EPE presents gloomy outlook


EPE presents gloomy outlook

Published Date: 2020-09-29 | Source: Stephen Gunnion | Author: Stephen Gunnion

EPE presents gloomy outlook

The private equity investor took a stake in Brait just before Covid-19 resulted in the closure of gyms and non-essential retailers.

EPE Capital Partners (Ethos Capital) says after a steady start to the year, its second-half performance was significantly impacted by the Covid-19 pandemic. Government-imposed lockdowns curtailed consumer spend, significantly reduced production capacity and output, and resulted in a large global contraction in GDP.

Ethos Capital invests into funds or co-investments that are managed by Ethos Private Equity. With 18 out of the 22 portfolio companies closed during the lockdown, the short-term profitability of its portfolio of unlisted companies was severely impacted and the peer group multiples on which their valuations are based declined significantly.

During the second half of the year, it also bought a 9.8% stake in investment group Brait for R1.03 billion, funded by a R750 million rights issue and a R700 million loan facility. That increased its exposure to consumers due to Brait's holdings in Virgin Active, UK womenswear retailer New Look and local food group Premier. Brait's share price declined by 58% over the latter part of the year while MTN Zakhele Futhi, its other listed investment, fell 23%.

Ethos was appointed as advisor to Brait's board in March, which adopted a strategy of realising value from its existing investments. Since taking over, Brait has sold its interests in UK food retailer Iceland and wine and spirits producer DGB (Douglas Green Bellingham), realising over R3 billion. Apart from the stake in Brait, EPE invested R240 million into existing investments, bringing its invested capital to R2.7 billion.

At the end of June, Ethos Capital's net asset value fell to R1.71 billion from R1.79 billion, while its net asset value per share was R6.65, down 41% from a year earlier. It said the impact of Covid-19 was likely to be felt for some time.

The company's shares rose 7.1% to R3.75 in just two deals yesterday.

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