Libstar Holdings Ltd. · JSE:LBR
Libstar — H1 2018 Earnings Presentation
70 slides from Libstar's earnings presentation, 2018
Slide 1: Interim Results Presentation
Interim Results Presentation SIX MONTHS ENDED 30 JUNE 2018
Slide 2: Introduction and Salient Features / Financial Results / Strategy and Outlook
INTRODUCTION AND SALIENT FEATURES Andries van Rensburg, Chief Executive Officer FINANCIAL RESULTS Robin Smith, Financial and Commercial Director STRATEGY AND OUTLOOK Andries van Rensburg, Chief Executive Officer
Slide 3: Introduction and Salient Features / Financial Results / Strategy and Outlook
INTRODUCTION AND SALIENT FEATURES Andries van Rensburg, Chief Executive Officer FINANCIAL RESULTS Robin Smith, Financial and Commercial Director STRATEGY AND OUTLOOK Andries van Rensburg, Chief Executive Officer
Slide 4: Business Overview
Business Overview Leading producer of consumer packaged goods 3 distinct 7 product 4 channels decentralised experienced offerings categories business model central office Brand Solutions Perishables Retail and Wholesale Clustered business Supporting all Outsourced Ambient Groceries Industrial units
Slide 5: High Growth Track Record
High Growth Track Record R’000 10 year revenue: CAGR 22.3% 4 year Normalised EBITDA: CAGR 23.1% 10,000 940 1000 9,000 816 900 8,827 8,000 800 8,021 7,000 658 700 6,000 505 600 6,176 5,000 500 4,752 4,000 400 4,077 3,000 3,495 300 2,733 2,879 2,637 2,000 200 2,036 1,000 100 1,179 0 0 FY07 FY08 FY09 F
Slide 6: Initial Public Offering
Initial Public Offering Concluded R7.6bn market Raised R1.5bn R1.5bn secondary capitalisation primary capital sell-down on IPO Selling 608.9 million shareholders 40% net ordinary subject to free float shares in issue 180 day lock-up 6
Slide 7: What We Do
What We Do OUTSOURCED FOOD SERVICE BRAND SOLUTIONS MANUFACTURING SOLUTIONS SOLUTIONS Libstar Brands & Dealer Own Brands & Principal Licensed Brands Private Label Brands (1) Gross revenue = net revenue plus customer allowances 7
Slide 8: What We Do
What We Do OUTSOURCED FOOD SERVICE BRAND SOLUTIONS MANUFACTURING SOLUTIONS SOLUTIONS Libstar Brands & Dealer Own Brands & Principal Licensed Brands Private Label Brands FY18 H1 Gross1 Revenue 30% by product offering (1) Gross revenue = net revenue plus customer allowances 8
Slide 9: What We Do
What We Do OUTSOURCED FOOD SERVICE BRAND SOLUTIONS MANUFACTURING SOLUTIONS SOLUTIONS Libstar Brands & Dealer Own Brands & Principal Licensed Brands Private Label Brands FY18 H1 Gross1 Revenue 30% 45% by product offering (1) Gross revenue = net revenue plus customer allowances 9
Slide 10: What We Do
What We Do OUTSOURCED FOOD SERVICE BRAND SOLUTIONS MANUFACTURING SOLUTIONS SOLUTIONS Libstar Brands & Dealer Own Brands & Principal Licensed Brands Private Label Brands FY18 H1 Gross1 Revenue 30% 45% 8% by product offering (1) Gross revenue = net revenue plus customer allowances 10
Slide 11: What We Do
What We Do OUTSOURCED FOOD SERVICE BRAND SOLUTIONS MANUFACTURING SOLUTIONS SOLUTIONS Libstar Brands & Dealer Own Brands & Principal Licensed Brands Private Label Brands FY18 H1 Gross1 Revenue 30% 45% 8% 10% by product offering (1) Gross revenue = net revenue plus customer allowances 11
Slide 12: What We Do
What We Do OUTSOURCED FOOD SERVICE BRAND SOLUTIONS MANUFACTURING SOLUTIONS SOLUTIONS Libstar Brands & Dealer Own Brands & Principal Licensed Brands Private Label Brands FY18 H1 Gross1 Revenue 30% 45% 8% 10% 7% by product offering (1) Gross revenue = net revenue plus customer allowances 12
Slide 13: What We Do
What We Do OUTSOURCED FOOD SERVICE BRAND SOLUTIONS MANUFACTURING SOLUTIONS SOLUTIONS Libstar Brands & Dealer Own Brands & Principal Licensed Brands Private Label Brands FY18 H1 Gross1 Revenue 30% 45% 8% 10% 7% by product offering (1) Gross revenue = net revenue plus customer allowances 13
Slide 14: Multiple Categories
