Brait PLC (BAT) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to Brait's financial year audited results for the year ended March 31, 2022. [Operator Instructions] Please note that this conference is being recorded. I'd now like to hand the conference over to Mr. Peter Hayward-Butt. Please go ahead, sir.

Thanks very much, Judith. And thanks very much to our shareholders and other stakeholders who have taken the time to join us today. We've got quite a few slides to get through. You'll note, they're all up on the Brait's website. So I probably won't give enough -- go through each side. I will try and get through most of them within an hour and leave ourselves in time for Q&A at the end of that. So moving on to the first slide in terms of the year-end review. It's been a very pleasing year, to be honest, in different ways for different portfolio companies. But I think overall, it's been a pleasing year in terms of progress. From a Virgin Active perspective, it was a very significant year for Virgin. I think we look back as to how much has been done over the course of the last 12 months. It was a huge amount. And I think it's really set a platform for this business to continue to grow. For those of you who would remember, we completed the restructuring plan in May 2021, which resulted in GBP 134 million of liquidity savings for the business. We then did debt refinancings at both Virgin Active South Africa and the VA international business. We raised about GBP 88 million of capital for the business at the beginning of this year, which closed in March, and we appointed new management, not just the CEO of the business, Dean Kowarski, but Mark Field is the CFO and more recently, Jessica Spira, who's joined us as the Virgin Active South Africa MD, so a significant amount of progress in the business. And it's very pleasing to see the positive momentum that we're starting to see across the various territories from a membership perspective. The revised strategy, which we'll talk a bit about later, we'll give you an indication of what our strategy is, where is the market at the moment and where do we see it going and how do we play into that space. In particular, as you'll see when we go through the presentation, the acquisition of the Real Foods nutrition assets, Kauai and Nü will definitely help accelerate the shift from Virgin Active from bringing a pure physical fitness business into the broader wellness space. From a premier perspective, we'll get into numbers later, but a very, very pleasing performance, both as I mentioned, on an absolute basis, EBITDA up 36%, but also on a relative basis relative to the peers in the market. And this has been driven by a broad number of things, to be honest, market share growth across just about every category volume growth. And we managed to pass -- or the company has managed to pass input costs through price increases and very significant cost management, and we're starting to see the benefit of operational leverage come into the business. So we'll touch a bit on that later. Mister Sweet's deal completed in June, which was a positive, and this is added to this year's performance for the last 10 months. And we have completed the IPO readiness. As anyone knows, there's probably a 6- to 9-month lag to list the business. We have now completed that. We are in a position to be able to progress listing should we so choose. It's definitely still on the cards. As you heard some market commentators thinking it may not be. But we're under no pressure to do so, and we will choose the right window to do so. So the company is ready to list, and we will do so when market conditions permit. From a New Look perspective, the operational and financial benefits that have started to come through from the restructuring of the business. As you remember, we went through 2 CVAs over the last 18 months, really have set a solid platform for growth. The business was doing fantastically well up until October last year. Obviously, Omicron in the October to December quarter impacted significantly on this business as to some of the supply chain issues, and we're going try and unpack that later in the presentation. The good news is the business has had a very good start to the year. It's year-end is March. The first couple of months of the year have been very positive. And hopefully, that will remain on track for the rest of the year. We also managed to sell the Consol business for a total valuation of ZAR 10.7 billion. The benefit of that from a Brait perspective was just over ZAR 400 million, and those proceeds were received in May and will be used to repay the existing RCF. From a Brait perspective, we completed the exchangeable bond issuance in December, which removed any liquidity constraints on the business. And as I mentioned when I was talking a bit about Premier, it's given us the flexibility in terms of timing the asset monetization in a basis that will make most sense and add most value to our shareholders. The strategy remains to unlock value for shareholders over the next 3 years. We have a slide at the end of this deck setting that out as our plan A. Clearly, there may be different plans that come between now and then. But what we've set out our basis that we're working towards to realize value for shareholders over the next 3 years. From an NAV perspective, it increased by 6% from ZAR 7.90 to ZAR 8.37, and hopefully, we're now in a position, particularly with respect to Virgin Active to see some growth in that business going forward. I won't touch on the ESG slide. There's lots and lots and lots of things that have happened across the portfolio companies, very positive. I've touched on a couple of them on this slide that you see in front of you. But if you go to the Ethos website, there's a very, very detailed ESG report, and it really does do a lot of credit to these companies and their management teams for the amount of work that they have done to position themselves on the ESG spectrum. Moving on to the NAV and liquidity. I'll let [indiscernible] talk to that in a bit more detail.

Thanks, Peter, and good afternoon, everyone. Starting with Slide 8. Rate orders at NAV per share of ZAR 8.37 represents an increase of 3% for the 6 months period compared to interim September NAV of ZAR 8.14 and a 6% increase for the financial year. Total assets of ZAR 18.7 billion is weighted 49% Premium, 44% Virgin Active, 4% New Look, 2% other investments and 1% cash. Total liabilities of ZAR 7.7 billion comprised, ZAR 3 billion committed boring facility due June 30, 2024 referred to as the BML RCF, which has drawn at reporting debt by ZAR 2.5 billion. The GBP 150 million convertible bonds due December 4, 2024, are valued in terms of IFRS at ZAR 2.7 billion and the ZAR 3 billion exchangeable bonds issued by subsidiary BIH, which are due December 3, 2024 and valued in terms of IFRS at ZAR 2.4 billion. Accounts payable of ZAR 166 million largely comprises of the accrual of coupons on these 2 bond instruments. Resulting NAV is ZAR 11.1 billion, which equates to ZAR 837 per share. To note, there are 2 disclosure changes shown in the audited FY '22 IFRS financial statement, either of which have any impact on the group's key NAV per share reporting metric. The first stems from the fact that Brait is no longer legally required to use the euro as a second presentation currency to the rand, following its redomiciliation from Malta to Mauritius. The second arises from the group's immediate subsidiary company, BIH, have been issued the ZAR 3 billion exchangeable bond in the current year. In terms of IFRS 10, this has led to the change in classification to BIH's investment entity status. As a result, with effect from October 1, 2021, the group is exempted from consolidation with the audited financial statements reflecting the fair value of the investment in BIH as opposed to the look-through consolidation method that applied in the past. We have included a slide in the appendix section of the results booklet, to unpack the effect of this change in the presentation of the audited balance sheet, income statement and cash flow statement. Importantly, it has no impact on the calculation of the group's audited NAV per share. Over to Slide 9, which sets an overview of the NAV movement for the financial year. To note that at the outset that the peer groups for Premier, Virgin Active and New Look remain unchanged. Premier's value at reporting date on a post IFRS 16 basis. The valuation slide on the deck set out for comparative purposes, the metrics on a pre-IFRS 16 basis for the carrying value of ZAR 9.3 billion. Virgin Active and New Look valuation metrics are quoted on a pre-IFRS 16 basis. Premier's carrying value increased by 22% from ZAR 7.6 billion to ZAR 9.3 billion. The main driver of the increase in current value is maintainable EBITDA, which is based on Premier's last 12 months achieved EBITDA of ZAR 1.5 billion. The valuation multiple of 7.6x is a 1% discount to the peer average LTM multiple of 7.7x. Net debt of ZAR 2 billion excludes CapEx of ZAR 370 million, largely spent on the recently commissioned Pretoria mill and bakery. Brait's equity participation in Premier post dilution for management incentive scheme is 96.5%. Virgin Active's carrying value increased 4% from ZAR 8 billion to ZAR 8.3 billion. Maintainable EBITDA is based on a look-through to a 2-year forward post coronavirus sustainable level of GBP 110 million. The unchanged 2-year forward valuation multiple of 9x is a 10% discount to the peer group's average of 10x. Net third party debt of GBP 380 million includes ZAR 27 million normalization adjustment for the estimated effect of working capital and costs deferred during lockdown period. Following Virgin Active's GBP 88 million capital raise that concluded in March this year, rates equity and shareholder funding participation has decreased from 80% to 71%. New Look's carrying value increased by 23% from ZAR 545 million to ZAR 672 million. Maintainable EBITDA is based on a sustainable level of GBP 55 million. The 1-year forward valuation multiple of 5x represented a 25% discount to the peer group's average of 6.7x. Net debt of GBP 79 million includes a ZAR 30 million normalization adjustment for estimated deferred costs. Rate equity participation in New Look is unchanged at 17.4%. Other investments meanwhile, increased by 29% to ZAR 437 million as a result of uplift in Brait's remaining private equity investments, mostly relating to Brait IV's investments in Consol, which is valued at reporting date based on the concluded sale agreement with Ardagh. Turning to Page 10. The ZAR 1 billion decrease in the foreign BML RCF comprises, the ZAR 2.9 billion repayment used in the net proceeds from the issuance of the BIH exchangeable bond in December 2021, which is offset by ZAR 1.7 billion investment in Virgin Active and ZAR 252 million interest accrual at the facility rate of JIBAR plus 4. Slide 11 analyzes Brait's liquidity and debt. In terms of liquidity, the opening cash balance as at April 1, 2021 was ZAR 213 million, Brait then received ZAR 234 million proceeds from the investment portfolio, mostly comprising ZAR 173 million shareholder funding repayments by Premier and the final ZAR 50 million deferred realization proceeds from the sale of TGP in March 2020, which in terms of the agreement were received on the due date of March 31, 2022. Total expenses paid during the year were ZAR 207 million. Purchase of investment of ZAR 1.7 billion all relates to Virgin Active and largely comprises advances of shareholder funding as set out in footnote 1 on the slide. Trade received net proceeds of ZAR 2.934 billion from the issuance of the BIH exchangeable bonds in December 2021, which were used to repay part of the BML RCF. Net cash outflow from financing activities of ZAR 1.4 billion relates to a net ZAR 1.1 billion from the BML RCF during the year, together with 200 million coupons paid on the 2024 convertible bonds and ZAR 135 million interest service on the BML RCF. The resulting group closing cash balance at reporting date is ZAR 83 million. In terms of coring that reporting date, the BML RCF facility limited ZAR 3 billion with a term date of June 30, 2024. The drawn level of ZAR 2.5 billion, resulting in an available facility of ZAR 532 million, which together with group cash of ZAR 83 million gives available liquidity at reporting date of ZAR 615 million. Including the ZAR 402 million proceeds that arise from the sale of Consol, available liquidity post balance sheet date is ZAR 1 billion. Brait is in compliance with all debt covenants on the BML RCF and on the 2024 convertible bond. Thank you, and over to you, Peter.

