Libstar Holdings Ltd. · JSE:LBR
Libstar — H1 2019 Earnings Presentation
62 slides from Libstar's earnings presentation, Jun 30, 2019
Slide 1: From our Home to Yours: Interim results presentation
THE LIBSTAR FAMILY From our Home to Yours Interim results presentation Six Months ended 30 June 2019
Slide 2: Index
Index 2 Andries van Rensburg 01 Introduction to Libstar Chief Executive Officer 02 Introduction to Results 03 Robin Smith Financial Review Commercial & Financial Director 04 Corporate Matters 05 Segmental Review & Outlook Andries van Rensburg 06 Group Outlook Chief Executive Officer
Slide 3: Introduction to Libstar
Introduction 3 01 Introduction to Libstar Andries van Rensburg CEO
Slide 4: Libstar strategy: Enriching people's daily lives
Libstar strategy Introduction 4 Entrepreneurial Culture Purpose: Enriching people’s daily lives Brand promise: From our Home to Yours. Values: Value Proposition: Entrepreneurial Spirit Passion Integrity “ Libstar – the catalyst where world class CPG manufacturing Strategic Initiatives Customer Centr
Slide 5: Strategic thrusts
Strategic thrusts Introduction 5 Entrepreneurial Culture Grow Our Categories Expand Our Capabilities Acquire Operational Excellence Commercial Excellence Strategic Initiatives Strategic Acquisitions Total business • Swift & visionary market Growing our capabilities, • Innovation & • Effectiveness ex
Slide 6: 7 Product Categories
7 Product Categories Introduction 6 Core growth categories Non-core categories (88% of revenue; 95% normalised EBITDA) 1 2 3 4 5 6 7 Ambient Snacks & Baking & Niche Specialised Perishables HPC Groceries Confectionery Baking Aids Beverages Packaging 7 Product categories (reporting structure) 4 Channe
Slide 7: 4 Channels
4 Channels Introduction 7 Libstar Channels Libstar Products (% of gross* group revenue) (% of gross* group revenue) 1 Retail & 62% Wholesale Dealer-own Brands 7 Product categories (reporting structure) & Private Label 2 46% 4 Channels 17% Food Service Brand Solutions (84%) 3 Libstar Brands & Outsour
Slide 8: Introduction to Results
Introduction 8 02 Introduction to Results Robin Smith Commercial & Financial Director
Slide 9: Conditions in our markets
Conditions in our markets Introduction to Results 9 H1 2018: • Decline in market conditions noticeably impacted Food Producers • Consumers remain under pressure in a weak economy H1 2019: • Conditions worsened • Significant volume decline in non-core businesses • Weak pricing environment Against thi
Slide 10: Results highlights
Results highlights Introduction to Results 10 Revenue 4.6% GP margin 2.3 b.p. Normalised EBIT 5.0% Normalised EBITDA 5.9% Normalised EPS 13.2% Normalised HEPS 12.4% H1 2019 = like-for-like (pre-implementation of new accounting standards) results from continuing operations Unaudited results for the 6
Slide 11: Core vs non-core performance
Core vs non-core performance Introduction to Results 11 Core Categories* Non-core Categories^ Organic Revenue Organic Revenue of group of group 88% revenue 12% revenue 5.3% 1.5% of group of group Normalised EBITDA 5% Normalised EBITDA 95% normalised normalised EBITDA EBITDA 8.5% 17.6% Mainly bolster
Slide 12: Financial Review
