Brait PLC (BAT) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Brait interim results presentation. [Operator Instructions] Please note that this call is being recorded. I'd now like to turn the conference over to Mr. Peter Hayward-Butt. Please go ahead, sir.

Thank you very much, and thank you very much to all our investors and stakeholders who have taken the time this morning to join us. In terms of the presentation, I will take you through an executive summary, just the very quick highlights package of the results and, obviously, the Premier listing, which was announced this morning. Sabelo will then take you through the Brait NAV and liquidity update. And then we'll go through in a bit more detail of the Premier portfolio performance, portfolio company performance, the Virgin Active performance, New Look, and then we'll get on to valuations and an overall summary slide on the Brait strategy. With respect to the executive summary and the performance, which we will go to in much more detail later, from a Virgin Active perspective, we continue to see positive momentum across the membership base. Importantly, across all territories, we've seen 20% membership growth year-to-date, which we think is a decent performance. From a South African perspective, memberships were up 18%; the U.K. up 17%; Italy up 33%; and Asia Pacific up 20%. So a decent performance across the various territories, and we'll go into a bit more detail on that later. Equally importantly, all the key territories, by that, we mean the U.K., Italy and the South African business, are at EBITDA run rate breakeven or at least forecast to be by the end of the year. As we've said many times over, APAC will take longer to recover, and we'll delve into a bit more detail on that during the presentation. With respect to the strategy, as we know, Dean and the team have been implementing a revised and a rejuvenation strategy on the business, which is definitely starting to pay dividends. The acquisition of the Real Foods assets, which was Kauai and Nü, was completed about a couple of months ago. And we're already seeing the benefits of that in the shift from Virgin Active into the broader wellness space. From a Premier perspective, a very strong operational performance over the last 6 months, EBITDA up 16%. And that's driven by a number of different things: market share gains, volume growth despite the very significant costs pass-through on commodity prices that we had to make over the last 6 months; and, very importantly, the retained focus on cost management and operational leverage in the business. Excitingly, it came across all 4 divisions. It wasn't just the MillBake business that performed well, and significant synergies saw -- that we saw in the Mister Sweet acquisition has started to bear fruit. And we've seen all of the divisions really start to contribute significantly. As part of the pre-IPO preparation, we collapsed the shareholder structure. There were shareholder loans and preference shares from Brait into Premier. Those were all collapsed and equitized. And as part of that, there was a dividend distribution paid out of ZAR 950 million, and that was paid to shareholders and received in November. As you all know, the company today announced it's intention to float this very strong cornerstone investor demand, and we'll touch a bit on that later in the presentation. From a New Look perspective, a very solid 6 months. As you all know, it's extremely difficult time for fashion retailers in the U.K. The business has performed well, which I think does demonstrate the robustness of the platform it's built. Very strong performance over the first 3 quarters of this year. Remember, we've got a March year-end. So only 2 of those account for the September numbers. But -- and despite the fact that we haven't received further benefits in this calendar year that received in the previous calendar year, the performance is up year-to-date. From a Brait perspective, this transaction in terms of the Premier listing will be a transformational one for the business. Brait will receive proceeds of around ZAR 4.5 billion after costs as a result of the IPO and the distribution, and they will remove any liquidity constraints and strengthen our balance sheet. The current RCF, or revolving credit facility, is around about ZAR 2.5 billion to ZAR 2.6 billion. So as you can see, if we raised ZAR 4.5 billion after costs, we will be left with a very significant cash balance in the business. That will be used, as I mentioned, to repay the RCF and for general working capital investment purposes. The strategy absolutely remains to unlock value for shareholders through unbundling the assets to them in time, and this would look to be completed by the latest of December 2024. Just a very quick high-level overview of the offer structure, which we will go into much more detail later on. The Premier IPO offer size will be ZAR 3.7 billion, which includes the ZAR 200 million greenshoe. The IPO price range has been set at just under ZAR 54 to ZAR 67 per Premier share. That, number one, mean anything to people. It's based on a Premier share -- shares an issue. And the implied equity value is ZAR 6.9 billion to ZAR 8.6 billion. Importantly, it is pointing out that equity value is post the receipt or the payment of ZAR 950 million distribution. That implies an EBITDA multiple of 6 to 7x LTM EBITDA, which compares to the 7.6 that we valued as fair value, the asset adds in Brait NAV, which implies somewhere between a 10% and 28% discount to the equity value of Premier post the refinance that I referred to earlier. And we'll touch again in a bit more detail on that later. Very pleasingly, we have cornerstone in demand before we opened the IPO. Titan has committed to take its pro rata share, which is 36% throughout the offer range. So wherever it prices between ZAR 54 and ZAR 67, Titan would -- is committed to taking its pro rata share of that. And another institutional investor came in of late, another 2.4, which means just under 40% of the offer is already subscribed for throughout the price range, whether that's at the bottom, the middle or the top of the price range. Equally importantly, the IPO has been fully underwritten by Titan at the bottom end of the price range. So subject to there being sufficient free float, Titan would undertake to underwrite the rest at the bottom end of the price range. With respect to the multiples that implies, as I mentioned, the 6 to 7x LTM EBITDA compares with the peer group LTM of -- average of 7.5, which is broadly where we value the businesses for fair value purposes. And I think if you look on the right-hand side, and it doesn't matter whether you take 1 year, 2 years or 3 years for this comparison, there's very significant EBITDA outperformance by Premier compared to the peer group. In this scenario, over the last year, Premier grew at under 30% as opposed to the peer group average of 7.4%. From a Brait perspective, we've mentioned this to investors who we chatted to already. And I think it's very important to point out that any Brait investor who participates in the IPO pro rata to their existing holding, will mitigate any dilution in the IPO. So to the extent an investor owns 2% of Brait and takes up 2% of the IPO offer, there will be 0 dilution. It's a mathematical formula for any Brait shareholder who participates. And to that end, we will ensure that Brait investors get preferential allocation rights in the IPO at the market clearing price. So again, importantly for an investor -- a Brait investor who wants to participate and has been a supportive shareholder, and once they minimize any dilution, there will be a preferential allocation for them at the market clearing price. To the extent there isn't sufficient demand to get to the 20% free float, which we very much doubt will be the case, but to the extent that, that happens, the listing will not proceed. And under that circumstance, RMB and Titan have irrevocably committed to invest ZAR 3.5 billion to acquire about 50% of the shares, and Premier will remain unlisted. We think it's an unlikely outcome. That is certainly an outcome which at the -- is effectively pricing at the bottom end of the range, would give the same proceeds to Brait. So therefore, as I mentioned, Brait will receive proceeds from the IPO of about ZAR 3.7 billion, and its share of the distribution has already received ZAR 0.92 billion, which totals ZAR 4.6 billion before fees and expenses. And I think as we can say that relatively holistically deals with Brait's liquidity issues, and even after paying the RCF, Brait would remain with ZAR 2 billion of surplus cash. Just moving on to the Brait and NAV liquidity. I'll hand over to Sabelo.