Thanks, [indiscernible]. And so let's turn to some of the portfolio companies and starting with Premier. As I mentioned, Premier has had a fantastic performance and credit must go to [indiscernible] and the entire team at Premier. It's easy to take credit for it sitting in front of the phone, but those guys have spent a huge amount of time, and this is not over the last 12 months, but probably over the last 3 to 4 years getting this business into shape to reflect the results that they do today. As you can see, revenue for the year, up 16% to ZAR 14.5 billion. Adjusted EBITDA, up 36% year-on-year to ZAR 1.5 billion and equally impressive, a 47% increase in EBIT for the year. So showing the operational leverage in the business. One of the questions I was asked today is what's the basis for that performance? And I do think it's a couple of things. It's the culture in the business that has been focused on cost management and growing the business over the last 3 or 4 years. It's a historic CapEx that's been spent over many, many years, nearly ZAR 5 billion over the last 10 years and a significant chunk of that over the last 3 to 4 years. And then it's obviously M&A. I think, obviously, Mister Sweet played a key role in that of late, but there's been a number of transactions over the last 3 to 4 years, which have all been additive overall to the growth. So a 47% increase in EBIT with a margin of 6.9%, up from 5.5% and an EBITDA margin of 10.3% versus 8.8% at this time last year. As I mentioned, the integration of Mister Sweet has been completed, I would say 80% to 90% of the synergies have been realized already, and that's on track to start delivering that in this financial year. And very pleasingly, we commissioned the first line of the new Pretoria bakery in the second line relatively soon. And we'll touch again on that in a bit more detail later on. But I think it will be a game changer for our inland strategy in the Brait business. Probably most pleasing to me anyway, is the adjusted return on invested capital increasing from 11.5% a year ago to 14.8%, which we think is in excess of our cost of equity for the first time. In terms of the business itself, and I won't dwell too much on the slide. But I think if you had to say in a nutshell, what is Premier about and why is it performing well? It has got a strong and increasing market share across almost all of its categories, which I think is important. So we've spent a huge amount of time talking about MillBake. But I think all categories have performed well over the last probably 2 to 3 years, but certainly over the last 12 months. It's got a national footprint of integrated milling and baking operations. And the important point there being integrated, having them on the same site results in massive operational efficiencies and enables you to get the operational efficiencies and margins that we've seen come through over the last 12 to 18 months. Very strong brands in various categories and own label products, which we do for our customers. And then distribution, particularly in the informal space is a massive barrier to entry. And I think if you look at all of those, to say, in a nutshell, why this business continues to be something that we believe is a great business, will continue to be a good business and still has latent growth, which we can touch on later in the presentation. Moving to the performance of MillBake itself. We've shown the results back to 2020 and '21 and '22. 15% growth in CAGR over that period of time. And very importantly, that has been driven by volume and price. We'll talk a bit about that below. And if you look at the adjusted EBITDA, up 23% over those 2 years, with the margin going from 10% to 12% in MillBake to just under ZAR 1.4 billion. That represents a fantastic result for this business. And it's demonstrated its ability to pass on input price increases, whilst protecting and growing volumes and margins, which I think dealing with all those 3 legs of the stool are pretty impressive in credit to the management team. So again, if you go back over a couple of years, from 2019 to -- 9% increase in revenue that was driven largely by a price increase of 5.9% and 3% volume growth from '20 to '21, volume growth consisted of 7.8% with -- 8.7% of price growth resulting in a 16% growth in revenue. And over the last 12 months, a relatively even spread 6% and 6.5% between volume growth and price growth, resulting in a 12.5% increase in revenue. So a fantastic results, EBITDA up 32% for the year, with margins expanding by about 170 basis points to 12% over the last 12 months. But as I said, it hasn't just been a MillBake story. The grocery is an international business. Again, over the last 2 years have seen CAGR in revenue of 16% and an EBITDA of 16%. Margin is relatively flat across that period of time, despite some relatively significant cost increases coming through across various categories. And I think this has been driven by a very, very significant historic CapEx spend. We seem to forget the fact that we've spent the money before. We're starting to see the benefits of that come through. We don't think we've seen all of the benefits of that come through. But this is something that's been 2 to 3 years in the making. And the brand loyalty and product expansion over that time really have added to the bottom line. Sugar confectionery revenue increased by 238% although obviously flatted by the Mister Sweet acquisition. Mister Sweet moved the business to #2 in the category. We'll talk a bit about later, and its numbers are included for 10 months of this financial year. Beverage is relatively small in our lives, but somewhat disappointing, decreased by 6% over the course of the last 12 months. But the Home & Personal Care business increased by 6%, which was pleasing in a very, very tough environment in our movement wheat business and is to increase revenue also in a different operating environment by 10.4%. And this resulted in an increase in EBITDA to ZAR 200 million, which is an increase of 24% year-on-year. Again, what I think is a fantastic result. Now dwelling on this slide on Page 17, it's just a function of all of them. But as you can see, the operational leverage coming through in the business, 16% revenue growth corresponds to 36% EBITDA growth, which corresponds to a 47% increase in EBIT for the business. From a working capital and cash flow perspective, just to pick up a couple of points. There was quite a big swing at the end of March around working capital. You would have seen a positive movement in '21 of ZAR 220 million to a negative movement in working capital at the 31st of March. That's largely unwound by the end of the -- well, first couple of weeks of April, but from an accounting perspective, there was a relatively big swing of, call it, nearly ZAR 300 million in working capital. From a maintenance CapEx perspective, we spent about ZAR 186 million CapEx total for the year was ZAR 519 million, ZAR 519 million, of which ZAR 333 million was expansionary CapEx, largely the Pretoria bakery, which was commissioned as I mentioned, in March 2022. This doesn't include the ZAR 419 million that we spent on the Mister Sweet acquisition, which was funded by internally generated cash and cash on the balance sheet. From a free cash flow perspective, free cash flow conversion was 67%, down from 97% last year, and that's predominantly as a result of the working capital swings in the business. Just touching on how the sector has performed generally. I know a number of our competitors have put a couple of slides out. We believe, and we've seen over a number of years that Brait has shown a really consistent real growth performance. Since -- if you go all the way back to 2017, and to be honest, before that as well, we didn't choose 2017 as a particular year. It just happened to be 5 years ago, in a highly, highly defensive sector. So we've seen CAGR of 7% since 2017 that has continued in '21 into '22 and we think is likely to continue going forward. The formal -- our formal market share is our Premier has grown from 2021 to '22 from 24% odd to north of 26%. And we've also seen and very pleasingly seen good growth in the informal market, which people must remember is 60% of our bread is sold into the informal space. The newly commissioned Pretoria bakery, we believe, will grow -- continue to drive earnings growth. We only commissioned that, as I mentioned, in March. So we started in April, the second line probably in the next month or so and then that will be up and running. We think it will only contribute fully probably in next year's results, but certainly, it will start to contribute at the back end of this year financial '23 results. From that perspective, operational efficiencies and consolidation of our Premier operations in land really will put that business -- that's a part of our business on hopefully the same trajectory and margins as our coastal bakeries. And again, I'll touch a bit on that later. From maize, wheat and baking products perspective, so the milling side of the business, again, decent volume growth pretty much since 2019. The market share for Premier has grown from 18.5% to 20.3% and in May from 8.9% to 9.9%. So again, across both categories, we see market share gains and very, very significant cost savings and operational efficiencies coming through this part of the business. There's massive operational leverage in this type of business. And despite the increased price and volatility we've seen in wheat and maize, the business has done a great job, and we'll talk again a bit about that later of passing that on in a considered manner to ensure that our margins and growth are protected. In the non-mill bake products part of the business, again, from a sugar confectionery perspective, back to 2017, it's about 9% CAGR. We think it's a category that will continue to grow. We are now #2 as Premier. We have a 17.4% market share in this business, and we're starting to see the extraction of significant operational synergies and costs coming out of the Mister Sweet business with our confectionery business. From a personal care and feminine care perspective, CAGR of 6% over a number of years, that's the South African business, relatively similar trends internationally. And the market share happens to be also the same 17.4%. I thought that might be a typo, but the team tell me it isn't. So 17.4% for Premier, obviously, it's different across different categories. We have a much higher market share in some categories and others within this space. And the growth here we see going forward being driven by increased urbanization and increasing South African middle class plus health awareness and a broader product range. So we still believe that there's a growth outlook for this part of the business going forward. Turning to how Premier has performed within that -- within the MillBake category. Again, I won't go into all of this, but why do we believe in the MillBake sector? I think first and foremost, it's a defensive sector, it's value for money in terms of the product for consumers. And we believe there is a well balanced demand and supply out there in the market. We don't think there's a much significant imbalance. We don't see that across our utilization of our portfolio. Secondly, it's differentiated. The product is differentiated, and it's short life product. It's not a product that you can put on the shelves for 3, 4 months. This is a product that lasts 3, 4 days on the shelves at most. And they are very, very high barriers to entry to get into this space, both from a CapEx perspective, a timing perspective and also just quite frankly a logistics perspective. And then the last one is, there's a relatively low dependence on retailers. One of the things about being in the FMCG space, there's lots to talk about the retailers. To be honest, when it comes to bread, retailers are important to our like, and we have very strong and good relationships with them, but particularly in the informal space, that's where the significant amount, as I mentioned, 60% of our bread is sold in the informal space. If you look on the right-hand side of this chart, just showing the operational leverage. As I said, the market has grown by 7% over a period of time. Over the last 2 years, we've grown CAGR of 15% in terms of our revenue, showing the market share gains that we've managed to get. And then the operational efficiencies are seen -- over the last 2 years, we've managed to increase our EBITDA not by 15%, but by 23%, again, by driving margins from 10% up to 12%. The last one, just quickly on this -- on the MillBake slide, the only one really to focus on is in the middle there. You can see our market shares in the Western Cape. We've been #1 as a 31% market share in that business with Blue Ribbon. We are very strong #2, not far from #1 in KZN with BNB. And in the Eastern Cape, we have a number of different brands -- and