2018 UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017
Brait SE (Registered in Malta as a European Company) (Registration No. SE1) Share code: BAT ISIN: LU0011857645 Bond code: WKN: A1Z6XC ISIN: XS1292954812 LEI code: 549300VB8GBX4UO7WG59 (“Brait”, the “Company” or “Group”) Item Page reference Section 1: Brait’s interim results presentation: Six months ended 30 September 2017 Contents3 ● Agenda 4
● Brait six months ended 30 September 2017: - Performance against targets 5 - Brait NAV analysis 6 - Brait’s unaudited interim results 12
● Portfolio performance review: - Virgin Active FY2017: Nine months ended 30 September 2017 14 - Iceland Foods FY2018: 24 weeks ended 8 September 2017 24 - Premier FY2018: Six months ended 30 September 2017 39 - New Look FY2018: 26 weeks ended 23 September 2017 53 - Other investments Update on portfolio 63
● Conclusion 64 Section 2: Appendices 65
● Brait overview 66
● Brait’s Convertible Bond – overview and salient terms 69
● Brait’s investment portfolio: Additional information including 5 year summarised financials
- Virgin Active 70 - Iceland Foods 85 - Premier 96 - New Look 102 - Other investments 110 Notice to recipients 112 Section 3: Brait’s unaudited interim results announcement: Six months ended 30 September 2017 113
Unaudited results for the six months ended 30 September 2017 BRAIT’S INTERIM RESULTS PRESENTATION for the six months ended 30 September 2017 Interim Results: 30 September 2017
Agenda
Welcome
Brait Results: Six months ended 30 September 2017
Portfolio Virgin Active Results: Nine months ended 30 September 2017 performance review Iceland Foods Results: 24 weeks ended 8 September 2017
Premier Results: Six months ended 30 September 2017
New Look Results: 26 weeks ended 23 September 2017
Other investments Update on portfolio
Conclusion
4 Unaudited results for the six months ended 30 September 2017 As at 30 September 2017
Performance against targets (1)
Performance metric Position at 30 September 2017
• 24.2% CAGR since 30 September 2014 1 NAV CAGR > 15% per year over any 3 year period • 24.0% CAGR since 1 April 2011
Dividend: 1% - 2.5% of closing NAV 2 • FY2017: 1% of R78.15 NAV paid August 2017 (2) ‒ bonus shares or cash dividend alternative
• 0.61% of average AUM (3) (FY2017: 0.64%) 3 Operating costs: < 0.85% of Brait AUM • 0.54% net after fee income (3) (FY2017: 0.54%)
4 Minimal cash drag: < 25% of NAV • 9.7% of NAV (FY2017: 8.3%)
5 Primarily unlisted investments • 100% of investment portfolio
Demonstrate cash flow within underlying investments 6 • Strong cash flow conversion across the portfolio over any 3 year period
(1) Going forward, shareholders are notified that in line with other listed investment companies, Brait will update the market on its NAV per share key performance metric on a six monthly basis at interim and final reporting dates (2) Shareholder election: 26% elected to receive bonus shares; 43% elected to reinvest their cash dividend of R169m and subscribe for new shares; and the remaining 31% elected to receive their cash dividend of R121m (3) Percentages quoted are annualised based on operating expenses of R135 million and fee income of R15 million for the six months ended 30 September 2017. (FY2017: Operating expenses R401 million; fee income R62 million). Brait’s average AUM for the six months ended 30 September 2017 is R45 billion (FY2017: R63 billion)
5 Unaudited results for the six months ended 30 September 2017 Brait NAV analysis
Reported Rand NAV per share
Unaudited Audited Unaudited 30 Sep 2016 31 Mar 2017 30 Sep 2017 R’m R’m R’m Investments 58,142 94% 44,408 93% 40,023 93% Virgin Active 16,107 26% 15,516 33% 17,726 41% Premier 13,485 22% 12,395 26% 12,030 28% Iceland Foods 7,660 12% 7,367 15% 8,511 20% New Look 18,726 30% 7,066 15% - - Other investments 2,164 4% 2,064 4% 1,756 4%
Cash and cash equivalents 3,598 6% 3,284 7% 3,287 7% Accounts receivable 4 - 5 - 3 -
Total assets 61,744 100% 47,697 100% 43,313 100%
Borrowings (2,736) (2,669) (3,317) Convertible Bonds (5,630) (5,396) (5,883) Accounts payable and other liabilities (101) (52) (262)
Total liabilities (8,467) (8,117) (9,462)
NAV: ordinary shareholders 53,277 39,580 33,851
Number of issued ordinary shares ('m) excluding treasury 507.10 506.44 508.12
Rand NAV per share (1) R105.06 R78.15 R66.62
(1) Closing GBP/ZAR exchange rates: (i) 30 September 2016: R17.82; (ii) 31 March 2017: R16.87; (iii) 30 September 2017: R18.16
6 Unaudited results for the six months ended 30 September 2017 Brait NAV analysis
Expressed in Pound Sterling (1)
30 Sep 2016 31 Mar 2017 30 Sep 2017 £’m £’m £’m Investments 3,264 94% 2,633 93% 2,204 93% Virgin Active 904 26% 920 33% 976 41% Premier 758 22% 735 26% 662 28% Iceland Foods 430 12% 437 15% 469 20% New Look 1,051 30% 419 15% - - Other investments 121 4% 122 4% 97 4%
Cash and cash equivalents 202 6% 195 7% 181 7% Accounts receivable ------
Total assets 3,466 100% 2,828 100% 2,385 100%
Borrowings (154) (158) (183) Convertible Bonds (316) (320) (324) Accounts payable and other liabilities (6) (3) (14)
Total liabilities (476) (481) (521)
NAV: ordinary shareholders 2,990 2,347 1,864
Number of issued ordinary shares ('m) excluding treasury 507.10 506.44 508.12
Pound NAV per share £5.90 £4.63 £3.67
(1) Taking consideration that Brait is most invested in Pound Sterling, NAV per share is presented here using this currency. The closing GBP/ZAR exchange rates used are: (i) 30 September 2016: R17.82; (ii) 31 March 2017: R16.87; and (iii) 30 September 2017: R18.16
7 Unaudited results for the six months ended 30 September 2017 Brait NAV analysis
Reconciliation of the movement in NAV: 1 April 2011 to 30 September 2017
2,852 29,457 (1,556) (747) 33,851 (2,908) Realised (2,227) R’m R27 bn
• The R2.2bn shown for “Distribution to shareholders” ignores the shares issued to shareholders electing to receive bonus shares or reinvesting their cash dividend • Using the closing reported NAV per share of R66.62, these 19.4m shares issued are valued at R1.3 billion • When aggregated with the R2.2 billion in respect of ordinary dividends (cash election) and share-buy backs, the total distribution for the 6.5 year period is R3.5 billion
7,055
1,925
Opening NAV: Capital Investment Foreign Other Operating Finance Distributions to Closing NAV: (1) (5) 1 April 2011 raised gains exchange income and expenses costs and shareholders 30 Sep 2017 losses (2) expenses (3) taxation (4) R16.50 R66.62 NAV per NAV per share share
(1) Capital raised of R7.1 billion represents the net proceeds of the R6.2 billion received from the 4 July 2011 Rights Issue and Private Placement, and the R0.9 billion Convertible Bond equity reserve created from the £350 million Convertible Bonds issued in September 2015 (2) Foreign exchange losses of R0.7 billion comprise cumulative gains recognised in earnings of R1.3 billion offset by cumulative translation loss adjustments recognised in comprehensive income of R2.0 billion over the period (3) Other income and expenses includes: interest income of R1.6 billion; dividend income of R0.9 billion; and fee income of R0.4 billion earned over the period (4) Finance costs and taxation comprise (i) amounts charged to earnings over the period of R2.3 billion and (ii) R0.6 billion relating to preference shares that were recognised in reserves (dividends paid and share issue costs) before the redemption of these preference shares in January 2016 (5) Distributions to shareholders include ordinary dividends (cash election) of R0.7 billion and R1.5 billion in respect of net ordinary share buy backs over the period. The ordinary shares bought over this period are treated as treasury shares and reduce the number of shares in issue for the calculation of the Group’s NAV per share
8 Unaudited results for the six months ended 30 September 2017 Brait NAV analysis
Reported assets and % weighting analysis: September 2014 to September 2017
Reported NAV R34.75 R77.12 R123.50 R136.27 R105.06 R78.15 R66.62 per share (1)
(1) NAV per ordinary share as at 1 April 2011 was R16.50
9 Unaudited results for the six months ended 30 September 2017 Brait NAV analysis
Historic EV/EBITDA multiples at 30 September 2017 (1)
Peer group for Virgin Active Multiple Virgin Active Planet Fitness, Inc 15.0 x 14.2 x 14.2 x 13.7 x 13.8 x 13.7 x 13.7 x The Gym Group Plc 13.7 x 13.5 x 13.6 x 13.4 x 12.0 x 13.5 x 12.4 x Basic Fit N.V.
Woolworths Holdings Ltd 9.0 x 10.8 x 11.0 x 11.4 x 11.4 x 11.4 x Life Healthcare Group Holdings Ltd 6.0 x 10.2 x Clicks Group Ltd 3.0 x Whitbread Plc Acq date Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Merlin Entertainments Plc
Multiple Premier 14.6 x 15.0 x (2) 15.0 x 14.0 x Peer group for Premier 13.0 x 13.4 x 13.3 x
Tiger Brands Ltd 12.0 x 12.7 x 13.2 x 13.1 x 12.3 x 12.6 x Pioneer Foods Group Ltd 11.3 x 9.0 x 13.2 x 13.2 x AVI Ltd 12.3 x 12.6 x 12.7 x 12.4 x 6.0 x Rhodes Food Group Holdings Ltd 3.0 x Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17
Brait valuation multiple discount / Legend (1) Peer groups are unchanged for the current period (premium) at 30 September 2017 (2) The reduction in Premier’s valuation multiple is largely to take consideration of the trend over the past 12 months of the peer average spot multiple trading at a Brait valuation multiple Virgin Active Premier discount to its trailing 3-year average Peer average: Trailing 3-year 17% 7%
Peer average: Spot 15% (10%)
10 Unaudited results for the six months ended 30 September 2017 Brait NAV analysis
Historic EV/EBITDA multiples at 30 September 2017 (1) Multiple Iceland Foods Peer group for Iceland Foods 13.0 x 11.3 x 11.4 x 10.7 x Tesco Plc 11.0 x 10.4 x 10.1 x 10.0 x 11.1 x 11.3 x 10.0 x J Sainsbury Plc 9.0 x 9.9 x 9.8 x 9.5 x
WM Morrison Supermarkets Plc 7.0 x 9.4 x 9.0 x 9.0 x Booker Group Plc 8.0 x 8.8 x 5.0 x 7.5 x B&M European Value Retail S.A. 3.0 x Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17
Peer group for New Look Multiple New Look H&M Hennes & Mauritz AB (H&M) 18.0 x 16.4 x 15.3 x Industria de Diseño Textil, S.A. (Inditex) (owns Zara) 15.1 x 14.9 x 15.0 x 14.4 x 14.1 x Marks & Spencers Group Plc (M&S) 14.8 x 13.3 x 13.0 x 14.5 x 12.6 x 12.1 x Next Plc 12.0 x
Associated British Foods Plc (owns Primark) 9.0 x 13.3 x 13.3 x 11.3 x 10.3 x Note 2 Fast Retailing Co. Ltd (owns Uniqlo) 9.0 x Ted Baker Plc 6.0 x Acq date Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Supergroup Plc (owns Super Dry) Brait valuation multiple discount / Legend (1) Peer groups are unchanged for the current period (premium) at 30 September 2017 (2) New Look valued at nil until such time as its turnaround strategy has taken shape Brait valuation multiple Iceland Foods New Look
Peer average: Trailing 3-year 21% Note 2 Peer average: Spot 20%
11 Unaudited results for the six months ended 30 September 2017 Brait’s unaudited interim results: 30 September 2017
Summarised statement of comprehensive income
UNAUDITED AUDITED 30 Sep 2017 30 Sep 2016 31 Mar 2017 R’m R’m R’m
(1) Investment (losses) / gains (7,957) (3,915) (15,085) Interest income 125 122 244 Dividend income 71 80 409 Fee income 15 32 62
Foreign exchange gains / (losses) 211 (264) (319)
(Loss) / income (7,535) (14,689) (14,689)
Operating expenses (135) (228) (401)
(2) Other expenses - (66) (76)
(Loss) / profit from operations (7,670) (4,239) (15,166)
Finance costs and taxation (310) (281) (688)
(Loss) / profit for the period (7,980) (4,520) (15,854)
Translation adjustments (3) 2,540 (10,565) (12,879)
Comprehensive (loss) / income for the period (5,440) (15,085) (28,733)
(1) Investment losses for the current and comparative periods primarily relate to the reduction in carrying value of the Group’s investment in New Look, which is valued at nil at reporting date (2) Other expenses represent the costs incurred in the prior periods relating to the Group’s proposed transfer of registered office from Malta to the UK (3) Translation adjustments arise in the conversion of the Group’s Pound functional currency to its Rand presentation currency. The Rand weakening against the Pound in the current 6 month period (from R16.87 to R18.16) resulted in a translation gain of R2.5 billion. The R10.6 billion translation loss for the comparative period resulted from the Rand having strengthened from R21.21 to R17.82
12 Unaudited results for the six months ended 30 September 2017 Brait’s unaudited interim results: 30 September 2017
Summarised cash flows UNAUDITED AUDITED 30 Sep 2017 30 Sep 2016 31 Mar 2017 R’m R’m R’m
Proceeds received from the investment portfolio (1,2) 42 21 603 (3) Other income received 23 57 84 Operating expenses paid (140) (225) (401) Other expenses paid (10) - (59) Taxation paid - (11) (35)
Operating cash flows before the purchase of investments (85) (158) 192 (4) Purchase of investments (226) (92) (190)
Net cash (outflow) / inflow from operating activities (311) (250) 2 Net drawdown of borrowings 500 1,550 1,491 Finance costs paid (109) (86) (391) Net purchase of treasury shares (168) (661) (710) Cash dividend paid net of cash dividend reinvestment (121) (629) (629)
Net cash inflow / (outflow) from financing activities 102 174 (239) Net decrease in cash and cash equivalents (209) (76) (237) Effects of exchange rate changes on cash and cash equivalents 212 (680) (833) Cash and cash equivalents at beginning of year 3,284 4,354 4,354
Cash and cash equivalents at end of year (5) 3,287 3,598 3,284 Available from undrawn gearing facilities 3,340 4,066 4,053
Total cash and available facilities 6,627 7,664 7,337
(1) Premier repaid Brait a further R100 million of shareholder funding on 31 October 2017 (2) FY2017’s R603 million comprised R281 million shareholder funding repayments from Premier and R322 million received from the Other Investments portfolio, mostly relating to a dividend received from DGB (3) Other income received comprises fee income and interest income received on bank balances held (4) Purchase of investments relates mostly to the exercise of put and call option agreements with Premier and Virgin Active (5) The Group holds the majority of its cash in Pound Sterling. At reporting date, this comprised £161m (HY 2017: £188 million; FY2017: £178 million)
13 Unaudited results for the six months ended 30 September 2017 Virgin Active
Milan Kennedy, Italy
14 Unaudited results for the six months ended 30 September 2017 Virgin Active
A leading international health club operator Virgin Active’s strategy is to create health club networks focused around major metropolitan hubs; offering a red hot customer experience
Virgin Active’s vision is to be the world’s most loved exercise brand and to make exercise irresistible
Following the value enhancing disposals of (i) 36 non-core UK traditional clubs, of which 35 were sold to Nuffield Health in July 2016; (ii) 14 UK racquet clubs to David Lloyd Leisure in May 2017; and (iii) the Iberian operations in October 2017, the Virgin Active Group represents: 236 clubs in 8 countries across 4 continents (1) 1.2m members worldwide (1.1m adult) (1)
Market positions:
(1) South Africa: Market leading operator Clubs(1) Closing Adult Members Total Revenue(2,3,4) UK: Premium London operator 6% 5% 10% Italy: Market leading operator 14% 14% Asia Pacific: Premium operator in chosen cities
19% 39% Commitment to product innovation and an outstanding member experience 16% 20% 60% 65% Delivering continued growth and a strengthening balance sheet: Actual currency revenue and EBITDA growth of 15% and 32% 16% respectively (Constant currency revenue and EBITDA 236 1.1m £557m growth of 5% and 2% respectively (3)); and Year on year reduction in net debt of £66m (following the Southern Africa UK Italy Asia Pacific disposal of racquet clubs to David Lloyd Leisure). Leverage down year on year from 2.9x to 2.4x
(1) As at 30 September 2017 excluding 12 Iberian clubs (8 in Spain and 4 in Portugal) sold 2 October 2017; (2) Last twelve months ended 30 September 2017; (3) Where constant currency rates are used in the presentation to remove the effect of foreign exchange movements, these are translated using 2017 Budgeted exchange rates: 1 £ = ZAR 18; Euro 1.2; Australian $1.7; Sing $1.8; and Thai baht 45; (4) Continuing operations is defined as the performance of the continuing business excluding the discontinued operations (36 UK clubs exited in July 2016; 14 UK racquet clubs sold In May 2017; and the 12 Iberian clubs sold October 2017)
15 Unaudited results for the six months ended 30 September 2017 Virgin Active
Trading update
Group EBITDA growth despite tough trading in some markets
UK: Generated Revenue growth and EBITDA margin expansion, driven by cost savings
Italy: Strong EBITDA growth driven by growth in membership and Revenue, as well as good cost control
Asia Pacific: Growth in membership, Revenue and EBITDA
Southern Africa: While Revenue increased in South Africa, a challenging South African economy, cost inflation and investment in sales and marketing led to EBITDA margin contraction for the territory and consequently a strong focus on cost control over the remaining quarter has been implemented
Wireless Road, Thailand Mansion House, London Revolution Durini, Milan, Italy Holland Village, Singapore
16 Unaudited results for the six months ended 30 September 2017 Virgin Active
Trading update
Continuing organic expansion: 17 new club openings LTM, 9 of which were opened during the current nine months ended September 2017 (5 South Africa, 2 Asia Pacific, 1 Italy and 1 UK). Strong pipeline in Asia Pacific
Strengthened portfolio: Completed the disposal of 14 UK racquets clubs to David Lloyd Leisure in May 2017 Sale of the non-core Iberian operations to Holmes Place in October 2017: 8 clubs in Spain and 4 clubs in Portugal
Focused innovation: Punch, launched in London Trialling a new studio led Health Club format Holland Village, Singapore (opened May 2017, performing ahead of expectations and receiving a strong reception); c.1,000sqm club, c.120 exciting and innovative classes a week Wireless Road, Bangkok, Thailand (opened September 2017); c.1,300sqm club with 9 dedicated work out spaces providing c.200 exciting and innovative classes a week Trialling our first boutique cycle studio - Revolution by Virgin Active, Milan, Italy (opened September 2017) Further progress on digital: UK launched Online joining with 12% of sales (1) through this channel; CRM enabling digital prospecting, sales and member communications across our UK and Italian business New partnerships launched in Australia with Lululemon (2) and Velocity (3) providing our members with exciting rewards. Later this year, we will be the first to market an exciting global cycle innovation with our partner, Les Mills in Asia
Pound, launched in SA
(1) UK online joining in nine months ended September 2017; (2) Lululemon, the Canadian athletic apparel retailer; (3) Velocity, the global frequent flyer program of Virgin Australia Airlines
17 Unaudited results for the six months ended 30 September 2017 Virgin Active
Our growth & value creation drivers
1 2 3 4 5 Upgrade Manage to Secondary the estate New club roll- Strategic and revenue Margin and manage out pipeline tactical M&A the portfolio
Manage price and volume Monetise member base Disciplined ongoing Clear roll-out pipeline in Strategic & tactical M&A to maximise revenue by driving additional capital expenditure to Asia Pacific building on successful track revenue streams maintain quality estate record Selective pipeline in SA, Identify opportunities for UK & Italy Opportunity for further upgrades; manage consolidation in existing underperforming clubs markets
Increase Grow estate by 13- Key global targets CPI+ LFL Adult Dues contribution from Optimise property 15 clubs p.a. over under continual growth secondary margin portfolio the medium term review each year
(4) 16 UK clubs +6% growth in 17 new clubs M&A opportunities CPI -2% (1,2,3) secondary and 12 Iberian opened being investigated earnings(3) clubs (5) exited LTM (6)
Core estate Expansion
(1) % calculated as a weighted average (CPI: SA 4.9%, UK 2.8%, Italy 1.1%, Asia Pacific 1.5%) on continuing operations adult membership dues; (2) Sources: UK data per ons.gov.uk, SA data per statssa.gov.za, Italy and Asia Pacific (both calculated as weighted avg) per Trading Economics; (3) Measured using constant currency at 2017 Budget rates on continuing operations performance; (4) 14 UK racquet clubs sold to David Lloyd Leisure in May 2017 plus Humberston and Rustington closed; (5) Iberian operations (including 8 Spanish clubs and 4 Portuguese clubs) sold to Holmes Place in October 2017; (6) 9 new clubs opened during the current 9 month period
18 Unaudited results for the six months ended 30 September 2017 Virgin Active
Summarised income statement: 9 months ended 30 September 2017
(1) (2) Unaudited Results Actual Currency Constant Currency (on a continuing Sep-17 Sep-16 Sep-17 Sep-16 operations basis) Commentary £m £m £m £m
Revenue 437.3 381.9 421.3 401.1 • At actual currency rates, Revenue was £437m (growth of 15%) (1) • On a constant currency basis, total portfolio revenue grew 5% with membership broadly stable % growth 14.5% 5.0% - UK revenue grew by 2% with one new opening and closing membership -2% lower than last year (3) - Italy revenue grew by 3% with one new opening and a 1% increase in closing membership - Asia Pacific revenue grew by 19% with maturing clubs and an addition of four new clubs since last year - Southern Africa grew revenue by 6% with 11 new clubs opened since September 2016 and closing membership 1% lower than last year
• At actual currency rates, EBITDA of £104m (growth of 16%) EBITDA 103.7 89.2 98.5 96.6 • Constant currency EBITDA grew 2%. Regional EBITDA growth (3) : - UK +14% due to head office restructure following disposals % growth 16.3% 2.0% - Italy +15% delivered strong EBITDA growth driven by growth in revenue and membership, as well as good cost control - Asia Pacific +3% due to new club opening costs partly offsetting revenue growth suppressing EBITDA growth - Southern Africa -8% following continued investment in sales and marketing to focus on volumes