Thanks, Peter. Good morning, all. Starting on Slide 8. Earnings reported NAV per share of ZAR 8.40 is relatively flat for the 6 months ended 30 September 2022 compared to March NAV of ZAR 8.37. Total assets of ZAR 19.1 billion is weighted at 54% Premier, 41% Virgin Active and 5% New Look. Total liabilities of ZAR 8.1 billion combined raised ZAR 3 billion committed borrowing facility June -- 30 June 2024, referred to as the BML RCF, which is drawn at reporting debt by ZAR 2.6 billion. The GBP 150 million convertible bonds due 4 December 2024, valued in terms of IFRS at ZAR 2.8 billion, the ZAR 3 billion exchangeable bonds issued by subsidiary, BIH, which are due 3 December 2024 and valued in terms of IFRS at reporting debt at ZAR 2.5 billion. Accounts payable of ZAR 137 million, which largely comprises the accrual of coupons on these 2 bond instruments stated above. The result of NAV is ZAR 11.1 billion, which equates to ZAR 8.40 per share. Slide 9 sets an overview of NAV movements for the period under review. So note at the outset that the peer groups of Premier, Virgin Active and New Look remain unchanged. Premier is valued on a post-IFRS 16 basis, while Virgin Active and New Look valuation metrics are quoted on a pre-IFRS 16 basis. Premier's carrying value increased by 11% from ZAR 9.3 billion to ZAR 10.3 billion. The main driver of the increase in carrying value is maintainable EBITDA, which is based on Premier's last 12 months, achieved EBITDA of ZAR 1.6 billion. The valuation multiple of 7.6x is unchanged. Net debt of ZAR 1.9 billion excludes CapEx spent on the recently commissioned Pretoria mill and bakery. Brait's equity participation in Premier, first dilution for management's incentive scheme, is 97.3%. Virgin Active's carrying value decreased by 5% from ZAR 8.3 billion to ZAR 7.9 billion. Maintainable EBITDA is based on a look-through to a 3-year forward sustainable level of GBP 113 million, which includes GBP 3 million EBITDA from the Real Food acquisition that completed in that period. The 3-year forward valuation multiple of 9x remains unchanged. Net third-party debt of GBP 438 million includes a GBP 24 million normalization adjustment for the estimated effect of working capital and costs deferred during the lockdown period. First, the position of Real Foods nutrition assets, Brait equity and shareholder funding participation decreased from 70.6% to 67.4%. New Look's carrying value increased by 27% from ZAR 672 million to ZAR 854 million. Maintainable EBITDA is based on a sustainable level of GBP 55 million. The 1-year forward valuation multiple of 5x is unchanged. Net debt of GBP 38 million includes GBP 4 million adjustment for estimated deferred costs during lockdown period. Brait equity participation in New Look is unchanged at 17.4%. While enterprise revenue was largely flat, equity value increased due to Brait's pro rata GBP 9.1 million investment to purchase the commitments under the HSBC operating facility. The decrease in carrying value for other investments is mainly due to the realization of Brait IV investment in Consol. Turning to Page 10. The liability movements were driven by interest cost of ZAR 280 million for the period on the 2 bonds and the BML RCF; ZAR 140 million IFRS accounting charge, representing the 6-month pickup in the value of the deal liability component for the exchangeable and convertible bonds; ZAR 130 million translation impact on the rand carrying value of the 2024 convertible bonds; and operating expenses of ZAR 76 million, which are in line with the comparison. Slide 11 analyzes the Brait liquidity and debt. In terms of liquidity, cash balance as of 1 April 2022 was ZAR 83 million. Brait received ZAR 416 million proceeds from the investment portfolio, mostly comprising ZAR 377 million realization proceeds from the sale of Consol and ZAR 24 million shareholder funding repayments by Premier. Total expenses paid during the period were ZAR 128 million. Purchase of investments of ZAR 182 million relates to Brait's pro rata GBP 9.1 million investment into New Look, as stated earlier. Net cash outflow from financing activities of ZAR 150 million related to drawdown of ZAR 378 million on the BML RCF offset by capital and interest repayments of ZAR 308 million and ZAR 50 million, respectively, as well as accrued interest amounting to ZAR 109 million. The resulting group closing cash balance at reporting date is ZAR 48 million. In terms of borrowings at reporting date, the ZAR 3 billion BML RCF, which is secured by the assets of BML, was drawn at ZAR 2.6 billion at reporting date. Including the closing cash balance of ZAR 48 million, available liquidity at reporting debt was ZAR 451 million. Brait is in compliance with all debt covenants on the BML RCF and 2024 convertible bonds. On the 4th of November 2022, first reporting date, Premier paid a ZAR 950 million return of capital distribution to its shareholders. Brait's proceeds received of ZAR 924 million applied to paying down the BML RCF. In terms of the facility agreement, the facility limit reduced by ZAR 462 million representing 50% of the distributions received to ZAR 2.5 billion, resulting in post-balance-sheet available liquidity, including cash, of ZAR 913 million. Thank you, and over to you.