we have about a 25% market share. We've recently done an infill acquisition in the Eastern Cape, which will add to that. And we're very confident that we will be moving up from #3 going north. And the one that obviously stands out a bit is our inland business. We're relatively distant #3 and that is why we spent the money on the Pretoria bakery. [indiscernible] is 30% of the South African bread market and we only constitute 12%. So to the extent we can continue to grow our market share through the Pretoria bakery and consolidation of our operations there, that will be significantly positive for our business. Just talking to, there's been a lot of chat in the markets around the ability of the business to pass on costs in an inflationary environment. We've gone back all the way back to March 14, 2014, and all out. So that's whatever an 8-year period to prove out the thesis that the business has managed over many, many years to increase its net sales per unit, as you can see in the blue chart on the left-hand side, at the same rate, if not higher, than the increase in the wheat price. So you can see there has been a very significant uptick in wheat prices over the last quarter in particular. And again, on the right-hand side, we've managed to retain and slightly grow our margins, which talks to the operating leverage in the business despite over that 8-year period, obviously, volatility and increases in the wheat price. And then in the chart below, what we just tried to show is the blue and dark blue boxes are net sales realizations. Again, you can see an upward trend in that. And what's that a result of, it's a result of increasing margins. You can see that in the red line over a period of time as wheat prices have increased and also very importantly, volumes. So I think the important message is we do it very responsibly. We are extremely aware of the impact that this has on consumer base, but we have been able to pass on price increases, inputs through to the ultimate price. From a wheat perspective, from a cost of a loaf of bread wheat constitutes around about 50% of the cost of a loaf of bread. So to give you some idea in terms of sensitivities, the ZAR 1,000 increase in the price of wheat. So call it going from ZAR 6,500 to ZAR 7,500 would add around ZAR 0.55 to the cost of a loaf. So you're talking about moving those from ZAR 16, ZAR 17 to ZAR 17.50, you're not talking about moving those from ZAR 15 to ZAR 25. And I think that's an important distinction. Fuel is obviously important, but it costs only -- it represents only about 6% of the cost of a loaf. So from the outlook for this business, very pleasingly, since the beginning -- for the beginning of this year, which is April and May, we continue to see very strong growth in the business, which is pleasing. We've managed to achieve both volume growth -- well, volume growth in the MillBake business of, call it, 9% in the last 2 months compared to the prior year. And then despite the significant cost pressures, which have come through, as I mentioned, due to higher commodity prices, we managed to see price growth of 10%. So it's early days. It's obviously a tough environment out there, but the good performance for the business didn't stop at the end of March. From an organic growth perspective, there's lots of opportunity to grow, whether that be M&A -- sorry, in terms of organic growth, sorry, we believe that the weak -- in a weak environment like we're in today, consumers do down trade. And to be honest where do you down trade to, you've probably down trade to bread and milling product, which is obviously we're where premier plays, and we're starting to see the operational benefits and the integration of Mister Sweet, which should enhance efficiencies going forward. From an M&A perspective, we continue to look at operations that will add value to the platform. There are many out there, but they need to fit with what we're trying to do in the business. And we think once Mister Sweet is bedded down, there are other operations that we will look at. From a CapEx perspective, there's been a long-term strategy of investing in the infrastructure of the business. That has continued with the circa ZAR 500-odd million we spent on Pretoria bakery. And that should continue to grow our market share on the inland business, but probably more importantly, drive massive operational efficiencies compared to the 6 or 7 other smaller operations that we had Inland. So that is the same for Premium. We're very happy to take questions at the end. But in summary, a very strong performance. We see growth from here as well. The business, as I mentioned, is in a good state, and we are looking potentially to list this business, but we don't have any massive liquidity requirements to force it through. We will do it when it makes sense for the business and for our shareholders. Moving on to Virgin Active. Virgin Active, obviously in a very different place. It's been an extremely tough year for Virgin Active. We've been through a restructuring. As I mentioned, the restructuring plan only completed in May. The number of refinancings, the capital raise. We've got a new management team on board. But all this is starting to manifest itself in a bit of positive momentum in the business. It's early days. So I don't want to get too excited, but you will have seen 12% growth in our membership base just since the last 5 months. That's a very big positive and a turnaround from where we were only 6 months ago. The restructuring in the European business with a cumulative cash benefit of about ZAR 134 million, really has set that business up to start a growth trajectory again from a much more sensible liquidity position. We still think there's significant opportunities for the business to improve its membership engagement. It enhances digital and data strategies, and we'll talk a bit about that later on in the presentation. In terms of the capital raise, we raised GBP 88 million. As you remember, at the back end of March. And very importantly, that was provided at the Brait valuation. I think it's -- a lot of people question the value that we put on the business. These are spec sophisticated new investors who came into the business that take the same value that we valued the business at and we showed -- gave us confidence but gave them confidence in that business as well. The new CEO, Dean Kowarski, who took over at the end of March, beginning of April. He has done a great job shaking things up. We very thankful and grateful to Matthew Buttner, who was the CEO of this business and the founder for many, many years. It's been a seamless transition from Matthew to Dean. And we're seeing the new energy and enthusiasm the Dean is bringing to the business. And importantly, from a South African perspective, we've appointed a new MD a couple -- about a week ago, Jessica Spira, an investment banking background, she worked actually with me at RMB, super talented lady. And it's great to see some female representation in an otherwise male-dominated sector. So Jessica will take over in the next couple of months, and she's got massive enthusiasm and some great ideas for the business going forward. From a brake NAV perspective, it was up very -- by 3.9% or the 4%. But I think most importantly that, that valuation was underpinned by the recent capital raise. We'll talk a bit more in the presentation about the overview of the market and 1 of the key value drivers in the sector and also how our performance has played out relative to that and what our revised strategy looks like going forward. I won't dwell on this slide, but it does again spell out the numerous things that have been done for this business. A significant amount of work has been done to preserve liquidity, first and foremost, to restructure the business, put it back on an operational cost base, that's more befitting of its growth profile and to raise additional capital. And we genuinely believe we're starting to see the benefits of that, and we'll talk to that in the numbers going forward. Again, a quick overview of the transaction that was concluded in March. GBP 88 million was raised at the Virgin Active valuation of GBP 949 million enterprise value. Existing shareholders capitalized the Virgin Activa South Africa guarantee in exchange per share. So there was a ZAR 950 million guarantee that have been provided by Brait and Virgin Group. We capitalized that and got shares for doing so. There was, as I mentioned, GBP 88 million, GBP 68 million of which was from third-party investors, was injected into Virgin Active for shares. And then Virgin Active has acquired the nutritional assets of Real Foods in exchange for shares as well, and that should hopefully complete probably in the next -- certainly this quarter. From the perspective of ownership at the bottom, you can see the equity value at the time when we did the transaction, the GBP 470 would be akin to the valuation you would have seen in September, GBP 46 million in terms of the Virgin Active South Africa capitalization, GBP 88 million of subscription for new shares and then a GBP 28 million will be the valuation of the amalgamation for the Real Foods business, and that ends up with an equity value of GBP 634 million. So Brait's shareholding went from 80% of the business with GBP 470 million to 67.4% of the business with GBP 634, which, when you do the calculations, means that it was an NAV neutral transaction for Brait. I won't touch too much on the slide other than say what are we going to do with the capital, what is already being done with the capital. The GBP 88 million will be used, obviously, to provide liquidity support we are required, particularly in the European business to rejuvenate the estate, which is required, both in South Africa, but probably some places of the U.K. as well to invest in our sales and marketing and to drive new sales and improve acquisition channels and then obviously, to drive the product offering, and we'll talk a bit about that in our strategy. And finally, from a digital and technology perspective. The amalgamation of the Real Foods deal, why did we do it? We think it adds a huge new blow to the arrow of this business, particularly around moving it to a wellness business. As you can see at the bottom, we really believe that combining nutrition and fitness will help our members achieve their wellness and goals much more effectively and also from a data perspective, having significant data on a new -- lots of new customers can only be positive for both businesses. Right. Let's talk a bit about the various businesses. In terms of the total group business, year-to-date membership recovery is up 12% since the beginning of January. These are active members I talk about. As you can see on the top chart, South Africa moved from having 497,000 active members to 557,000. So 70% of the 2019 membership base up to 78%, which is a positive. From a European perspective, they moved from having 257,000 members up to 290,000 particularly after a dip in late December, January. So that has been a very positive buildup from 67% of 2019 levels to 73%. So if you look on the right-hand side, what's happened from December to May, we moved from 69% to 75% as a percentage of 2019 members. 800,000 members before, it's now up at 871,000 in terms of closing members and a significant amount of those have been members that have moved off freeze. These are those members who don't pay, they remain as a member, but they don't pay. As you can see, that's moved from 6% down to 2.8%. But very importantly, if you look at the bottom, just to give you some indication, we'll talk about each of the territories different pieces separately. But to give you an idea of our -- this is year-to-date group sales net of termination. So if you sell 100 and you lose 20, that would be 80. 