% EBITDA margin 23.7% 23.4% 23.4% 24.1% • EBITDA margin increased year on year by 30bps at actual currency and declined by 70bps at constant currency as a result of SA EBITDA margin decline
Depreciation expense (34.6) (31.0) (33.5) (33.7) • Broadly flat on the prior period when measured in constant currency Amortisation expense (13.0) (9.3) (13.0) (11.8)
EBIT 56.1 48.9 52.0 51.1 • Function of above
% margin 12.8% 12.8% 12.3% 12.7% • EBIT margin flat year on year at actual currency and declined by 40bps at constant currency
(1) Actual rates 9 months ended September 2017 (1 £ = ZAR 16.85, Euro 1.15, Australian $1.67, Sing $ 1.78, Thai baht 43.69) and Actual rates for 9 months ended September 2016 (1 £ = ZAR 19.99, Euro 1.22, Australian $1.83, Sing $ 1.86, Thai baht 48.16); (2) Presented on constant currency at 2017 Budget rates (1 £ = ZAR 18 Euro 1.2, Australian $1.7, Sing $1.8, Thai baht 45); (3) Excluding two UK clubs (Humberston & Rustington) closed during the year
19 Unaudited results for the six months ended 30 September 2017 Virgin Active
9 months ended 30 September 2017 - Strong cash flow conversion
Cash Flow Commentary
Unlevered cash flow (£m) Sep-17 Sep-16 Strong operating cash flow generation reflects EBITDA growth and EBITDA - Continuing operations (actual rates) 103.7 89.2 disciplined capital expenditure
EBITDA - Discontinued operations (actual rates) 4.5 17.6 Operating cash conversion of 67% (Sept 2016: 58%) EBITDA - Reported (actual rates) 108.2 106.8
Working capital movement (6.7) (12.7) Cash generation supports self-funded growth opportunities via new Cash flow from operations 101.5 94.1 clubs and major refurbishments of existing facilities Maintenance and head office capex (29.4) (32.5)
Operating cash flow 72.1 61.6 Non-recurring items and proceeds on disposal of assets:
Operating cash conversion (1,2) 66.6% 57.7% 2017: Proceeds on sale of 14 UK clubs in May 2017, to David Lloyd Leisure, net of costs of UK and group restructure and Investments – new clubs and major refurbs (17.6) (17.1) Iberia disposal Non-recurring items and proceeds on disposal of assets 46.1 51.8 2016: Proceeds on sale of 36 clubs in July 2016 net of Operating cash post capex 100.6 96.3 reorganisation costs
Interest (39.1) (36.0) Tax (6.3) (5.2) Interest cashflows increased in 9 months to September 2017 due to the ‘one-off’ Europe/Asia Pacific refinancing costs of c.£5m partially offset Operating cash flow post capex, interest and tax 55.2 55.1 by lower interest payable on the European / Asia Pacific bank facility
(1) Group level operating cash conversion excludes new club capex and major refurbishment capex; (2) Defined as Operating cash flow / EBITDA – Reported
20 Unaudited results for the six months ended 30 September 2017 Virgin Active
Net debt as at 30 September 2017
Group Net Debt Local Actual Currency (1) Commentary Currency Sep-17 £m % of total Leverage ratio (m) Net debt (measured in pounds sterling) at actual rates decreased by Interest bearing bank debt 380.0 £66m from £392m at September 2016 to £326m at September 2017 which is 2.4x EBITDA (1,2) South African facility (Rand) 4,887 269.1 71% European facility (Sterling) 61 61.0 16% European facility (Euro) 57 49.9 13% The decrease of £66m in net debt is a combination of: - £4m favourable currency changes (primarily due to Rand) Less: cash (78.9) - £12m reduction in finance lease debt primarily due to the Finance leases 25.0 Iberian sale - £50m reduction in bank net debt primarily due to the receipt of (2) Net Debt at 30 September 2017 326.1 2.4x proceeds on the sale of 14 UK clubs to David Lloyd Leisure
Sep-16 £m % of total Leverage ratio On 30 June 2017, Virgin Active successfully restructured the group and refinanced the European & Asia Pacific business with a new £180m Interest bearing bank debt 476.4 facility
South African facility (Rand) 5,225 295.0 62% - Asia Pacific companies brought into the European banking European facility (Sterling) 164 164.4 35% groups enabling UK disposal proceeds to become available to European facility (Euro) 20 17.0 3% fund growth in Asia Pacific
Less: cash (121.4) - Cost of borrowing decreased from 6.75% to 4% saving c.£5m interest costs per annum Finance leases 37.1 - Debt maturity extended to 2022
Net Debt at 30 September 2016 (3) 392.1 2.9x
(1) Actual closing currency rates at 30 September 2017 (1 £ = ZAR 18.164, Euro 1.134, Australian $1.71, Sing $ 1.820, Thai baht 44.651); (2) The 2017 Leverage ratio of 2.4x is calculated as the net debt per the latest management account information available at the time of finalising Brait’s valuation, expressed as a multiple of maintainable EBITDA considered in Brait’s September 2017 valuation of Virgin Active; (3) Consistent with the disclosure provided previously in Brait’s HY2017 results booklet, the 2016 Leverage ratio is expressed as a multiple of December 2015 EBITDA of £134m, which comprises continuing operations EBITDA of £108m and discontinued operations EBITDA of £26m
21 Unaudited results for the six months ended 30 September 2017 Virgin Active
Outlook
2017 Outlook
Virgin Active remains focused on delivering an outstanding member experience through continued innovation and investment
At actual currency rates, double-digit EBITDA growth anticipated for 2017 benefitting from currency tailwinds: ‒ A streamlined, more cash generative UK estate with recent volume growth showing signs of improvement ‒ Positive momentum in Italy ‒ A strong pipeline in Asia Pacific, providing good momentum and medium term growth opportunities ‒ In South Africa, the challenging consumer market looks set to continue, consequently Virgin Active is moderating the roll-out pipeline, focusing future growth at lower price points, as well as trialling different membership options
Continued de-gearing as a result of strong cash generation
Invest further in the digital customer journey
Siam Discovery, Bangkok, Thailand
22 Unaudited results for the six months ended 30 September 2017 Virgin Active
Brait’s valuation Unaudited Audited Unaudited 30-Sep-16 31-Mar-17 30-Sep-17 £'m £'m £'m Maintainable EBITDA (1) 135.3 140.0 138.9 EV/EBITDA multiple (2) 11.4x 11.4x 11.4x Enterprise value 1,542.4 1,596.0 1,583.1 Less: net third party debt (3) (370.3) (411.4) (335.5) Shareholder value 1,172.1 1,184.6 1,247.6 Less: shareholder funding (4) (992.3) (1,037.4) (1,087.6) Equity value 179.8 147.2 160.0 Brait’s effective equity value participation % (5,6) 70.5% 71.1% 71.9%
Carrying value (GBP’m) for Brait’s share of equity value A 126.8 104.6 115.0
Shareholder funding at valuation date 992.3 1,037.4 1,087.6 Brait’s shareholder funding participation % (6) 78.3% 78.6% 79.2%
Carrying value (GBP’m) for Brait’s share of shareholder funding B 777.3 815.3 860.9
Carrying value (GBP’m) for Brait’s investment in Virgin Active (7) (sum of A and B) 904.1 919.9 975.9 Closing GBP/ZAR exchange rate R17.82 R16.87 R18.16
Carrying value (ZAR’m) for Brait’s investment in Virgin Active R16,107 R15,516 R17,726 Carrying value (GBP’m) translated into ZAR’m using acquisition exchange rate of R18.39 R16,626 R16,916 R17,947 Impact on carrying value from GBP/ZAR exchange rate movement (R519) (R1,401) (R221) (1) Maintainable EBITDA considered at each reporting date excludes discontinued operations exited at the time of finalising the valuation (2) The historic multiple of 11.4x used at September 2017 represents a 17% discount to the peer average trailing three year EBITDA multiple of 13.7x and a 15% discount to the peer spot average multiple of 13.4x (3) Brait’s valuation considers net debt based on latest management accounts at the time of finalising the valuation (4) GBP denominated shareholder funding bears interest at a fixed rate of 10%, is unsecured, with no fixed repayment terms and matures 16 July 2025. Total shown includes accrued interest to valuation date (5) Brait announced on 16 July 2015 the completion of the acquisition of c.80% of Virgin Active. During September 2015, further classes of non-voting share capital (sweet equity) were issued to the Virgin Active management team subject to vesting over a 4 year term. The valuation at reporting date reflects the full dilution to Brait’s economic interest in the equity value of Virgin Active (6) The increase in participation % over the year is a function of buybacks by the company and / or shareholders from departed Virgin Active management team members (7) Brait entered into a series of put option agreements with the Virgin Active management team, based on Brait’s fair value of Virgin Active at the exercise date and as a result, do not expose Brait to fair value risk
23 Unaudited results for the six months ended 30 September 2017 Iceland Foods
24 Unaudited results for the six months ended 30 September 2017 Iceland Foods
Business overview Introduction • UK based national food retailer best known for its frozen food offering • Founded in 1970 by Sir Malcolm Walker, current Executive Chairman Market position • 2.1%(1) of UK grocery food market; second largest retailer in the overall UK frozen food market with a 15.3%(1) market share • Largest player in frozen ready meals, frozen meat, frozen burgers, frozen pastry and frozen healthy / diet food sub-categories • Focused differentiated customer proposition of quality, value & convenience Products • c.3,000 SKUs (branded and private label) in traditional Iceland stores, of which c.900 are frozen food, and c.3,400 SKUs in the Food Warehouse stores, with the majority of the range extension being in grocery (general merchandise) and chilled SKUs • Iconic private label offering (c.43% of total sales) with high levels of product quality and innovation (c.72% of Frozen sales are private label) • Sales are c.40% frozen with the balance split evenly between chilled and grocery Channels • Core Iceland: 847 stores mainly in convenient high street locations trading under the Iceland logo, offering Home Delivery; a unique free delivery service offered to customers spending in excess of £20 • Online: service available throughout the UK, with free delivery to customers spending in excess of £35 • The Food Warehouse: 47 larger stores on small retail parks trading under The Food Warehouse logo • International: 23 stores trading under the Iceland logo in Ireland and Czech Republic, with franchise agreements in Spain, Portugal, Channel Islands, Iceland, the Isle of Man and Malta
(1) Kantar 12 weeks ending 10 September 2017
25 Unaudited results for the six months ended 30 September 2017 Iceland Foods
Company strategy • Product innovation and development – Around 900 SKU’s in Frozen, with a track record of innovation – Development Kitchen – Slimming World – Award recognition • Marketing and PR – Power of Frozen campaign – changing perceptions – Reinforce the value message • Refits of traditional Iceland stores – Commenced October 2016 – 34 store refits completed to 10 November 2017 – Aim to have 55 refitted stores by financial year end • Food Warehouse roll-out – Commenced September 2014 – Opened 50th store in September 2017 – Plan of opening 24 Food Warehouse stores per annum continues Deleveraging history Net leverage ratio
5 .5 5.0x 4.9x • Online 5
4 .5 4.2x
– Award winning online business outgrowing the market 4
3 .5 • Strong cash generation and deleveraging 3 2 .5
2 – Strong free cash flow (cash from operations less capex) FY15 FY16 FY17
26 Unaudited results for the six months ended 30 September 2017 Iceland Foods
Products • Iceland firmly established as the UK’s leading Frozen food specialist
• Iceland Development Kitchen awarded Business Initiative of the Year at the Grocer Gold Awards 2017
• Major marketing and PR campaign launched to educate consumer on the superiority of frozen fish to ‘fresh’
• Iceland differentiates itself through exciting innovation, great quality and outstanding value
• Over 100 awards and commendations during the past year, including being the first retailer in the UK to have products independently tested and approved by the Craft Guild of Chefs
• Independent taste tests conducted by Cambridge Market Research ranked several Iceland products ahead of Waitrose & M&S
• Benefited from further growth in the exclusive branded ranges offered through partnerships with Slimming World™, Greggs, Millie’s Cookies and Pizza Express
• Dedicated Slimming World manufacturing site at Gorton, Manchester (c.£11 million investment project, structural and equipment)
Iceland frozen Gaucho Sirloin “ Steak is as good as Waitrose chilled British Sirloin Steak for taste, succulence and quality.”
27 Unaudited results for the six months ended 30 September 2017 Iceland Foods
Marketing activity Strategy focusing on frozen innovation continues with new lines to the Frozen range launched in Q3 as well as supporting the value proposition in the run up to Christmas
28 Unaudited results for the six months ended 30 September 2017 Iceland Foods
Traditional Iceland store refits – a “game changer”
• In October 2016, Iceland trialled a new format store in Clapham Common, London, followed by Chester and Worcester Park stores
• New format features a bold new look, improved in-store navigation and presentation, and an extended product range
• A positive sales performance demonstrated the success of the new concept in extending Iceland’s appeal
• 34 stores have been refitted to 10 November 2017, all delivering incremental LFL sales growth
• 55 stores planned for new format refit in FY2018; primarily London and the South East
East Finchley - before and after
29 Unaudited results for the six months ended 30 September 2017 Iceland Foods
The Food Warehouse • Frozen led destination shops, typically in retail parks • Continually refining the look and feel • Offer customers bigger packs and a wider range in bigger, fresher stores, removing barriers for new customers • 47 Food Warehouse stores in operation at 8 September 2017 (March 2017: 36 stores; March 2016: 12 stores) • 11 new stores opened in HY2018, on track for the planned 24 openings in FY2018 • 6 additional stores opened since end of HY2018
Key differences to a Traditional Iceland store: • 7,000 sq. ft to 15,000 sq ft (vs. Traditional Iceland store at 5,000 sq. ft.) • Out of Town location – operates in retail parks • Offers an extended product range (including general merchandise) • Single unit pricing – no multi-buys • Higher average weekly sales (c.40%) • Higher average basket size (c.50%) • Lower cost to serve %
30 Unaudited results for the six months ended 30 September 2017 Iceland Foods
Online
• Building on 20 years of expertise in home delivery, Iceland’s fast growing online business continues to achieve strong LFL growth, with more than 15,000 new registrations a week steadily expanding its existing database of some two million customers • The business has benefited from major investment in Iceland’s website and head office team • Orders are picked from existing stores (no additional costs except incremental picking and delivery) • Free delivery threshold drops have driven transactions (free delivery on online order of £35 or more; customers can place orders of £25 subject to a small charge) • Over 40k deliveries a week with the average online transaction spend over £50 • Online service distribution radius covers c.84% of the UK population • Iceland has been awarded: – Britain’s top online store in February 2017 in the Which? Annual supermarket survey for the second consecutive year; – Online Supermarket of the Year in the Grocer Gold Awards in June 2017; and – Online Retailer of the Year at the IGD Awards in October 2017
31 Unaudited results for the six months ended 30 September 2017 Iceland Foods
Sales performance
The increasingly strong comparatives in FY2017 are making it harder to achieve continued positive LFL sales in what remains an intensely competitive UK retail climate:
Anticipate continued positive total sales growth driven by store roll-out:
32 Unaudited results for the six months ended 30 September 2017 Iceland Foods
Summarised income statement: 24 weeks ended 8 September 2017
HY2018 Variance HY2017 (£’m) Commentary Unaudited % Unaudited
• Sales increased by 7.3% • LFL sales of +4.3% compares favourably to the comparative HY2017’s negative Sales 1,301.8 7.3% 1,213.3 (0.8%) and FY2017 full year LFL of +2.0% • In addition to this core growth, sales benefited from the net 17 new stores opened in the current period and the net 21 new stores opened during FY2017
EBITDA 60.9 5.2% 57.9 • EBITDA growth driven by the improved sales performance % Margin 4.7% 4.8%
Depreciation (19.1) 14.4% (16.7) • Depreciation charge increase a function of new stores and the store refit programme Amortisation of intangibles (0.8) n/m (0.3) roll-out
41.0 0.2% Adjusted EBIT 40.9 • Function of the above % Margin 3.1% 3.4%
Amortisation of goodwill (34.6) - (34.6) • In terms of UK GAAP, Iceland amortises goodwill of £1.5 billion over 20 years
6.4 1.6% EBIT 6.3 • Function of the above % Margin 0.5% 0.5%
33 Unaudited results for the six months ended 30 September 2017 Iceland Foods
Summarised cash flow: 24 weeks ended 8 September 2017
(£’m) HY2018 HY2017 Commentary
EBITDA 60.9 57.9
• Positive YTD movement of £23.8 million driven by the favourable timing of supplier Movement in working capital 23.8 41.1 payments
Cash from operations 84.7 99.0 • Function of the above % EBITDA 139.1% 171.0%
• Increase in capex a result of new store openings and the roll-out of the traditional Capital expenditure (34.3) (25.5) Iceland store refit programme
Operating cash flow post capex 50.4 73.5 • Function of the above % EBITDA 82.8% 126.9%
• Decrease in tax paid due to lower payment on account following a favourable Tax paid (5.3) (7.0) FY2016 tax charge and higher capital allowances claimed year-on-year
• Net interest paid includes underlying interest payable on the bonds offset by Net interest paid (23.8) (22.5) discount on bond buybacks and interest income
Net cash flow before financing 21.3 44.0 • Function of the above % EBITDA 35.0% 76.0%
• Increase for the current period due to the £50m Bond buyback of 2020 Floating Financing (81.1) (38.3) Rate Notes during Q1 and the £33m buyback of non-voting shares during Q2; offset by a new finance lease undertaken
Cash (outflow) / inflow (59.8) 5.7 • Function of the above
34 Unaudited results for the six months ended 30 September 2017 Iceland Foods
Gearing analysis as at 8 September 2017
• No covenants - only certain limited restrictions associated with the requirement to service the coupon • All tranches have a bullet repayment profile at maturity (no amortisation) • On 26 June 2017 Iceland purchased and redeemed a nominal total of £50 million Floating Rate Notes at a redemption price of 100.00% of the principal amount, plus accrued and unpaid interest • To date, Iceland has purchased and redeemed bonds with a nominal total of £152.2 million since the original 2014 issue, at a discount of £14.2 million
(£’m) HY2017 Variance FY2017 Variance HY2018
Cash at bank and in hand 170.6 22.6 193.2 (59.8) 133.4
Term Debt (847.8) - (847.8) 50.0 (797.8)
Finance leases (11.2) (9.3) (20.5) (2.5) (23.0)
Net third party debt (688.4) 13.3 (675.1) (12.3) (687.4)
Net leverage (1) 4.6x (0.4x) 4.2x - 4.2x
(1) Net leverage ratio calculation based on rolling 12 month EBITDA
35 Unaudited results for the six months ended 30 September 2017 Iceland Foods
FY2018 Refinance
• Since the beginning of the third quarter, Iceland successfully completed a refinancing to issue £550m of Senior Secured Notes due 2025 at a fixed rate of 4.625% • This has partially reduced the Floating Rate Notes at 4.25% plus LIBOR due 2020 from £271.1m to £79.5m and fully repaid the Senior Secured Notes at a fixed rate of 6.25% due 2021 of £356.5m • The existing Senior Secured Notes at fixed rate of 6.75% due 2024 of £170.2m remain in place • The refinance has generated an annual interest saving of £5.7m compared to the previous structure and £14.1m versus the original issue in 2014 • Assuming Iceland repays the remaining £79.5m on the Floating Rate Notes through internally generated cash, there will be no refinancing requirement until at least 2023
Term debt facilities Interest rate Maturity date Currency Previous structure Post refinance
Term debt - Existing 797.8 249.7 Senior Secured Note – Floating Libor + 425 bps 15/07/2020 GBP 271.1 79.5 Senior Secured Note – Fixed 6.25% 15/07/2021 GBP 356.5 - Senior Secured Note – Fixed 6.75% 15/07/2024 GBP 170.2 170.2
Term debt - New - 550.0
Senior Secured Note – Fixed 4.625% 15/03/2025 GBP - 550.0
TOTAL TERM DEBT 797.8 799.7 Revolving Credit Facility (RCF) – undrawn GBP 30.0 30.0
36 Unaudited results for the six months ended 30 September 2017 Iceland Foods
Outlook
• Current trading: – Total sales growth remains ahead of the market – Trading over tougher comparatives; cannibalisation to existing estate from own new stores; and greater intensity on value messaging by competitors
• The strategy to focus on frozen innovation continues: – New lines to the frozen fish range launched in Q3 – Undertaken a major marketing and PR campaign to educate consumers on the superiority of frozen fish to ‘fresh’ – Iceland’s value proposition supported with a more intensive trading plan in the run up to Christmas
• Store estate: – Opened the 900th UK store last week – The 50th Food Warehouse store opened in September, and now have 53 stores; plan to open a further 10 by year end (24 openings for the year) – Completed the 34th new format store refit; plan to have 55 refits finished by year end – Expect to open another two new Iceland stores in the UK and three new stores in the Republic of Ireland by year end