Multiple Categories FY18 H1 Net1 Revenue 48% Perishables PACKAGING SOLUTIONS 2% HOME AND PERSONAL CARE 8% FOOD 83% NICHE BEVERAGES 7% 6% Baking and Baking Aids 5% Snacks and Confectionery Ambient Groceries 24% (1) Net revenue = gross revenue less customer allowances 14
Slide 15: Multiple Channels
Multiple Channels FY18 H1 Gross1 Revenue RETAIL FOOD SERVICE INDUSTRIAL EXPORTS 61% 16% 11% 12% (1) Gross revenue = net revenue plus customer allowances 15
Slide 16: Salient Features
Salient Features ▪ Total revenue up 14.2% to R4.5bn (organic up 3.7%) ▪ Gross Profit margin 20.9% (H1 2017: 22.4%), impacted by: - Price realisation in mushrooms during Q1 - Sonnendal Dairies acquisition - Strike at Dickon Hall Foods ▪ Significant non-trading items (unrealised forex, SAR provision)
Slide 17: Introduction and Salient Features / Financial Results / Strategy and Outlook
INTRODUCTION AND SALIENT FEATURES Andries van Rensburg, Chief Executive Officer FINANCIAL RESULTS Robin Smith, Financial and Commercial Director STRATEGY AND OUTLOOK Andries van Rensburg, Chief Executive Officer
Slide 18: Market Overview
Market Overview Food inflation Competitive landscape Exchange rate volatility Higher LSM resilience Pricing conditions remain Significant YTD fluctuations tough Growth of private label Trends Consumer demand Growing convenience, health and wellness trends 18
Slide 19: Private Label: Positive Consumer Perceptions
Private Label: Positive Consumer Perceptions Perceptions Libstar Value Proposition ▪ Extremely good value for money ▪ Wide product range ▪ Quality as good as named brands, ▪ Production capacity and capabilities and less expensive ▪ Category management ▪ Saves me money ▪ Pro-active innovation ▪ Innov
Slide 20: Group Income Statement
Group Income Statement H1 2018 H1 2017 Change (%) FY 2017 CONTINUING OPERATIONS Revenue 4,528,738 3,967,156 14.2% 8,796,450 Gross profit 944,566 887,367 6.4% 2,007,818 Gross profit margin 20.9% 22.4% -1.5% 22.8% Other income 7,053 50,019 -85.9% 146,653 Operating expenses (728,130) (678,102) 7.4% (1,
Slide 21: Group Income Statement
Group Income Statement H1 2018 H1 2017 Change (%) FY 2017 CONTINUING OPERATIONS Revenue 4,528,738 3,967,156 14.2% 8,796,450 Total revenue growth of 14.2%, Gross profit 944,566 887,367 6.4% 2,007,818 organic revenue growth of 3.7% Gross profit margin 20.9% 22.4% -1.5% 22.8% Other income 7,053 50,019
Slide 22: Group Revenue Growth H1 2017 to H1 2018
Group Revenue Growth H1 2017 to H1 2018 Organic revenue = Volume + Price/mix 3.7% 2.7% 1.0% Perishables (+12.4%) Ambient Groceries (-10.5%) Snacks and Confectionery (+9.9%) Baking and Baking Aids (+13.4%) Niche Beverages (-1.3%) Specialised Food Packaging (+2.5%) Household and Personal Care (+5.5%)
Slide 23: Group Income Statement
Group Income Statement H1 2018 H1 2017 Change (%) FY 2017 CONTINUING OPERATIONS Revenue 4,528,738 3,967,156 14.2% 8,796,450 Gross profit 944,566 887,367 6.4% 2,007,818 Gross Profit margin 20.9% Gross profit margin 20.9% 22.4% -1.5% 22.8% (H1 2017: 22.4%), impacted by: Other income 7,053 50,019 -85.9
Slide 24: Group GP Margin Evolution H1 2017 to H1 2018
Group GP Margin Evolution H1 2017 to H1 2018 22.4% 0.9% 0.6% 0.2% 0.1% 0.1% 0.0% 20.9% 0.0% GP margin H1 Perishables Ambient Snacks and Baking and Niche Beverages Home and Specialised Food GP margin H1 2017 Groceries Confectionery Baking Aids Personal Care Packaging 2018 24
Slide 25: Group Income Statement
Group Income Statement H1 2018 H1 2017 Change (%) FY 2017 CONTINUING OPERATIONS Revenue 4,528,738 3,967,156 14.2% 8,796,450 Gross profit 944,566 887,367 6.4% 2,007,818 Gross profit margin 20.9% 22.4% -1.5% 22.8% • Realised forex gains of R35m Other income 7,053 50,019 -85.9% 146,653 (H1 2017: R12m)
Slide 26: Group Income Statement