65,000 in the first 5 months compares to 23,000, nearly 3x the amount in terms of net additions compared to 2019. So genuinely, there is some positive momentum back in the business, but there's still a very long way to go. I'll touch briefly on the South African business, focusing on the right-hand side. As I mentioned, they're up to 78% of the 2019 levels, a relatively small number on freeze, although you must remember, in South Africa, the freeze concept didn't exist before. So that number used to be 0, and we would hopefully work that number to 0 over time. About 12% increase in the last 5 months in terms of memberships. And as you can see, the terminations there, there were the net additions there of 46,000 compared to circa 13,000 in 2019 is nearly fourfold higher than it was in 2019. From a breakeven perspective, the business currently has 565,000 total members and the breakeven total membership is 524,000. So it's a positive contributor both cash flows and to EBITDA. Moving on to the U.K. The U.K. has had a very strong run when we opened up post December. Omicron had a massive impact, as you can see, if you look at the numbers from sort of September to December, since December, at the end of December, 107,000 members is going to 120,000 also about 12% growth. The business is back to about 70% of 2019 levels. And with about just under 6% of its members on freeze, I would say the average over 3 or 4 years in this business, pre-COVID was probably closer to 3% to 4%. So again, some work to be done on those members. But again, from a net additions perspective, bottom right, you can see almost again, not quite a threefold, maybe it's 2.5-fold increase compared to 2019. If I'd say which businesses are doing well, the residential clubs have recovered very well. They're operating at some of the, it's probably closer now to 90% of 2019 levels, whilst the Central London clubs, a bit like our peers in the London market are still at around 70% of 2019 levels. Importantly, total membership is about 127,000, which is slightly below the breakeven for this business of 133,000 members required. Again, very similar on Italy, growth from 106 to 123, the difference here is that we only really saw the restrictions lifted at the back end of March in Italy. Sales progression since then has been very, very good and very strong. We've opened up a number of 2 new clubs in this market, both have been significantly taken up. So I think that's a significant positive. If you take our total membership of 129,000 members, it's obviously still below the breakeven of 141,000 but the progression towards those numbers are positive. As you can see, we increased our active membership base by 16% over the last 5 months. I won't dwell much on the Asia Pacific. It's a much smaller part of the business. It's remained closed. As you see at the top, there are still massive restrictions, particularly across Singapore and Thailand. Australia has opened up, but we have the same issue that we have in London there with our intercity gyms performing less well. But we are starting to see that turn. And the numbers are starting to look better. Look, it's a small part of the overall business, but it's got quite a long way to get back to a breakeven contribution to the overall group. From a strategy perspective, we spent a huge amount of time with Dean and the new team just looking back and saying, how does the business perform? And what do we need to do differently? Just to remind people, this business made GBP 142 million of EBITDA in 2019. It made cumulative cash flows of GBP 309 million over 5 years than the pounds, and it has a 22% EBITDA margin in this business. And this is the group. Obviously, I have a significantly higher than that. So from a perspective on the right of our previous strategy, what was good about the business. I mean, clearly, it's got a significant footprint, state-of-the-art subs in Italy and Asia Pacific. The South African clubs had an extremely strong market share, but do require some rejuvenation. And we were really at the end of the repositioning of the U.K. property portfolio just as COVID came. We've sold off a number of provincial clubs. We had a potential opportunity to do further downsizing there. And obviously, that was interrupted by COVID. In terms of the revisions strategy, what do we need to do differently? We need to move from being a bricks-and-mortar-only business to offering digital. We've done that, but I think we need to up our game on the digital side. We need to invest much more in the member experience in certain geographies and particularly in South Africa. It's not up to speed with what the rest of the world does, and we need to get it there. We need to get it there relatively quickly. We need to expand it to multiple sales channels. At the moment, you can only come in, really, to be honest, to the club to join up most people use that never go to come to join up. They need to do it online. And we've got the systems in place, hopefully, to open that up in the next 2 to 3 months to enable ourselves to do that. And that has come with investment in the IT platforms and systems, particularly around data and digital, understanding your customers better, personalization, all the themes and we need to get that right with an investment in IT. We need a much more flexible pricing model. I think we've been fixated in the past about having 12-month contracts and the benefits that has. I do think we've moved to a more flexible model, but we continue to refine that and improve it and ensure that we can continue to engage our customers better. And then the last one is an increased focus on return on invested capital, one certainly may be my issue. I don't think this business has spent enough time focusing on getting the requisite return on its invested capital and being more circumspect about where to spend its money. There's lots of great opportunities, but we need to go through the smokers board and decide which of the those we're actually going to do and get a return on capital for shareholders. Just in terms of the overall wellness industry, there have been a number of commentators in the market who said that the physical activity or the wellness space was dead. I think when we talk about wellness, we don't just talk about physical activity. If you look at the left-hand side of that box, it's a $4.4 trillion market according to Global Wellness Institute are unpaid. So this is their own view as not paid to provide these views. But if you look at next to the physical activity box, actually, healthy eating, nutrition, weight loss, et cetera, is a much bigger part of the market than physical activity. So our first foray into that is obviously Real Foods, but there's many other options to do that and to improve our offering to members. So as we say, whilst physical activity contributes less than 20% of the wellness economy, where do we continue to play and look to play to continue to grow this business. So it's not just about the physical real estate, there's lots of other things. On the right-hand side, again, GWI project that the wells this economy will grow at, call it, 10% to over the next 5 years. Now maybe they're wrong. But I think what the research they've done is it's certainly not a business that many commentators called 12 months ago in perpetual decline. And interesting as part of that physical activity is 1 of the ones that's likely to grow slightly ahead of the average at 10.2%. So again, I think we're extremely well positioned as a brand, as a business that has lots of operations in key countries that continue to grow. We need to be able to combine the left-hand side of this chart with the right-hand side and find ourselves a place to play in the wellness space. Again, we looked at a lot of -- we've done a lot of work, and I won't spend time on this on what are the key industry trends? What are our competitors doing? What are our customers asking for? And -- very simply, it's about community. It's about wanting to go to a gym. It creates a community outside of the home so that people want to go there and an experience. The second is digital. You need to be able to provide people with the ability to come into gym, but also to do that class as a home. Now we're long way to underline there, but having a combination of what we call digital, we definitely think will distinguish you from the rest. Having a diverse offering, and I think this really talks to our group exercise classes, our personal trainers, having a hybrid model that gets people outside of the house to come their wife because they've got something to go to someone to go to some want to push them, that will get people coming back to the gym and that reduces churn. Personalization is an absolute key trend in this market. We need to get it right. We need to get our data right, so that we can talk to our customers better and improve their -- the membership engagement, and we're a long way down the line to being able to do that. And the next start of that would be to develop and we are developing an app, which will give us the ability to do that. And then there's overall wellness, which is exactly what I talked to. This is not just about physical gym work, it's about physical nutrition, mental health and how do you retain your savvy members from other than just offering them a treadmill to come and run on. And then the last one is sustainability. It talks to the ESG trends I mentioned at the beginning. It's absolutely key to the business. Epic and sustainable products and services are absolutely something that are growing younger membership base are demanding. From a strategy perspective, these are the bones of the strategy that have been developed. And again, I won't dwell on it. I'll leave you to it. But there's probably 6 key strategic levers. The first is to improve the product offering. I mentioned that we need to get the product offering better. It's fantastic in the U.K. It's very good in Italy. And it's substandard in South Africa, we need to improve it. We need to get tech improvements to enhance the membership experience. I've talked a bit to that already. And then we need to spend CapEx on rejuvenating the estate. The look and feel you want to come to a place that looks fresh, new and rejuvenate the membership base as well. The app development, online sales, digital personalization, all of those things are caught up in the app, and we need to get that done and finished as soon as possible. We've talked about flexible membership options and then having a holistic wellness strategy. Those are the strategic levers. We've talked about the enablers, it's data apps, it's leveraging the partnerships we have. We have a fantastically supportive partnership with Vitality, but there's other partners that we can continue to work with. And one of the most important enablers for you is the capital allocation to ensure that we don't waste money where it's not going to give us a return. And then importantly, it's well in good talking about strategic levers. It's how we say that's interesting, but where does it manifest itself? And so just again running through it, the product and operations. If we get that right, what will happen, we will reduce churn. We will generate ancillary revenues from enhanced product offerings. So that's the nub of this whole thing from a product perspective. Technology again, growing sales, reducing terminations, being -- having more personalization, all of that will talk to our membership experience. And if again, if we get that right, we will increase the customer lifetime value, which is absolutely the key metric for this business. Capital allocation, again, just talk to which clubs should we keep, which clubs do we need to negotiate with the landlords and say, guys, we don't get the right deal. We're not in this for the long term. And where do we need to invest in new clubs. The online offering, that talks to increasing our engagement levels. We've seen it already. Usage levels are up significantly from 6 months ago, but we need to continue to drive to lower the customer acquisition cost. We need a model which can get people in there without having to pay very significant commissions to our sales force. And then the last one is our flexible membership models. Obviously, that's to talk to what our members want. Can we create a product and also a structure that gets the people back into the gym and then integrating that with food and fitness is exactly what we're talking about doing with respect to the Real Foods business. The half thing is going. Again, on this slide, in terms of the outlook, what's been pleasing to see is how relatively quickly, I don't know how quickly that is, but quickly moving from December of 69%, we've moved up to 75% in terms of active members. And on the right-hand side, you can see how that manifests itself in a very significant 45% increase from a year ago in terms of the quarterly revenue. I've always said this is a massively operationally leveraged business. You have the same fixed cost base. Every single member that you get in is effectively marginal profit or reducing your marginal loss. But -- and we've seen a 45% increase from 64 to 93 over the last over the last year. And again, it's pleasing to see that that's across all territories. This hasn't been 1 particular territory, it really has been across the lot. We get a lot of questions quite rightly from our investors saying, but what does all this mean from this perspective of how much money should the business make? What do we try to show here is on the top left, we show the performance in 2019 for the group. So as I mentioned there, GBP 134 million. The reason that's different to the GBP 140 million that you saw earlier is because of the exchange rate reduced here, we've used the current exchange rate. But that gives you an idea. The group made about GBP 134 million. It invested about GBP 70 million, of which GBP 25 million was new clubs, so call it GBP 45 million of maintenance CapEx, which