• Forecast net debt at year end: – Notwithstanding the increased capex principally from the continued investment in the estate, anticipate year end net debt to be in line with FY2017 (£675.1 million)
• Expecting certain exceptional P&L charges: – Costs associated with making the Deeside depot operational; management restructuring costs and litigation expenses
37 Unaudited results for the six months ended 30 September 2017 Iceland Foods
Brait’s valuation
Unaudited Audited Unaudited 30-Sep-16 31-Mar-17 30-Sep-17 £'m £'m £'m
Maintainable EBITDA 153.3 160.0 163.0
EBITDA multiple (1) 9.4x 9.0x 9.0x
Enterprise value 1,440.6 1,440.0 1,467.0
Less: net debt (687.5) (675.1) (687.4)
Equity value of Iceland Foods 753.1 764.9 779.6
Brait’s shareholding in Iceland Foods (2) 57.1% 57.1% 60.1%
Carrying value (GBP’m) for Brait’s investment in Iceland Foods 430.0 436.8 468.6
Closing GBP/ZAR exchange rate R17.82 R16.87 R18.16
Brait’s carrying value (ZAR’m) for its investment in Iceland Foods R7,660 R7,367 R8,511
Carrying value (GBP’m) translated into ZAR’m using acquisition blended exchange rate of R18.51 R7,959 R8,085 R8,674 Impact on carrying value from GBP/ZAR exchange rate movement (R299) (R718) (R163)
(1) The historic Sept 2017 valuation multiple used of 9.0x represents a 21% discount to the peer average trailing three year EBITDA multiple of 11.4x, and a 20% discount to the peer average spot EBITDA multiple of 11.3x
(2) Following a company buyback of non-voting ordinary shares on 21 April 2017, Brait’s shareholding in Iceland Foods increased to 60.1%
38 Unaudited results for the six months ended 30 September 2017 Premier
39 Unaudited results for the six months ended 30 September 2017 Premier
Business overview
• A fast moving consumer goods (FMCG) manufacturer offering branded and private label solutions • Strong heritage brands dating back to 1820 and corporate history back to 1912 − Snowflake (wheat flour), Iwisa No 1 and Nyala (maize meal), Blue Ribbon and BB bread (bread) − Lil-lets (feminine hygiene), Manhattan and Super C (sugar confectionery) − CIM market leading food and animal feeds portfolio in Mozambique • Operates a wide footprint − Manufacturing operations in South Africa, Swaziland, Lesotho and Mozambique − 23 manufacturing sites and 19 distribution depots − Premier exports to 15 countries in Africa; as well as China and the Middle East from the Lil-lets sales office in the UK − c.19% of revenue derived from sales outside South Africa • On a large scale − Employs 9,700 people − Premier sells 540 million loaves of bread and in excess of 950,000 tons of maize and wheat each year (including by-products) − Makes almost 40,000 bread daily deliveries using a fleet of 840 bakery trucks • Serves all channels to the market with significant exposure to the informal market which accounts for c.70% of bread sales volumes
40 Unaudited results for the six months ended 30 September 2017 Premier
Premier FMCG
Milling Baking Groceries
(1)
International
(1) Premier has the rights to produce and distribute the “Dove” brand for use in cotton wool products in South Africa in perpetuity
41 Unaudited results for the six months ended 30 September 2017 Premier
Summarised income statement: 6 months to 30 September 2017(1)
(Amounts in R’m) H1 FY2018 Growth H1 FY2017 Commentary
• Compared to H1 FY2017, group revenue down 10%: - Bakeries (46% of net revenue): Good performance in a highly competitive and promotional market; revenue down 2.5% - Maize (17% of net revenue): Extreme commodity market pricing volatility; Net revenue 5,442 (10%) 6,042 revenue declined by 22% - Wheat (19% of net revenue): Satisfactory performance in an oversupplied market impacted by high import levies; revenue down 7% - Groceries & International (18% of net revenue): Impacted by the weak Mozambican economy and maize price volatility; revenue down 17%
• Compared to H1 FY2017, group EBITDA down 24%: - Bakeries: EBITDA declined by 2% EBITDA (2) 450 596 - Milling: EBITDA margin severely impacted by commodity market pricing, (24%) % Margin 8.3% 9.9% declined by 74% - Groceries & International: EBITDA impacted by the commodity pricing volatility on CIM’s milling operations, declined by 41%
Depreciation and amortisation (140) (3%) (145) • Decrease due to a reassessment of the useful life of assets in FY2017
EBIT (2) (31%) 310 451 • Function of above % Margin 5.7% 7.5%
(1) In the prior financial year, Premier changed its year end to 31 March to align with Brait (2) Excludes exceptional items: HY2018 R27 million (HY2017: R55 million), primarily relating to the accounting mark-to-market that arises on the share appreciation rights scheme, restructuring costs, costs associated with the December 2016 debt package refinance and straight lining of leases
42 Unaudited results for the six months ended 30 September 2017 Premier
Summarised cash flow: 6 months to 30 September 2017
(Amounts in R’m) H1 FY2018 H1 FY2017 Commentary
Cash flow from operations 366 398 • The aggregate investment in working capital remained constant at 14% of revenue % EBITDA 81% 67% (H1 FY2017: 14%)
• Following five years of significant investment, no major expansionary projects forecast for FY2018 • The capex budget for FY2018 is R336m (FY2017: R625m) split between: Capex (146) (364) ‒ The fleet replacement programme ‒ The acquisition of a building housing the tampon manufacturing business ‒ Various baking and milling projects including CIM
Operating cash flow post capex 220 34 • Function of above % EBITDA 49% 6%
Taxation paid (17) (41) • Function of taxable earnings
Interest paid • Decrease in 3rd party interest paid due to the December 2016 debt package ‒ Third party bank debt (75) (120) refinancing and consolidation of loans ‒ Shareholder funding (15) (16)
Operating cash flow post capex, tax and interest paid (1) 113 (143) • Function of above % EBITDA 25% (24%)
(1) Premier repaid Brait R100 million of shareholder funding on the 31 October 2017
43 Unaudited results for the six months ended 30 September 2017 Premier
Trading and operational review - Bread
Category Premier brands
• Premier’s bread division has performed well in a highly competitive and promotional market, holding its average bread pricing with sales volumes declining by 2% relative to the prior period • H1 FY2018 revenue was down 2.5% over the prior period • Sold 271 million loaves in H1 FY2018: • Blue Ribbon - Competitor promotional pricing put pressure on sales volumes. In addition, new independent bakeries in the Western • BB Bread (KZN) Cape and Kwa Zulu Natal (1) gained distribution into top-end retail with lower prices aimed at competing with in-store Bread • Star Bread brands (46% of (Eastern Cape) - Converted two bakeries to depots during the period H1 FY2018 • Mister Bread - Launched a new whole wheat loaf in Sept 2017 under the “Classic range” targeting a lower price point than competitors’ net (Eastern Cape & comparable products Swaziland) revenue) - Drove product and brand awareness through limited edition packaging for events such as Mother’s Day and Heritage • SUB Bread Day (Swaziland) - Premier retained its national market share in the formal market at 23% across all its bread brands (2) with strong positions in Western Cape (30% share), KwaZulu-Natal (30% share) and Eastern Cape (25% share) (1,2) . In South Africa, c.70% of bread sales are made through the “informal sector” sales channel (3) - Premier remains the leading baker in Swaziland and Lesotho and has launched Blue Ribbon in Mozambique
(1) South African provinces (2) Market share is the share of value for the 12 months to September 2017 as measured by AC Nielsen (3) Market shares in the informal sector are not measured
44 Unaudited results for the six months ended 30 September 2017 Premier
Trading and operational review – Bread (cont) Category
• “Sandwich Squares” was launched in Gauteng (1) in Feb 2017 as a first to market product and in Aug 2017 was launched in Kwa Zulu Natal (1) (under the BB brand) and in the Western Cape (1) which has boosted sales volumes significantly. Squares are produced in a newly built, Bread dedicated manufacturing plant in Pretoria • Focus on bread quality remains a priority. Premier’s internal quality assessment continues to show that its bread scores the highest quality scores
(1) South African provinces
45 Unaudited results for the six months ended 30 September 2017 Premier
Trading and operational review - Maize Premier Category brands • Maize revenue declined by 22% for the H1 FY2018 with a fall in volumes of 7% on the prior period. Premier’s maize margins were 4% lower than the prior period as Premier sold its stock of relatively expensive maize at below budgeted margins • In 2016, South Africa experienced its worst drought in 110 years with devastating effects on the 2016 maize crop, followed by one of the best rain seasons and a record maize crop in the 2017/18 season. This caused extreme volatility in the commodity market Maize • Iwisa with Safex white maize prices dropping by 50% between December 2016 and April 2017. Sales volumes declined below forecasts (17% of • Invicta as consumers substituted into cheaper staples as maize prices reached record highs H1 FY2018 • Nyala • Premier did not deviate from its raw material procurement policy, which has been in place since 2012, and secured its maize supply net • Super Sun in 2016 during a period of uncertainty in respect of the availability of white maize. Lower consumer demand resulted in stocks of maize lasting longer than planned revenue) • Thrive • The overall maize market as measured by SAGIS (1) grown by 4% for the LTM October 2017 • Premier’s formal retail market share, across all its maize brands, was 19% (2) for the LTM September 2017
(1) South African Grain Information Service; (2) Formal retail market share is the share of value as measured by AC Nielsen
46 Unaudited results for the six months ended 30 September 2017 Premier
Trading and operational review – Wheat and Cereal
Category Premier brands
• In a market impacted by wheat import levy pricing and oversupply, revenue for Premier’s wheat business declined by 7% with sales volumes down 4% Wheat • The formula to calculate the wheat import levy, which had risen to R1,591 per ton (representing c.45% of the raw material (19% of H1 cost), was changed in March 2017. This reduced the levy to R947 per ton and then to R380 per ton during the period FY2018 net Snowflake • Consumer flour sales account for 33% of Premier’s total flour sales value, the balance sold to Premier’s bakeries and to revenue) customers who buy flour to use in their products • Overall wheat production grew by 1% for the LTM October 2017 as measured by SAGIS (1). In the retail flour sales channel, Premier had 22% national market share and 42% share of cake mixes (2). Premier’s consistent focus on margin management has resulted in Snowflake trading at a value / volume premium of c.16%
• Thrive • Premier entered the breakfast category in March 2016 with a high protein breakfast cereal aimed at the mid-market Breakfast • Iwisa, Top Score consumer launched under a new brand “Thrive” and instant maize porridge marketed under its existing maize brands in cereals and Nyala Instant South Africa and Mozambique. Premier’s share of the total porridge market in South Africa has grown to 4% (2)
(1) South African Grain Information Service; (2) Market share is the share of value for the 12 months to September 2017 as measured by AC Nielsen
47 Unaudited results for the six months ended 30 September 2017 Premier
Quarterly Wheat and Maize sales volumes and EBITDA
Tons Rm’s R’m (000)
(LHS) (RHS)
• Premier’s milling business performed fairly consistently selling on average 233,000 tons of wheat and maize per quarter and reporting an average operational EBITDA (before allocation of head office costs) of R110 million each quarter • Q4 FY2017 and Q1 FY2018 were the quarters most severely affected by the commodity price volatility and Premier’s procurement position, both negatively impacting the FY2017 and the H1 FY2018 results • During Q2 FY2018, the milling performance normalised in line with historical trends as Premier milled the last of its expensive maize in June 2017
48 Unaudited results for the six months ended 30 September 2017 Premier
Trading and operational review - CIM Category Premier brand
• The poor macro economic conditions combined with the maize position, resulted in CIM’s revenue and EBITDA in local currency (Metical) declining by 20% and 78% respectively for H1 FY2018. In Rand terms, revenue declined by 24% • Top Score and EBITDA by 74% (1) CIM (maize) • Mozambique’s macro-economic issues (currency devaluation, high interest rates) which began in Q2 FY2017, have led (Mozambique) • Polana (pasta) to a sharp decline in disposable income and consequent fall-off in demand for CIM’s staple foods products (9% of H1 • Florbela & • The maize business accounted for the bulk of the decline in CIM’s EBITDA for H1 FY2018. Trading has improved FY2018 net Favorita (wheat) significantly in September revenue) • Feedpro (animal • A third biscuit line became fully operational in August 2017, which has led to insourcing of previously imported cream feeds) filled biscuit products and launch of flavour extensions for the existing dry biscuit range • Premier is using CIM’s in-country distribution infrastructure to sell its basket of products and plans are advanced to introduce new products and brands to the market in FY2018 that will be sold through this infrastructure. In this regard, a new improved blended rice will be taken to market in H2 FY2018
(1) CIM revenue and EBITDA in Rands includes the animal feeds sales office in Nelspruit, South Africa
49 Unaudited results for the six months ended 30 September 2017 Premier
Trading and operational review – Groceries Premier Category brand Home & • Performed in line with expectations Personal Care • In South Africa, market share is at 22% (3) of overall Femcare and 50% (3) of cotton wool • Lil-lets (6% of H1 • Premier’s focus is to grow Lil-lets’ share of the pads and liners market in South Africa (1) • Dove (4) FY2018 net • The overall UK Femcare market remains in decline (3.1%) The Lil-lets Teen range continued to grow with volumes up • Vulco (2) revenue) 1% on the prior year in a difficult market • The international business continues to perform on plan
Sugar • Despite challenging trading conditions for the category which is a discretionary spend, the business performed Confectionery satisfactorily • Manhattan (2% of H1 • Innovation continued to contribute c.27% to sales. Notable recent product innovation includes the launch of a soft mints • Super C range in Oct 2016, which as a new product line now a has a market share of 21% (3) FY2018 net • Overall market share remained at around 10% (3) with share of the marshmallows category growing to 24% (3) and share of revenue) Gums & Jellies at 15% (3)
(1) Licenced from Unilever Plc for cotton wool products in South Africa; (2) Vulco is the No. 1 household glove brand in SA; (3) Market share is the share of value for the 12 months to September 2017 as measured by AC Nielsen; (4) IRI volume data week ending 7th October 2017
50 Unaudited results for the six months ended 30 September 2017 Premier
Outlook Macro backdrop
• The extreme maize commodity price volatility significantly impacted Premier’s milling business over the period January 2017 to July 2017. This situation has normalised in Q2 FY2018 and expect to outperform the comparable period for the remainder of FY2018 • A recent report by Bank of America Merrill Lynch (1) concluded that “The bread market in South Africa….. is expected to grow at an even stronger forward CAGR of c.11% from 2017 to 2021. We highlight that bread is expected to be the highest growth category within packaged food in South Africa.” Premier is well placed to take advantage of this growth • Early signs of some relief for the macro-economic conditions that have been impacting Mozambique, which is positive for Premier’s CIM business
Strategic focus H2 FY2018
• Margin management across all businesses • Continued optimisation of the bakery manufacturing footprint to align Premier's capacity to market demand • Execute on the cost saving programme launched during Q2 FY2018 • Focus on innovation and support for new product launches • Continue to seek value enhancing acquisitions to assist in entering new categories and / or geographies • Without compromising Premier’s growth, continue repaying shareholder funding, made possible from the increase in internally generated cash flows, post normalisation of Premier’s investment cycle
(1) BoAML “Bread market not toast yet” (6 October 2017)
51 Unaudited results for the six months ended 30 September 2017 Premier
Brait’s valuation
Unaudited Audited Unaudited 30-Sep-16 31-Mar-17 30-Sep-17 R'm R'm R'm Maintainable EBITDA 1,211 1,140 1,170 EBITDA multiple (1,2) 13.2x 13.2x 12.4x Enterprise value 15,988 15,048 14,507 Less: net third party debt (1,508) (1,850) (1,768) Total net third party debt at valuation date (1,810) (2,363) (2,091) Adjustment for acquisitions / capex not as yet generating EBITDA 302 513 323 Less: shareholder funding (2,938) (2,854) (3,020) Total shareholder funding at valuation date (2,938) (2,854) (3,020) Adjustment for acquisitions / capex not as yet generating EBITDA -- -
Equity value of Premier 11,542 10,344 9,719
Brait’s shareholding in Premier (3) 91.4% 92.2% 92.7%
Brait’s carrying value (ZAR’m) for its investment in Premier (4) 13,485 12,395 12,030 Equity value 10,547 9,541 9,010 Shareholder funding (5) 2,938 2,854 3,020
(1) Premier’s valuation multiple has been reduced from 13.2x to 12.4x, largely to take consideration of the trend over the past twelve months of the peer average spot multiple trading at an increased discount to its three year trailing average (2) The historic Sept 2017 valuation multiple used of 12.4x is at a discount of 7% to the peer average trailing three year EBITDA multiple of 13.3x and a 10% premium to the peer average spot EBITDA multiple of 11.3x (3) Increase in Brait’s shareholding due to the exercise of put and call option agreements (4) Brait has entered into a series of put option agreements with the Premier management team, based on Brait’s fair value of Premier at the exercise date and as a result, do not expose Brait to fair value risk (5) Shareholder funding carries a return based on the ruling SA prime interest rate plus a margin of 2% and is unsecured, with no fixed repayment terms. Premier has repaid Brait R680m as at 30 September 2017, with a further R100m repaid on 31 October 2017
52 Unaudited results for the six months ended 30 September 2017 New Look
53 Unaudited results for the six months ended 30 September 2017 New Look
Headlines
• Performance weakened further in Q2
• H2 FY18 will remain challenging
• Leadership change actioned
• We continue to identify major causes of decline and are already implementing corrective measures
• We have a strict focus on cost control
• We have an adequate cash profile and our core relationship bank has agreed to increase the level of committed facilities available
• We continue to work in partnership with our key strategic suppliers to ensure we are commercially aligned
• Brait remains committed to being a long-term shareholder
54 Unaudited results for the six months ended 30 September 2017 New Look
Leadership changes
• Alistair McGeorge appointed as Executive Chairman − Significant industry experience − Led previous New Look turn-round and recovery in 2011-2014
• Tom Singh (Founder) taking active product role alongside Roger Wightman (Chief Product Officer)
• Danny Barrasso resumes his role of UK & ROI Managing Director
55 Unaudited results for the six months ended 30 September 2017 New Look
Reasons for underperformance
• We moved away from our successful broad appeal − We had become too young and edgy − Customer messaging was becoming overly fashionable and did not highlight value
• Chased E-commerce sales at the expense of profitability
• We were late to some trends and have lost flexibility and speed
• Excessive product options and increased complexity throughout the organisation
• We did not clear previous season stock quickly enough
• Need to improve cost controls
• Ongoing difficult market conditions added to the challenges experienced
56 Unaudited results for the six months ended 30 September 2017 New Look
Segmental performance Sales by Segment H1 FY18 vs. H1 FY17 Sales (1) • UK Retail sales declined 6.1% (£30.0m) H1 FY18 H1 FY17 • E-commerce (2) sales declined 7.6% (£7.8m) whilst business with our 3PE partners continued to perform strongly, growing 17.0% (£4.9m) • International sales marginally declined 1.5% (£1.3m), year on year growth in China was offset by challenging trading conditions across Europe, despite favourable currency movements. In constant currencies, International sales declined 7.9% • Franchise sales improved by 7.0% (£1.1m)
Underlying Operating Performance (UOP) Underling Operating Profit by Segment • UK Retail UOP declined by £51.1m, due to the sales decline and on-going H1 FY18 vs. H1 FY17 investment in our strategic initiatives H1 FY18 H1 FY17 • E-commerce (2) UOP was £1.4m, a decline of 89.4%, predominantly driven by the decline in sales and increased investments in digital marketing and customer experience • International UOP declined by £4.2m, primarily driven by on going challenging market conditions across Europe and our strategic investment in China
(1) Sales refers to Gross Transactional Value excluding adjustment to state concession income on a net basis for statutory reporting purposes (H1 FY18: £9.2m, H1 FY17: £10.2m). (2) Ecommerce Sales and UOP include UK, French, German and RoW E-commerce sales and costs.