Introduction 12 03 Financial Review Robin Smith Commercial & Financial Director
Slide 13: New accounting standards
New accounting standards Financial Review 13 1st time adoption of IFRS 9 (hedge accounting) & IFRS 16 (leases) Pre-adoption of new accounting standards Post-adoption of new accounting standards Normalised EBIT Normalised EPS Normalised EBIT Normalised EPS 5.0% 13.2% 8.7% 7.7% Normalised EBITDA Norma
Slide 14: Income Statement
Income Statement Financial Review 14 Rm H1 2019 Ch (%) H1 2018 2018 Revenue 4 616.9 +4.6% 4 414.8 9 659.6 Gross profit 1 072.5 +16.1% 924.1 2 166.0 (margin) (23.2%) (20.9%) (22.4%) Other income 26.4 +300.0% 6.6 18.0 Operating expenses - 828.3 +18.0% -701.8 -1 562.4 (margin) (17.9%) (15.9%) (16.2%) E
Slide 15: Income Statement – Revenue
Income Statement – Revenue Financial Review 15 Rm H1 2019 Ch (%) H1 2018 2018 Revenue 4 616.9 +4.6% 4 414.8 9 659.6 Core categories Non-core categories 88% of H1 F19 organic revenue 12% of H1 F19 organic revenue 5.3% 1.5% H1 F18: 3.9% H1 F18: 3.2% Volume Price / mix Volume Price / mix 5.3% 0% 19.1%
Slide 16: Income Statement – Gross profit
Income Statement – Gross profit Financial Review 16 Rm H1 2019 Ch (%) H1 2018 2018 Revenue 4 616.9 +4.6% 4 414.8 9 659.6 Cost of sales -3 544.4 +1.5% -3 490.7 -7 493.6 Gross profit 1 072.5 +16.1% 924.1 2 166.0 (margin) (23.2%) (20.9%) (22.4%) • H1 2019 GP margin up 2.3 p.p on H1 2018 despite difficu
Slide 17: Income Statement – Other income
Income Statement – Other income Financial Review 17 Rm H1 2019 Ch (%) H1 2018 2018 Revenue 4 616.9 +4.6% 4 414.8 9 659.6 Gross profit 1 072.5 +16.1% 924.1 2 166.0 (margin) (23.2%) (20.9%) (22.4%) Other income 26.4 +300.0% 6.6 18.0 Realised forex gains (Rm) Unrealised forex gain/(loss) (Rm) • Other I
Slide 18: Treasury & FEC exposure management
Treasury & FEC exposure management Financial Review 18 R1.5m investment in FEC exposure management 1 2 3 Hedge accounting logistics IT platform function outsourced 2018 initiative 2018 initiative 2018 initiative • Piloted at Rialto in March 2019 • FEC policies formalised* • To be implemented H1 2019
Slide 19: Income Statement – Operating expenses
Income Statement – Operating expenses Financial Review 19 Rm H1 2019 Ch (%) H1 2018 2018 Gross profit 1 072.5 +16.1% 924.1 2 166.0 (margin) (23.2%) (20.9%) (22.4%) Other income 26.4 +300.0% 6.6 18.0 Operating expenses - 828.3 +18.0% -701.8 -1 562.4 (margin) (17.9%) (15.9%) (16.2%) Operating expenses
Slide 20: Income Statement – Normalised EBIT
Income Statement – Normalised EBIT Financial Review 20 Rm H1 2019 Ch (%) H1 2018 2018 Operating expenses - 828.3 +18.0% -701.8 -1 562.4 (margin) (17.9%) (15.9%) (16.2%) EBIT 270.6 +18.2% 229.0 621.5 (margin) (5.9%) (5.2%) (6.4%) Normalised EBIT 339.1 +5.0% 323.0 823.5 (margin) (7.3%) (7.3%) (8.5%) E
Slide 21: Income Statement – Normalised EBITDA
Income Statement – Normalised EBITDA Financial Review 21 Rm H1 2019 Ch (%) H1 2018 2018 EBIT 270.6 +18.2% 229.0 621.5 (margin) (5.9%) (5.2%) (6.4%) Normalised EBIT 339.1 +5.0% 323.0 823.5 (margin) (7.3%) (7.3%) (8.5%) Normalised EBITDA 424.9 +5.9% 401.3 984.5 (margin) (9.2%) (9.1%) (10.2%) EBIT norm
Slide 22: Income Statement – Net interest paid