Thanks, Sabelo. Thank you very much. Let's then turn to the portfolio of companies and their performance. So starting with Premier. At a summary high-level performance perspective, a very, very strong 6 months. As I've mentioned, revenues were up 24% year-on-year to ZAR 8.7 billion. Pleasingly, EBITDA was also up 16% to ZAR 821 million and EBIT up to ZAR 604 million, which is a 23% year-on-year increase. But probably the most important point, I think, on this slide is actually the return on invested capital, which as you can see on the right-hand side, increased to 14.9%. That number used to be 8.9% probably 2 or 3 years ago and really does show what management have done with this business to increase not just the profitability but to ensure the capital base and denominator is kept under control. From a net third-party debt perspective, leverage ratio fell all the way down to 1.4x. As I mentioned, as part of the distribution, gearing was increased by just under -- just over ZAR 1 billion. And therefore, at the time of listing, the leverage ratio will be about 2x EBITDA. Again, I won't dwell too much on this page. The management team will be on the road in the course of the next 2 weeks. But I think it's important to say Premier and the feedback we've had from the market has been extremely positively received. Premier really is seen as a sector champion within the broader South African FMCG market. It is the largest unlisted essential foods business, hopefully soon to be listed. And I think very importantly, one of the key questions that we had from investors when we last spoke in May, I think it was, did the company has the ability to pass through cost pressures in a volatile inflationary environment. I think you can see from the results over the last 6 months that management has done a very, very good job of not just passing on price increases but growing volumes at the same time. It's got a very consistent track record of superior financial performance. As I mentioned, whether you look over 12 months, 18 months, 24 months or 36 months, the performance already has significantly outperformed the peer group. And I think this is largely because, over the last 6 or 7 years, there's been continued CapEx investment into really high-quality operating facilities, whether that be the Pretoria bakery or other bakeries around the country, including Cape Town, that the team has invested in, this really has set the business up to succeed. Over ZAR 5 billion has been spent on this -- on the various operating facilities in the group over the last 6 or 7 years. And I think credit must go to Kobus and his team, a very highly skilled and experienced management team who really do understand this market. And I think all credit for this set of results must go to them. In terms of the performance, I think we touched on some of this on the left-hand side. But if you talk at -- look at the market share progression, again, we see an uptick in market share literally across every single category, I think, by one over the last 12 months. And again, this is something that management -- the management team has invested behind to ensure that it happens. It doesn't just happen overnight. And this has been a progression over the last 2 to 3 years where market share in all of the key categories has continued to grow. From an operational highlight's perspective, full production levels have been reached at the Pretoria bakery. It was commissioned earlier in the year and fully commissioned the second line, I think it was at the end of March, and that's now running at full production, which is a massive milestone and, again, credit to Kobus and the team. We'll talk a bit about the numbers for the last 6 months. But as I mentioned, despite a 20% price increase as a pass-through of commodity prices, we saw a 5% increase in volumes over the 6 months. So the ability to pass on price increases and grow volumes really has been a double whammy for the business. The Mister Sweet acquisition, the confectionery business that was bought in the business, and the Outeniqua Bakery, which was acquired earlier in the year, have both been fully integrated. And in the case of Mister Sweet, very significant synergies of around ZAR 50 million of efficiencies have been achieved already in the first half of 2023. Moving on to the next slide. Just to give you a bit more detail on how the MillBake business performed. Again, as I mentioned, revenue was up 25%. The mix between -- price and mix was 20.2% up; volume, up 4.5%. So as I mentioned, the ability to pass on price increases as well as grow volumes has been demonstrated. With respect to EBITDA, EBITDA up to ZAR 761 million, 15% growth year-on-year. Whilst margins were impacted, importantly, we ensured that the contribution -- rand contribution number stayed the same. That's exactly what we focus on. So with higher commodity prices, you would expect, obviously, the margin to shrink if the rand contribution remains the same. Moving on to just quickly talking about Premier's ability to pass on the commodity price increases. You can see all the way back to 2019. So if we take the first half of the year back in 2019 to 2020 to '21, '22, '23, it gives you some idea of how volumes and prices have grown. The black numbers that you see there are volume growth. The green ones you see are price growth. So in every single comparative period there, you've seen the ability to pass on price increases to the market while still growing volumes. So very significant volume growth over that period of time. And if you look in the last half of the year, so first half of 2022 compared to first half of '23, as I mentioned, 20-odd percent increase in prices with a corresponding increase of just under 5% in volumes. So again, a spectacularly good result, which is reflected over the -- on the chart on the right, which shows that margins are up from -- if you rebase all to 100, 100 to about 160. And at the same time, the SAFEX wheat price is also going from 100 to just over 160. So very significant margin improvement in the business as it's continued to pass on price increases whilst growing volumes. But equally pleasingly, the rest of the business has also performed very well. So the Groceries & International business, revenue up 20%, nearly ZAR 1.5 billion of contribution from this part of the business, which is very, very significantly up from where it was only 2 or 3 years ago. Pleasingly, EBITDA up 24% and margins up slightly to ZAR 112 million. The contributing parts of that sugar in confectionery increased by 46% to just under ZAR 0.5 billion. Clearly, part of that was due to an increase in Mister Sweet, which only had 3 months of consolidation in the prior year to 6 months this year. But again, across the board, whether it be home and personal care up 9% or CIM revenues up 12%, pretty significant contributions across the board. Just a quick breakdown of the income statement. As I mentioned, EBITDA -- sorry, revenue is up 24%; MillBake up 25%, groceries up 20% supported by the inclusion of Mister Sweet for the first full year; EBITDA, up 16%. And I've touched a bit on that. Corporate head office costs effectively only increased by 7% once you exclude the one-off transaction costs due to the IPO. EBIT, pleasingly up 23%. And the reason for that is, as I've mentioned in the past, very significant overinvestment in the assets over the last 5 years. I think we have about a 30% to 40% -- when you increase compared to our peer debt when you compare EBITDA to CapEx, so a significant investment in the portfolio. And that has seen our depreciation and amortization increase over the years. Very pleasingly, for the first time in a long time, that's been flat or slightly down year-on-year. And I think we'll continue to see that going forward as that investment continues to unwind in our P&L. From a cash flow perspective, again, a very significant increase in the performance cash flow from operations before working capital of just under ZAR 900 million, up from ZAR 731 million relatively similar working