57 Unaudited results for the six months ended 30 September 2017 New Look
Underlying Admin Cost Growth – H1 FY18 vs H1 FY17 3.3 343.8 6.9
2.9 3.4 2.0 1.6 7.1 322.5 2.3 2.0
315.4 (3.1)
Annualised Investment Other Costs One Off Controllable costs
H1 H1 FY17 Normalised UK Store International Head Office UK Other International Head Office UK Store Depreciation FX H1 FY17 One Off H1 FY17 Staff E-comm Costs Costs Estate & FY18 Gains Costs Marketing Costs Amortisation The cost base increased by 1.6% or c.£5m after adjusting for one off, annualised investment costs and FX H1 FY17 One off gains The prior year benefited from a business rates credit for the London support centre, as well as an FX gain due to movements in the rate Controllable costs Store payroll savings achieved despite annualised store growth. Marketing investment to raise Brand awareness in International E-commerce Other costs System upgrades e.g. Cloud, Brand marketing, E-commerce staff investment, website photography and International investments primarily in China One off Current year impacted by a number of management changes Annualised investment costs Rent, rates and service charge increases due to annualising stores, RPI, depreciation and amortisation (FY17 investment)
58 Unaudited results for the six months ended 30 September 2017 New Look
Liquidity and Operating Facilities H1 FY18 H1 FY17 £’m £’m • A focus on adequate cash and liquidity control is in place Cash, cash equivalents and bank overdrafts 93.4 108.8
• H1 FY18 total cash, liquidity and operating facilities available was £242.5m Available liquidity facilities (1) − £93.4m Cash Overdraft facility 15.0 5.0 − £115.0m Overdraft and RCF (fully undrawn) Revolving credit facility 100.0 100.0 − £34.1m Operating facilities for Trade and Imports Total available liquidity facilities 115.0 105.0 • Following H1 FY18 New Look signed an agreement with our core operational bank to provide increased bi-lateral liquidity, trade and Total available cash and liquidity facilities 208.4 213.8 import facilities to £100.0m on a fully committed basis (pari passu with the RCF, subject to documentation and customary conditions) (H1 FY18 £78.0m uncommitted) H1 FY18 H1 FY17 £’m £’m (1) • As a consequence, following the changes the Company will have Available Operating (Trade and Import) facilities − £100.0m RCF (committed) Operating (Trade and Import) facilities – Total 63.0 73.0 − £100.0m Bi-lateral liquidity facility (£15.0m) and Operating Operating (Trade and Import) facilities – Drawn 28.9 23.5 facilities (£85.0m) (expected to be committed)
Available Operating (Trade and Import) facilities 34.1 49.5 • Despite this being our peak working capital period as at 3 November we have c.£183m of Cash, Liquidity(2) and Operating facilities available Total available cash, liquidity and operating facilities 242.5 263.3
(1) Designated operating facilities ranking pari passu with RCF (2) Approximately £56m drawn as at 3 November 2017
Note: If the RCF is required to be drawn the financial covenant Net Leverage Ratio test is only tested when the facility is drawn equal to or greater than 25% at 5:00pm as of the last day of the most recent reporting quarter. If the ratio is exceeded at this time the covenant only acts as a draw stop on future drawings. There is no breach or default trigger from exceeding the ratio
59 Unaudited results for the six months ended 30 September 2017 New Look
Recovery FY18
• Quarter 3 o Product committed – we will trade hard and aim to exit the season ‘clean’
• Quarter 4 o Progressive return to broad appeal product at a great price o Improved planning cycle and speed – greater flexibility
• Focus on restoring UK profitability: o Back to basics mentality – Long term focus on profit over sales – Store layout and messaging already clarified – E-commerce platform optimisation o Action on cost base already started o Remaining challenging until FY19
• Continue to closely monitor operating costs to ensure we maintain an adequate liquidity profile
60 Unaudited results for the six months ended 30 September 2017 New Look
Recovery – beyond FY18
• We have total belief in the New Look brand
• We will fully recover our broad appeal with a planning cycle and speed fit for today’s market
• We will leverage our omni-channel competitive advantage
• We will rigorously review our store portfolio
• We will optimise our cost investment to generate the best return and at the same time preserve an adequate liquidity profile
• Within International, we will prioritise achieving optimum performance in China
61 Unaudited results for the six months ended 30 September 2017 New Look
Summary
• We have the liquidity and operating facilities to implement our plans – and we have the time to recover
• H2 FY18 will remain difficult – we will continue focusing on improving trading in a challenging market
• Necessary changes have been made in senior management
• We are a proven brand with a clear market position
• Our immediate focus is on short-term stabilisation together with cash and profit recovery
• Brait remains committed to being a long-term shareholder
62 Unaudited results for the six months ended 30 September 2017 Other investments
Overview Unaudited Unaudited Audited 30 Sep 2017 30 Sep 2016 31 Mar 2017
% total % total % total R’m assets R’m assets R’m assets
Other investments portfolio carrying value 1,756 4% 2,164 4% 2,064 4%
Investments housed within Brait’s Other Investments portfolio:
• Majority of the carrying value of this portfolio relates to Brait’s 81.3% shareholding in DGB, a leading South African producer and exporter of local wine and importer of international spirit brands • The remainder of the portfolio comprises Brait’s remaining private equity investments, which mostly relates to Brait’s effective c.10% interest in Brait IV. The carrying value is largely attributable to: o Consol – the largest manufacturer of glass packaging products on the African continent o Primedia – a leading South African media group
Movements during the last twelve month period
• The decrease in carrying value over this period is largely due to the receipt of R343m proceeds, mostly comprising dividend income received from DGB • In September 2017, Brait IV has signed a Sale and Purchase agreement to sell its investment in Primedia, which is expected to conclude before the end of this calendar year
Proceeds received from the Other Investments portfolio (since 1 April 2011)
• In excess of R2.4 billion has been received to 30 September 2017
63 Unaudited results for the six months ended 30 September 2017 Conclusion
• A streamlined, more cash generative UK estate, positive momentum in Italy and a strong pipeline in Asia Pacific provides good momentum and medium term growth opportunities in these territories Virgin • In South Africa, the challenging consumer market looks set to continue, consequently Virgin Active is moderating the roll-out Active pipeline, focusing future growth at lower price points, as well as trialling different membership options • Virgin Active remains focused on delivering an outstanding member experience through continued innovation and investment
• The extreme maize commodity price volatility significantly impacted Premier’s milling business over the period January 2017 to July 2017. Having cleared through the expensive 2016 season maize, performance normalised during the second quarter of FY2018. With sales volumes increasing as the market restocks, the milling business expects to outperform the comparable Premier period for the second half of FY2018 • Premier continues to execute on its strategy of brand building, producing consistent quality offerings and product innovation, as well as operational efficiencies, with its core brands well positioned to compete in their respective markets Investment portfolio • Iceland’s growth remains ahead of the market into its third quarter due to new stores, however LFL growth has softened due to tougher comparatives and increased value messaging by its competitors. Iceland • The 50th Food Warehouse store opened in September 2017 and 34 new format Iceland store refits have now been completed Foods and continue to perform well • The recent refinancing gives a strong platform from which to pursue Iceland’s well-established long-term strategy for growth and deleveraging with the benefit of lower borrowing costs
• New Look’s H2 FY2018 will remain difficult and thus the immediate focus is on short term stabilisation together with a strict focus on costs to preserve an adequate liquidity profile. The necessary changes have been made in senior management New • New Look is a proven brand with a clear market position and thus when looking beyond FY2018, the ‘back to basics’ mentality Look and progressive return to broad appeal, with a heightened focus on an improved planning cycle combined with speed appropriate for today’s market, will serve to reconnect New Look with its heartland customer • The business has the appropriate liquidity and operating facilities in place to implement its plans and thereby provide time to recover
• Brait continues to explore new pools of capital to enhance its capital structure and ensure that it is well placed to execute on opportunities Brait • Driving value in the existing portfolio remains the key focus for the year ahead
64 Unaudited results for the six months ended 30 September 2017 APPENDICES
65 Unaudited results for the six months ended 30 September 2017 Brait overview
History of Brait
Jul-2011 Mar-2015 Jun-2015 Sep-2015 Nov-2015 2018 Total of R8.6 billion (£800 million) raised: Acquired 89% of Sold 37% stake in Raised £350m Increased Increased stakes in Iceland − R6.4 billion rights offer and private placement at Pepkor, returning through the issue of stake in Foods to 60.1% and Virgin Active NAV of R16.50 per share 7.0x cost and convertible bonds Iceland Foods to 79.2% through company − R2.2 billion debt facilities Jul-2015 from 18.7% to buybacks and exercise of put IRR of 69.5% listed on the Open Investment team acquired 18% of Brait Acquired 78% of Market segment of 57.1% options respectively Dr Wiese acquired 34.6% of Brait FSE Fundamental change in Brait’s business model from a private equity (PE) fund manager to an investment company focused on long term value creation
Jul-2011 • Acquired 49.9% of Premier • Acquired 37% of Pepkor
NAV (per share)
1991 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 HY2018
1991 to 2011 Mar-2012 2012 to 2018 • Credible 20 year PE track record achieved Acquired 18.7% of • Increased shareholding in Premier from 49.9% to 92.7% through option agreements with former across Brait I,II and III PE funds: Premier shareholders; majority referenced to Jul-11 price + fixed interest at 5.5% − Invested R3.2 billion across 48 investments Iceland Foods − Realised R12 billion • Invested over R2 billion via shareholder funding to finance Premier’s 8 acquisitions − Returned 3.7x cost; IRR in excess of benchmark 30% (in USD and ZAR) • Flagship Brait III fund ranked joint 3rd out of 246 PE funds by New York State Common Retirement Fund (vintage years 1999 to 2004) − 80% of value creation from EBITDA growth Strategic Events Acquisition Disposal
66 Unaudited results for the six months ended 30 September 2017 Brait overview
Brait’s investment criteria
Core attributes
Primarily majority stakes in quality, market leading, growth oriented and entrepreneurially managed private businesses
Sizeable investments that “move the needle”
Focus broadly on the consumer sector
Developed business model in respective local markets with ability to expand geographically
Track record of earnings growth, strong margins and high cash flow generation
Portfolio company management team aligned with Brait through sizeable equity ownership in their business
Sensible acquisition multiple
Open ended investment horizon, whilst remaining opportunistic on exit
Focus on clear transparency on NAV calculation and valuation of portfolio assets
Capital Allocation
All investment acquisitions at a Brait and portfolio company level, including capital expenditure projects, are required to exceed set IRR hurdle rates, modelled using constant entry / exit multiples and exchange rates
Should an offer be received for one of Brait’s investments, a primary consideration is to apply the offer price as the pro forma entry point and model the business’ five year plan to assess the resulting IRR against Brait’s hurdle rates
67 Unaudited results for the six months ended 30 September 2017 Brait overview
Brait’s valuation methodology Brait’s audited financial statements are prepared in accordance with IFRS as adopted by the EU. Given the nature of the Group’s operations, the Group applies the investment entity exemption in IFRS 10: Consolidated Financial Statements As a result, all portfolio companies, irrespective of whether they are associates, joint ventures or subsidiaries, are exempt from consolidation, accounted for instead at Fair Value Through Profit and Loss (FVTPL) in terms of IAS 39: Financial Instruments: Recognition and Measurement
Component Methodology
• Mix of the portfolio company’s prior year audited EBITDA and latest available current year forecast EBITDA, adjusted, with appropriate Maintainable disclosure provided, for any non-recurring income / expenditure: − As the portfolio company’s financial year progresses, the weighting increases towards the current year forecast EBITDA − This facilitates maintainable EBITDA applied in the portfolio company’s valuation at its financial year end matching the actual EBITDA achieved for the year, adjusted for non-recurring items
• The listed peer group for a portfolio company is based on discussion with banks / investment community to ensure it comprises the comparable listed companies the market would look at upon a potential IPO • Given Brait’s long term investment horizon, the valuation multiple applied is referenced to the 3-year trailing average of this peer group, EV/EBITDA with adjustments for points of difference and consideration of the peer average spot multiple at each reporting date multiple • Brait’s interim and final results presentations provide transparent disclosure of the listed peer group construct, including: − The peer average 3-year trailing and spot multiples at reporting date − The level of discount / premium that the valuation multiple represents to these peer averages • This enables investors to apply their own valuation multiples and derive their own NAV per share for Brait
Enterprise Value • The resulting valuation multiple is applied to sustainable EBITDA to calculate the portfolio company’s Enterprise Value (“EV”)
Net debt • Net third party interest bearing debt and shareholder funding per latest available management accounts • Adjustments for acquisitions / capital expenditure incurred that has not as yet generated EBITDA are applied, with appropriate disclosure
• EV less net debt results in the portfolio company’s Equity Value, to which Brait’s effective economic interest is applied Equity Value • Brait’s shareholder funding is recognised in Brait’s carrying value for the portfolio company • Closing exchange rates are applied to value the portfolio company in Brait’s presentation currencies
68 Unaudited results for the six months ended 30 September 2017 Brait’s Convertible Bond
Overview and salient terms Issuer Brait SE
Issue size £350 million
Denomination £100,000 each
Coupon Fixed rate of 2.75% per annum, payable semi-annually in arrears on 18 March and 18 September over the 5 year term
Term Five years
Listing exchange Listed on 15 October 2015 on the Open Market (Freiverkehr) segment of the Frankfurt Stock Exchange
Pricing date 11 September 2015
Reference share price VWAP between launch and pricing on 11 September 2015 of GBP6.0934 (equivalent to R127.65)
Conversion premium 30%
Conversion price £7.7613 (£7.9214 at time of pricing; adjusted for the August 2016 and August 2017 ordinary dividends, in accordance with the terms and conditions) Conversion ratio 12,884 Brait ordinary shares per Bond
Settlement date 18 September 2015 (T+5)
Settlement upon Convert into 45,095,538 Brait ordinary shares (1) (8.6% of Brait’s current issued share capital) conversion (settlement via new issue of shares or from treasury shares held) In the event that bondholders have not exercised their conversion rights, the Bonds are cash settled at par value on settlement date Issuer call To early settle the Bonds at their par value, provided that Brait’s ordinary share price is equal to or exceeds £10.0897 (30% premium to conversion price) for more than 20 of the 30 consecutive trading days on or after 9 October 2018 Status of the bond Unsubordinated and unsecured
Dividend protection The conversion price is adjusted for ordinary dividends paid, in accordance with the terms and conditions
Covenant Brait’s “Tangible NAV / Net Debt” ratio shall not be less than 200% so long as the Bonds remain outstanding (1) £350 million / £7.7613 conversion price
69 Unaudited results for the six months ended 30 September 2017 Virgin Active
Appendix information
70 Unaudited results for the six months ended 30 September 2017 Virgin Active
Delivered through multiple formats
71 Unaudited results for the six months ended 30 September 2017 Virgin Active
Broad geographic diversity of operations and earnings UK At Change to 30 Sep 2017 comparative No. of clubs (6) 45 +1 No. of adult members 181k (2%) Revenue (2,6) £130m +2% Market position Premium London operator Total Group At Change to 30 Sep 2017 comparative No. of clubs 236 +17 No. of adult members 1.1m 0% (4) Italy Asia Pacific Revenue £419m +5% At Change to At Change to 30 Sep 2017 comparative 30 Sep 2017 comparative No. of clubs 34 +1 No. of clubs 15 +4 No. of adult members 150k +1% No. of adult members 55k +17% (2) Revenue (2) £81m +3% Revenue £44m +19% Market position (1) No.1 in Italy Market position Premium operator in chosen cities
Southern Africa (5) At Change to 30 Sep 2017 comparative No. of clubs 142 +11 Current locations No. of adult members 719k (1%) Revenue (2) £164m +6% Market position (3) No.1 in SA All figures above are as at 30 September 2017 (1) Based on revenues, source: IHRSA; (2) 9 months ended September 2017 measured using 2017 Budget exchange rates; (3) Based on revenues of private health clubs; (4) Asia Pacific includes Australia, Thailand and Singapore; (5) Southern Africa includes South Africa, Namibia and Botswana; (6) Presented on a continuing operations basis and excluding closed clubs Humberston and Rustington in the UK which delivered £2m revenue in the nine months to September 2017
72 Unaudited results for the six months ended 30 September 2017 Virgin Active
Southern Africa
73 Unaudited results for the six months ended 30 September 2017 Virgin Active
Southern Africa
Market and brand positioning Performance Sep-16 Sep-17 Change Clubs # (1) 131 142 11 The macro environment is causing headwinds to achieving volume growth Membership # (000’s) (1) 729 719 (1%) VA remains the market leading fitness provider in SA with club format and price (2) points to appeal to all market segments Revenue £m 155 164 6% Rm 2,786 2,951 YoY EBITDA Growth (2) (8%)
Jabulani RED, Soweto Rosebank, Johannesburg
Clubs and innovation Performance
The estate now includes 142 clubs: 5 Collection clubs, our premium offering, 12 ‘low September closing membership volumes are 1% down year on year cost’ Red clubs for price sensitive, emerging consumers and 125 ‘life centre’ clubs, as a result of a tougher consumer environment our full service offering Revenue growth of 6% achieved despite lower volumes 11 new club openings since 1 Oct 2016 including 1 collection club (Silo District) & 1 Red (Durban CBD) EBITDA decline from increased investment in promotional offers to maintain volume in a more price sensitive environment and the costs Launched Pound, an exciting new programme from the US. A Pilates offering is associated with new club openings being introduced to the estate New membership options being trialled to provide the consumer with a wider choice in a challenging consumer environment
(1) As at 30 September; (2) For nine month period ended 30 September 2017 measured at constant currency using 2017 Budget rates
74 Unaudited results for the six months ended 30 September 2017 Virgin Active
UK
75 Unaudited results for the six months ended 30 September 2017 Virgin Active
UK Market and brand positioning Performance Sep-16 Sep-17 Change Clubs # (1) 44 45 1 The UK fitness market demonstrates continuing growth in the number of gyms, members and penetration, driven by the roll-out of low cost gyms, proposition Membership # (000’s) (1) 185 181 (2%) development across traditional and boutique operators and continued consumer (2) interest in health & fitness Revenue £m 128 130 2% Within the Traditional Health Club Sector there has been a high degree of YoY EBITDA Growth (2) 14% consolidation which saw more major acquisitions last year, leading to much broader differentiation within this sector and further establishing Virgin Active’s market position as a premium operator The growth of Low Cost operators is set to continue with a number of operators securing funding and announcing future roll-out plans; and the rapid emergence of the Boutiques is accelerating, largely concentrated within London
Mansion House, London Walbrook, London
Clubs and innovation Performance
45 clubs: 20 Collection clubs and 25 Life centre clubs with over 50% of our clubs in Volume growth has been challenging in a highly competitive and around London. Sold 16 clubs, including 14 racquets clubs to David Lloyd market, but strong performance over the peak month of September, Leisure, further consolidating the estate to fewer, higher quality clubs. Successfully supported by a strong trade plan saw significant year on year opened our 20th collection club in the City of London, Mansion House volume growth Creation of a more studio rich environment with focus on group exercise and product Revenue growth of 2% despite lower volumes due to strong innovation. The UK launched Punch, a boxing inspired group ex class consisting of performance in ancillary revenues, particularly Personal Training 12 rounds of combination on the bags and interval body conditioning; and expanded and Club V (children’s proposition) HEAT, a high energy athletic training programme Strong P&L performance and control, with head office savings Further product development and launches include in 3 clubs, Beyond Movement driving overall EBITDA performance focusing on restorative sports massage and physiotherapy; Reformer Pilates; a refresh of our Cycle proposition; new product development of Run and Row programmes; consolidation of Grid and Mind & Body proposition across the estate (1) As at 30 September 2017 on a continuing operations basis and excluding closed clubs; (2) For the nine month period ended 30 September 2017 on a continuing operations basis and stated on a constant currency basis (excluding closed clubs, Humberston and Rustington which generated £2m of revenue in the 9 months to September 2017)