Income Statement – Net interest paid Financial Review 22 Rm H1 2019 Ch (%) H1 2018 2018 Normalised EBIT 339.1 +5.0% 323.0 823.5 (margin) (7.3%) (7.3%) (8.5%) Normalised EBITDA 424.9 +5.9% 401.3 984.5 (margin) (9.2%) (9.1%) (10.2%) Net interest paid -78.3 -40.7% -132.0 -221.7 Reduced by: • New bankin
Slide 23: Income Statement – Tax
Income Statement – Tax Financial Review 23 Rm H1 2019 Ch (%) H1 2018 2018 Normalised EBITDA 424.9 +5.9% 401.3 984.5 (margin) (9.2%) (9.1%) (10.2%) Net interest paid -78.3 -40.7% -132.0 -221.7 Profit before tax 192.3 +98.4% 96.9 399.8 Income tax -55.9 -24.9 -125.9 +124.5% (effective rate) (29.1%) (25
Slide 24: Normalised earnings & headline earnings
Income Statement Normalised earnings & headline earnings Financial Review 24 Rm H1 2019 Ch (%) H1 2018 2018 Income tax -55.9 -24.9 -125.9 +124.5% (effective rate) (29.1%) (25.7%) (31.5%) Profit after tax 136.4 +89.3% 72.1 273.9 Normalised earnings* 185.4 +29.8% 142.8 419.9 Normalised headline earnin
Slide 25: Normalised EPS, HEPS & DPS
Income Statement Normalised EPS, HEPS & DPS Financial Review 25 H1 2019 Ch (%) H1 2018 2018 Normalised headline earnings (million) 185.2 +28.7% 143.9 422.4 WANOS^ (million) 599.3 14.5% 523.3 566.4 Like-for-like ◊ Normalised EPS (cps) 30.9 +13.2% 27.3 74.1 Normalised HEPS (cps) 30.9 +12.4% 27.5 74.6
Slide 26: H1 2019 – Exit of non-core business
H1 2019 – Exit of non-core business Financial Review 26 Impairment loss due to sale of Elvin H2 2018 H1 2019 • Structurally weak market Binding agreement to exit non-core dairy-blend & fruit concentrate beverage operations • Relocation of non-beverage production, marketing & sales functions to group
Slide 27: Cash Flow summary
Cash Flow summary Financial Review 27 H1 2019 H1 2018 829 Opening cash balance 402 Cash generated from operations 390 -96 Working capital changes -86 -78 Net finance charges -132 -108 Tax paid -92 120 Cash generated from operating activities 80 -161 Investment activities -151 -178 Finance activities
Slide 28: Cash Flow – Cash conversion
Cash Flow – Cash conversion Financial Review 28 Rm 800 100% Focus on cash generation 700 68% 62% 66% 62% 75% 64% 583 • Divesting non-core business - Elvin 600 559 50% 500 25% • Further focus on working capital 425 381 401 400 0% − Supply chain finance, debtor factoring 300 -25% • Tightened controls
Slide 29: Cash Flow – Working capital days
Cash Flow – Working capital days Financial Review 29 Net working capital : revenue 13.6% 13.6% 13.8% Net working capital (12-month rolling) 13.20% 49 • Notice seasonality - H1 usually higher than full year 48 45 46 Net working capital days Creditors • Refinanced third-party supply chain facilities w
Slide 30: Cash Flow – Net investing activities
Cash Flow – Net investing activities Financial Review 30 R’m H1 2019 H1 2018 2018 Capex -162 -151 -345 Other financial assets advanced / proceeds from discontinued ops 1 0 -1 Cash flow from investing activities -161 -151 -346 Main capex items Capex H1 2019 • Main replacement items − Denny 16 • Key i
Slide 31: Cash Flow – Net financing activities
Cash Flow – Net financing activities Financial Review 31 R’m H1 2019 H1 2018 Net cash flow from financing activities -178 363 Proceeds from issue of equity shares - 1 500 Net debt inflow 87 889 Net debt outflow -41 -1226 Treasury shares -92 - Capital distribution - -800 Dividends paid -132 - Unaudit