gives you a free cash flow of a sum, between, call it, GBP 52 million. And if you add GBP 25 million back to that sum, it is GBP 75 million a year. The fixed versus variable cost base absolutely changes by territory. So we've got one of these older territories, but to give you an idea here, if you look at the split, it's 30% variable and 70% fixed broadly as an average. What have we then done is we said, look, if we take our 2022 cost base, we apply this fixed versus variable. And all you change at the top is your percentage of 2019 membership base. And on the left-hand side, your yield, that will give you an idea, it'll spit out a number based on 2022's cost of what the business should make from an EBITDA perspective. So where are we today? Current membership levels, as I mentioned, 75% of 2019 membership base call it a 2% yield increase over 2019 would suggest that on current run rate, the business should make GBP 25-odd million. To get back to the GBP 110 million, which we use in our valuations, would require us to get back to just short of 95% with the yield increase of somewhere between 2% and 3%, that somewhere between GBP 108 million and GBP 112 million is GBP 110 million. And then to get back to where we were in 2019, a coincidentally means that we need to get back to 100%. Obviously, the costs are different. We've taken costs out of the business. There have been some escalations. But if we get back to the same cost base, we -- same membership base we had in 2019, we're currently 75, we get back to 100. We will make the same profitability in this business that we made historically. Then let's just move on to New Look. I know New Look is a smaller part of the business. So I will talk about this in a quicker, I understand we're running shortage of time. But again, New Look from 1 year to the next, it had a very significantly positive performance. I think we were disappointed because it had a very poor third quarter there, October to December quarter was poor along with all the other retailers in the U.K. But if you look at revenue year-on-year, it was up 58%. We made GBP 875 million. It's a substantial business. It grew very significantly year-on-year. From an EBITDA perspective, it turned from a loss of GBP 34 million to a positive GBP 25 million. It was less than we had hoped for, for sure. But certainly, it's a GBP 59 million turnaround from the year before. Cash remains at GBP 84 million. Again, when we had to do the recapitalization, it was because there wasn't cash in the business. So that's a very big positive. From a retail perspective, the retail business was significantly impacted in the third quarter, the effective quarter. It wasn't just Omicron, which was huge, but obviously, supply chain issues. And again, we'll touch on a bit later. We had our own internal issues as well. They weren't only exogenous factors. But from an online perspective, up a massive 46% on current pre-COVID levels and now consumes nearly 30% of revenues from less than 10, 2, 3 years ago. It's been a fantastic performance, and I do think the management deserves the credit. The business has still got a #1 market share in women's dresses and denim. And very interestingly, we started a concession stores business with Asda, trial with Asda, which has gone fantastically well. We're looking to further grow that with Asda, but also potentially with other partners. And it's been a significant third leg to the business, which we didn't have probably 12 months ago. Importantly, the start to the year has been positive and probably even more positive since the -- so if you take the calendar year, the first 3 months or the last 3 months of the year were good for the business, and importantly, April and May have been a relatively strong above budget months for this business going forward. In terms of the like-for-like, again, I'm not going to dwell much on this. As I mentioned, there was supply chain, Omicron and inflation issues. We are starting to see the impacts of inflation in this market. Consumers obviously are not -- they are impacted by it. We do play into lower-end category, which, to some extent, of down trading happens is to our benefit. But clearly, we are starting to see the benefit -- I mean, the impact that it's had. But from a retail and e-commerce perspective, I think both parts of the business, whilst we could do better in many cases, and we look at slide coming up and see what we are going to do is trying to look very positive for the business. Talking a bit about what are we going to do with the business. As I said, there's 2 key things that we need to get right. The first is the revenue mix. And we've really got 3 avenues for revenue. The first is owned stores, and we're looking very carefully at where do you want to be, where do you want to own stores, in which locations and what value do they add to the rest of your business, particularly the online business. As I mentioned, the next is the U.K. concession stores, which we got with Asda, significant growth that we didn't have a year ago. We're looking to see -- is that something we can roll out and it's starting to look like it's something that could be very successful with the business. And then finally, online, online has done fantastically well. We do need to get moved from a business who's only a retail business, bricks and mortar to 1 that now has online. We do need to make sure from a distribution center perspective on the right-hand side that we do 2 things. Firstly, that we get our costs fitting of an omnichannel business, and we're looking very significantly at that. And then obviously, improvements that we need to continue to make in our DCs, which will require some investment to improve our operational capacity and flexibility. So there's lots on the go. The management team is working hard here, but it's been a good start to the year. Then moving on to what everyone really wants to know. This is how do you value these businesses. From a Premier perspective, relatively simple. We get the valuation methodology exactly the same. What we've tried to show here, I think Sabella alluded to it. We've moved from a pre-IFRS accounting to post-IFRS. And the reason for that is all of our peers in the form of Tiger, AVI, RFG will report on a post IFRS basis. So if you look at the pre-IFRS basis, what would this business have made on a pre-IFRS basis, it would have made ZAR 1.4 billion, compared to the ZAR 1.152 billion that it made a year ago. We always value this business at an 8x multiple. If we value the same business, this business an 8x multiple, it would have an enterprise value of ZAR 11,241, the net debt would have been ZAR 1,760 would have given you a valuation of ZAR 6,198. If you look on the right-hand side, we've moved to a post-IFRS basis. Very importantly, starting at the bottom. It doesn't change the valuation. So the valuation at the bottom starts with ZAR 6,198. If you move your way up, the net debt is slightly higher, obviously, because of the IFRS adjustment, but your EBITDA is correspondingly slightly higher. So what does that do? All we've changed is we've changed the multiple from 8x to 7.6x, that's a [indiscernible] to ensure that we end up with the same valuation. How does that 7.6x compared with the peer groups as you can see target brands trading at 8.3x, maybe 8, 8.3x and the average of 7.7x. So we traded a slight discount to that. And just to give you some idea of the 2-year CAGR for EBITDA. We can see our peers, Tiger brands at minus 11, AVI flat just about flat. And we've grown over that 2 years at a rate of 20% per annum. And on the right-hand side, probably the most important metric being in return on invested capital. I think despite having invested very heavily in this business, ZAR 5 billion over the last 10 years, we've got our return on invested capital up to nearly 15%. From a Virgin Active perspective, we've -- again, the methodology is exactly the same. We've taken a 2-year forward to EBITDA, that's based on our current management accounts would suggest that EBITDA in 31st of March 2024 would be GBP 110. We've kept the multiple the same. If you look down the table there, the net debt has reduced from GBP 422 million to GBP 353 million, call it, about a GBP 70 million reduction, largely due to the GBP 88 million that we injected into the business. Obviously, there's been some cash burn over that 6-month period as well. The deferred costs, these are costs to license fees and other operating costs that we deferred carrying lockdown. It's gone down from GBP 34 million to GBP 27 million, so they're still out there. We've accounted for that as if they were in the debt today and that gives you a shareholder value of GBP 610 million and a surplus equity value of GBP 561 million. Importantly, we are now 70-odd percent shareholder in this business, down from 80-odd, 79%, I think it was. But as I said, it's a bigger business, with the cash injected in. The deal was done at our rates in a carrying value for Virgin Active. And I think that gave both us and the auditors a lot of confidence that this valuation has got some credibility. From a multiple perspective, again, the peer average is around 10, some are lower, some are higher. That's obviously an average, we've applied a 10% discount to that and retain the same 9x at the bottom. Moving on to New Look. New Look, again, very similar valuation we use a 12-month forward which is how the market values these businesses, particularly in the U.K. We've kept the maintainable EBITDA at a similar level to what it was in September. The multiple is the same. And if you work your way down, the valuation is up on March last year, so up from ZAR 545 million to ZAR 672 million, but actually slightly down from September. And again, they're largely because the net debt is slightly up in the business. Again, from a perspective of where the peers trade, the average is 6.7. We apply about a 25% discount to that -- to get back to our valuation. Then just the last slide, we get asked a lot of questions around how we're going to monetize value in this business. We believe -- genuinely believe we've got some great assets in Premier. We've got a great asset in Virgin and New Look is definitely an option value for us that actually could end up being a very fortuitous option that we have in the business. How are we looking at this? And this is we have now got the Board to sign off on our ethos-led exit strategy for the various businesses. Let's start with the first one, which is the listing of Premier despite market commentators think it's certainly not off. We intend to list this business. We don't need to be in a rush to list this business, but I've always said that listing businesses 30% about how the business itself is performing and 70% about how the market is performing. We need the market to settle down to be quite frank, but that can happen in a matter of weeks. We are ready to press the button. We don't need to press the button, and we will continue to monitor it. And when the time is right, we intend to list this business. And we said you look to sell down, let's say, a 30% stake, those proceeds would be used to fully settle the RCF and the cash in the business for operating costs. If you then move down further down the line, that could happen, as I mentioned anytime over the next 12 months, it could happen very soon. It could happen in 12 months' time. We have full optionality around that. What we would see coming towards the back end of -- or the middle of '24 is potentially the sale of the New Look business at that point in time. Hopefully, it's fully recovered with its EBITDA closer to what we think is a sustainable long-term level. We could sell that business, it might require us to sell a bit of our residual stake in Premier. And that would enable us to repay the convertible bond and cash to the extent it hasn't already converted. We don't think the convertible bond will necessarily convert at the current prices at exchange price is ZAR 10 a share from where we are today. But it might, in which case, we wouldn't need any further cash. But if it wasn't, we would settle the convertible bond in cash. That would give us full optionality on the basis that the exchangeable bond would have extended into Brad shares to unbundle the Premier shares, whatever it remains at the Premier shares, call it 50%, 60%, 70% and the Virgin Active shares to Brait shareholders. That would -- in a one file swoop get rid of any discount to NAV. We currently traded a 50% discount to NAV. And again, if you assume relatively small modest growth of, call it, 12% -- 10% to 12%, 13% growth in NAV over the next 3 years, and you then unbundle everything to investors, the share price should triple from where it is today. That is the strategy. That's what we've agreed with the Board, and that's what we will work to conclude. Thank you very much, and we're very happy to answer any questions.