76 Unaudited results for the six months ended 30 September 2017 Virgin Active
Italy
77 Unaudited results for the six months ended 30 September 2017 Virgin Active
Italy
Market and brand positioning Performance Sep-16 Sep-17 Change
(1) The fitness market is growing well at 6% YOY in part due to the Clubs # 33 34 1 expansion of Low Cost Operators and Outdoor training (running and Membership # (000’s) (1) 148 150 1% cycling) Revenue £m (2) 79 81 3% Media research conducted in 2017, covering both Active and Radio, has shown that the Virgin brand is ranked 83rd out of the top 150 YoY EBITDA Growth (2) 15% Companies with the strongest brand reputation and image, and is the only fitness operator in the top 150 In terms of brand image, both among prospects and members, Virgin Active is recognised as the undisputed leader in the health & fitness industry in Italy
Clubs and innovation Performance
34 clubs: 4 Collection clubs (3 in Milan, 1 in Turin), 8 Life centre September closing membership volumes were 1% higher than prior premium, 8 Lifecentre province, 13 Lifecentre metro and 1 year with 9% membership growth in our 4 collection clubs Revolution club, an authentic revolution in urban training; in the Revenue growth of 3% and EBITDA growth of 15% on prior year driven very heart of Milan, with a pay-per-use App by strong performance amongst the collection clubs, combined with Upgrade of Corso Como club in Milan cost savings in utilities and rent Punch will launch in January
(1) As at 30 September; (2) For the nine month period ended 30 September stated on a constant currency basis
78 Unaudited results for the six months ended 30 September 2017 Virgin Active
Asia Pacific
79 Unaudited results for the six months ended 30 September 2017 Virgin Active
Asia Pacific Market and brand positioning Performance Sep-16 Sep-17 Change
(1) The Singapore fitness club market is maturing and continues to see market Clubs # 11 15 4 entrants at the low cost and boutique end of the market Membership # (000’s) (1) 47 55 17% The Australian Health and Fitness club market is mature, with Virgin Active's Revenue £m (2) 37 44 19% premium offering faring well in the large and established low cost and boutique market YoY EBITDA Growth (2) 3% Thailand is Virgin Active’s least mature market where there are promising signs of a growing urban middle class an increase in retail / leisure openings
Clubs and innovation Performance
Asia Pacific features 15 clubs of which six are the Premium Collection clubs Membership and revenue growth driven by maturing clubs and with the balance of the estate also within the premium end of the market continued roll-out Since September last year, opened 4 new clubs (Eastville, Tanjong Pagar, LFL clubs’ revenue growth +5% year on year from Australian Holland Village and Wireless Road). Thailand estate increased from 4 to 6 membership growth and yield growth across the region clubs with the opening of Eastville (3,400+ sqm) and Wireless Road EBITDA growth lower than revenue growth due to 3 new club (1,300sqm). Singapore estate increased from 1 to 3 clubs with the opening of opening costs in the region Tanjong Pagar and the first group exercise led club at Holland Village Secured and launched two key new brand partnerships: Lululemon - staff uniforms and gift vouchers for new joining members; and Velocity, Virgin Australia’s rewards programme - offering new and existing members velocity points rewards for completing 12 visits in any calendar month Good traction gained on new club growth pipeline Yoga development - Yoga head coach appointed in each Australian club with improved programming Later this year we will be launching an exciting global innovation with our partner, Les Mills in Asia EmQuartier, Thailand Reformer Pilates Studio at EmQuartier, Thailand (1) As at 30 September; (2) For the nine months period ended 30 September measured at constant currency using 2017 Budget rates
80 Unaudited results for the six months ended 30 September 2017 Virgin Active
Net Debt Facilities as at 30 September 2017 SA Bank Facilities Drawn at Drawn at Total Facility Floating 30 Sep 17 30 Sep 2017 Margin Term Date ZARm Rate ZARm £m (Act FX) (1)
Senior Loan A1 Amortising 1,466 - - JIBAR 3.75% Jun-20
Senior Loan A2 Amortising 420 339.4 18.7 JIBAR 3.75% Jun-20
Senior Loan B Bullet 2,594 2,594.0 142.8 JIBAR 3.75% Jun-20
Senior Propco Loan Bullet 420 420.0 23.1 JIBAR 3.75% Jun-20
Senior Loan C Bullet 1,100 1,100.0 60.6 JIBAR 3.75% Jun-20
Capex Facility Amortising - 433.3 23.9 JIBAR 3.75% Jun-20
Total SA Loan Facilities (2) 6,000 4,886.7 269.1
European / Asia Pacific Bank Facilities Drawn at Drawn at Total Facility Floating 30 Sep 17 30 Sep 17 Margin Term Date £m Rate £m (17 bdg FX) £m (Act FX) (1)
GBP Term Loan Bullet 50.0 50.0 50.0 LIBOR 3.50% Jun-22
Euro Term Loan Bullet 47.2 47.2 49.9 EURIBOR 3.50% Jun-22
Capex Facility 50.0 5.0 5.0 LIBOR 3.50% Jun-22
RCF 25.8 6.0 6.0 LIBOR 3.50% Jun-22
Europe / Asia Pacific Loan Facilities (3) 173.0 108.2 110.9
RCF – letters of credit / guarantees 4.3 4.3 4.3
Uncredited Facility 3.5 3.5
Europe / Asia Pacific facilities (including LC / 177.3 112.5 115.2 Guarantees)
Total: SA and European Loan Facilities drawn 380.0
(1) Translated to GBP using September 2017 actual closing FX rates (Rand 18.164, Euro 1.134); (2) Virgin Active has fixed c 56% of its floating interest rate exposure for the SA loan facilities; (3) Virgin Active has fixed c.101% of its floating interest rate exposure for the Europe/Asia Pacific Loan Facilities
81 Unaudited results for the six months ended 30 September 2017 Virgin Active
Summarised financial information
Summarised income statement Dec-16 Dec-15 Dec-14 Dec-13 Dec-12 (Results in £m; actual reported currency) Audited (6) Audited (6) Audited Audited Pro forma (1)
Revenue 535 490 639 653 642 % growth 9% n/a (2%) 2%
EBITDA (2) 121 108 124 123 122 % margin 23% 22% 19% 19% 19%
Depreciation expense (38) (34) (36) (44) (40) Amortisation expense (17) (27) (35) (39) (43)
EBIT 66 47 53 40 39 % margin 12% 10% 8% 6% 6% Net interest charge (3) (43) (75) (100) (89) (92) Exceptional items (4) (28) (44) (43) (57) (25) EBT (5) (72) (90) (106) (78) Tax (5) (7) (15) (1) (24) (1) PAT, continuing operations (12) (87) (91) (130) (79) PAT, discontinued operations 66---- PAT 54 (87) (91) (130) (79)
(1) The audited results for FY2012 covered a 16 month and 30 day period. For comparability, pro forma results for 12 months to December 2012 shown; (2) EBITDA is defined as operating profit before depreciation, impairment, amortisation, non-recurring items and profit/(loss) on disposal of property, plant and equipment as well as the impact of non-cash rent adjustments; (3) The overall interest charge reduced primarily as a result of a restructuring of the shareholder funding following Brait’s acquisition. Shareholder funding is now held in a Virgin Active parent company and not included in the operating company’s audited results. Brait’s valuation of Virgin Active takes full consideration of this shareholder funding, including accrued interest to Brait’s reporting date; (4) Exceptional items in 2016 include non-recurring items of £9m, a £7m straight-lining lease adjustment, club impairments of £11m, and profit or loss on the disposal of fixed assets £1m; (5) The tax charge in 2014 was reduced by a deferred tax credit; (6) Presented on a continuing operations basis (excludes 35 UK clubs sold to Nuffield and 1 UK club exited in July 2016, as well as 14 clubs sold to David Lloyd effective 31 May 2017)
82 Unaudited results for the six months ended 30 September 2017 Virgin Active
Summarised financial information
Summarised balance sheet (1) Dec-16 Dec-15 Dec-14 Dec-13 Dec-12 (Results in £m, actual reported currency rates) Audited (3) Audited (3) Audited Audited Pro forma (2)
Total Assets 1,009 903 998 1,028 1,174
Property and equipment 370 365 349 332 345 Goodwill and intangibles 410 389 467 513 643 Current assets 73 41 42 43 45 Cash 113 79 83 90 72 Other 43 29 57 50 69
Total Liabilities 849 803 836 754 789 Trade creditors 31 26 24 27 24 Current liabilities 117 96 111 114 116 Interest bearing bank debt 486 423 423 336 373 Finance leases 34 58 62 66 69 Other 181 200 216 211 207
Shareholders’ Equity 160 100 162 274 385
(1) The audited figures are from the Virgin Active operating company’s financial results. The shareholder funding which sits in a Virgin Active parent company is therefore not reflected. Brait’s valuation of Virgin Active takes full consideration of this shareholder funding, including accrued interest to Brait’s reporting date; (2) The audited results for FY2012 covered a 16 month and 30 day period. For comparability, pro forma results for 12 months to December 2012 shown; (3) Summarised balance sheet is stated on a continuing operations basis for December 2016 and 2015 with the assets related to the discontinued operations classified as assets held for sale within other assets and other liabilities
83 Unaudited results for the six months ended 30 September 2017 Virgin Active
Summarised financial information
Summarised cash flow statement (1) Dec-16 Dec-15 Dec-14 Dec-13 Dec-12 (Results in £m, actual reported currency) Audited Audited Audited Audited Pro forma (2)
Cash flow from operations 149.7 125.1 121.0 121.0 119.0 % EBITDA 124% 116% 98% 98% 98%
Maintenance and head office capex (46.7) (47.3) (31.0) (38.0) (33.0)
Operating cash flow 103.0 77.8 90.0 83.0 86.0 % EBITDA 85% 72% 73% 67% 70% Investments - new clubs, acquisitions and premiumisation (35.4) (70.4) (46.0) (30.0) (29.0) Non-recurring capex - - (5.0) - (17.0) Exceptional, one off items and proceeds on disposal of assets 50.4 (9.9) (13.0) 6.0 6.0 Operating cash flow post capex 118.0 (2.5) 26.0 59.0 46.0 % EBITDA 98% (2%) 21% 48% 38% Interest paid (48.6) (37.6) (35.1) (33.2) (43.1) Tax paid (13.1) (10.0) (13.1) (11.6) (11.5) Operating cash flow post capex, tax and interest paid 56.3 (50.1) (22.2) 14.2 (8.6) % EBITDA 47% (46%) (18%) (12%) (7%)
(1) The audited figures are from the Virgin Active operating company’s financial results. The shareholder funding which sits in a Virgin Active parent company is therefore not reflected. Brait’s valuation of Virgin Active takes full consideration of this shareholder funding, including accrued interest to Brait’s reporting date; (2) The audited results for FY2012 covered a 16 month and 30 day period. For comparability, pro forma results for 12 months to December 2012 shown
84 Unaudited results for the six months ended 30 September 2017 Iceland Foods
Appendix information
85 Unaudited results for the six months ended 30 September 2017 Iceland Foods
Effective and streamlined business model
• c.3,000 products (Core Iceland) and c.3,400 (Food Warehouse) Disciplined and diversified • More simplified product range than the “Big 4” in all categories product range • Largest single product at c.4% of sales and top 10 products Optimised • Limited supplier concentration with top 10 suppliers < c. 25% of total purchases procurement • Fewer SKU’s allowing for more concentrated purchasing and buying scale Consistent • Consistent layout across all stores creating operational efficiency store layout • Distribution system fully outsourced to XPO Logistics for efficiency Outsourced distribution • Warehouse productivity has continued to increase over the last five years with major investments in technology including telematics and voice pick Strict inventory • Reduced rate of restocking without compromising product availability management • Unique Home Delivery service commenced in mid 1990’s which attracts a minimum spend of £20 Delivered sales • Iceland has also developed a fast growing online business attracting a minimum spend of £35 • Combined Delivered Sales (Home Delivery and Online) transactions of 200k per week 86 Unaudited results for the six months ended 30 September 2017 Iceland Foods UK grocery market • Iceland retain a stable position in the overall UK Grocery Market at 2.1% and are second only to Tesco in the UK frozen food market with a 15.3% share Total UK Grocery market share: 2018 v 2017 UK Frozen market share: 2018 v 2017 Source: Kantar 12 weeks ending 10 September 2017 and 12 weeks ending 11 September 2016 87 Unaudited results for the six months ended 30 September 2017 Iceland Foods Traditional Iceland store refits – a “game changer” Clapham Common, London – before and after Benefits of store refits : • New bold store fascias • Improved in-store navigation including wider aisles • Upmarket in-store presentation • Extended product ranges • Increased footfall • Positive sales performance 88 Unaudited results for the six months ended 30 September 2017 Iceland Foods Profitable stores nationwide Two store formats: Core Iceland (847 stores) (1) • Typical store 4,000–6,000 sq. ft. • Primarily convenient, high street locations • Unique free home delivery service to customers spending more than £20 Food Warehouse (47 stores) (1) • Typical store 7,000 – 15,000 sq. ft. • Out of town Retail parks • Extended range, including general merchandise (1) As at 8 September 2017 89 Unaudited results for the six months ended 30 September 2017 Iceland Foods Iceland store estate Iceland store estate Store numbers HY2017 FY2017 HY2018 Core Iceland (UK) 852 847 847 Old format 852 844 825 New refit - 3 22 (1) Pick Centres - 1 2 Food Warehouse (UK) 20 36 47 Total UK Estate 872 884 896 International 18 18 23 Republic of Ireland 13 12 17 Czech Republic 5 6 6 Total Owned 890 902 919 Franchise 28 31 37 Total Owned and 918 933 956 Franchise (1) As at 10 November, 34 stores have been refitted to the new format 90 Unaudited results for the six months ended 30 September 2017 Iceland Foods Core Iceland stores Core Iceland stores • Well laid out stores, wide aisles, big ticket displays, clear cut pricing • Convenient & Profitable High Street Locations • Typically areas with lower income demographics • Typical store 4,000–6,000 sq. ft. • “One size fits all” – Successful across store sizes / formats • 99% of stores profitable at the contribution level • Sales mix split – Shop & Go : 86% – Home Delivery : 14% International • 23 owned stores : 17 in Ireland and 6 in Czech Republic • 37 Franchise stores : Spain, Portugal, Isle of Man, Channel Islands, Malta and Iceland 91 Unaudited results for the six months ended 30 September 2017 Iceland Foods Marketing and PR • Ongoing multi-media “Power of Frozen” marketing and PR campaign continues to change perceptions of Iceland and frozen food by underlining the many advantages freezing can offer • The “Power of Frozen” TV campaign focused on the reactions of real families to their food, giving additional weight during the year to press, leaflet and door drop advertising that underlined their outstanding value • Iceland aims to offer customers top quality food with authentic provenance from around the world at truly amazing prices • Frozen food can also be “fresher than fresh”, locking in vitamins and nutrients that are liable to degrade in the fresh food supply chain • It minimises the need for artificial additives and preservatives, helping their customers to eat more naturally and healthily, and it benefits both household budgets and the environment by reducing food waste 92 Unaudited results for the six months ended 30 September 2017 Iceland Foods Summarised financial information Summarised income statement 2017 2016 2015 2014 2013 (March year-end – results in £’m) Audited Audited Audited (1) Audited Pro forma (2) Revenue 2,792 2,675 2,697 2,711 2,640 % growth 4.4% (0.8%) (0.5%) 2.7% 1.0% EBITDA 160 151 150 202 226 % margin 5.7% 5.6% 5.6% 7.5% 8.5% Depreciation and amortisation of intangibles (42) (36) (39) (47) (42) Adjusted EBIT 118 115 112 155 184 % margin 4.2% 4.3% 4.2% 5.7% 7.0% Amortisation of goodwill (3) (75) (75) (75) (75) (72) Exceptional items - (9) (5) (8) - EBIT 43 30 32 72 112 % margin 1.5% 1.1% 1.2% 2.7% 4.2% Net finance charges (47) (53) (4) (80) (49) (68) EBT (4) (23) (48) 23 44 % margin (0.1%) (0.9%) (1.8%) 0.9% 1.7% PAT (15) (35) (54) 4 16 % margin (0.5%) (1.3%) (2.0%) 0.2% 0.6% Trading information 2017 2016 2015 2014 2013 (as at March year-end) Number of UK retail outlets 883 864 859 833 790 Retail space ('000 m2) 419 399 397 385 362 (1) Iceland Foods adopted Financial Reporting Standard 102 “The Financial Reporting Standard Applicable in the UK and Republic of Ireland” in FY2016. This resulted in the restatement of FY2015 EBT and PAT to recognise the £12m gain on fair value of foreign exchange forward contracts, cross currency and interest rate swaps. Under the old UK GAAP, such derivative contracts were not recognised in the balance sheet. These derivative contracts were closed out during the July 2014 debt refinancing (2) The audited FY2013 financial statements are Group accounts which include operating results from the acquisition date 9 March 2012 to 31 March 2013. For comparability, pro forma results for the 52 weeks to 31 March 2013 have been shown (3) In terms of UK GAAP, Iceland amortises goodwill of £1.5 billion over 20 years (4) FY2015 net finance charges include refinancing costs of £53.8m associated with the July 2014 debt refinance (exceptional item) and £5.5m amortisation of loan fees 93 Unaudited results for the six months ended 30 September 2017 Iceland Foods Summarised financial information Summarised cash flow (£’m) 2017 2016 2015 2014 2013 EBITDA 160 151 150 202 226 Movement in working capital 35 (2) 39 (6) 8 Cash flow from operations (1) 195 149 189 196 234 % EBITDA 121.9% 99.1% 126.0% 97.0% 103.5% Capital expenditure (65) (62) (29) (49) (37) Operating cash flow post capex 130 87 160 147 197 % EBITDA 81.2% 57.8% 106.7% 72.8% 87.2% Tax paid (26) (21) (19) (27) (32) Interest paid (47) (49) (40) (33) (48) Operating cash flow post capex, tax and interest 57 17 101 87 117 % EBITDA 35.6% 11.3% 67.3% 43.1% 51.8% (1) FY2017 and FY2015 cash flow from operations benefited from the timing of supplier payments 94 Unaudited results for the six months ended 30 September 2017 Iceland Foods Summarised financial information Summarised balance sheet 2017 2016 2015 2014 2013 (March year-end – results in £’m) Audited Audited Audited Audited Audited Total Assets 1,723 1,743 1,798 1,874 1,891 Property and equipment 193 178 165 174 166 Intangibles (1) 1,142 1,209 1,271 1,346 1,421 Current Assets 195 191 198 202 176 Cash 193 165 164 152 128 Total Liabilities 1,405 1,405 1,426 1,436 1,456 Trade creditors 424 372 387 345 316 Current liabilities 101 117 109 69 65 Debt 868 897 912 1,003 1,050 Other 12 19 18 19 25 Shareholders Equity 318 338 372 438 435 (1) Intangibles primarily comprises goodwill, which under UK GAAP is amortised over 20 years 95 Unaudited results for the six months ended 30 September 2017 Premier Appendix information 96 Unaudited results for the six months ended 30 September 2017 Premier Regional footprint 3 Maize Mills in SA, Swaziland & Mozambique 7 Wheat Mills in SA, Swaziland & Mozambique 13 Bakeries in SA, Swaziland & Lesotho 1 Sugar Confectionery Plant in SA 1 Home & Personal Care manufacturing plant (1) 19 Distribution Depots in SA, Swaziland, Lesotho & Mozambique 1 Pasta Plant in Mozambique 1 Animal Feed Plant in Mozambique 1 Biscuit Plant in Mozambique (1) Lil-lets has offices in SA and Birmingham, UK 97 Unaudited results for the six months ended 30 September 2017 Premier Trading performance since implementation of the strategic plan 11,692 11,209 11,000 1,138 11% 10.4% 1,167 9.7% 10,000 8,835 10% 9.7% 9,000 7,750 9% 7.4% 856 8,000 6,272 8% Rm 573 7,000 7% 6.7% 5,731 6,000 422 6% 4,896 5.0% 4.5% 289 5,000 5% 222 4,000 4% 2011 2012 2013 2014 2015 2016 LTMLTM March 2017 2017 Revenue(LHS) EBITDA(LHS) EBITDA margin(RHS) For the six years to 31 March 2017, Premier has: • Grown revenue by 139% at a CAGR of 16% • Grown EBITDA by 413% at a CAGR of 31% • Expanded its EBITDA margin from 4.5% in FY2011 to 9.7% for LTM March 2017 This strong trading performance is attributable to Premier’s growth strategy: • Run the existing business well by investing in people, brands and assets • Expand the portfolio by converting from a staple foods producer to an FMCG branded business • Grow in chosen geographies 98 Unaudited results for the six months ended 30 September 2017 Premier Acquisitions to date (1) Company Date acquired Business description 1. Acquired assets of Swaziland Acquired a controlling stake in in the two leading bakeries in Swaziland and United Bakeries and February 2012 created Premier Swazi Bakeries. Bought out minorities during March 2015 Mister Bread in Swaziland Entry into sugar confectionery sub-categories of gums & jellies, marshmallows and 2. Manhattan and Super C May 2013 compressed tablets Bakeries in Eastern Cape giving Premier a national SA bread footprint; ‘Mister 3. Star Bakeries November 2013 Bread’ and ‘Star’ brands 4. Lil-lets November 2013 Leading brand in feminine hygiene with operations in the UK and SA Largest wheat and maize miller in Swaziland to complement Premier Swazi 5. Ngwane Mills April 2014 Bakeries’ operations An Eastern Cape flour mill currently supplying c.50% of the Eastern Cape 6. Mister Bread Milling March 2015 bakeries’ flour requirements 7. La Femme March 2015 Durban based business manufacturing tampons for Lil-lets SA 8. Companhia Industrial da Acquired a controlling stake in the leading food producer in Mozambique with a March 2015 Matola S.A. (CIM) diversified product range; maize, wheat, pasta, biscuit and animal feeds (1) Premier has invested R2.2bn to date in these acquisitions at an average EV / EBITDA multiple of 7x 99 Unaudited results for the six months ended 30 September 2017 Premier Summarised financial information Summarised income statement (1) March 2017 June 2016 (2) June 2015 June 2014 June 2013 (Amounts in R’m) Pro forma Audited Audited Audited Audited Net revenue (3) 11,692 11,209 8,835 7,750 6,272 % Growth 4.3% 26.9% 14.0% 23.6% 9.4% EBITDA 1,138 1,167 856 573 422 % Margin 9.7% 10.4% 9.7% 7.4% 6.7% Depreciation and amortisation (291) (373) (369) (135) (86) Adjusted EBIT 847 794 487 438 336 % margin 7.2% 7.1% 5.5% 5.7% 5.4% Exceptional items (4) (134) (27) (56) (53) (15) EBIT 713 767 431 385 321 Net interest charge (587) (521) (313) (227) (120) EBT 126 246 118 158 201 PAT 21 103 71 100 122 (1) Premier has changed its year end from June to March to align with Brait, resulting in a nine month audited financial period ended 31 March 2017. For comparability, the