Brait : audited results for the year ended 31 March 2019 – Market Announcement

Brait SE
(Registered in Malta as a European	Company)
(Registration No. SE1)
Share code: BAT ISIN: LU0011857645
Bond code: WKN: A1Z6XC ISIN: XS1292954812
LEI: 549300VB8GBX4UO7WG59
("Brait", the "Company" or "Group")
AUDITED RESULTS ANNOUNCEMENT
for the year ended 31	March 2019
Summary consolidated statement	of financial position as at 31 March
Restated	Restated						Restated	Restated
Audited	Audited	Audited			Audited	Audited	Audited
31 March	31 March	31 March			31 March	31 March	31 March
2017	2018		2019			2019	2018	2017
R'm	R'm		R'm		Notes	EUR'm	EUR'm	EUR'm
				ASSETS
44 408	36 497	31	444	Non-current assets		1 934	2 501	3 100
44 408	36 497	31	444	Investments	3	1 934	2 501	3 100
3 289	2 932	1	158	Current assets		71	201	230
5	25		324	Accounts receivable	4	20	2	-
3 284	2 907		834	Cash and cash equivalents	5	51	199	230
47 697	39 429	32	602	Total assets		2 005	2 702	3 330
				EQUITY AND LIABILITIES
39 580	28 384	19	708	Ordinary shareholders equity and reserves		1 213	1 945	2 763
8 065	10 813	12	870	Non-current liabilities		791	741	563
5 396	5 443	6	359	Convertible Bonds	7	391	373	377
2 669	4 719	6	511	Borrowings	8	400	323	186
-	651		-	Financial guarantee	9	-	45	-
52	232		24	Current liabilities		1	16	4
52	232		24	Accounts payables and other liabilities		1	16	4
47 697	39 429	32	602	Total equity and liabilities		2 005	2 702	3 330
521.0	525.6	525.6	Ordinary shares in issue (m)		525.6	525.6	521.0
(14.6)	(17.5)	(54.1)	Treasury shares (m)	6	(54.1)	(17.5)	(14.6)
506.4	508.1	471.5	Outstanding shares for NAV calculation (m)		471.5	508.1	506.4
7 815	5 586	4	180	Net asset value per share (cents)		257	383	546
Summary consolidated statement	of comprehensive income for the year ended 31 March
Restated								Restated
Audited	Audited						Audited	Audited
31 March	31 March						31 March	31 March
2018	2019						2019	2018
R'm	R'm					Notes	EUR'm	EUR'm
(9 192)	(10 813)	Investment losses			(679)	(605)
287	377	Interest	income			24	19
149	162	Dividend	income			10	10
35	74	Fee income				5	2
(219)	599	Foreign exchange gains/(losses)			38	(14)
(281)	(278)	Operating expenses			(18)	(18)
(651)	(523)	Other expenses		9	(33)	(45)
(710)	(838)	Finance costs				(53)	(47)
(28)	(26)	Taxation					(2)	(2)
(10 610)	(11 266)	Loss for	the	year			(708)	(700)
		Other comprehensive profit/(loss)
(297)	3 502	Translation adjustments			33	(99)
(10 907)	(7 764)	Comprehensive loss for the year			(675)	(799)
(2 092)	(2 219)	Loss and	Headline loss per share (cents) - basic		10	(139)	(138)
Summary consolidated statement	of changes in equity for the year ended 31 March
Restated								Restated
Audited	Audited						Audited	Audited

