Valuation methodology

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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 IFRS 9: Financial Instruments

Component Methodology
Maintainable EBITDA
Mix of prior year audited numbers and forecasts for future periods after adjusting both for non-recurring income/expenditure or abnormal economic conditions if applicable:
 
- If the forecasts are higher than the prior year earnings, as the year progresses the weighting is increased towards the portfolio company’s forecast.
- If the forecasts are lower, the forecasted future earnings will usually be used as the maintainable earnings for valuation purposes.
- For portfolio companies that have been significantly impacted by the Coronavirus pandemic, maintainable earnings are based on a look-through to a medium term post Coronavirus sustainable level.
EV/EBITDA multiple
The Directors decide on an appropriate group of comparable quoted companies from which to base the EV/EBITDA valuation multiple.
Pursuant to Brait’s strategy focused on maximising value through the realisation of its existing portfolio companies over the medium term, the primary reference measure generally considered at reporting date is the average spot multiple of the comparable quoted companies included as peers, which is adjusted for points of difference, where required, to the portfolio company being valued. The three-year trailing average peer multiple at reporting date is also considered. Where maintainable earnings are based on a post Coronavirus sustainable level, peer average forward multiples for the corresponding forward period are used as the reference measure. No control premium or minority discount adjustments are considered.
Peer multiples are calculated based on the latest available financial information which may be adjusted based on subsequent macro or company specific information publicly known if appropriate:
 
- Adjustments for points of difference are assessed by reference to the two key variables of risk and earnings growth prospects and include the nature of operations, type of market exposure, competitive position, quality of management, capital structure and differences between the liquidity of the shares being valued and those on a quoted exchange.
Brait’s interim and final results presentations provide transparent disclosure of the listed peer group construct, enabling 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 expected losses or provisioning required, and for the timing of capex expenditure relative to its commissioning if appropriate.
Equity Value
EV less net debt results in the portfolio company’s Equity Value, to which Brait’s effective economic interest is applied.
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.