pro forma results for the Last Twelve Months ended 31 March 2017 (LTM March 2017) are shown (2) The audited results for FY2015 exclude the CIM acquisition made in March 2015, which was integrated into Premier with effect from 1 July 2015 (3) In FY2016, Premier has changed the recognition of sales of its milling by-product from revenue to recovery of costs. The historical net revenue amounts quoted in this slide have not been restated to exclude these sales (4) Exceptional items include: (i) non-cash adjustments such as: the accounting mark-to-market that arises on the share appreciation rights scheme, profit or loss on the sale of assets, straight lining of leases; and (ii) non- recurring items such as debt refinance and business restructuring costs 100 Unaudited results for the six months ended 30 September 2017 Premier Summarised financial information Summarised cash flow information (1) March 2017 June 2016 (3)June 2015 June 2014 June 2013 (Amounts in R’m) Pro forma Audited Audited Audited Audited Cash flow from operations before working capital (2) 1,035 1,140 857 577 408 Working capital (85) 241 (153) (31) (9) Cash flow from operations 950 1,381 704 546 399 % EBITDA 83.5% 118.3% 82.2% 95.3% 94.6% Capex (including acquisition of intangibles) (625) (1,199) (549) (408) (203) Operating cash flow post capex 325 182 155 138 196 % EBITDA 28.6% 15.6% 18.1% 24.1% 46.5% Taxation paid (100) (121) (80) (22) (2) Interest paid (244) (252) (147) (116) (124) Operating cash flow post capex, tax and interest (19) (191) (72) - 70 % EBITDA (1.7%) (16.4%) (8.4%) - 16.6% Summarised balance sheet (1) March 2017 June 2016 (3) June 2015 June 2014 June 2013 (Amounts in R’m) Pro forma Audited Audited Audited Audited Total Assets 8,064 7,935 5,680 5,206 3,209 Property and equipment 3,388 3,181 1,871 1,363 951 Intangibles 2,525 2,447 2,226 2,335 949 Current Assets 1,975 2,132 1,548 1,436 972 Cash 176 175 35 72 337 Total Liabilities 4,481 4,128 3,185 2,738 1,990 Trade creditors 1,251 1,709 1,008 1,047 673 Debt 2,508 1,829 1,732 1,252 1,082 Other 722 590 445 439 235 Shareholders Equity (4) 3,583 3,807 2,495 2,468 1,219 (1) Premier changed its year end from June to March to align with Brait, resulting in a nine month audited financial period ended 31 March 2017. For comparability, the pro forma results for the Last Twelve Months ended 31 March 2017 are shown (2) Cash flow before non recurring gains and losses, pre tax paid (3) The audited results for FY2015 exclude the CIM acquisition made in March 2015, which was integrated into Premier with effect from 1 July 2015 (4) Shareholder loans are included in Shareholders Equity 101 Unaudited results for the six months ended 30 September 2017 New Look Appendix information 102 Unaudited results for the six months ended 30 September 2017 New Look Summary consolidated income statement H1 FY18 H1 FY17 (26 weeks) (26 weeks) £m £m • Revenue declined 4.5% (£32.1m). This was mainly a result of our Revenue 686.0 718.1 product focusing on a narrow customer base. However, 3PE sales grew by 17.0% Cost of sales (352.6) (343.4) Gross Profit 333.4 374.7 • Revenue declined 5.3% in constant currencies Gross profit % 48.6% 52.2% Administrative expenses (SG&A) (367.8) (323.0) • Gross margin declined 360 bps to 48.6%, as a result of the increase in the number of markdown units and the level of discount offered Operating profit (34.4) 51.7 Operating profit % (5.0%) 7.2% • Administrative expenses increased by 13.9% (£44.8m), whilst underlying administrative costs(1) increased by 9.0% (£28.4m) from £315.4m in H1 FY17 to £343.8m in H1 FY18 Operating profit (34.4) 51.7 Add back • Underlying operating profit declined by £69.7m Exceptional items 7.2 2.5 • H1 FY18 Adjusted EBITDA was £24.2m, LTM Adjusted EBITDA was Impairment charge on PPE & intangible assets 4.0 0.3 £92.3m Share based payments expense 5.1 5.9 FV movement of financial instruments 1.4 (3.4) Onerous lease charge 6.3 2.3 Underlying operating profit (10.4) 59.3 Underlying operating profit % (1.5%) 8.3% Depreciation of tangible fixed assets 23.0 21.3 Amortisation of intangible assets 11.6 6.3 Adjusted EBITDA 24.2 86.9 Adjusted EBITDA % 3.5% 12.1% (1) Underlying Administrative costs excludes exceptional items, impairment charge on PPE and intangible assets, share based payments, FV movement of financial instruments and onerous lease charges 103 Unaudited results for the six months ended 30 September 2017 New Look Summary consolidated balance sheet As at As at • Inventory reduced £18.2m compared to last year as a result of 23 Sep 17 24 Sep 16 lower intake and an exceptional increase in the stock provision £m £m Derivatives - 33.4 Other non current assets 906.6 914.9 • At H1 FY18 our Euro FRN was c. 54% hedged via cross Non current assets 906.6 948.3 currency swaps, c. 84% of our total debt is at fixed rates, with the balance subject to floating rates Inventory 175.9 194.1 Derivatives 26.1 41.7 Other current assets 75.1 93.8 • Following H1 FY18 period end we concluded a re-strike of three Current assets (excl. cash) 277.1 329.6 of our existing cross currency hedges and cancelled the fourth Cash 93.4 108.8 generating a net inflow of c.£30.0m cash. The underlying Euro Trade payables (126.4) (126.7) FRN remains 36% hedged. Accruals and other payables (122.3) (115.2) Derivatives (20.8) (2.9) Other (72.1) (78.7) • Post H1 FY18 available liquidity and operating facilities include Current liabilities (341.6) (323.5) the following: Financial liabilities (1,227.1) (1,217.3) − £100.0m Revolving Credit Facility Deferred tax liabilities (52.0) (58.6) − £100.0m Operating facilities Derivatives (0.8) - Deferred income and other payables (80.1) (73.0) Non current liabilities (1,360.0) (1,348.9) • New Look have determined that a listing of its debt securities on The International Stock Exchange would be preferable to the Net liabilities (424.5) (285.7) current listing on the Euro MTF in Luxembourg and therefore have applied for a listing with The International Stock Exchange. Senior Secured Notes (1,051.7) (1,042.1) Senior Notes (175.4) (175.2) Financial liabilities (1,227.1) (1,217.3) Cash 93.4 108.8 Note: At H1 FY18 Cash and cash equivalents includes cash £66.2m, cash in transit £13.5m and blocked cash Net Debt (1,133.7) (1,108.5) £13.7m 104 Unaudited results for the six months ended 30 September 2017 New Look Summary consolidated cash flow statement H1 FY18 H1 FY17 (26 weeks) (26 weeks) • Operating Profit declined by £86.1m compared to H1 FY17 as a result £m £m of the decline in sales and increases in administrative expenses Operating profit (34.4) 51.7 Non cash items 39.3 21.4 • Cash inflows from working capital increased year on year as a result of a reduction in inventories, together with timing of rental payments Changes in working capital: and favourable timing of trade and other payables, which will both Increase in inventories (17.4) (45.0) reverse in Q3 FY18 Decrease / (increase) in trade and other receivables 14.9 (9.9) Increase in trade and other payables 67.9 42.1 • Underlying free cash flow of £46.5m was £18.7m higher than H1 Net change in working capital 65.4 (12.8) FY17 as the decline in operating profit was more than offset by cash inflows from working capital Other 9.3 5.5 • Cash flow from financing activities reduced year on year due to the Net cash flow from operating activities 79.6 65.8 repurchase of Senior notes in H1 FY17 Tax received (3.5) (3.5) Net cash flow from investing activities (29.6) (34.5) Free cash flow (1) 46.5 27.8 Net cash flow from financing activities (29.0) (61.5) Net increase / (decrease) in cash 21.0 (30.2) Opening cash (2) 73.2 134.5 Exchange gains on cash (2) (0.8) 4.5 Closing cash (2) 93.4 108.8 (1) Free cash flow, a non-IFRS measure, is pre-tax cash flow from operating activities less investing activities (2) Includes cash equivalents and bank overdrafts 105 Unaudited results for the six months ended 30 September 2017 New Look Capital expenditure H1 FY18 H1 FY17 (26 weeks) (26 weeks) Committed investment in current year – flexible in future £m £m years Total UK 17.2 26.6 New space 5.7 5.8 Refurbishments 1.2 3.4 • UK new space – opened 6 core stores, 1 Mens standalone with IT infrastructure 6.1 9.2 3 store closures Logistics 0.4 2.5 Retail infrastructure 3.8 5.7 • We have slowed our Concept refurbishment program in line with Other -- current trading E-Commerce 6.8 3.3 • 36 net new stores opened in China, with 60-80 total planned in Europe 2.1 2.9 FY18 China 3.5 1.7 • Completion of our ATLAS Retail Stock Management program Capital expenditure cash paid 29.6 34.5 and our Hybris digital platform will bring to an end more than 2 (Decrease) / increase in capital accrual (5.1) 6.4 years and c.£60m of investment Capital additions 24.5 40.9 Capex paid in the period (29.6) (34.5) Proceeds from sale of PPE - - Proceeds from sale of intangibles - - Net cash flow from investing activities (29.6) (34.5) 106 Unaudited results for the six months ended 30 September 2017 New Look Summarised financial information Summarised income statement 2FY2017 FY2016 (1) FY2015 (2) FY2014 (Audited March results in £’m) Audited Audited Audited Restated Revenue 1,455 1,491 1,415 1,368 % growth (2.4%) 5.4% 3.4% 2.9% Gross profit 747 785 746 722 % margin 51.3% 52.7% 52.7% 52.8% EBITDA 155 227 212 204 % margin 10.7% 15.2% 15.0% 14.9% Depreciation and amortisation (57) (53) (59) (63) Other non-operating items (3) (22) (40) (4) (4) EBIT 76 134 149 137 % margin 5.3% 9.0% 10.5% 10.0% Net interest expense (4,5) (93) (169) (98) (116) EBT (17) (35) 51 21 % margin (1.1%) (2.3%) 3.6% 1.5% Tax (3) 1 (2) (7) PAT (20) (34) 49 14 % margin (1.4%) (2.3%) 3.5% 1.0% (1) Continuing operations shown for FY2015 (2) Restated to reflect the divestment of Mim which took place during FY2015 (3) FY2017 includes £13.0m (FY2016: £10.0m) share based payments expense in relation to management’s performance based sweet equity. FY2016 includes £27.3m costs associated with the acquisition by Brait (4) FY2017 includes £79m net interest expense, £3m gain on repurchase of Bonds and £17m related to the revaluation of the Euro FRN and capitalised fees. FY2016 net interest expense reflects a £71m increase on FY2015. £67m thereof relates to (i) the £56m net exceptional finance costs consisting primarily of prepayment premiums due to the June 2015 refinancing; and (ii) the £11m accelerated amortisation of previously capitalised debt issuance costs (5) Figures stated represent the net interest expense amounts per New Look Retail Group’s (operating company) audited financial results. The 10% fixed rate interest on shareholder funding, which sits at the New Look holding company level, is therefore not reflected. Brait’s valuation of New Look however takes full consideration of this shareholder funding, including accrued interest to Brait’s reporting date 107 Unaudited results for the six months ended 30 September 2017 New Look Summarised financial information FY2017 FY2016 (1) FY2015 (2) 2014 Summarised cash flow information (£’m) Audited Audited Audited Restated Cash flow from operations 116 228 193 178 % EBITDA 74.6% 100.5% 91.0% 87.3% Capital expenditure (73) (72) (60) (49) Operating cash flow post capex 43 156 133 129 % EBITDA 27.4% 68.7% 62.7% 63.2% Tax refunded / (paid) 2 (11) (10) (5) Net interest paid (80) (83) (70) (48) Refinancing fees paid - (54) - - Operating cash flow post capex, tax and interest (35) 8 53 76 % EBITDA (23.0%) 3.5% 25.0% 37.3% (1) Continuing operations shown for FY2015 (2) FY2014 restated to reflect the divestment of Mim which took place during FY2015 108 Unaudited results for the six months ended 30 September 2017 New Look Summarised financial information Summarised balance sheet FY2017 FY2016 FY2015 FY2014 (Audited March results in £’m) Audited Audited Audited Audited Total Assets 1,291 1,306 1,262 1,221 Non-current assets (1) 948 910 879 907 Inventory 159 148 148 138 Other current assets 111 113 108 65 Cash 73 135 127 111 Total Liabilities 1,621 1,616 1,575 1,613 Current liabilities 276 280 268 286 Financial liabilities (2,3) 1,218 1,208 1,165 1,157 Other non-current liabilities 127 128 142 170 Net liabilities (330) (310) (313) (392) (1) Largely property, plant and equipment and intangible assets (2) Term debt (noting that accrued interest thereon is included in current liabilities) (3) Figures as per New Look Retail Group’s (operating company) audited financial results. The shareholder funding, which sits at the New Look holding company level, is therefore not reflected. Brait’s valuation of New Look however takes full consideration of this shareholder funding, including accrued interest to Brait’s reporting date Trading information FY2017 FY2016 FY2015 FY2014 Retail outlets (4) 872 838 809 804 Retail space (m2 in '000) (5) 514 506 498 507 Revenue per m2 (in £) 2,829 2,946 2,840 2,698 (4) Retail outlets for all years are on a continuing operations basis only (5) Retail space is reported in square feet with the m 2 equivalent converted at 1 sq ft = 0.09290304 metre squared. All fiscal years exclude Mim 109 Unaudited results for the six months ended 30 September 2017 Other investments DGB − Leading SA producer and exporter of local wine and importer of international spirit brands − Formally founded in 1990, although winemaking history extends over 300 years − Headquartered in Midrand, Johannesburg. Production facilities in Western Cape (Wellington and Franschhoek) − Largest corporate employer in the Wellington area, employing 457 staff − State of the art production, bottling, storage and warehousing facilities − Commissioned a new craft brewery in Gauteng during May 2016 − 26 company owned wine brands, 5 agency wine brands − 13 company owned spirit brands, 23 agency spirit and allied beverage brands − Extensive distribution network with 16 national depots ensuring good coverage across SA − Logistics platform to drive growth into new brands − Entrepreneurial management team − SA agent for all Bacardi products 110 Unaudited results for the six months ended 30 September 2017 Other investments Brait IV investments overview - Headquartered in Johannesburg, Consol Group employs around 2,100 staff - Consol is the largest manufacturer of glass packaging products on the African continent - Operates 6 manufacturing sites comprising 13 furnaces and 33 production lines strategically located in close proximity to its customers - Principal supplier to all leading beverage and food companies in South Africa - Owns the #2 glass producer in Nigeria, the #1 glass producer in Kenya and has recently commenced construction of a Greenfields factory in Ethiopia, due for start-up in 2018 - Manufactures and markets an extensive range of standard and premium glass packaging products in a variety of shapes, sizes, colours and weights - In September 2017 Brait IV signed a Sale and Purchase Agreement to sell its investment in Primedia and is subject to conditions precedent which are expected to be finalised before the end of the 2017 calendar year 111 Unaudited results for the six months ended 30 September 2017 Notice to recipients The presentation has been prepared by the Group. For the purposes of this notice to recipients, the “presentation” shall include this document, the oral presentation of this document by the Group or any person on its behalf, hard copies of this document and any materials distributed (or statements made) in connection with this document. By attending the meeting at which the presentation is made, dialling into any teleconference during which the presentation is made or reading the presentation, you will be deemed to have agreed to the restrictions that apply with respect to the presentation. Certain statements contained in the presentation, including, without limitation, any statements preceded by, followed by or including the words “targets”, “believes”, “expects”, “aims”, “intends”, “may”, “anticipates”, “would”, “could” or similar expressions or the negative thereof, constitute forward-looking statements, notwithstanding that such statements are not specifically identified. Examples of forward-looking statements include but are not limited to: (i) statements about future financial and operating results; (ii) statements of strategic objectives, business prospects, future financial condition, budgets, projected levels of production, projected costs and projected levels of revenues and profits of the Group or its management or boards of directors; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict and outside of the control of the management of the Group. Therefore, actual outcomes and results may differ materially from what is expressed or implied by such forward-looking statements. Neither the Group nor any of its associates or directors, officers or advisers provide any representation, assurance or guarantee that the occurrence of the events or circumstances expressed or implied in any forward-looking statements will actually occur. You are cautioned not to place undue reliance on these forward-looking statements which only speak as of the date of this document. Except as required by applicable regulation or by law, the Group expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events. The presentation shall not, under any circumstances, create any implication that there has been no change in the business or affairs of the Group since the date of the presentation or that the information contained therein is correct as at any time subsequent to its date. The information contained in the presentation has not been subject to any independent audit or review. Our internal estimates have not been verified by an external expert, and we cannot guarantee that a third party using different methods to assemble, analyse or compute market information and data would obtain or generate the same results. We have not verified the accuracy of such information, data or predictions contained in the presentation that were taken or derived from industry publications, public documents of our competitors (or competitors of our investment portfolio) or other external sources. The presentation does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities. The making of the presentation does not constitute a recommendation regarding any securities. Certain financial measures and ratios related thereto in the presentation are not specifically defined under IFRS or any other generally accepted accounting principles. These measures are presented because we believe that they help illustrate the underlying performance and position of the Group. These measures should be considered in addition to, and not as a substitute for, or as superior to, measures of financial performance in accordance with IFRS. 112 Unaudited results for the six months ended 30 September 2017 UNAUDITED INTERIM RESULTS ANNOUNCEMENT for the six months ended 30 September 2017 BRAIT SE (Registered in Malta as a European Company) (Registration No. SE1) Share code: BAT ISIN: LU0011857645 Bond code: WKN: A1Z6XC ISIN: XS1292954812 LEI code: 549300VB8GBX4UO7WG59 (“Brait”, the “Company” or “Group”) UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017 KEY HIGHLIGHTS • Brait’s reported Rand NAV per share at 30 September 2017 is ZAR66.62 • For the quarter, this represents a decrease of 10.1% compared to the ZAR74.14 reported at 30 June 2017 • For the six month period, this represents a decrease of 14.8% compared to 31 March 2017’s reported NAV per share of ZAR78.15 • For the twelve month period, this represents a decrease of 36.6% compared to 30 September 2016’s NAV per share of ZAR105.06 • The three year CAGR for reported Rand NAV per share to 30 September 2017 is 24.2% per annum (benchmark of 15% per annum); including ordinary share dividends it is 25.5% • Since 1 April 2011’s NAV per share of ZAR16.50, the 6.5 year CAGR to 30 September 2017 for reported Rand NAV per share is 24.0% per annum 114 Unaudited results for the six months ended 30 September 2017 Performance against targets (1) Performance metric Position at 30 September 2017 NAV CAGR > 15% per year over any • 24.2% CAGR since 30 September 2014 1 P 3 year period • 24.0% CAGR since 1 April 2011 Dividend: 1% – 2.5% of closing NAV 2 P • FY2017: 1% of R78.15 NAV paid August 2017 (2) – bonus shares or cash dividend alternative • 0.61% of average AUM (3) (FY2017: 0.64%) 3 Operating costs: < 0.85% of Brait AUM P • 0.54% net after fee income (3) (FY2017: 0.54%) 4 Minimal cash drag: < 25% of NAV P • 9.7% of NAV (FY2017: 8.3%) 5 Primarily unlisted investments P • 100% of investment portfolio Demonstrate cash flow within underlying 6 P • Strong cash flow conversion across portfolio investments over any 3 year period (1) Going forward, shareholders are notified that in line with other listed investment companies, Brait will update the market on its NAV per share on a six monthly basis at interim and final reporting dates (2) Shareholder election: 26% elected to receive bonus shares, 43% elected to reinvest their cash dividend of R169m and subscribe for new shares; and the remaining 31% elected to receive their cash dividend of R121m (3) Percentages quoted are annualised based on operating expenses of R135 million and fee income of R15 million for the six months ended 30 September 2017. (FY2017: Operating expenses R401 million; fee income R62 million). Brait’s average AUM for the six months ended 30 September 2017 is R45 billion (FY2017: R63 billion) 115 Unaudited results for the six months ended 30 September 2017 Summary consolidated statement of financial position as at 30 September Audited Unaudited Unaudited Audited year ended six months six months year ended 31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March 2017 2016 2017 2017 2016 2017 R’m R’m R’m Notes €’m €’m €’m ASSETS 44 408 58 142 40 023 Non-current assets 2 499 3 767 3 100 44 408 58 142 40 023 Investments 2 2 499 3 767 3 100 3 289 3 602 3 290 Current assets 205 233 230 5 4 3 Accounts receivable – – – 3 284 3 598 3 287 Cash and cash equivalents 3 205 233 230 47 697 61 744 43 313 Total assets 2 704 4 000 3 330 EQUITY AND LIABILITIES 39 580 53 277 33 851 Ordinary shareholders equity and reserves 4 2 114 3 451 2 763 8 065 8 366 9 200 Non-current liabilities 574 542 563 5 396 5 630 5 883 Convertible Bonds 5 367 365 377 2 669 2 736 3 317 Borrowings 6 207 177 186 52 101 262 Current liabilities 16 7 4 52 101 262 Accounts payable and other liabilities 16 7 4 47 697 61 744 43 313 Total equity and liabilities 2 704 4 000 3 330 520.6 521.0 525.6 Ordinary shares in issue (m) 525.6 521.0 520.6 (14.6) (13.9) (17.5) Treasury shares (m) (17.5) (13.9) (14.6) 506.0 507.1 508.1 Outstanding shares for NAV calculation (m) 508.1 507.1 506.0 7 815 10 506 6 662 Net asset value per share (cents) 416 681 546 116 Unaudited results