Group Income Statement H1 2018 H1 2017 Change (%) FY 2017 CONTINUING OPERATIONS Revenue 4,528,738 3,967,156 14.2% 8,796,450 Gross profit 944,566 887,367 6.4% 2,007,818 Gross profit margin 20.9% 22.4% -1.5% 22.8% Other income 7,053 50,019 -85.9% 146,653 • Costs well controlled at 16.1% of Operating e
Slide 27: Bridge: Operating Profit: H1 2017 to H1 2018
Bridge: Operating Profit: H1 2017 to H1 2018 (R’000) 7.6% 12.5% 8.9% 13.8% + + = 19,767 259,284 35,007 23,110 5,525 223,489 61,934 Operating profit H1 Trading Unrealised forex Share appreciation Non-operating items Depreciation and Operating profit H1 2017 movements rights amortisation 2018 27
Slide 28: Bridge: Headline Earnings: H1 2017 to H1 2018
Bridge: Headline Earnings: H1 2017 to H1 2018 (R’000) 55,562 19,767 115,502 22,198 379 67,743 9,855 Headline earnings H1 Increase in operating Decrease in operating Increase in finance Taxation Minorities and Headline earnings H1 2017 (net of tax) profit from trading profit from non-trading costs ad
Slide 29: Income Adjustments 2018
Income Adjustments 2018 (R’000) 77,329 397,691 317,546 2816 32,173 5,838 70,420 7,303 21,677 223,489 Operating Profit Amortisation - Share IPO costs Unrealised forex Other Normalised Amortisation - Depreciation - Normalised customer appreciation loss adjustments EBIT software PPE EBITDA contracts ri
Slide 30: Income Adjustments 2018
Income Adjustments 2018 (R’000) 77,329 397,691 317,546 2816 32,173 5,838 70,420 Arising mainly from additional intangibles created 7,303 by 2014 restructuring 21,677 223,489 Operating Profit Amortisation - Share IPO costs Unrealised forex Other Adjusted EBIT Amortisation - Depreciation - Adjusted cu
Slide 31: Income Adjustments 2018
Income Adjustments 2018 (R’000) 77,329 397,691 317,546 2816 32,173 5,838 70,420 Reversal of R22m 7,303 21,677 (H1 2017: expense of R13m) 223,489 Operating Profit Amortisation - Share IPO costs Unrealised forex Other Adjusted EBIT Amortisation - Depreciation - Adjusted customer appreciation loss adju
Slide 32: Income Adjustments 2018
Income Adjustments 2018 (R’000) 77,329 397,691 317,546 2816 32,173 •5,838 6-12 month forward cover on major 70,420 7,303 suppliers and customers 21,677 223,489 • Unrealised IFRS forex loss of R32m (2017: gain R30m) included in other income Operating Profit Amortisation - Share IPO costs Unrealised f
Slide 33: Trade Balance
Trade Balance IMPORTS H1 2018 EXPORTS H1 2018 Denomination R’000 % Country R’000 % USD 173,263 36.2% Africa 181,124 30.9% EUR 292,527 61.1% USA 129,523 22.1% GBP 1,978 0.4% Germany 57,167 9.8% SGD 7,584 1.6% United Arab Emirates 54,917 9.4% THB 3,019 0.6% Australia 53,842 9.2% Y 719 0.2% United King
Slide 34: Cash Flows
Cash Flows H1 2018 H1 2017 FY2017 R '000 R '000 R '000 Net cash flow from operating activities 80,104 233,232 572,614 Net cash flow from investment activities (150,845) (138,861) (605,778) Net cash flow from financing activities 362,533 (28,576) 266,609 Net increase/(decrease) in cash and cash equiv
Slide 35: Cash Flows
Cash Flows H1 2018 H1 2017 FY2017 R '000 R '000 R '000 Net cash flow from operating activities 80,104 233,232 572,614 • Working capital investment of R86m Net(H1 cash flowR31m 2017: from net investment activities working capital release) (150,845) (138,861) (605,778) - R55m net inventory investment
Slide 36: Working Capital Management
Working Capital Management R86m net working capital investment 79 63 65 DAYS 61 61 54 50 45 FY2017 H1 2018 INVENTORIES TRADE RECEIVABLES TRADE PAYABLES NET WORKING CAPITAL Increased to improve Continued focus on Targeted improved service levels, seasonal collections and terms working capital purchas
Slide 37: Cash Flows
Cash Flows H1 2018 H1 2017 FY2017 R '000 R '000 R '000 Net cash flow from operating activities 80,104 233,232 572,614 Net cash flow from investment activities (150,845) (138,861) (605,778) • R152m Net cash flow from capex financing investment activities (H1 2017: R139m) 362,533 (28,576) 266,608 • 3.