[Operator Instructions] The first question comes from [indiscernible]

I've got 3. I'll ask them one by one. The first question I have is on Slide 21 on MillBake. If you have a look at the slide on the top right, you show the CAGR bridge sales performance over 7 years, but 5 actual and 2 forecaster, but 7%. What would be Premier's MillBake revenue and EBITDA over the 5-year period, for example, sort of longer-term investors like to see what 5-year view might be?

Sure. Do you have the exact number to hand. I don't have the number at hand. It would look good. That's the only thing I would say. But I'll be honest. Sorry, I just have the number to hand. I can definitely can get it for you. Actually nothing too high. It's just that I haven't shown it. It's -- sorry, I don't have it. It's on -- I would suggest it's 7%.

Sure, sure. As buy siders, we have slow-moving branch and we're normally cautious about IPOs. And even the old bugger Benjamin Graham said, watch out for IPOs, right? Because it's an asymmetry of information be there, right? And there's precedents recently. I mean in the last 5, 7 years ago, there was a listing of a food company that's currently still listed and specifically listed out of the private equity deal as well, they listed it, and that wasn't much of a success. So I suppose my question is how do you give us some comfort, Peter, that you don't -- and especially if you look at the large EBITDA number, FY '22 versus FY '21, that is a proper growth, right? I mean how do you give us some comfort? And sometimes, you have to explain it slowly to buy siders like me, right? How do you give us comfort that you didn't cut costs to the bone and how they say it in English. You didn't just the Turkey up for Christmas.

