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| SEGMENTAL REVIEW |
| PRIVATE EQUITY (CONTINUED) |
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| Brait Private Equity |
| Brait Private Equity will continue to execute the investment
fundamentals which have enabled it to build an outstanding 15-year
track record. These include an experienced, cohesive team; support
from senior industrialists; strong, self-originated dealflow; a large,
active pool of capital from a diversified investor base; a diversified
portfolio of assets; and a coherent empowerment strategy. In addition,
South Africa is experiencing a growing, stable macro-environment and
an efficient diverse exit environment – factors which were not always
present during the building of Brait's track record and which should
enhance returns further. |
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| Brait believes that successful private equity managers require a healthy mix of the following: |
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Brait position |
Reflected in ... |
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| 1. |
Solid sustainable track record |
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Invested in over 80 companies over the past 14 years which, on an aggregate basis, yielded in excess of 30% IRR |
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Diversified investor base |
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Brait has managed money for both international (60%) and SA (40%) investors over the past 10 years – 25 key investors |
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Coherent empowerment strategy |
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Brait has executed a successful four-pronged strategy at various levels:
1) equity ownership
2) employment equity
3) franchise development
4) investee profiles |
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Experienced, cohesive team |
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14 investment professionals;leadership group has worked as a team for 8 – 10 years |
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Engaged senior industry advisors |
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Active involvement with five industrialists |
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Strong originated dealflow |
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Over 90% of transactions have been originated on an exclusive basis |
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Diversified portfolio |
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Across all sectors (except typical exclusions, eg:tobacco, gambling, etc) |
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Large, active pool of capital |
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SA’s largest and independent player – ZAR1 billion committed funds to date |
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Brait III is SA’s largest Private Equity fund to date |
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Efficient, growing macro environment |
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Macro fundamentals are healthy |
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Regulatory procedures are strong |
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Efficient, diverse exit environment |
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IPO’s;trade sales (domestic and international);leverage recaps |
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| Brait IV will continue to focus on the same types of deals as Brait's
prior private equity funds. These are: |
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Entrepreneur Partnering, in which capital is provided in support
of established entrepreneurs in profitable businesses that are
positioned to take advantage of organic growth and acquisition
opportunities, including platforms for build-up strategies. |
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Buyouts of private and stock exchange-listed companies, where
Brait believes it has the opportunity to accelerate growth alongside
strong management teams. |
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Unique Public Opportunities, where Brait's skills and network
can be used to take advantage of undervalued strategic
opportunities, to purchase public shares, enabling Brait to effect
change through the board of directors and execute a private equity
strategy whilst the investee company remains public. |
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| All three transaction types feature the following primary components: |
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Entry |
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Identify an opportunity that has the ability to significantly
enhance EBITDA growth and strategic appeal |
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Thorough due diligence executed by Brait |
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Develop the value-build plan with management |
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Development stage |
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Help execute the value-build plan; focus on areas where value
can be added; requires flexible approach |
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Partnership approach versus head office approach requiring
frequent interaction |
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Exit |
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Maximise exit opportunity through timing and methodology |
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Trade sale, IPO, re-leverage the business |
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| Financial results and commentary |
Private equity earnings for the financial year have once again produced
a solid performance. Profit from operations improved by 1% from
US$38, 8 million to US$39, 1 million.
Revenue and other income in aggregate have increased by 8% from
US$52, 6 million to
US$56, 9 million driven primarily by value recognition in Brait
III and further growth in proprietary investing income. Revenue
and other income from Private Equity investing is by nature
volatile and dependent on opportunistic timing and market conditions.
Revenue includes management fees, dividend distributions and
interest income from investing activities. Other income typically
incorporates realised and unrealised fair value based uplifts.
Approximately 68% of total private equity income in the period
is attributable to unrealised gains on investments.
Costs have increased disproportionately by 29% from US$13, 8 million
to US$17, 8 million primarily due to non-recurring charges on raising
and administering Brait IV. The largest components of the expense line
are staff costs, supporting systems and infrastructure.
Return on equity in private equity was 40, 8% on average capital
employed of US$95, 8 million. |
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