Slide 32: 5-year net debt trend
5-year net debt trend Financial Review 32 Rm 2 500 4% 3.7x 3.2x 2.6x 2 000 2 125 2 094 2.0x 2% 1.3x 1.2x 1.4x 1 891 1 865 1 500 0% R265m net debt 1 432 increase due to: 1 288 • R132m dividend 1 000 1 167 -2% paid from cash 940 960 985 1008 • R92m share 816 repurchases from 500 658 -4% cash 505 • rem
Slide 33: Net debt structure
Net debt structure Financial Review 33 Rm 1 300 1 000 1 000 F2018 800 670 670 H1 F2019 285 331 300 41 41 - 200 - 700 - 610 - 829 -1 200 Facility A Facility B Other term loans Vehicle & Asset finance Net overdraft/ (Jibar +1.65%) (Jibar +1.65%) facility (variable) (Cash) • Renegotiated debt package i
Slide 34: Corporate Matters
Introduction 34 04 Corporate Matters Robin Smith Commercial & Financial Director
Slide 35: Shareholder matters
Shareholder matters Addressing the perceived share overhang Corporate Matters 35 Hermes Mauritius 3.11% BEE Trust General APEF Pacific APEF IV & share Hermes GPE 3.11% shareholders Mauritius Ltd 41.54% repurchases 13% 50% 37% Santander 10.70% APEF Mauritius 37% AAF III 41.54% • Libstar is a portfoli
Slide 36: Shareholder matters
Shareholder matters Free float, share repurchases & board matters Corporate Matters 36 New Libstar Free Float • At listing, a sizeable pre-listing shareholder was barred from selling Share Repurchase Programme a portion of its holding • Commenced on 19 Dec 2018 • Holding period has ended so these sh
Slide 37: B-BBEE Update
B-BBEE Update Corporate Matters 37 1 2 Implementation of BEE Options being assessed by the Board (indicative only): Scheme delayed due to: • Collapse strategic shareholder SPV & incorporate into ESOP* • Unfavourable issue price vs (will amount to c. 11% of shares in issue) current market price • Re-
Slide 38: Category Review & Outlook
Introduction 38 05 Category Review & Outlook Andries van Rensburg Chief Executive Officer
Slide 39: Category contributions
Category contributions Category Review & Outlook 39 Snacks and Confectionery Baking and Snacks and Baking Aids Confectionery Ambient Groceries Ambient 5% Niche 28% Groceries 7% Beverages 37% 7% 1% Baking and Baking Aids HPC 9% Revenue 8% Normalised = 0% 3% Specialised EBITDA 4% HPC Food 1% Packaging
Slide 40: Perishables: 6 month performance
6 month Performance Category Review & Outlook 40 PERISHABLES Volume Price/mix H1 2019 % ch. H1 2018 (units) Organic Revenue (Rm) -2.8% +4.5% 2 205.3 +1.5% 2 172.6 Normalised EBITDA (Rm) 200.7 +6.0% 189.4 EBITDA margin % 9.1% - 8.7% Weighted contribution to 6.0% normalised EBITDA increase Dairy: • Im
Slide 41: Perishables: Outlook & Key Initiatives
Outlook & Key Initiatives Category Review & Outlook 41 PERISHABLES Dairy • Grow market share ‒ Targeting 5% yoghurt singles tubs market share of R4bn total market in medium term ‒ New product launches e.g. sauces and yoghurts • Invest in Lancewood Capacity & Capability ‒ Kiri and Laughing Cow manufa
Slide 42: Ambient Groceries: 6 month performance