31 March	31 March			31 March	31 March
2018	2019			2019	2018
	R'm	R'm		Note	EUR'm	EUR'm
37	802	27 125	Ordinary shareholders balance at beginning of year		1 859	2 639
1	778	1 259	Restatement impact	2.1	86	124
39	580	28 384	Restated Ordinary shareholders balance at beginning of year		1 945	2 763
(10 610)	(11 266)	Loss for the year		(708)	(700)
(297)	3 502	Net translation adjustment		33	(99)
(168)	(912)	Purchase of treasury shares		(57)	(11)
(290)	-	Ordinary dividend paid (cash election)		-	(19)
	169	-	Cash dividend reinvestment		-	11
28	384	19 708	Ordinary shareholders balance at end of year		1 213	1 945
Summary consolidated statement of cash flows for the year ended 31 March
Restated					Restated
Audited	Audited			Audited	Audited
31 March	31 March			31 March	31 March
2018	2019			2019	2018
	R'm	R'm		Notes	EUR'm	EUR'm
			Cash flows from operating activities:
	123	409	Investment proceeds received		26	8
	20	17	Fees received		1	1
	446	404	Interest received		25	29
(303)	(275)	Expenses paid		(17)	(20)
(37)	(19)	Taxation paid		(1)	(2)
	249	536	Operating cash flow before investments		34	16
(1 734)	(1 658)	Purchase of investments		(104)	(110)
	-	(1 420)	Gross amount advanced: Debtor Purchase Agreement	4	(89)	-
	-	1 187	Gross amount received: Debtor Purchase Agreement	4	75	-
(1 485)	(1 355)	Net cash used from operating activities		(84)	(94)
1	971	1 945	Net drawdown of Borrowings	8	122	120
1	438	-	Drawdown of third party borrowings		-	90
(1	461)	-	Refinance of third party borrowings		-	(86)
	-	(1 174)	Settlement of financial guarantee	9	(74)	-
(293)	(647)	Interest paid	8	(41)	(20)
	(42)	(17)	Facility fees paid		(1)	(3)
(166)	(176)	Convertible bond coupon paid		(11)	(11)
(168)	(912)	Net purchase of treasury shares		(57)	(11)
(290)	-	Cash dividend paid		-	(19)
	169	-	Cash dividend reinvestment		-	11
1 158	(981)	Net cash (used in)/generated from financing activities		(62)	71
(327)	(2 336)	Net decrease in cash and cash equivalents		(146)	(23)
	(50)	263	Effects of exchange rate changes on cash and cash equivalents		(2)	(8)
3 284	2 907	Cash and cash equivalents at beginning of year		199	230
2 907	834	Cash and cash equivalents at end of year		51	199

Notes to the summary consolidated financial statements for the year ended 31 March

1. ACCOUNTING POLICIES

1.1 Basis for preparation

The Consolidated and Company financial statements (Financial Statements) 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 the framework concepts, measurement and recognition requirements of IFRS and as a minimum contain the information required by IAS 34 Interim Financial Reporting. Except as detailed in note 2 below, the accounting policies and methods of computation are consistent with those applied in the consolidated financial statements for the year ended 31 March 2018. The Group has only one operating segment being that of an investment holding company. All segment information can be obtained through inspection of the consolidated financial statements.

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:

	2019		2018
	Closing	Average	Closing	Average
USD/ZAR	14.4978	13.7630	11.8408	12.9902
GBP/ZAR	18.8946	18.0440	16.5965	17.2166
EUR/ZAR	16.2620	15.9166	14.5952	15.1903
USD/EUR	0.8915	0.8647	0.8112	0.8552
GBP/EUR	1.1619	1.1337	1.1371	1.1334

2. RESTATEMENT

In the financial years 2011-2017 Brait accounted for the financial guarantee given by it for Fleet (the Investment Team's vehicle to facilitate the holding of shares in Brait) under IAS37 (Provisions, Contingent Liabilities and Contingent Assets) as required by IAS39 (Financial Instruments: Recognition and Measurement). In the full year financials for 2018, and following extensive discussions with the auditors, the decision was made to change the basis

of accounting to consolidate Fleet in accordance with IFRS10 (Consolidated Financial Statements) and the comparative figures for 2017 and 2018 were restated accordingly.

During the current financial period, this basis of accounting has been rigorously reassessed by the Audit Committee and the auditors. It has been concluded that variations in the size of the net exposure under the guarantee do not provide Brait with any incremental rights over the relevant activities of Fleet or any decision-making power over Fleet or any ability to influence the variable returns of Fleet in the periods prior to the due date of the loans guaranteed by Brait. This has been the case since the inception date of July 2011. The assessment of the facts and the conclusion

reached have also been confirmed by a written opinion from Senior Counsel. As such, the Directors are of the view that, in accordance with IFRS 10 paragraph B85, their initial assessment of Brait's control of Fleet has not changed simply because of a change in the net exposure.

