02 Sep 2020 Eating in supports Libstar
While the diverse food group missed out on restaurant trade during the lockdown, consumers bought more of its products to prepare at home.
Libstar has reported a small rise in first-half sales as households bought more of its products during the lockdown, making up for a decline in sales to hotels, restaurants and fast-food customers.
The company, whose brands include Lancewood cheese, Denny Mushrooms and Finlar Fine Foods, said earnings were impacted by extraordinary expenses of R44-million due to Covid-19, including R22-million in direct operating expenses.
Revenue increased by 1.9% to R4.71-billion over the six months to end-June. Demand within its retail and wholesale channel was strong but the closure of hospitality venues weighed on the performance of its food service channel over the six months. Normalised earnings before interest, tax, depreciation and amortisation (EBITDA) fell 5.4% to R457-million. Excluding extraordinary Covid-19 operating expenses, normalised EBITDA was 3.7% higher at R501-million.
Normalised headline earnings per share declined by 18% to 24.2c. Libstar says the normalised numbers indicate its true operating performance as they exclude non-recurring, non-trading and non-cash items.
Libstar’s investment in working capital increased to 14.8% of revenue as a result of holding higher inventory of imported meal ingredients to ensure product availability during Covid-19. Despite that, it said it remained highly liquid, improving its cash flow conversion ratio to 64% from 62%.
Since the end of June, it said shipment and fulfilment rates of exported dry condiments had improved. This, combined with cost-rationalisation in its home and personal care (HPC) business, would underpin second-half earnings.
Commenting on the results, Libstar CEO Andries van Rensburg said: “In this difficult trading period, the group has continued to work in pursuit of the protection, safety, health and well-being of Libstar’s people, the preservation of cash and maintenance of our financial stability to deliver superior service levels to customers.
“We will continue to capitalise on existing and new growth opportunities, enabled by our well-diversified portfolio of brand solutions, manufacturing capabilities and category growth plans.”
Looking forward, he said:
“Our food categories will remain at the heart of our growth strategy. We are well positioned to capitalise on key consumer trends and changing consumer lifestyles, including the supply of products which cater to consumers’ health and wellness, home cooking and baking, convenience, and eco-friendly needs.
“Although our performance is traditionally stronger in the second half of the year, the impact of Covid-19 in the already weak economy cannot yet be quantified. We are, however, seeing promising signs of recovery and will continue to pursue the opportunities that the market presents.”
Libstar is also going ahead with the payment of its 25c per share dividend for 2019 due to stable cash flows. In April, it postponed the payout due to the uncertainty caused by Covid-19 and the lockdown.
Libstar fell 10% to R6.25 yesterday. Its shares rose 15.7% on Tuesday ahead of the release of its results.
Source: LIbstar, InceConnect.co.za