Yes, look, it's a great question. And I think there's 2 ways to answer the question. The first is -- and the most important guys is that we're not selling out. We'll be picking up a 70-odd percent shareholder is great. I would suggest, and I would hope that a lot of our investors that buy into the IPO would actually probably be our existing investors as well, right? They know the assets well. So we are not selling out. We intend to unbundle the rest of the shares to our shareholders. So there's no short-term game here where we can sell it to someone else walk into sunset with a ton of cash. Yes, we are selling down to provide some liquidity at a break level. But genuinely -- and I say genuinely, we are long-term holders of the asset. We will lock ourselves up for an extended period of time, because we are longer-term owners of the asset, we intend to as per our strategy slide, unbundle the shares to shareholders. So I think that's the first one, which is the biggest mitigant, quite frankly. The second is on, yes, the performance has been strong, but the performance has strongly over the last couple of months as well, and it's been over a pretty lengthy period of time. I suggest we've outperformed the market for 3, 4 years. And that comes from having invested in this business over a very long period of time. As I mentioned, ZAR 5 billion over 10 years, even for your buy-side guys 10 years is the longest time, right? So we've been investing in this business. We've been improving it, and we're starting to see the benefits of that, like Mister Sweet deal, we don't see the synergies in this year's numbers. In fact, we've only consolidated 10 months. We definitely see benefits there. We see other add-ons that we can make to this. So there's still lots of runway to grow. And then from a CapEx perspective, that's the way I would look at it. Private equity is notorious for not spending money on a business before it brings it to market or sell it. if I say, that's what Mr. Benjamin would tell you, I'm sure. You go back and look and compare our -- what we say EBITDA over D&A. So I mean, CapEx over EBITDA or let's say, whatever metric you want to look at, we have spent a huge amount more money than any of our peers over a very significant period of time. And I think that's what differentiates us. And that is different from a normal private equity sell this thing. I think genuinely Brait was never a private equity vehicle. It was a long-term owner of these assets. And I think credit to them long before we came around at Ethos, they've invested in this portfolio, and the management have done a good job. So I think there are 2 things. One, we're not selling out. We're going to be a long-term holder and we'd be locked up to show that, right? And secondly that if you go back in history, this has been a long progression of performance coming through. And I think we spent much, much more on the business than any of our peers, which is why we're starting to see the benefits of that.