movements of ZAR 264 million. Adjusted for that is the debtors, which came in literally 2 or 3 days after the month end. So effectively, a net increase in working capital there of just about ZAR 150 million, which is exactly the same as last year. Maintenance CapEx, very significant number this year where we continue to invest in our facilities as we promised investors we would do. And if you compare that with the expansion in CapEx we had last year, the expansion CapEx slightly down. Most of that was in the Pretoria bakery. We finished off the Pretoria bakery in terms of it was commissioned early in March. So decrease in expansion in CapEx but an increase in the maintenance CapEx over the year. And that resulted in operating cash flow post-CapEx costs and the finance costs in tax of ZAR 300 million, which compares to ZAR 134 million in the previous year. That was responsible for driving the debt down to a level of 1.4x from 2.1x this time last year. In terms of the outlook and before I get on to the offer structure, post year-end, as Sabelo mentioned, premier refinanced long-term debt. It increased the debt by just over ZAR 1 billion, lower interest rates, increased taxability and a full bullet repayment profile. So it does show the banks are very keen to lend to this business. So therefore, overall, despite the increase in debt, there won't be a significant increase actually in the interest, given that we've got it refinanced at lower rates. ZAR 950 million was distributed to Premier shareholders, of which we are 97%, as a special distribution based on the restructuring of the balance sheet prior to the IPO, i.e., the removal of the interest-bearing shareholder loans, which we had in there. From a recent trading perspective, trading has continued very strongly since the 30th of September, pretty much across all of the businesses. Commodity prices do remain elevated, but I think we would say, relative to history, but I think the volatility has reduced over the past 6 months, which makes it easier to manage. Volatility is the killer in this as opposed to an elevated commodity price, per se. Premier remains well covered, both from a commodity supply and pricing perspective. And I think the management team has done a very good job on the procurement front. We have seen, obviously, discretionary income under pressure. I think that is across the entire country. But I do think we continue to see, particularly in the informal space, the continued downtrading to Premier's product range. From an outlook perspective, as we mentioned, Premier announced this morning, its intention to Float on the JSE. We do genuinely believe that the business remains well capitalized with respect to growth opportunities, both organically and there are significant numbers of growth opportunities organically but also in complementary adjacencies, and the management team continues to look out for opportunities there. You can see the benefit of operational leverage when you're growing revenue, and you've got a relatively fixed cost base. And I think the management team remains very focused on optimizing both the cost base and the operating platform going forward. Just talking a bit about the Premier listing, which was announced this morning. There's obviously a lot more detail in the ITF. So we would encourage investors to read that, but I'll try and give you a summary of that. From an offer price range perspective, that has been set at ZAR 53.82 to ZAR 67.04, which as I mentioned, equates to an equity value of ZAR 6.9 billion to ZAR 8.6 billion. Just to give you an idea, that is after the refinancing. And I think it's important that, that number won't tally with the NAV that you see in our books. So from an enterprise value, that range corresponds to ZAR 9.8 billion to ZAR 11.5 billion as an enterprise value, which equates to an LTM EV/EBITDA of 6 to 7x. I think, very importantly, when we talked to institutional investors in May and June, we went with our ears open. And one of the key messages coming back from investors was ensure, given that we're going to own -- as I said, Brait's going own somewhere between 50- and 60-odd percent of Premier post the listing and strong aftermarket performance is absolutely key. So the important message that came from investors was get the right investors into the book, price it in the right basis, allow investors from Brait to invest into the IPO to minimize any dilution. And as part of that, you'll ensure that you have a strong aftermarket performance. The value range, I think, suggests that we have given all Brait investors, as I mentioned, the opportunity to invest pro rata. They will get preferential allocations, but we genuinely believe this gives all Brait investors the best way to realize a significant amount of value out of Premier whilst being able to put a net pro rata share. The base offer size will be ZAR 3.5 billion, which all comprised of secondary shares sold down by -- effectively sold by Brait. And there's an overallotment option, which equates to ZAR 200 million. So the total offer size is actually ZAR 3.7 billion, of which the greenshoe is ZAR 200 million. The ITF was launched today. The offer will open on the 22nd of November and close on the 2nd of December. From a cornerstone investment perspective, we are extremely appreciative of Titan, and another investor who's come in already. They've committed to take 36%, which is their pro rata share of the base offer size committed throughout the price range. So it doesn't matter where the price is. Titan will undertake to take its share of the offer. Titan will also remain -- take the remainder of the base offer if it prices at the bottom end of the range, so long as there's sufficient free float taken up by the institutional investors. Should the IPO not achieve the JSE free float, it obviously wouldn't list. And under that scenario, Titan and RMB will invest ZAR 3.5 billion at the bottom end of the price range, and Premier would remain unlisted. So as I mentioned before, any shareholders who participate in the IPO and, therefore, mitigate any dilution, will be entitled to preferential allocations with reference to their fully diluted shareholdings in Brait, and all Brait shareholders who submit an order into the book for their pro rata share will also -- and this is something new to given their -- cession of their voting rights. And the reason we did this, we also heard from investors that why weren't we unbundling Premier in totality today. We can't do that until we settle the convertible bond, as you know. But what we tried to simulate as far as possible is a full unbundling today. Now we've done that, obviously, through selling a portion of the shares. What we've also undertaken to do is any shareholder who wants to get their pro rata voting rights and put an order in the book with their pro rata share, we will, as Brait, give them their pro rata share of our voting rights on post-IPO. And again, we think that simulates as far as possible under the structural constraints we have an unbundling. As a result of the cornerstone investment in Brait that Titan is putting in, they will end up earning 36% of the voting rights. Obviously, it wouldn't have been fair to make them take a mandatory offer for the business. So we -- a [indiscernible] resolution was passed to ensure that, that didn't happen. From a lockup perspective, again, we heard one of the most important points from investors in the IPO was that there wasn't an overhang. From a Brait perspective, as I mentioned, we dealt holistically with the debt. We're happy to be locked up for 360 days. We do not need the further liquidity. The standard lockup for Premier of 180 days, for Titan of 180 days, and for senior management within Premier of 360 days. So as I mentioned, the IPO, together with the recently concluded distribution, will see ZAR 4.5 billion of proceeds after costs sitting with Brait, which will be used to repay the RCF and clear its path towards unbundling the rest of the assets to shareholders in due course. From a timing