R131.94, however, reflected an increase of 64.2 percent for the twelve months to end June, up from R80.34 a share reported at the end of June last year and a three-year compound annual growth rate (CAGR) to end June of 67.9 percent. Inclusive of the ordinary share dividends paid to date, the three-year CAGR to June 30 is 68.2 percent. The CAGR is defined as the year-over-year growth rate of an investment over a specified period of time.
“The June 24 announcement of the UK referendum result to leave the EU adversely impacted share prices of companies with UK exposures. This resulted in the average spot multiple for New Look’s peer group declining from 13.3x, which was the valuation multiple Brait applied at March 31, to 12.6x at June 30. However, share prices recovered soon thereafter, with the average spot multiple for New Look’s peer group closing at 13.5x on July 29. Accordingly, Brait’s valuation multiple for New Look at June 30 is unchanged at 13.3x,” Brait said.
The group said all divisions - New Look, Virgin Active and Iceland Foods and Premier - had delivered results ahead of plan in the current year to date. However, New Look, the UK clothing and apparel sector had experienced a challenging quarter as a result of unfavourable market conditions, lower consumer confidence and a consequent increase in promotional sales.
Virgin Active had continued to trade well for the five-month period to May 31. Measured in constant currency, revenue increased 6 percent.
Iceland Foods the UK grocery market grew by 0.1 percent, with food deflation still at 1.4 percent. The group said Premier’s strong trading continued through the 11 months to May 31, and saw the business well placed to exceed its five-year target 10 percent earnings before interest, tax, depreciation and amortisation (Ebitda) margin, having delivered solid double digit Ebitda growth over this period.
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