for the six months ended 30 September 2017 Summary consolidated statement of comprehensive income for the six months ended 30 September Audited Unaudited Unaudited Audited year ended six months six months year ended 31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March 2017 2016 2017 2017 2016 2017 R’m R’m R’m Note €’m €’m €’m (15 085) (3 915) (7 957) Investment losses (530) (240) (978) 244 122 125 Interest income 8 7 16 409 80 71 Dividend income 5 5 27 62 32 15 Fee income 1 2 4 (319) (264) 211 Foreign exchange gains/(losses) 14 (16) (21) (401) (228) (135) Operating expenses (9) (14) (26) (76) (66) – Other expenses – (4) (5) (659) (274) (317) Finance costs (21) (17) (43) (29) (7) 7 Taxation – – (2) (15 854) (4 520) (7 980) Loss for the period (532) (277) (1 028) Other comprehensive income (12 879) (10 565) 2 540 Translation adjustments (98) (337) (266) (28 733) (15 085) (5 440) Comprehensive loss for the period (630) (614) (1 294) (3 119) (887) (1 577) Loss and Headline loss per share (cents) – basic 7 (105) (54) (202) (2 809) (785) (1 421) Loss and Headline loss per share (cents) – diluted 7 (95) (48) (182) 117 Unaudited results for the six months ended 30 September 2017 Summary consolidated statement of changes in equity for the six months ended 30 September Audited Unaudited Unaudited Audited year ended six months six months year ended 31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March 2017 2016 2017 2017 2016 2017 R’m R’m R’m Note €’m €’m €’m 69 872 69 872 39 580 Ordinary shareholders’ balance at beginning of period 2 763 4 164 4 164 (15 854) (4 520) (7 980) Loss for the period (532) (277) (1 028) (12 879) (10 565) 2 540 Translation adjustments (98) (337) (266) (930) (881) (168) Net purchase of treasury shares (11) (57) (65) – – 169 Cash dividend reinvestment 4 11 – – (629) (629) (290) Cash dividend paid 4 (19) (42) (42) 39 580 53 277 33 851 Ordinary shareholders’ balance at end of period 2 114 3 451 2 763 118 Unaudited results for the six months ended 30 September 2017 Summary consolidated statement of cash flows for the six months ended 30 September Audited Unaudited Unaudited Audited year ended six months six months year ended 31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March 2017 2016 2017 2017 2016 2017 R’m R’m R’m Note €’m €’m €’m Cash flows from operating activities 300 7 28 Investment proceeds received 2 – 21 56 30 13 Fees received 1 2 4 65 41 24 Interest received 2 3 4 266 – – Dividends received – – 18 (401) (225) (140) Operating expenses paid (9) (15) (26) (59) – (10) Other expenses paid (1) – (4) (35) (11) – Taxation paid – (1) (2) 192 (158) (85) Operating cash flow before investments (5) (11) 15 (190) (92) (226) Purchase of investments (15) (6) (12) 2 (250) (311) Net cash (used in)/from operating activities (20) (17) 3 1 491 1 550 500 Net drawdown of borrowings 33 101 85 (391) (86) (109) Finance costs paid (7) (6) (24) (710) (661) (168) Net purchase of treasury shares (11) (43) (42) (629) (629) (290) Cash dividend paid (19) (41) (42) – – 169 Cash dividend reinvestment 11 – – (239) 174 102 Net cash from/(used in) financing activities 7 11 (23) (237) (76) (209) Net decrease in cash and cash equivalents (13) (6) (20) (833) (680) 212 Effects of exchange rate changes on cash and cash equivalents (12) (21) (10) 4 354 4 354 3 284 Cash and cash equivalents at beginning of period 230 260 260 3 284 3 598 3 287 Cash and cash equivalents at end of period 3 205 233 230 119 Unaudited results for the six months ended 30 September 2017 Notes to the summary consolidated financial statements for the six months ended 30 September 1 ACCOUNTING POLICIES 1.1 Basis for preparation The financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, on the going concern principle, using the historical cost basis, except where otherwise indicated. The summarised financial statements are presented in accordance with IAS 34: Interim Financial Reporting and in accordance with the framework concepts, measurement and recognition requirements of IFRS. The accounting policies and methods of computation are consistent with those applied in the Group annual financial statements for the year ended 31 March 2017. The Group has only one operating segment being that of an investment holding company. The Group’s financial statements are prepared using both the Euro (EUR) and SA Rand (R/ZAR) as its presentation currencies. The Group’s subsidiaries have one of three functional currencies: Pound Sterling (GBP), SA Rand or US Dollar (USD/US$). The holding company, Brait SE, and its main consolidated subsidiaries use GBP as their functional currency. The financial statements have been prepared using the following exchange rates: 30 September 2017 31 March 2017 30 September 2016 Closing Average Closing Average Closing Average USD/ZAR 13.5655 13.1902 13.4247 14.0513 13.7268 14.5313 GBP/ZAR 18.1636 17.0727 16.8674 18.4171 17.8155 19.9926 EUR/ZAR 16.0183 15.0119 14.3232 15.4319 15.4336 16.3167 USD/EUR 0.8469 0.8786 0.9373 0.9105 0.8894 0.8906 GBP/EUR 1.1339 1.1373 1.1776 1.1934 1.1543 1.2253 120 Unaudited results for the six months ended 30 September 2017 Notes to the summary consolidated financial statements for the six months ended 30 September (continued) 2. INVESTMENTS The Group designates the majority of its financial asset investments as at FVTPL as the Group is managed on a fair value basis, with any resultant gain or loss recognised in investment gains/losses. Fair Value is determined in accordance with IFRS13. Statement of financial position items carried at fair value include investments in equity instruments and shareholder funding instruments. The Group applies a number of methodologies to determine and assess the reasonableness of the fair value, which may include the following: • Earnings multiple • Recent transaction prices • Net asset value • Price to book multiple Listed investments are held at recent quoted transaction prices. Where the listed investment is either thinly traded and / or the market is inactive, the valuation applied to determine the carrying value is based on the applicable unlisted investment methodology set out below. The primary valuation model utilised for valuing unlisted portfolio investments is the maintainable earnings multiple model. Maintainable earnings are derived with reference to the mix of prior year audited and latest available current year forecast EBITDA per the portfolio company, adjusted for any non-recurring income/expenditure. As the year progresses, so the weighting is increased towards the portfolio company’s forecast. The Directors decide on an appropriate group of comparable quoted companies from which to base the EV/EBITDA multiple. The three year trailing average multiple of the comparable quoted companies, is adjusted for points of difference, where required, to the portfolio company being valued. The peer average spot multiple at reporting date is also considered. The equity valuation takes consideration of the portfolio company’s net debt/cash on hand as per its latest available financial results. Further valuation information can be obtained from the 30 September 2017 investor presentation on the Group’s website, www.brait.com. 31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March 2017 2016 2017 2017 2016 2017 R’m R’m R’m €’m €’m €’m 44 408 58 142 40 023 The Group’s porfolio of investments 2 499 3 767 3 100 15 516 16 107 17 726 Virgin Active 1 107 1 044 1 083 12 395 13 485 12 030 Premier 751 874 865 7 367 7 660 8 511 Iceland Foods 531 496 514 7 066 18 726 – New Look – 1 213 493 2 064 2 164 1 756 Other investments 110 140 145 121 Unaudited results for the six months ended 30 September 2017 Notes to the summary consolidated financial statements for the six months ended 30 September (continued) 2. INVESTMENTS (CONTINUED) Valuation metrics 30 September 2017 30 September 2016 31 March 2017 3rd Party 3rd Party 3rd Party EBITDA Multiple Net Debt EBITDA Multiple Net Debt EBITDA Multiple Net Debt Virgin Active (GBP’m) 139 11.4x 336 135 11.4x 370 140 11.4x 411 Premier (R’m) 1 170 12.4x 1 768 1 211 13.2x 1 508 1 140 13.2x 1 850 Iceland Foods (GBP’m) 163 9.0x 687 153 9.4x 688 160 9.0x 675 New Look (GBP’m) Note 1 203 11.3x 1 100 155 10.3x 1 136 Other investments varied varied varied *Note 1 Until such time as its turnaround strategy has taken shape, New Look is valued at Nil Fair Value Hierarchy IFRS 13 provides a hierarchy that classifies inputs used to determine fair value. Investments measured and reported at fair value are classified and disclosed in one of the following categories: Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3 Inputs for the assets or liability that are not based on observable market data There are no financial assets that are categorised as Level 1 and Level 2 and no transfers between levels in the current or prior year. All Level 3 investments have been valued using a maintainable earnings multiple model. R’m 30 September 2017 €’m 17 726 Virgin Active 1 107 9 010 Premier 562 8 511 Iceland Foods 531 1 514 Other investments 95 36 761 Investments at fair value 2 295 3 020 Premier shareholding funding 189 242 Other investments shareholder funding 15 3 262 Investments at amortised cost 204 40 023 Total investments 2 499 122 Unaudited results for the six months ended 30 September 2017 Notes to the summary consolidated financial statements for the six months ended 30 September (continued) Audited Unaudited Unaudited Audited year ended six months six months year ended 31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March 2017 2016 2017 2017 2016 2017 R’m R’m R’m €’m €’m €’m 3. CASH AND CASH EQUIVALENTS 3 284 3 598 3 287 Balances with banks 205 233 230 196 171 270 – ZAR cash 17 11 14 77 78 96 – USD cash 6 5 5 3 011 3 349 2 921 – GBP cash 182 217 211 39 580 53 277 33 851 4. ORDINARY SHAREHOLDERS’ EQUITY AND RESERVES 2 114 3 451 2 763 Share Capital and Premium Authorised share capital 1 500 000 000 at par value of €0.22 per share Issued share capital 31 March 2017 521 012 174 Bonus share issue 1 665 192 (1) Cash dividend reinvestment 2 921 849 (2) 30 September 2017 525 599 215 (1) 26% of shareholders elected bonus shares The par value of the bonus shares issued are accounted for in Ordinary Share Premium with no adjustment to any other reserves in Equity. The bonus share issue option was converted at the 15 day Volume Weighted Average Price (VWAP) of R62.37 per share to result in the R0.7815/€0.0525 dividend per share translating into 1.25301 shares for every 100 shares held. (2) 43% of shareholders elected to reinvest their cash dividend of ZAR169 million. The remaining 31% of shareholders elected to receive cash of R121 million. (3) The dividend amount reflected for 30 September 2016 is ZAR629 million. The variance of R19 million to the amount previously reported is due to a classification change with the line item “Translation Adjustments”. 123 Unaudited results for the six months ended 30 September 2017 Notes to the summary consolidated financial statements for the six months ended 30 September (continued) Audited Unaudited Unaudited Audited year ended six months six months year ended 31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March 2017 2016 2017 2017 2016 2017 R’m R’m R’m €’m €’m €’m 5. CONVERTIBLE BONDS 5 396 5 630 5 883 On 18 September 2015 Brait received GBP350 million from 367 365 377 the issuance of its five year unsubordinated, unsecured convertible bonds (Bonds). The Bonds carry a fixed coupon of 2.75% per annum payable semi-annually in arrears. The initial conversion price of GBP7.9214 per ordinary share represented a 30% premium to the VWAP of Brait’s ordinary shares between launch and pricing on 11 September 2015. The adjusted conversion price at reporting date is GBP7.7613 per ordinary share, which takes into account Brait’s bonus share issue and cash dividend alternative since date of issuance, in accordance with the Bonds’ terms and conditions. Using the adjusted conversion price, the Bonds will convert into 45,095,538 ordinary shares (8.6% of Brait’s current issued share capital) on exercise of bondholders conversion rights. In the event that the bondholders have not exercised their conversion rights, the Bonds are settled at par value in cash on maturity on 18 September 2020. Brait has a soft call to early settle the Bonds at their par value after 9 October 2018 if the value of the ordinary shares underlying the Bonds is equal to or exceeds GBP130,000 for more than 20 of the 30 consecutive trading days up to 9 October 2018. The Bonds are listed on the Open Market (Freiverkehr) segment of the Frankfurt Stock Exchange. 6. BORROWINGS 2 669 2 736 3 317 The loan from First Rand Bank Limited (trading through its 207 177 186 Rand Merchant Bank division) and The Standard Bank of South Africa Limited is Rand denominated, bears interest at JIBAR plus 3.0% repayable quarterly, with a right to rollup. The ZAR8.5 billion facility expires in December 2020 and is secured by Group assets. 124 Unaudited results for the six months ended 30 September 2017 Notes to the summary consolidated financial statements for the six months ended 30 September (continued) Audited Unaudited Unaudited Audited year ended six months six months year ended 31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March 2017 2016 2017 2017 2016 2017 R’m R’m R’m €’m €’m €’m 7. HEADLINE EARNINGS RECONCILIATION (15 854) (4 520) (7 980) Loss and Headline loss for the period (532) (277) (1 028) 508 510 506 Weighted average ordinary shares in issue (m) – basic 506 510 508 (3 119) (887) (1 577) Loss and headline loss per share (cents) – basic (105) (54) (202) (15 854) (4 520) (7 980) Loss and Headline loss for the period (532) (277) (1 028) 318 171 150 Adjustment for Bond interest saved if Bond converted to shares 10 10 21 (15 536) (4 349) (7 830) Diluted loss and Headline loss (522) (267) (1 007) 553 554 551 Weighted average ordinary shares in issue (m) – diluted (1) 551 554 553 (2 809) (785) (1 421) Loss and headline loss per share (cents) – diluted (95) (48) (182) (1) All ordinary shares underlying the Bonds are treated as dilutive and weighted from issue of the Bonds on 11 September 2015 8. RELATED PARTIES Transactions between the Company and its subsidiaries have been eliminated on consolidation or on fair value of subsidiaries and are not disclosed in this note. During the year, Group companies entered into the following transactions with related parties who are not members of the Group: Loss from operations include: (17) (9) (8) Non-executive directors fees (1) (1) (1) (5) (1) (1) Professional fees – M Partners S.à r.l – – – (1) (3) (1) Professional fees – Maitland International Holdings Plc – – – (8) – – Other expenses – Maitland International Holdings Plc – – (1) 125 Unaudited results for the six months ended 30 September 2017 Notes to the summary consolidated financial statements for the six months ended 30 September (continued) Audited Unaudited Unaudited Audited year ended six months six months year ended 31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March 2017 2016 2017 2017 2016 2017 R’m R’m R’m €’m €’m €’m 9. CONTINGENT LIABILITIES AND COMMITMENTS 9.1 Contingencies 2 048 1 942 2 160 Loan to Fleet Holdings Ltd (Fleet) 135 126 143 (2 048) (1 942) (2 160) Loan from Fleet (135) (126) (143) – – – Net loan to Fleet – – – Fleet (the Investment Team’s SPV) refinanced its loan from the Group with The Standard Bank of South Africa Limited and First Rand Bank Limited (trading through its Rand Merchant Bank division) (“The Lenders”). The proceeds from the refinance were advanced back to the Group as a new separate loan. The loans both bear interest at the 3 month Johannesburg Inter Bank Acceptance Rate (“JIBAR”) plus 3.45%, with the right to roll up interest. The loans both mature on 4 July 2021. Brait has provided the Lenders to Fleet with an indemnity for the amount owing, for which Brait holds collateral in the form of the pledged Brait shares held by Fleet and the Investment Team. The amount owing is repayable to the Lenders on maturity, at which time the indemnity will either be released or claimed by the Lenders. Applying the closing 30 September 2017 Brait share price of ZAR53.50, the market value of the pledged shares is ZAR440 million less than the amount owing to the Lenders. Given the remaining term is more than three years, this amount is disclosed as a contingent liability at reporting date. 126 Unaudited results for the six months ended 30 September 2017 Notes to the summary consolidated financial statements for the six months ended 30 September (continued) Audited Unaudited Unaudited Audited year ended six months six months year ended 31 March 30 Sept 30 Sept 30 Sept 30 Sept 31 March 2017 2016 2017 2017 2016 2017 R’m R’m R’m €’m €’m €’m 9. CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED) 9.2 Commitments 6 472 6 920 6 882 Convertible Bond commitments 430 448 451 162 171 175 – Coupon payments due within one year 11 11 11 406 514 350 – Coupon payments due between one and five years(1) 22 33 28 5 904 6 235 6 357 – Principal settlement due within five years (1) 397 404 412 (1) The coupon payments due amounts reflect the semi-annual coupons payable in arrears over the Bond’s five year term. The principal settlement due amount is only payable in the event that the bondholders have not exercised their conversion rights. Brait has a soft call to early settle the Bonds at their par value after 9 October 2018 if the value of the ordinary shares underlying the Bonds is equal to or exceeds GBP130,000 for more than 20 of the 30 consecutive trading days up to 9 October 2018. If the soft call is exercised, coupons from 18 September 2018 to 18 September 2020 will not be payable. 121 119 88 Private equity funding commitments 5 8 8 Rental commitments (Malta and Mauritius) 2 2 2 – Within one year – – – 3 3 3 – Between one and five years – – – 6 598 7 044 6 975 Total commitments 435 456 459 9.3 Other The Group has rights and obligations in terms of shareholder or purchase and sale agreements relating to its present or former investments. 10 POST BALANCE SHEET EVENTS No events have taken place between 30 September 2017 and the date of the release of this report, which would have a material impact on either the financial position or operating results of the Group. 127 Unaudited results for the six months ended 30 September 2017 Review of operations The Board of Directors hereby report to shareholders on the Group’s interim results at 30 September 2017. VALUE DRIVERS Growth in NAV is the Group’s key performance measure together with the following additional factors comprising the core value drivers of the business: • Low cost to Assets Under Management (“AUM”) ratio; • Minimal balance sheet cash drag; • Significant cash flow within the investment portfolio; and • Predictable and consistent ordinary dividend to closing NAV yield. Going forward, shareholders are notified that in line with other listed investment companies, Brait will update the market on its NAV per share on a six monthly basis at interim and final reporting dates. Growth in NAV Brait’s valuation policy is to reference the EV/EBITDA valuation multiple on a historical basis for each of its investments to their peer group’s trailing three year average multiple. At 30 September 2017, the EV/EBITDA historical valuation multiples used were: 30 September 2017 30 September 2016 Valuation Peer average: Valuation Peer average: multiple used 3 year trailing multiple used 3 year trailing Virgin Active 11.4x 13.7x 11.4x 13.8x Premier 12.4x 13.3x 13.2x 13.2x Iceland Foods 9.0x 11.4x 9.4x 10.0x New Look Note 1 14.1x 11.3x 14.9x The discount/(premium) when comparing the valuation multiples used to respective peer average multiples are: 30 September 2017 30 September 2016 Discount/(premium) to: Discount/(premium) to: Peer average: Peer average: Peer average: Peer average: 3 year trailing spot 3 year trailing spot Virgin Active 17% 15% 17% 17% Premier 7% (10%) – 6% Iceland Foods 21% 20% 6% 7% New Look Note 1 Note 1 24% 10% Note 1: Until such time as its turnaround strategy has taken shape, Brait’s investment in New Look is valued at nil. 128 Unaudited results for the six months ended 30 September 2017 Review of operations (continued) The NAV break-down is as follows: 30 Sep 30 Sep 30 Sep 30 Sep 2016 2017 2017 2016 ZAR’m ZAR’m % EUR’m EUR’m 58 142 40 023 Investments 93 2 499 3 767 16 107 17 726 Virgin Active 41 1 107 1 044 13 485 12 030 Premier 28 751 874 7 660 8 511 Iceland Foods 20 531 496 18 726 – New Look – – 1 213 2 164 1 756 Other investments 4 110 140 3 598 3 287 Cash and cash equivalents 7 205 233 4 3 Accounts receivable – – – 61 744 43 313 Total assets 100 2 704 4 000 8 467 9 462 Total liabilities 590 549 2 736 3 317 Borrowings 207 177 5 630 5 883 Convertible bond 367 365 101 262 Accounts payable 16 9 53 277 33 851 Net asset value 2 114 3 451 507.10 508.12 Number of issued ordinary shares (’mil‚ excluding treasury shares) 508.12 507.10 10 506 6 662 Net asset value per share (cents) 416 681 129 Unaudited results for the six months ended 30 September 2017 Review of operations (continued) KEY HIGHLIGHTS FOR THE GROUP’S INVESTMENT PORTFOLIO ARE: Virgin Active • For the nine months ended 30 September 2017, Revenue and EBITDA in Pound Sterling, for continuing operations, increased by 15% and 16% on the comparative period respectively. On a constant currency basis, Revenue and EBITDA for continuing operations increased by 5% and 2% respectively. • The discontinued operations relate to the value enhancing disposals of (i) 36 non-core UK traditional clubs, of which 35 were sold to Nuffield Health in July 2016; (ii) 14 racquet clubs sold to David Lloyd Leisure, which completed on 31 May 2017; and (iii) the non-core Iberian business, with 8 clubs in Spain and 4 clubs in Portugal sold to Holmes Place on 2 October 2017. • On a continuing operations basis, 17 new clubs opened during the last twelve months, of which 9 were opened in the current nine month period (5 in South Africa, 2 in Asia Pacific, 1 in Italy and 1 in the UK) giving a total of 236 clubs and 1.2 million members as at 30 September 2017. • On a continuing operations basis, for the current 9 month period, Asia Pacific, Italy and the UK territories each generated growth in Revenue and EBITDA margin expansion, driven by cost savings. While Revenue increased in Southern Africa, a challenging South African economy, cost inflation and investment in sales and marketing led to EBITDA margin contraction for the territory and consequently a strong focus on cost control over the remaining quarter has been implemented. • Net debt for the period ending September 2017 reduced to GBP326 million (30 September 2016: GBP392 million) and comprised GBP380 million of interest bearing bank debt, GBP25 million of finance leases, and GBP79 million of cash. The net debt leverage ratio reduced to 2.4x (30 September 2016: 2.9x). • Virgin Active’s commitment to product innovation and an outstanding membership experience is illustrated with the following highlights during the current period: (i) the trialling of a new group exercise focused studio format (approximately 1,000m2 footprint), with the May 2017 opening of Holland Village in Singapore and the September 2017 opening of Wireless Road in Bangkok, Thailand; (ii) the September 2017 opening of the group’s first boutique cycle studio – Revolution by Virgin Active, in Milan, Italy; (iii) further progress on the member’s digital journey, with the launch of online joining in the UK; (iv) new group exercise formats including Pound (a dance based program from the US) and Punch (a boxing based format launched in the UK); and (v) later this year, Virgin Active will be the first to market an exciting global cycle innovation in partnership with Les Mills in Asia. • Virgin Active, in which Brait has an effective 71.9% (HY2017: 70.5%) economic interest post dilution for the performance based sweet equity granted to the Virgin Active management team, is valued at reporting date using an EV/EBITDA multiple of 11.4x (HY2017: 11.4x), which represents a discount of 17% to the peer group’s three year trailing average multiple of 13.7x and a 15% discount to the peer average spot multiple. Applying the closing GBP/ZAR exchange rate of ZAR18.16, Virgin Active’s carrying value is ZAR17.7 billion (HY2017: ZAR16.1 billion), which represents 41% of Brait’s total assets (HY2017: 26%). 