perspective, quickly, research was published today. There are 3 banks working on this. It's Standard Bank, Investec and RMB. All 3 analysts have published research today. They are on the road for the next week or so, and then Kobus and the team will start the management roadshow on the 22nd of November. The books will open on the 22nd and close, as I mentioned, on the 2nd of December. The expected listing date is the 8th of December, and we're very positive that, that will happen. That's enough on Premier. Moving on to Virgin Active. Just to give you a quick territory update, and the numbers on the right-hand side show the year-to-date membership growth. So that's numbers of members at the beginning of the year, how much of each territory increased it by in the 9-odd months to -- sorry, 10 months to October. Starting with South Africa, pretty strong sales across the last 9 or 10 months, significantly ahead of budget or significantly ahead of 2019 levels and pretty much in line with budget. We see net membership growth of about 90,000 members over that period of time. And that compares to about just under 30,000 members at the same time in 2019, which was a good year for sales, a nearly threefold increase in membership growth -- net membership growth over the last 10 months. Net members -- net active members now are 587,000 in South Africa. From a perspective of what is the management team been up to, significant refurbishment of a number of key clubs has been undertaken, and we've seen very strong operating metrics post-reopening of those clubs, and we'll continue to look to do that. New Managing Director in the form of Jessica Spira is getting her feet under the desk and very successfully so. She started on the 1st of October. And we look forward to continued engagement in the business. And we've seen a number of initiatives in the South African business, driven by Dean and the team, particularly the Padel initiative, which we really think is starting to increase the membership engagement around the South African business. And we've seen that already in a lower termination rate, certainly over the last 9 months or so. So again, from a year-to-date perspective, a membership growth of 18%. Italy. Italy had a very slow start to the year. As you'll remember, COVID restrictions were only really lifted at the beginning of April. But since then, there's been a very, very strong recovery. They're up to 141,000 active members, so 35,000 new members, this year active members. And if I gave you the same number for last year, that was actually 8,000. So again, doing the math in my head here, but nearly a 4.5x increase compared to what we did in the same period for 2019. Whilst there has been strong performance, the inner-city clubs remain underutilized. It is an improving trend, but we still believe that there's some growth to happen once the work from home starts to -- trend starts to change. There have been a very significant increase in utility costs. I'll talk a bit about that later when we talk about the results. And we've opened 3 new clubs very successfully. Luca's opened 3 new clubs in the territory. And it's very pleasing to say that the total membership is above the 2022 breakeven membership level of 141,000 members. So a 33% increase year-to-date, a very significant and very pleasing performance. On the U.K., again, a relatively decent performance on a year-to-date sales perspective, up 17%. It had a very strong first 6 months of the year. I think the last couple of months have been a bit slower, really driven by, I think consumers being under pressure in the U.K. as we've mentioned. But they've increased their membership base since the beginning of the year by 18,000 members net, and that compares to 2,000 members in 2019, so 9x more than they did in 2019. But I think we have started to see the consumer under pressure in the U.K. We have seen increased terminations, and we've continued to have to drive sales growth and active -- activate new flexible memberships to ensure that we can continue to grow our membership base there. There's a focus on reducing operating costs, which is already happening in that business, especially since utility costs in the U.K. as they are in Italy and growth CapEx on certain clubs is required over the next couple of months. From an APAC perspective, there've been long delays in COVID restrictions. In fact, I would say, Thailand and Singapore still remain under some of those restrictions. That said, they've increased their membership base by 20% year-on-year. Australia is sort of more residential. Clubs there performed very, very strongly. What hasn't performed as strongly is the inner-city -- in urban clubs. Those continue a bit like the London clubs to remain a bit under pressure. And we look forward to that relief coming through in that when those -- when that starts to change. From a head-office perspective, Dean and the management team have restructured the way they focus on the business from a global -- to start focusing globally as opposed to operationally by territory. And this really has seen 2 things: one, a massive reduction in costs, but secondly, much more improved accountability by the management team across the various countries as opposed to their own individual territories. A significant focus remains on what we call a quantitative capital allocation. When we look at growth projects, there are growth projects. Dean and the team remind us, we've got to continue to grow to expedite the recovery, but we also need to manage tight liquidity. It is tight. It remains tight due to obviously higher interest rates across the board. Utility costs, particularly in the U.K. and Italy, loadshedding-related CapEx in South Africa. And obviously, we want to bring forward some refurbishment CapEx. So all of that does put a strain on liquidity. So we need to measure both growth opportunities against ensuring that we continue to have sufficient liquidity in the business. I'm not going to dwell significantly on the strategy other than to say, across all of the 6 key pillars of Dean's strategy, we're starting to see the benefits of that. I highlighted that in the previous presentation we gave back in May. I think it was we tried to show you what the outcomes are for the business. And we're not going to in detail. Really, it's around membership engagement, membership engagement and again membership engagement. If we get membership engagement up, we will reduce churn. We'll get ancillary revenues in through our enhanced product offering. And we'll be able to, in time, reduce terminations and grow sales through our IT platforms. So if we can get that right, we ensure that we spend the right capital on the right opportunities, we genuinely think this business really is that -- going to get back to where it was and hopefully ahead of those 2019 levels. Just talking a bit about that to try and give you some idea of the growth in members, the top chart shows you the South African membership growth year-to-date. So it started with 497,000 members on the 1st of January at 70% of 2019 levels. That number has grown to 587,000 active members at 81% of 2019 levels. And again, if you look at the U.K., it started with 257,000 members or 67% of 2019 levels, and that's going up to -- growing to 318,000 or just under 80% of 2019 levels. On the right-hand side, you can see the October numbers. Closing members as a percentage of 2019 is around about 80%. It's just over 80%, but rounding gets you to 80%. Closing members being 927,000 members with 2.4% of those on freeze, giving active members of 905,000. Drawing your attention to the year-to-date growth. As I mentioned, 20% up year-to-date. That means on a net basis, we've added 151,000 members, and that compares with 55,000, so nearly a threefold increase over what was added in 2019. And I keep reminding people that 2019 was actually a strong year from a growth perspective in the business. Taking you quickly territory by territory, talking quickly on South Africa. You can see at the top where the restrictions