Plenty worries, discontent

From his perch on the rocks of Clifton Fourth Beach, Christo Wiese, once SA’s richest man, must surely have been contemplating the latest grim news on the Brait front.

According to reports in the UK’s Financial Times last week, the UK arm of Virgin Active has warned of doubts over its ability to continue as a going concern after lockdowns forced the closure of its gyms.

In accounts filed at the UK’s Companies House, Virgin Active said its debt covenants would be breached unless it raised money.

It warned lockdowns and reduced city centre footfall were adding to pressure on the business. It was trying to raise additional funds and expected parent company Brait would come to the rescue.

Virgin Active said it is in discussions with all stakeholders and “with their support we look forward to getting back to
business as usual across all our territories, enabling the business to benefit from global trends towards health and wellness.”

In its end-September interim results, released in November, Brait revealed Virgin Active continued to be its single most valuable investment accounting for 49% or R7.8 billion of total net asset value (NAV) of R16 billion.

NAV was considerably down o the end-March figure of R22.3 billion and about 50% of what it had been 12 months
earlier in September 2019, before most had heard about Covid-19.

In November, Brait told investors the R1.5 billion reduction in Virgin Active’s carrying value since end-March was due
to a variety of factors, including UK and SA lockdowns.

The UK accounts for 23% of Virgin Active’s revenue, Italy 27%, SA 36% and Asia-Pacific 15%.

The latest news will be disappointing for Brait shareholders who had forked out £16 million (about R320 million) seven months ago to tide over the cash-strapped UK business.

It’s probably enough to help ensure the share price doesn’t move far beyond the R2.40 low it reached last August.

Reports of the filing of the “going concern” issue knocked the share price from a recent high of R3.84 back to R3.73.

Hospitality Property Fund

Talking of disappointments, Hospitality Property Fund shareholders won’t have taken much comfort from Tsogo Sun’s decision to extend the closing of its general offer from 15 January to 29 January.

Tsogo’s proposal will see yet another share disappear from the JSE through a process that looks unfair to minority
shareholders.

Spar Group

Meanwhile, Spar Group is set to hand over another €44.1 million (about R785 million) to buy out the remaining 10% of Ireland-based BWG Group it doesn’t already own.

The group’s 2020 annual report provides further details of this final payment for an acquisition initiated in 2014, at a significantly lower overall valuation.

The Irish deal, and two subsequent ones – Switzerland and Poland – have given Spar a major source of non-southern African revenue.

The group’s more cautious approach to international acquisitions has helped it avoid the value and reputation-destroying catastrophes suffered by other ambitious SA companies, but it comes with a heavy debt burden.

This article first appeared on Moneyweb and was republished with permission.

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