Accordingly, Brait has restated its comparative figures to account for its net exposure, representing the amount payable if the loans were settled at that time, as a financial guarantee as defined in IAS39 and in accordance with IAS37. The Directors believe that this is a more accurate reflection of the commercial and legal reality of the arrangements with Fleet. As announced on 27 March 2019, following constructive discussions initiated by Fleet, the loan amount owing by Fleet to the Lenders was settled in full as a result of Brait Mauritius Limited ("BML") using the ring-fenced portion

of its borrowing facility to (i) acquire the pledged Brait shares held as collateral; and (ii) subsequently settle Fleet's loan amount. As a result, Brait no longer has any exposure in terms of the indemnity provided.

2.1 Restatement impact on Group statement of financial position

Brait's net exposure in terms of its financial guarantee to Fleet is recognized as a liability in the comparative periods. The net exposure takes into account the loan amount owing by Fleet to the Lenders at each reporting date, reduced by the pledged Brait shares held as collateral for this loan, which are valued at the closing share price. The number of pledged Brait shares recognized as collateral is limited to the extent of the loan amount owing by respective individual Investment Team Borrowers, calculated using the closing share price at each reporting date.

Previously	Restatement					Restatement	Previously
reported	Adjustment	Restated		Restated	Adjustment	reported
R'm	R'm		R'm	2017	EUR'm	EUR'm	EUR'm
4 426	961	5	387	Share capital and premium	565	100	465
(4 828)	-	(4 828)	Foreign currency translation reserve	(782)	(34)	(748)
864	-		864	Convertible Bond reserve	57	-	57
37 340	817	38	157	Retained earnings	2 923	58	2 865
37 802	1 778	39	580	Ordinary shareholders equity and reserves (NAV)	2 763	124	2 639
1 778	(1 778)		-	Other liability	-	(124)	124
34.0	(19.4)		14.6	No. of treasury shares (m)	14.6	(19.4)	34.0
7 763	52	7	815	Net Asset Value per share (cents)	546	4	542
				2018
4 482	906	5	388	Share capital and premium	565	95	470
(5 125)	-	(5 125)	Foreign currency translation reserve	(881)	(34)	(847)
864	-		864	Convertible Bond reserve	57	-	57
26 904	353	27	257	Retained earnings	2 204	25	2 179
27 125	1 259	28	384	Ordinary shareholders equity and reserves (NAV)	1 945	86	1 859
(1 910)	1 910		-	Other liability	-	131	(131)
-	(651)	(651)	Financial guarantee	(45)	(45)	-
52.4	(34.9)		17.5	No. of treasury shares (m)	17.5	(34.9)	52.4
5 732	(146)	5	586	Net Asset Value per share (cents)	383	(10)	393

2.2 Restatement impact on Group statement of comprehensive income

As a result of recognizing the net exposure in terms of the financial guarantee to Fleet as a liability, the change in exposure during the period is recognized as "Other expense/income".

Previously	Restatement				Restatement	Previously
reported	Adjustment	Restated		Restated	Adjustment	reported
R'm	R'm	R'm	2018	EUR'm	EUR'm	EUR'm
(897)	187	(710)	Finance costs	(47)	12	(59)
-	(651)	(651)	Other expenses	(45)	(45)	-
(9 249)	-	(9 249)	Other unchanged income/expense items	(608)	-	(608)
(10 146)	(464)	(10 610)	Loss for the year	(700)	(33)	(667)
(297)	-	(297)	Translation adjustments	(99)	-	(99)
(10 443)	(464)	(10 907)	Comprehensive loss for the year	(799)	(33)	(766)
			Earnings/Headline earnings per share - basic
(2 144)	52	(2 092)	(cents)	(138)	3	(141)

2.3 Restatement impact on Group statement of cash flows

Under the previous consolidation basis, repayments made by Fleet or the Investment Team Borrowers on	their respective outstanding loan
amounts gave rise to cash flows	to Brait. As a result of recognizing the net exposure in terms of the financial guarantee to Fleet as a liability, Brait's
cash flow statement now only reflects	a cash outflow during the	current financial period as a result	of the settlement of the loans outstanding.
Previously	Restatement						Restatement	Previously
reported	Adjustment	Restated			Restated	Adjustment	reported
R'm	R'm		R'm	2018		EUR'm	EUR'm	EUR'm
(113)	(55)	(168)	Net purchase of Treasury shares	(11)	(5)	(6)
(348)	55	(293)	Interest paid		(20)	3	(23)
134	-		134	Other unchanged cash flow	items	8	-	8
(327)	-	(327)	Net decrease in cash and cash equivalents	(23)	(2)	(21)
(50)	-		(50)	Effects of exchange rates	on cash	(8)	2	(10)
3 284	-	3	284	Cash and cash equivalents	at beginning of year	230	-	230
2 907	-	2	907	Cash and cash equivalents	at end of year	199	-	199

3. INVESTMENTS

The Group designates the majority of its financial asset investments as 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 IFRS 13.