were lifted. And again, without going into a huge amount of detail, the closing membership base in October is now 81%, up from May, which was the last time we reported to you at 78%. Closing members of 595,000 with active members of 587,000 members. So growth year-to-date of 18% or 90-odd thousand memberships compared to 28,000 in the same period in 2019. Moving over to the U.K. From a U.K. perspective, U.K.'s closing membership is at 72%, up from 70% in May. So again, progress in the right direction. That means it has closing members of about 132,000, 5% of which remain on freeze that's higher than historical averages. So we would hope to see that trend continue downwards with an active membership base of 125,000. Year-to-date growth of 17% year-to-date, and that is 18,000 memberships compared to 2,000 memberships in 2019. Moving across to Italy. As you can see Italy there, the restrictions were only really lifted at the back end of March, starting of April. So we've had a relatively short period of time in Italy with the gyms fully open. But it's very, very pleasing to see the closing membership has jumped from 77% to 87% in October. Closing members gone from 129,000 to 145,000 and, even better, the active membership base gone from 123,000 in May to 141,000. So very significant jump over the last couple of months. As I mentioned, year-to-date increase of 33% of 35,000 members compared to 8,000 for a similar period in 2019. Just finishing up on the territories around Asia Pacific. Asia Pacific is a laggard. As you can see at the top there, we remain restricted in what we can do in some of those territories, particularly around Singapore and Thailand. That said, the last couple of months have been better once Thailand and Singapore had been out, and you can see it in the numbers, pretty much since June, going from 45,000 members up to 52,000 members in October, which is pleasing and headed in the right direction, but we've always said that this part of the business, in particular, is going to take some time to get back to pre-COVID levels. As you can see in the October year-to-date numbers, 20% up year-to-date but actually 9,000 additional members compared to 16,000 additional members in 2019. So it's the one territory that's a laggard compared to where we were in 2019. What we try to do, and we keep getting asked questions on this, and we keep refining how we show these numbers. I just want to spend a bit of time on this slide to show investors what we've done. What we've done in the top 2 charts, effectively, if you take the number of members in any particular month, closing members in any -- active members in a particular month, you charge it 5x that number by the yield, which is effectively the average price that those members are paying year-to-date. And then you sort of track the cost base year-to-date with effectively an annualized cost in that particular month. You will get a very good idea of what the annualized run rate EBITDA is. Now just to tell you, it's not a forecast. I don't want anyone to think that we're going to forecast the numbers going forward. All I can say is, for example, in October '22, if you take the normalized -- sorry, the actual year-to-date yield, you add it to the -- you times that by the number of subscribers or members we have as at October '22, and you take off annualized costs, you will see that, on an annualized basis, the group has moved to a positive GBP 14 million of EBITDA compared to January when, on the same basis, the run rate was minus GBP 25 million. The difference between those 2, as you can see, is about GBP 40 million. To give you an idea, the GBP 150-odd million net subscriber growth adds about GBP 65 million of revenue, of which GBP 40 million ends up as an increase in EBITDA. The chart on the bottom does slightly -- exactly the same analysis. All it uses is a normalized yield. The difference between the 2 is, obviously, if you have specials in place at the time, for example, you offer 50% off the first 3 months of joining, your year-to-date yields will be below what we call a normalized yield, which is what the yield will be once the specials filter out after that 3-month period. And again, on that basis, if we apply a normalized yield to today, October '22, we would be making on a run rate basis GBP 24 million of EBITDA across the group, obviously, a difference between different territories. On the top right-hand side, you will see from a yield perspective what we tried to show is what was the yield in 2019 on an average. So take South Africa. If you rebase that to a GBP 100, the year-to-date actual is GBP 104, so a 4% yield increase. And the normalized yield that we use is also GBP 104. Take the U.K. as an example, U.K. of GBP 100. As you can see, the year-to-date actual yield is GBP 91. We use a normalized yield of GBP 98. The difference between those 2 is largely driven by their inner-city gyms, which are higher margin, as you can imagine, higher revenue, higher yield. So obviously, the fact that those are being underutilized is why, from a yield perspective, the U.K. is down compared to where it was in 2019. And hopefully, from a normalized perspective, we'll go back to 98 or closer to 100. From Italy, for example, the year-to-date of 95, we've used the normalization pretty much in line with that of 94. And then again, you can go down the list and see exactly what that means. Then at the bottom, what we try to show is what does that mean in terms of the total membership growth and actual yields. So if you take, for example, the year-to-date average at 80%, that's where we are today, that 13.9 is the 14 that you see in the top left-hand chart. On a normalized yield, that would equate to 23.8, which is the 24 that you see on the left-hand side of that chart. So for example, if we did not change the normalized yields going forward, and we had 100% of the same members that we had in 2019, the business would be making GBP 116 million, excluding what we get from the Real Foods business. Again, to give you some idea of the 110, which is what we use for this part of the business but free for Real Foods, that is somewhere between 84.8 you see on a normalized yield basis and 116. It probably equates to, as we said before, somewhere between 96% and 97% of our total membership base. If we get back there, that effectively equates to the EBITDA, assuming no yield increase between now and then. Just moving on to the last slide, quickly on Virgin Active, what's the focus area going forward. Absolutely key is the continued membership rebuild and yield. We focus on both. It's not -- it's important to do so. We have seen relatively good membership growth, which has been good across the territories. But these have included some promotional offers. As I mentioned, you can get 50% off the first 3 months if you sign up to a 12-month contract. So things like that have impacted the year-to-date yield. We would hope to see that normalize, which is what we tried to show in the numbers on the previous page. The key focus is it remains on getting the inner-city clubs back to full capacity in U.K., Italy and Australia. From an operating cost perspective, there have been significant operating costs taken out of the business, both at a head-office cost level where we restructured the management structure. And we need to continue to focus on costs in this business to ensure it's aligned with its potential growth. There have been very significant cost inflation, particularly around utilities in the U.K. and Italy, and this remains a key focus for management going forward. Obviously, to the extent we can continue to shift online membership enrollment, which will continue to reduce sales commissions, it's a very, very big cost across the group. And as we see that continue to grow, we will see that cost line item come down in time. From an IT perspective, we continue to develop and roll out the group membership app, which I think will be done in early in the new year, and we genuinely believe this will significantly improve the customer