Brait likely to take a hit from coronavirus


Brait likely to take a hit from coronavirus

Published Date: 2020-03-25 | Source: Stephen Gunnion | Author: Stephen Gunnion

Brait likely to take a hit from coronavirus

The investment group says companies in its portfolio will be affected differently by the pandemic, with most of its Virgin Active gyms closing.

Brait says the Covid-19 pandemic will have a short-term impact on the profitability of the underlying businesses that it's invested in. However, the investment holding company says the effect will be felt very differently across its diverse portfolio.

The group owns the Virgin Active chain of gyms, food producer Premier, UK supermarket chain Iceland Foods, and UK fashion chain New Look. It is in the process of selling its stake in Douglas Green Bellingham (DGB). It said the portfolio companies had all implemented plans to mitigate the impact of the coronavirus, where possible, with a focus on reducing costs, preserving cash and maximising liquidity. However, the outbreak of the virus had resulted in sharp declines in the valuation of peer groups, which would affect the carrying values of its portfolio companies.

Virgin Active had closed its gyms in Italy, the UK, Australia and Thailand, with its SA gyms shutting from today as part of the government's initiatives to limit the spread of the virus. Its clubs in Singapore remained open, operating in strict accordance with government directives. Due to measures taken since early last month, operating cost cash outflows would reduce by two thirds while the clubs were closed.

Premier had a strong performance during the second half of its current year to end-March, benefitting from an improved performance in Mozambique and volume recovery at its Cape Town bakery following a four-month strike the previous year. It said the business was currently trading well and was well capitalised.

In the UK, Iceland continued to grow sales ahead of the UK grocery market last year as it opened more stores. Since the outbreak of the virus, it said the food retail sector in the UK had experienced strong sales as customers stocked up on groceries, including frozen food. Management had continued to assess the potential impact of the coronavirus and to date had managed to ensure continuity of its supply chain.

In line with other retailers of non-essential goods in the UK, New Look closed its stores last weekend, with trading continuing through its online and third-party e-commerce business. It said the womenswear chain delivered an improved third-quarter performance under tough market conditions. The government's announcements of relief from business rates and taxes and subsidies for salaries of affected staff while its stores were closed would provide support to the company, it said.

The group has just emerged from a rights issue as part of a restructuring, which brought private equity group Ethos on board as a big shareholder and investment advisor. A new board of directors will be proposed at its annual general meeting in Malta before the end of August. It also plans to transfer its registered office from Malta to Mauritius, where its main investment subsidiary is domiciled, in order to reduce costs. It said the proposed move wouldn't affect any of its listings.

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