Great. My last question is on Slide 47, if I can. It's where you have a value premier, right? I suppose my question is the multiple you guys use. I mean I'm looking at the top right-hand chart, you use 7.5, right? If you -- is it -- is it fair to compare it against something like AVI with its quite diversified category categories of goods and portfolio, right? And even Tiger Brands, given its -- okay, it's half of it's similar to you guys and the other half is every day branded goods, right, consumer goods. The reason I'm asking is this is a good time for bread at the moment for some of the players there. But if there is a bread war, for example, I mean, some of the risks in the premier model is not reflected in that multiple because it's a commoditized product, if there's a risk of a bread war, right, 80% of your profits come from one bread and wheat, right? Whereas -- and flower. And whereas these other companies have a much more diversified portfolio and very little debt. So I'm just speaking -- and I know EBITDA multiples take care of the dip. But -- is it fair to compare it to these guys is my question, I suppose.

Look, it's a very good question. And there's no right answer, right? Everyone can have a view. I mean, we have taken -- we've been consistent about how we valued it. And just so that you're aware, we currently value ourselves on this basis here at a 10% discount to both Tiger and AVI. I mean, Tiger's growth historically has been let's say, not great. Its return on invested capital gone from 15 or 16 down to 11. And even AVI's performance over the last -- growth over the last it hasn't been stellar. And if you look at its investment in new capacity and as existing capacity has been very low, which is why it's return on invested capital is so high, okay? So we've also taken a lot of advice from advisers, as you can imagine, and I was a banker, so I will -- I can knock in, but a lot of clever bank is telling us what they think. We've got 3 different bankers working with us, all of you corroborated our view on value. We have auditors who sign off on it. So yes, it's an eye of the beholder. We look at a couple of things. We look at growth, what's our performance and growth historically, but also going forward. We look at return on invested capital is a key metric. And then you look at longer-term trends in margin, right? And then I think you compare all of that to what was the long-term average EV EBITDA multiples. And I think the sector is trading probably 20% to 25% below the long-term average, I would be a bit more worried if we were trading at 25% above the long-term average, but we're not. So taking all that into account and applying a 10% discount to Tiger and AVI, who I think have underperformed. I don't think is Look, the best way to value this business on a DCF basis, which -- what we do, and I think all of our advisers do. And I think that backfills back to a number, which is obviously at a premium to the level. So look, I can't say we're right. I would suggest that we are confident at this level. And our advisers are confident and our auditors are competent. So -- but as you mentioned, there's lots of things that need to go into the price work can happen at any point in time. We've been through one. I think it talks to operational efficiency. Those who are the lowest cost producer will be in the best place in any potential price war and right now, that's us.

[Operator Instructions] At this stage, we have no further questions on the line. I'll now hand over for questions on the webcast.

Yes. So there's one Charles, Charles Wells from Titanium. Thanks Charles. Slide 41 indicates that if Virgin Active membership gets back to 2019 levels at 100% with a 3% yield, EBITDA would get back to 2019 levels. Why is there no benefit from the costs that have been taken out in the restructuring? I think if you take what are we comparing we're comparing a profit in 2019 to a profit in 2022 and ties with all the best will in the world, despite the costs that we've taken out and there have been significant, the inflation across whether it be staff, whether it be energy costs, whether it be even leases, particularly in the South African context, that would probably get our costs back to flat, which is why the number is exactly the same. So despite having taken out very significant costs, I think 3 years of inflation in the other product lines, have obviously eaten into that. So the fact that we've been able to effectively keep costs flat over a 3-year period despite inflation being in many cases, north of 5%, 6%, 7%, I think that's why the numbers are the same. The next question is from Pierre Borsy from HBK. How much CapEx was deducted from Premier net debt? When do you expect the Pretoria bakery to come EBITDA positive? Rolf, do you want to -- do you have the answer to I mean it's in the...

Yes. So I think -- the CapEx reduction from net debt was about ZAR 370 million. And the deduction for that is because the asset hasn't sort of contributing EBITDA in these results. So it's consistent with prior years. In terms of EBITDA positive, the first line is in operation in March and the second -- the second line coming in July. We would expect it to start contributing immediately start making cost savings. We've already closed 1 of the bakeries Middleburg. So that will start generating the cost savings upon which the investment return is predicated. So I think it will generate in terms starting this year when it's been both lines are in full production.

Thanks, Rolf. Next question from Nick Richer at Signal. There are rumors in the market that breaks has approached institutions about listing Premier, and there has been soft appetite for the IPO. Can you comment, please? Premier results are very good. And I guess there's some disappointment that the IPO was not announced today. I can absolutely categorically say that, that's not right. Nick, we have not approached any investors, we went around and I think I'm going to say February on a soft signing basis to introduce the management team to investors, I would say that the -- it was unanimously positive. The feedback from investors. And since then, we haven't been to investors. The reason for not announcing it today, look, when I say we actually -- there's still certain things that need to be done, I would say, but we're in very short order ready to do it. There's no rush, Nick at the end of day. I know there's maybe some disappointment, but we need to monitor when is the right time to go out and do it. And it's not because you want to eke out the best -- absolutely best price for this thing, but you do want to launch an IPO in a relatively positive market generally. So I would suggest we are -- we have a finger above the button, we can press it at any time, and we're going to do it in a responsible manner when the time is right. There's no need to rush and do it. But I can absolutely categorically say there's been no feedback from investors, certainly that I've heard that would suggest that they're not positive. The next question, how do Premier plan to gain market share in high teen? Are you prepared to use price to gain market share? Or is it about enhancing distribution to gain share? So again, the -- and Rolf alluded to it, when we put this -- when we pressed the button on the Pretoria bakery, it absolutely wasn't around market share growth. We could get an 18% return rate. I'm looking at maybe 17%. 18% IRR on the business through operating efficiencies. So let me repeat, even if we didn't get one single share above our 12% or 13% in the housing market, the operating efficiency you get from having an integrated MillBake business would give us a circa 17% return. That was the base which we pressed the button we hope to gain market share? Of course, we would hope to gain market share. The quality of our bread has improved, moving from 12 to 20. Would we use price to do that? Absolutely not. Absolutely not. We're not in that game, right? We're going to price our product appropriately. So the sales. We've got long-term customer relations that we need to monitor. But are we going after market share in this market? No. What we need to do is do it responsibly. We see growth in the market. And we see our ability to grow some market share, but it's not driven by predatory pricing that's going to get us there.

Anything else?

I think that's the last of the questions that we have. Are there any others on the line.

And no sir, we have no further questions from the lines.

Sorry, I'll go one more. Can you please provide the exact date when the IPO windows for Premier is open? Look, it's a long -- you got, right? The window is really driven by the results go stale from an international marketing perspective after a period of time, post your results being audited. So for example, our March year-end results, you could probably go until the end of September is without having to reaudit those accounts. If you want, at the date of September, you can reaudit accounts and then you're going to go again. So the windows are open to us. You just need to do different things at a certain point in time. If you want to press the button and -- in November, you need to audit, for example, the mid-year results of Premier. But from now to, I would say, broadly September, that window is open from a -- effective. It's also driven by we're not the international institutions at their desk, as we all know, those guys seem to go away for 2 months over August and September. And if we want to get international demand, you obviously want them at their desk. So it's partly driven by the audited numbers going stale and partly driven by when is the best time to tap investors both locally and internationally. That's only question I have. Thank you very much for your participation. We really appreciate it. And as I've always said, please feel free to reach out if there's any further questions.

Thank you. Ladies and gentlemen, that concludes today's event. Thank you for joining us. You may now disconnect your lines.