6 month Performance Category Review & Outlook 42 AMBIENT GROCERIES Volume Price/mix H1 2019 % ch. H1 2018 (units) Organic Revenue (Rm) +0.1% +7.5% 1 311.8 +7.6% 1 218.9 Normalised EBITDA (Rm) 178.9 +13.5% 157.6 EBITDA margin % 13.6% 12.9% Weighted contribution to 13.5% normalised EBITDA increase Dry
Slide 43: Ambient Groceries: Outlook & Key Initiatives
Outlook & Key Initiatives Category Review & Outlook 43 Ambient AMBIENT Groceries GROCERIES Dry condiments • Continued growth in key export markets • Focus on value-added products in local & export markets Wet condiments • Increased factory efficiencies: H2 expected to run at full-production capacity
Slide 44: Snacks & Confectionery: Performance & Key Initiatives
6 Month Performance & Key Initiatives Category Review & Outlook 44 SNACKS & CONFECTIONERY Volume Price/mix H1 2019 % ch. H1 2018 (units) Organic Revenue (Rm) -2.0% +12.8% 234.8 +10.6% 212.3 Normalised EBITDA (Rm) 35.9 +2.7% 35.0 EBITDA margin % 15.0% 16.5% Weighted contribution to 2.7% normalised EB
Slide 45: Baking & Baking Aids: Performance & Key Initiatives
6 Month Performance & Key Initiatives Category Review & Outlook 45 BAKING & BAKING AIDS Volume Price/mix H1 2019 % ch. H1 2018 (units) Review Organic Revenue (Rm) +24.3% -1.3% 313.9 +22.7% 255.8 Normalised EBITDA (Rm) 41.9 +5.3% 39.7 EBITDA margin % 13.3% 15.5% Weighted contribution to 5.3% Baked go
Slide 46: Niche Beverages: Performance & Key Initiatives
6 Month Performance & Key Initiatives Category Review & Outlook 46 NICHE BEVERAGES Volume Price/mix H1 2019 % ch. H1 2018 (units) Review Organic Revenue (Rm) -45.6% +38.4% 53.5 -24.8% 71.1 Normalised EBITDA (Rm) 1.2 -79.6% 6.0 EBITDA margin % 2.3% 8.5% Weighted contribution to 79.6% normalised EBITD
Slide 47: Household & Personal Care: Performance & Key Initiatives
6 Month Performance & Key Initiatives Category Review & Outlook 47 HOUSEHOLD & PERSONAL CARE Volume Price/mix H1 2019 % ch. H1 2018 (units) Review Organic Revenue (Rm) -11.9% +12.1% 373.1 -1.2% 377.5 Normalised EBITDA (Rm) 16.8 +5.5% 15.9 EBITDA margin % 4.5% - 4.2% Weighted contribution to 5.5% nor
Slide 48: Specialised Food Packaging: Performance & Key Initiatives
6 Month Performance & Key Initiatives Category Review & Outlook 48 SPECIALISED FOOD PACKAGING H1 2019 % ch. H1 2018 Organic Revenue (Rm) 120.0 +12.7% 106.5 Normalised EBITDA (Rm) 3.5 -16.2% 4.1 EBITDA margin % 2.9% 3.9% Contribution to 16.2% normalised EBITDA decrease • Newly launched biodegradable
Slide 49: Group Outlook
Introduction 49 06 Group Outlook Andries van Rensburg Chief Executive Officer
Slide 50: Meeting consumers needs with product innovation
Meeting consumers needs with product innovation Group Outlook 50 H1 F19 235 New products Renovated 123 products Innovation 358 Total Innovation “ Previously shoppers relied on brand, now companies must constantly innovate, drive prices down & streamline / aestheticise their offerings to entice shopp
Slide 51: Private Label evolution: Libstar advantages
Private Label evolution Group Outlook 51 Value Based Strategic Dealer Own Brand H1 2019 Libstar PL / DOB Private Label Private Label Strategies profitability Low Cost Production to Scale Innovation Libstar advantages • Revenue growth > rest of group Category Insight Management • Price increases achi
Slide 52: What was challenging in H1 2019?