Statement of financial position items carried at fair value include investments in equity, debt 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; and price to book multiple. Listed investments are held at recent quoted transaction prices.

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 EBITDA 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.

No control premium adjustment is considered for those portfolio investments in which the Group holds a majority interest. 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 31 March 2019 investor presentation on the Group's website, www.brait.com.

	2018	2019		2019		2018
	R'm	R'm		EUR'm	EUR'm
36	497	31 444	The Group's portfolio of investments	1 934	2	501
			Equity and shareholder funding investments
17	067	17 363	Virgin Active	1 068	1	169
10	735	8 803	Premier	541		736
6	287	3 176	Iceland Foods	196		431
	960	1 146	New Look	70		66
1	448	956	Other investments	59		99

Valuation metrics		31 March 2019			31 March 2018
	Maintainable		3rd Party	Maintainable		3rd Party
	EBITDA	Multiple	Net Debt	EBITDA	Multiple	Net Debt
Virgin Active (GBP'm)	138	11.0x	353	144	11.4x	331

Premier	(R'm)	1 009	11.0x	2 053	1 065	12.4x	1 938
Iceland	Foods (GBP'm)	140	7.0x	714	157	8.4x	689
New Look (GBP'm)		Note 1			Note 1
Other investments		Varied			Varied

Note 1 Brait's equity and shareholder loan investments in New Look are valued at nil based on the Enterprise Value at the reporting dates shown. Senior Secured Notes ("SSNs") are valued at the reporting date using the post balance sheet restructuring conversion ratio price of 0.234561 (determined at the restructure transaction's voting record time (5:00 pm UK time on 18 April 2019) representing the existing SSNs of GBP1,066 million to be exchanged into GBP250 million new SSNs) applied to the nominal value of Brait's 18.2% holding of existing SSNs.

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 or Level 2 in the current period or Level 2 in the prior period.

All Level 3 investments have been valued using a maintainable earnings multiple model.

Level 3					Level 3
R'm	31 March 2019			EUR'm
17 363	Virgin Active			1 068
5 776	Premier				355
3 176	Iceland Foods			196
856	New Look				52
956	Other investments		59
28 127	Investments at fair value		1 730
2018	2019			2019	2018
R'm	R'm			EUR'm	EUR'm
25	324	4.	ACCOUNTS RECEIVABLE	20	2
			Included in accounts receivable is the outstanding balance of GBP13.2 million
			(R250 million) for the Debtor Purchase Agreement with New Look (refer to note
			11 and note 13). This represents the net GBP12.9 million (R233 million) advanced
			together with GBP0.3 million (R7.0 million) factoring charge earned. Also included
			is the accrual of fees earned on the New Look restructure of GBP3.1 million
			(R58.6 million).
		5.	CASH AND CASH EQUIVALENTS
			Balances with banks (1)
2 907	834			51	199
155	74		- ZAR cash	5	11
104	9		- USD cash	1	7
2 648	751		- GBP cash	45	181
			(1) All balances are held with banks with credit ratings of at least BB+.
Restated					Restated
2018	2019			2019	2018
		6.	TREASURY SHARES
14 576 784	17 475 070		Opening shares held for the vested benefit of the Group	17 475 070	14 576 784
2 898 286	36 616 189		Net shares purchased	36 616 189	2 898 286
17 475 070	54 091 259		Closing shares held for the vested benefit of the Group	54 091 259	17 475 070
2018	2019			2019	2018
R'm	R'm			EUR'm	EUR'm
		7.	CONVERTIBLE BONDS
5 443	6 359		On 18 September 2015 Brait received GBP350 million from the issuance of its five	391	373
			year unsubordinated, unsecured convertible bonds ("Bonds"). The Bonds listed

on the Open Market (Freiverkehr) segment of the Frankfurt Stock Exchange on 15 October 2015 and carry a fixed coupon of 2.75% per annum payable