experience. And as an engagement tool, we really do hope this will help us reduce churn and improve engagement across the portfolio. From a capital allocation perspective, I think I've touched on this. We need to continue to focus on where we should continue to invest and expedite trajectory back to pre-COVID levels. In some cases, that does mean we need to spend CapEx in advance of what we had in the plan, but we have a very quantitative and ROIC-focused decision-making framework to ensure that new capital spend is spent on the right projects. We do continue to manage the tradeoff between liquidity, growing liquidity -- growing -- investing capital to grow and liquidity, and that remains a very significant focus on both the Board and the management team. And then lastly, obviously, we need to continue to invest for growth. There are territories where we think we can consolidate our leading market positions and grow. There are equity territories where we think we can prune some of the portfolio. So we need to continue to focus on that. We're investing into product and people, so people who need personal trainers, et cetera, to continue to ensure that the membership engagement and experience improves. And then we will continue to invest in new sites or enhance existing sites where we can see tangible opportunities to grow and -- to grow revenues. Moving quickly on to New Look. As you know, this is a much smaller component part of the business. It's around 5% of our NAV. So I'll touch on this much quicker. From a revenue perspective, our 3% year-on-year for the 26 weeks to GBP 430 million of revenue and relatively good performance as retail up 7% in terms of revenue, online slightly down, growth orders -- growth in orders but slightly down in terms of slightly higher returns in online. But again, across the mix, a relatively pleasing portfolio performance given the difficulties of the market. From an EBITDA perspective, GBP 28 million, which is up 4% year-on-year, but I'll touch over the page on what we said on the right-hand side. Last year, we had GBP 17.5 million of cost support from the U.K. government, which is not reflected in this year's numbers. So actually, if you compare year-for-year, a very significantly outperformance by the management team. From a cash perspective, the business has GBP 51 million of cash in the business, which excludes the GBP 50 million that was recently raised by shareholders to repay the HSBC facility. So again, I think the business is in decent shape. The key is obviously going to be the December quarter, the next couple of months to see how this business performs for the full year. Again, just touching quickly on this slide. I won't dwell on detail because I think I have mentioned it. Just to touch on the bottom hand -- the bottom left-hand side there. As you can see, year-on-year, as we mentioned, EBITDA up 4%. But actually, if you compare it to what EBITDA would have been if we didn't have the COVID relief from the U.K. government, the EBITDA has increased from GBP 9.5 million to GBP 28 million. So I think it is genuinely a very strong performance by the management team. Costs have been taken out of the business. The business has been managed very efficiently. And I really do think it has a platform to continue to grow in what is a very, very difficult operating environment. Just quickly getting on to the valuations. Without spending much time on the Premier valuation, we have not changed the methodology. We kept it exactly the same as we've done for many years on a post-IFRS basis. We take the LTM EBITDA of ZAR 1,635 million, and we apply a 7.6x multiple, which is effectively the peer group average on a post-IFRS basis. That gets you to an enterprise value of ZAR 12.5 billion. The net debt, and this is pre- the special dividend, which is what I mentioned before, ZAR 1,897 million gives you a shareholder value of ZAR 10.6 billion. That is equivalent of ZAR 9.6 billion when you compare it to the equity value that we're talking about in the IPO because, obviously, we've received nearly ZAR 950 million dividend since then. At the bottom left-hand side, you can see the peer growth compared -- sorry, the growth compared to the peer group, very significant growth this year, unlike the peer group. And I think it's very important from a return on invested capital, which I saw some comments in -- this morning from Twitter as to why you would invest in a business like this, very important and pleasing to see return on invested capital of 15% compared to a WACC of probably around 12%, and that is a reason to invest in the business. If you can have a return on invested capital above your weighted average cost of capital, that should give you a premium rating. Moving to Virgin Active. Again, we've kept the valuation methodology 100% the same except for including the Real Foods business. So the GBP 110 million of sustainable EBITDA remains as a September 2024 EBITDA. We've added GBP 3 million, which is what we believe the EBITDA will be from Real Foods, as at that point in time, we applied exactly the same multiples we have since March 2020. The adjustment to net debt is a slightly higher actual third-party net debt in the business, which is the cash burn in the business that we've seen over the last 6 months, has resulted in a slightly lower decrease in the valuation of around GBP 480-odd million or 300 -- sorry, GBP 393 million as the value of this business with about ZAR 400 million difference in valuation. And as you can see on the top right, what we just tried to show in terms of ensuring that we look through the cycle, if you look back to January 2020, the peer group, they all had a market capital of GBP 100. The peer group is now trading at GBP 85 of what it was in January 2020. Our equity value within Virgin Active, where we value this business is at 39% of where it was in that comparative period. Moving on to New Look. The New Look valuation methodology is exactly the same. We've used the same maintainable EBITDA despite I think a slightly better operating performance. We've applied the same multiple to it. The only difference between the 2 is, as you can see, our net third-party debt has come down. That's effectively the operating facility that was repaid with HSBC. And you can see the additional PIK facility that went in the 50. So actually, the valuation increase, from a rate perspective, it's flat year-on-year, excluding the GBP 180-odd million that we injected to refinance the HSBC operating facility. So again, very little change with respect to the valuation of this business. Just moving quickly on to the Brait strategy. Again, very unchanged from where we showed you in May. Just in terms of the timeline, we've announced today the Premier IPO, which would result in Brait selling somewhere between 43% and 53% of its stake, depending where in the price range the IPO price is. The RCF will be fully settled. We will have ZAR 2 billion of surplus cash to -- for general working capital purpose, investment purposes potentially. And if you look at the sale of New Look, which we're planning for somewhere between March '24 and September '24, that would enable us to repay the convertible bond with the existing money that we're raising hopefully over the next couple of weeks in the Premier IPO. Post the exchange of the exchangeable bond, we would then unbundle the remaining Premier shares to Virgin Active -- and Virgin Active shares to Brait shareholders. So absolutely, the strategy remains on course. In fact, having dealt holistically with the debt, we would like to think there's an opportunity to expedite this unbundling, but obviously, there are a couple of hoops to jump through. But this is what we promised to investors. And I think the listing of Premier is certainly a very key and first step in delivering that for investors. With that, I will hand over to any questions that investors have. Thank you very much.

[Operator Instructions] At this time, there are no questions on the phone lines. I'd like to hand over questions on the webcast.