130 Unaudited results for the six months ended 30 September 2017 Review of operations (continued) Premier • The Baking division, which constitutes nearly half of Premier’s net revenue, has performed well in a highly competitive market, maintaining its average bread pricing over the six month reporting period. Whilst competitor promotional pricing put some pressure on sales volumes, Premier retained its national market share in the formal market across all its bread brands, with strong positions in the Western Cape, KwaZulu-Natal and Eastern Cape provinces. Premier continues to supply around 70% of its bread sales to the informal sector sales channel. • In a first to market in South Africa, Premier launched Blue Ribbon “Sandwich Squares”, a sandwich alternative product, in the Gauteng market in February 2017. The product was subsequently rolled out in Kwa-Zulu Natal and Western Cape in September 2017, which has boosted sales volumes significantly. • The Milling division, which represents around a third of Premier’s net revenue, has been impacted by the extreme commodity market pricing volatility, which is the main reason for the group’s net revenue for the six months ending 30 September 2017 declining by 10%. The worst drought in 110 years, followed by the best maize crop ever had a significant effect on the price of white maize, causing the price per ton to drop 50% during the period December 2016 to April 2017. • Whilst Premier’s cost saving initiatives meant that its operating costs remained in line with the prior period, margins in the Milling division were impacted as a result of the reduced demand for the expensive 2016 season crop. This led to lower trading volumes which delayed Premier’s ability to mill lower priced new 2017 season crop until June 2017. The resulting decline in the Milling division’s marginal contribution (being revenue after all production and direct selling costs) was the main factor in the group EBITDA decreasing by 24%, and the EBITDA margin of 8.3% for the current six month reporting period (six months ended 30 September 2016: 9.9%). • The Milling division’s performance normalised in line with historical trends during the second quarter of FY2018. • Premier’s Mozambican operations (CIM, the leading food and animal feed producer in that country) was negatively impacted by a combination of poor macro-economic conditions (currency devaluation and high interest rates) and the expensive maize positions which accounted for the bulk of the decline in CIM’s EBITDA. CIM has shown signs of volume recovery in September 2017, with good momentum into October. A stabilised forex environment, improved margins in maize meal, the launch of a new biscuit line (producing creamed biscuits) and entry into the rice market (which is significantly larger than the maize meal market in Mozambique) underpin CIM’s profitability recoverability. Elsewhere in the Groceries division, Sugar Confectionery and Lil-lets South Africa performed according to plan. • Following five years of significant capital expenditure, which resulted in an aggregate investment of some ZAR3 billion into a number of major completed projects that have generated both attractive returns and qualitative benefits, no major expansionary projects are forecast for FY2018. Premier repaid a further ZAR100 million of Brait’s shareholder funding on 31 October 2017. Whilst ensuring growth is not compromised, Premier is forecast to make further shareholder funding repayments during the remainder of FY2018. • Premier, in which Brait owns 92.7% (HY2017: 91.4%), is valued at reporting date using an EV/EBITDA multiple of 12.4x (HY2017: 13.2x), which represents a discount of 7% to the peer group’s average three year trailing multiple and a 10% premium to the peer group’s average spot multiple. The reduction in valuation multiple is largely to take consideration of the trend over the past twelve months of the peer average spot multiple trading at an increased discount to its three-year trailing average. Premier’s carrying value of ZAR12.0 billion (HY2017: ZAR13.5 billion) represents 28% of Brait’s total assets (HY2017: 22%). 131 Unaudited results for the six months ended 30 September 2017 Review of operations (continued) Iceland Foods • Iceland continues to grow through both new store openings and positive like-for-like (“LFL”) sales. • Sales (in GBP) for the 24 weeks ended 8 September 2017 increased by 7.3%, with LFL sales 4.3% positive on the comparative period, reflecting an increase in both transactions and average basket values. In addition to this, Iceland benefited from sales generated by the net 17 new stores opened in the current period and the net 21 new stores opened in the previous financial year. • EBITDA growth for the period was 5.2%, driven by the improved sales performance. • Strong product innovation continues, with new ranges for summer 2017 and a comprehensive range of bread, cakes and morning goods launched under Iceland’s own Luxury brand, together with forming a new partnership with Warburtons to become Iceland’s sole supplier of branded bread products. • The “Power of Frozen” marketing campaign continues to maintain its focus on the high quality of Iceland’s food and the award winning Online service, complemented by press advertising and door drops highlighting Iceland’s value for money proposition. • Expansion of The Food Warehouse is on track, with 11 new stores opened in the period and 27 openings in the last 12 months taking The Food Warehouse estate to 47 stores at the period end. These larger stores have continued to perform well, with established stores achieving LFL growth. • The new Iceland format has been extended to 22 stores, with 19 refits completed during the period. These stores extend Iceland’s customer appeal through their bold new modern look, improved in-store navigation and equipment and an extended product range. All are achieving LFL sales growth ahead of Iceland’s average. • Iceland’s Online business which leverages off its established Home Delivery infrastructure, continues to achieve strong LFL growth, with more than 15,000 new registrations a week expanding the existing database of some two million customers. The business has benefited from investments to Iceland’s website and head office team, as well as a growing awareness of the industry-leading levels of customer satisfaction achieved. This has been recognised through a number of awards, including “Online Retailer of the Year” at the IGD Awards in October 2017 and “Online Supermarket of the Year” in the Grocer Gold Awards in June 2017. In July 2017, Iceland opened its second dedicated online picking centre in Manchester, offering online customers in the area a wider range and better service. This releases 17 stores in the area from online picking, allowing them to focus on developing their traditional Home Delivery business for in-store purchases. • The group opened 18 stores during the period, with 1 store closure, resulting in a total estate of 919 stores. The UK store portfolio at the end of the period, including The Food Warehouse stores and two Online Picking centres, stood at 896. • Iceland remains highly cash generative, with cash balances on hand of GBP133.4 million. The reduction from the GBP170.6 million cash holding at the same point last year, reflects the redemption on 26 June 2017 of GBP50 million Floating Rates Notes (“FRN’s”) due in 2020. • After the period end, Iceland completed a refinancing of the majority of the FRN’s and all the Senior Secured Notes (“SSN”) due in 2021, by raising a new SSN of GBP550 million due 2025. The GBP170 million SSN due in 2024 remains in place. This refinance generates an annual interest saving of approximately GBP5.7 million and, assuming the remaining GBP79.5 million FRN’s are repaid through internally generated cash, results in no refinancing requirement for Iceland until at least 2023. 132 Unaudited results for the six months ended 30 September 2017 Review of operations (continued) • Net debt, including finance leases, at reporting date of GBP687.4 million, has reduced to a net leverage ratio of 4.2x (HY2017: 4.6x), based on the last twelve months EBITDA. • Iceland Foods, which since April 2017 is 60.1% owned by Brait (HY2017: 57.1%), is valued at reporting date using an EV/EBITDA multiple of 9.0x (HY2017: 9.4x), which represents a discount of 21% to the peer group’s average three year trailing multiple of 11.4x and a 20% discount to the peer group’s average spot multiple. Applying the closing GBP/ZAR exchange rate of ZAR18.16, Iceland Foods’ carrying value of ZAR8.5 billion (HY2017: ZAR7.7 billion) represents 20% of Brait’s total assets (HY2017: 12%). • The Iceland Foods HY2018 debt investor presentation is available at www.brait.com. New Look • The 26 week period ending 23 September 2017, reflects a disappointing performance, suffering from a combination of challenging market conditions and a number of self-inflicted issues. Group revenue (in GBP) decreased by 4.5% on the comparative period, with group LFL sales declining by 8.6%. UK LFL sales decreased by 8.4%. Third Party E-commerce sales increased by 17.0%, whilst Own Website Ecommerce declined by 7.6%. • In response to this underperformance, changes to the New Look leadership have been made. As announced on 1 September 2017, Anders Kristiansen stepped down from his role as CEO by mutual agreement. On 6 November 2017 Alistair McGeorge was appointed as Executive Chairman of New Look. Alistair has significant industry experience and the requisite expertise having previously led New Look’s turn-round and recovery in 2011-2014. Furthermore, Tom Singh, New Look’s Founder, has taken a more active product role, working alongside Roger Wightman, the reinstated Chief Product Officer. • Some of the key reasons for New Look’s underperformance include: (i) its product positioning had moved away from its successful broad appeal, becoming too young and edgy; (ii) its customer messaging had become overly fashionable and in the process, no longer highlighting New Look’s value proposition; (iii) excessive product options and increased complexity throughout the organization resulted in the business being late to certain trends and as a result not clearing ranges by season end; and (iv) reduced flexibility and speed as well as an increased cost base. • The following corrective measures are being taken: (i) a progressive return to broad appeal product at a great price, reconnecting New Look with its heartland customer and restoring its market position in keeping with its strong brand; (ii) strict focus and action already being implemented to reduce the cost base and preserve an adequate liquidity profile; (iii) applying a ‘back to basics’ mentality and clarifying store layout and messaging; (iv) optimizing the E-commerce platform; and (v) improving the planning cycle which should enhance speed and flexibility. • New Look has an adequate liquidity profile, with total cash, liquidity and operating facilities available of GBP242.5 million at reporting date. • Until such time as New Look’s turnaround strategy has taken shape, New Look is valued at nil. Brait remains committed to being a long-term shareholder of New Look. • The New Look HY2018 debt investor presentation is available at www.brait.com. 133 Unaudited results for the six months ended 30 September 2017 Review of operations (continued) Other investments • The decrease in carrying value over the twelve month period is largely due to the receipt of ZAR343 million proceeds, comprising mostly dividend income received from Brait’s 81.3% investment in DGB, which continues to be the majority asset in this portfolio. • During September 2017, Brait IV signed a Sale and Purchase agreement to sell its investment in Primedia, with the transaction expected to complete in the last quarter of this calendar year. • At reporting date, the Other Investments portfolio carrying value of ZAR1.8 billion (HY2017: ZAR2.1 billion) comprises 4% of Brait’s total assets (HY2017: 4%). Low cost to AUM ratio Operating expenditure for the six month period reduced to ZAR135 million (HY2017: ZAR228 million). On an annualized basis, using average AUM for the period as the reference basis, operating costs are 0.61% (FY2017: 0.64%) and net after fee income are 0.54% (FY2017: 0.54%), compared to the target of 0.85% or less. Minimal balance sheet cash drag To manage dilution of overall returns, the Group targets minimal cash holdings on balance sheet, whilst maintaining access to large undrawn committed facilities. The Group’s cash and equivalents position at 30 September 2017 of ZAR3.3 billion (FY2017: ZAR3.3 billion) represents 9.7% of NAV (FY2017: 8.3%), which is well within the benchmark maximum of 25% of NAV. Significant cash flow within the underlying assets over any 3 year period Brait’s portfolio of investments are highly cash flow generative with high earnings-to-cash conversion ratios. Predictable and consistent ordinary dividend to NAV yield The Group’s policy is an ordinary bonus share issue or cash dividend alternative election, of 1% to 2.5% of closing NAV, considered annually when the results for each year are published, taking into account the Group’s available resources. During the current six month period, a bonus share issue, with a cash dividend alternative, of 1% of ZAR78.15 per share, relating to the year ended 31 March 2017, was paid in August 2017 (“FY2017 Dividend”). In terms of shareholder elections, 26% elected to receive bonus shares, 43% elected to reinvest their cash dividend of ZAR169 million and subscribe for new shares; with the remaining 31% electing to receive their cash dividend of ZAR121 million. ORDINARY SHARE CAPITAL As a result of the shareholder elections for the FY2017 Dividend, during August 2017 the Company issued 1,665,192 bonus shares (August 2016: 387,339 bonus shares issued), as well as 2,921,849 new shares issued to shareholders that elected to reinvest their cash dividend. This resulted in total issued ordinary share capital at 30 September 2017 of 525,599,215 shares of EUR0.22 each (FY2017: 521,012,174 shares). The Group held 17,475,070 treasury shares at 30 September 2017 (FY2017: 14,576,784 treasury shares held), resulting in ordinary share capital, net of treasury shares, of 508,124,145. 134 Unaudited results for the six months ended 30 September 2017 Review of operations (continued) CONVERTIBLE BOND Brait’s GBP350 million unsubordinated, unsecured convertible bonds are listed on the Open Market (Freiverkehr) segment of the Frankfurt Stock Exchange (“Bonds”). The Bonds have a five year term ending 18 September 2020 and carry a fixed coupon of 2.75% per annum payable semi-annually in arrears. In accordance with the terms and conditions of the Bonds, Brait’s bonus share and cash dividend alternatives issued / paid during the Bonds’ term result in adjustment to the Bonds’ conversion price, which at reporting date is GBP7.7613. Using this latest adjusted conversion price, the Bonds’ will convert into 45.096 million ordinary shares (8.6% of Brait’s current issued share capital) on exercise of bondholder conversion rights. In the event that the bondholders have not exercised these rights, the Bonds are cash settled at par value on maturity date. In accordance with IAS 32 (Financial Instruments: Presentation), the Bonds’ liability component is measured at reporting date as GBP323.9 million. Applying the closing GBP/ZAR exchange rate of ZAR18.16, results in the Bonds’ translated carrying value of ZAR5.9 billion. GROUP FUNDING POSITION The Group’s committed revolving ZAR8.5 billion facility from First Rand Bank Limited (trading through its Rand Merchant Bank division) and The Standard Bank of South Africa Limited is Rand denominated, bears interest at JIBAR plus 3.0% and is repayable quarterly, with the right to rollup capital and interest repayments. This facility expires in December 2020 and is secured by Group assets. At 30 September 2017, the Group has available undrawn gearing facilities of ZAR3.3 billion, resulting in total cash and available facilities of ZAR6.6 billion. GROUP OUTLOOK • Virgin Active remains focused on delivering an outstanding member experience through continued innovation and investment. A streamlined, more cash generative UK estate, positive momentum in Italy and a strong pipeline in Asia Pacific provides good momentum and medium term growth opportunities in these territories. In South Africa, the challenging consumer market looks set to continue, consequently Virgin Active is moderating the roll-out pipeline, focusing future growth at lower price points, as well as trialling different membership options. • The extreme maize commodity price volatility significantly impacted Premier’s milling business over the period January 2017 to July 2017. Having cleared through the expensive 2016 season maize, performance normalised during the second quarter of FY2018. With sales volumes increasing as the market restocks, the milling business expects to outperform the comparable period for the second half of FY2018. Premier continues to execute on its strategy of brand building, producing consistent quality offerings and product innovation, as well as operational efficiencies, with its core brands well positioned to compete in their respective markets. • Iceland’s growth remains ahead of the market into its third quarter due to new stores, however LFL growth has softened due to tougher comparatives and increased value messaging by its competitors. The 50th Food Warehouse store opened in September 2017 and 34 new format Iceland store refits have now been completed and continue to perform well. The recent refinancing gives a strong platform from which to pursue Iceland’s well-established long-term strategy for growth and deleveraging with the benefit of lower borrowing costs. 135 Unaudited results for the six months ended 30 September 2017 Review of operations (continued) • New Look’s H2 FY2018 will remain difficult and thus the immediate focus is on short term stabilisation together with a strict focus on costs to preserve an adequate liquidity profile. The necessary changes have been made in senior management. New Look is a proven brand with a clear market position and thus when looking beyond FY2018, the ‘back to basics’ mentality and progressive return to broad appeal, with a heightened focus on an improved planning cycle combined with speed appropriate for today’s market, will serve to reconnect New Look with its heartland customer. The business has the appropriate liquidity and operating facilities in place to implement its plans and thereby provide time to recover. Brait continues to explore new pools of capital to enhance its capital structure and ensure that it is well placed to execute on opportunities. Driving value in the existing portfolio remains the key focus for the year ahead. For and on behalf of the Board PJ Moleketi Non-Executive Chairman 15 November 2017 Directors (all non-executive) PJ Moleketi (Chairman)*, JC Botts^, AS Jacobs##, Dr LL Porter##, CS Seabrooke*, HRW Troskie**, Dr CH Wiese* ##British ^American **Dutch *South African Brait’s primary listing is on the Euro MTF market of the Luxembourg Stock Exchange and its secondary listing is on the Johannesburg Stock Exchange. Sponsor RAND MERCHANT BANK (A division of FirstRand Bank Limited) 136 Unaudited results for the six months ended 30 September 2017 Administration and contact details BRAIT SE LUXEMBOURG REGISTRAR AND SUBSIDIARY OFFICE Registration No: SE1 TRANSFER AGENT Brait Mauritius Limited Maitland Luxembourg SA Suite 520, 5th Floor, Barkly Wharf ISSUER NAME AND CODE 58, rue Charles Martel Le Caudan Waterfront, Port Louis Issuer long name – BRAIT SE L-2134 Luxembourg Mauritius Issuer code – BRAIT Tel: +352 402 5051 Tel: +230 213 6909 Share code: BAT – ISIN: LU0011857645 Fax: +352 402 505 66 Fax: +230 213 6913 Bond code: WKN: A1Z6XC ISIN: XS1292954812 SOUTH AFRICAN TRANSFER CORPORATE ADVISORS COMPANY SECRETARY AND SECRETARIES Brait South Africa Pty Ltd Computershare Investor Services Pty Ltd Office level 7, Rosebank Towers REGISTERED OFFICE 15 Biermann Avenue, Rosebank Anjelica Camilleri de Marco Rosebank Towers, 15 Biermann Avenue Rosebank, Johannesburg, 2196, South Africa Johannesburg, 2196 4th Floor, Avantech Building South Africa St. Julian’s Road, San Gwann Tel: +27 11 370 5000 Fax: +27 11 668 5200 Tel: +27 11 507 1000 SGN 2805, Malta Fax: +27 11 507 1001 Tel: +356 2248 6203 Fax: +356 2144 6330 JSE SPONSOR Brait Advisory Services UK Limited Rand Merchant Bank 3rd Floor, 55 Blandford Street, (A division of FirstRand Bank Limited) London W1U 7HW COUNSEL 1 Merchant Place M Partners S.à r.l Corner Fredman Drive and Rivonia Road INVESTOR RELATIONS (a Member of Maitland Legal) Sandton, 2196, South Africa 56, rue Charles Martel www.brait.com L-2134 Luxembourg Email: [email protected] INDEPENDENT AUDITORS Tel: +27 11 507 1000 Tel: +352 263 868 Deloitte Audit Limited Fax: +352 263 868 66 Deloitte Place, Mriehel Bypass Mriehel, BKR3000, Malta