Private equity market helps Brait double its profit
November 4, 2005
By Sherilee Bridge
Johannesburg - Investment firm Brait is expecting to post sterling full-year earnings after doubling its first-half profit, return on equity and interim dividend.
Brait's shares rose 3.38 percent on the news. They closed 70c up at R19 yesterday. The shares have nearly doubled in value this year and rose 185.84 percent in the past 12 months.
It has benefited from a resurgence in the private equity market, where a number of management companies are in the process of raising funds, driving strong growth in the market.
The local private equity market is well developed, with R42.7 billion under management at the end of 2004. This equates to more than 2 percent of South Africa's gross domestic product.
Private equity, which makes up 80 percent of Brait's business, recorded a 44 percent increase in operating profit in the six months to September 30.
This helped boost total profit from operations by 94 percent from R77.8 million to R150.6 million in the six months.
Net income climbed to R130.6 million from R52.9 million a year earlier and annualised return on equity - a measure of profitability - increased by 37 percent from 20 percent.
An interim dividend of 7.85 US cents a share, against 3.5 US cents a share, was declared. Funds under management increased by more than 50 percent to $793 million (R5.2 billion) and the company has $16 million cash on hand.
Led by chief executive John Coulter, Brait has come a long way in the past year and a half. After a return to basics, Brait is now aiming to create a more balanced portfolio of businesses to diversify its earnings base.
Its corporate finance business recorded a 169 percent increase in revenue in the six months under review, while its specialised funds business grew income by 86 percent and income from its group investments business grew by 73 percent.
"We are also very pleased with how all other business lines are continuing to increase their profitability," said Coulter.
Specialised Funds grew assets under management in the Brait fund of hedge funds by 245 percent to $180 million, which "highlights the strong potential of this business", Brait said.
The company believes its business risk management capabilities will be its differentiator in a growing industry.
"Private Equity will continue to deliver well, with Brait IV expected to be a major contributor.
"Specialised Funds is poised for a significant upswing in earnings and our corporate finance and specialised debt teams are focusing on higher-margin earnings in the mid-cap sector," Brait said, adding that its microlender Bayport, the largest contributor to earnings in its group investments business, would continue to perform well.
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