Thanks very much. The first question is from [ Titanium Capital, Charles ]. Thanks very much again. The question is, will Premier allocation rights be offered to all Brait shareholders or only key institutions approached prior to listen. I -- will rights be allocated to all Brait shareholders who can elect to take up Premier IPO shares, saving which they will be taken up by parties that commit to take up along -- I think I get your message Charles. Charles, it will be offered to any existing Brait shareholder who is allowed to participate in the IPO. Obviously, there are restrictions from a retail perspective about who can or can't participate. But any Brait shareholder who wants to participate and can participate in a listing, which is not driven by us; it's driven by regulatory requirements, will be offered the same allocation right. Just so I'm clear, it's not a guaranteed allocation. It's a preferential allocation. By that, I mean, let's say, at the market clearing price of ZAR 60 a Premier share, we had an investor who wanted 200 million, and we had another investor wanted 200 million, one was a Brait investor, and the other wasn't, we would give preference, not a guaranteed allocation, but definite preference to the Brait investor so that they can mitigate any dilution through the offer. So Charles, so long as you can participate, we look forward to being able to give you as much as you would need in the listing. Next question from SaltLight Capital, [ Dave ]. Please provide more detail on where the net proceeds of the Premier unbundling are going after paying the RCF. As you can imagine, Dave, there's, call it, ZAR 2 billion of surplus cash in the business. we will obviously not be investing outside of our existing portfolio. There may be opportunities to invest in the existing portfolio where required. So that could always be something that we would look to do. I mean, obviously, from our perspective there, we will continue to look at the capital structure. And by that, I don't need to give much away. We've got a convertible bond there. There are opportunistic things that we can do around that potentially. We would look to see how we can add value for investors around that. So we will look at all options, to be honest. But what we will do is ensure as far as possible that we ensure we have a hedged position against the convertible bond from a currency perspective. So there are lots of opportunities, Dave, both in the portfolio but also from a capital allocation perspective within the current capital structure. Second question, most of the businesses are free cash flow positive. So is it the intention that it goes to fund CapEx for Virgin Active? If so, how much do you anticipate being deployed? So again, to that question, there isn't a specific number that we have in mind. There are lots of really good growth opportunities in the portfolio. I think what we have seen is early investment in rejuvenation CapEx, and that's what I call it. It's probably maintenance CapEx, but expedited maintenance CapEx really absolutely does pay dividends. There's probably 6 or 7 clubs in South Africa where we put decent capital spend into to rejuvenate the estate. You see it instantly in new membership growth and lower terminations. So for us, we sit there and say, "Well, look, guys, if we can expedite that, and we can see a trend, would you put more capital in to expedite the growth back to 2019?" Well of course, you would. But we are extremely conscious of ensuring that we need to maintain liquidity as well as growth projects. So I think we will continue look at opportunities there, Dave, but there's nothing penciled in for now. But the early signs are pretty clear to us that where you can find opportunities, and I'll give you another example, one of which is, say, Wimbledon in the U.K., Wimbledon we genuinely believe that we can reinvest in that estate. It really does need some rejuvenation CapEx. But the ability to then increase the yield is -- you can genuinely, tangibly see where the revenues can come from. So there's another opportunity where we would rather expedite it then wait till the capital is available. So I think it is going to be wait and see, and see where the opportunities arise. We've got a Board meeting next weekday where we'll go through line by line what management is looking to do. Moving on to the next question from [ Tiat at Roden Investment Management ]. Can you start buying back the convertible bonds with your surplus cash post-RCF-paydown? Very importantly, in the exchangeable bond documents that we sent out, you can't move capital past the exchangeable bondholders without their approval. So to the extent we wanted to do something around those -- around the convertible bonds, we would need to first ensure that it is something that the exchangeable bond, obviously, you remember, obviously, benefit in the share price upside are happy to do. But to the extent we can do that, and we think there's opportunities to do that with the investors that are in the exchangeable bond, yes, you would be able to start buying back the convertible bonds, but it's one of a number of things that we would look to do. The next question is, do you see -- same question, do you see for -- other cash injections in Virgin Active. Again, just to be clear, where the right opportunities exist to expedite growth and where we can see a tangible upside to doing so, we will continue to look at that. So we'd be mad not to, quite frankly, but there's nothing imminent that we are looking at today. As I mentioned, we've got a Board meeting coming up. Clarissa from Fairtree. Could you please let us know the run rate expense growth in the various VA territories currently? I actually don't have that number. Sure. Vanessa -- sorry, Clarissa, I actually don't have that number, I'll be absolutely honest with you. But just -- let me just give you some idea of -- from the top of my head here, right? Again, it's different by territory. I would say utility bills in the U.K. and Italy are -- round number is around 10% of your cost base. As I mentioned, and I think I've told you this number before, where it was 2, 3 months ago is those utility bills were two, threefold more than we had budgeted for, not 2%, 3% more, two, threefold more. Now obviously, it's come back a bit of late. But that gives you some indication of what sort of pressure is there around utility costs in couple of those territories. Ironically, in South Africa is a bit the opposite. Our utility bills have come in slightly lower than we had budgeted. So it is territory by territory different. From the U.K. perspective, we've taken out significant costs through the restructuring. So costs like-for-like are down in the U.K. We've added a couple of new clubs in Italy, 3 new clubs, as you know. So the cost base is slightly higher in Italy. So it's really difficult territory by territory. I think I've mentioned to you in the past that, again, probably 30% of our cost base in the South African business is driven by rentals. And around that, what are we seeing? We are seeing rental reductions literally across the portfolio. As I mentioned, we've probably got a 10- to 12-year cycle in terms of doing so. So if you think about that, it's about 8% to 10% of your portfolio comes up for renewal. And on those, we are seeing anywhere between 15% and 30% reduction in many cases in potential costs. So yes, I can't answer the question. I don't have it at hand, but I would suggest management has got a good handle on costs, and we're trying to keep them down to the extent possible. Obviously, there's some exogenous factors, particularly around utility bills. Those are the only questions that I have, and we can go back to the lines in case there are any others.

At this time, there aren't any questions. [Operator Instructions] Peter, there are no questions on the phone lines. Could I perhaps hand over to you for closing remarks, if there aren't any questions on the webcast?

Thanks so much. Quickly, again, I just want to thank all the investors for taking the time. We genuinely do appreciate it. As we always say, between Rohan, myself and Sabelo, we're always available to ask -- answer any questions. So if there are any, please reach out. Hopefully, people can see that what we said on the can in terms of unbundling and getting the value back to shareholders is starting to take place. We would really hope that shareholders participate and enjoy the benefit, hopefully, over a new listing on the JSE, but we really appreciate the support we've had over many years from the Brait investor base, and we look forward to obviously completing the Premier IPO. Many thanks for taking the time. Thank you.

Thank you very much, sir. Ladies and gentlemen, that does conclude today's conference. Thank you very much for joining us. You may now disconnect your line.