What was challenging in H1 2019? Group Outlook 52 Challenges Mitigating actions 1 Category plan, incl. new customers, product opportunities Continued under-utilisation of chicken production facilities and exports Under-performance of HPC cluster, despite cost 2 rationalisation HPC cluster amalgamati
Slide 53: Strategic enablers – H1 2019 update
Strategic enablers – H1 2019 update Group Outlook 53 • Implementation of category plans & steerco’s • Full benefits now flowing from F18 • Drive new strategic product innovation Commercial projects: • Libstar market share growth > PL market growth Excellence − Granola plant, health bar capacity, • P
Slide 54: Key take-outs
Key take-outs Group Outlook 54 PL/DOB constitutes 46% of 40:60 H1:H2 ratio still largely intact Resilient performance revenue & presents significant • Constrained demand poses from group's core opportunity downside risk against • Libstar innovates & helps backdrop of economic categories customers gr
Slide 55: Disclaimer
Disclaimer 55 Certain matters discussed in this document regarding Libstar’s future performance, that are neither reported financial results nor other historical information but involve known and unknown risks based on assumptions regarding the group’s present and future business strategies and the
Slide 56: Appendices
Introduction 56 Appendices
Slide 57: Breakdown of open FEC exposure
Breakdown of open FEC exposure Appendices 57 Import "Purchase" / FEC FEC revalued (Export "Sell") FEC spot rate at 30 June 19 Quarter Millions Rate FEC Cover Rm on 30 June 19 Rm 2019-Q3 -102 -100 AUD -2 10.9 -20 10.1 -18 EUR -1 20.5 -14 18.9 -13 GBP -1 19.1 -14 21.3 -16 NZD -0 9.9 -1 9.4 -1 SGD 0 10
Slide 58: H1 2019 – Results summary
H1 2019 – Results summary Appendices 58 Post impact of new Pre impact of new accounting standards accounting standards Normalised EBITDA (group) 20.3% 5.9% Normalised EBITDA (core categories) 19.0% 8.5% Normalised EBITDA (non-core categories) 26.8% 17.6% Total basic and diluted EPS 28.7% 4.1% Total
Slide 59: Adoption of new accounting standards: IFRS 16
Income Statement Adoption of new accounting standards Appendices 59 H1 2019 impact of 1st time adoption of IFRS 16 Income Statement Balance Sheet in rental expense & similar in R58m normalised EBITDA R464.4m in long term lease asset (before normalisation adjustments) R5.4m in operating lease asset R
Slide 60: Adoption of new accounting standards: IFRS 9
Income Statement Appendices 60 Adoption of new accounting standards H1 2019 impact of 1st time adoption of IFRS 9 (hedge accounting) Recognition of gain in hedge accounting reserve Other Income (statement of comprehensive income) R12m (pre-tax) or Other Comprehensive Income (hedge reserve in stateme
Slide 61: Balance sheet summary
Balance sheet summary Appendices 61 Accounting changes reconciled New H1 2019 Accounting H1 2019 Rm reported Standards Like-for-like H1 2018 2018 Comment ASSETS PPE 1 263.7 1 263.7 1 103.6 1 205.9 Lease asset 464.4 -464.4 - - - IFRS 16 lease assets Intangible assets 2 144.4 2 144.4 2 377.0 2 269.2 G
Slide 62: Income Statement: Accounting changes reconciled
Income Statement Appendices 62 Accounting changes reconciled New Like-for-Like H1 2019 Accounting H1 2019 H1 2018 % ch vs Rm reported Standards Like-for-Like reported H1 2018 Comment Revenue 4 616.9 - 4 616.9 4 414.8 +4.6% IFRS 16 – R12.4m reversal of rental expense & Cost of sales -3 544.3 - -3 544