Slide 38: Net Debt
Net Debt (R’000) 150,845 1,500,000 1,864,815 80,104 47,466 1,283,022 800,000 Net debt at 31 Cash flow from Cash flow from IPO proceeds Pre-IPO distribution Other investing Net debt at 30 June December 2017 operating activities investing activties activities 2018 38
Slide 39: Net Debt
Net Debt R'000 Amount 31 December 2017 Amount 30 June 2018 Rate Utilisation - Senior Facility A 494,449 407,118 Jibar + 2,85% Utilisation - Senior Facility B 950,000 950,000 Jibar + 3,30% Utilisation - Senior Facility C 308,755 308,755 Jibar + 3,27% Utilisation - Senior Facility D 191,973 - Other te
Slide 40: Cash Flows
Cash Flows H1 2018 H1 2017 FY2017 R '000 R '000 R '000 Net cash flow from operating activities 80,104 233,232 572,613 Net cash flow from investment activities (150,845) (138,861) (605,778) Dividend: • No interim dividend Net cash flow from financing • Target activities policy of 30%-40% of PAT 362,5
Slide 41: Group Financial Results: Segments & Outlook
Group Financial Results SEGMENTS & OUTLOOK Perishables Ambient Groceries Baking and Baking Aids Snacks and Confectionery Niche Beverages Home & Personal Care Specialised Packaging
Slide 42: Perishables
Perishables H1 2017 H1 2018 ▪ Revenue growth driven by Lancewood, as 29.8% well as Sonnendal and Millennium Foods integrations 2,172,598 ▪ Growth in hard cheese volumes in retail, food service and export channels ▪ Strong growth in imported speciality meats 1,673,933 and cheeses ▪ Fresh mushroom mar
Slide 43: Perishables
Perishables H1 2017 H1 2018 Outlook 29.8% ▪ Continued strong cheese performance ▪ New premium dairy ranges (yoghurts, spreads 2,172,598 and sauces) ▪ Focus on mushroom margin and upper-end 1,673,933 market share growth ▪ Traditional seasonality 4.4% 181,448 189,388 REVENUE NORMALISED EBITDA 43
Slide 44: Perishables
Perishables Organic revenue = Volume + Price/mix 12.5% 6.8% 5.6% ▪ Strong growth in cheese and ▪ Moderate increase in cheese prices meat volumes ▪ Lower meat margin - mix and conversion cost realisation ▪ Volume decline in fresh ▪ Low increase in fresh mushroom prices mushrooms due to competitive ma
Slide 45: Ambient Groceries
Ambient Groceries H1 2017 H1 2018 ▪ Dickon Hall Foods strike, revenue impacted by R63m YoY 9.6% ▪ Kellogg’s noodle cake production successfully 1,225,206 implemented 1,107,388 ▪ Herbs and spices strong growth in local market, slower shipments to certain international markets (-R43m revenue YoY) ▪ Pl
Slide 46: Ambient Groceries
Ambient Groceries H1 2017 H1 2018 Outlook ▪ Dickon Hall Foods catching up backlog 9.6% ▪ Herbs and spices shipment timing and 1,225,206 margins 1,107,388 ▪ Montagu/Denny Foods fully online and growing ▪ Private label wet condiment product launches 3.7% 148,920 143,352 REVENUE NORMALISED EBITDA 46
Slide 47: Ambient Groceries
Ambient Groceries Organic revenue = Volume + Price/mix -9.6% 1.4% -11.0% ▪ Strong growth in honey volumes ▪ Pricing of herbs and spices flat to down ▪ Herbs and spices shipment timing ▪ Lower prices in food service channel ▪ Dickon Hall Foods strike reduced volumes by 20% YoY (5% impact on category)
Slide 48: Baking and Baking Aids
Baking and Baking Aids H1 2017 H1 2018 ▪ Strong growth in the retail channel for rolls, 13.4% speciality breads, baking aids ▪ Slower demand for wraps 255,766 225,627 Outlook ▪ Strong baking performance expected to continue ▪ New private label baking aids for retail customers in Q4 16.8% ▪ Par-bake
Slide 49: Baking and Baking Aids
Baking and Baking Aids Organic revenue = Volume + Price/mix 13.4% -4.3% 17.7% ▪ Lower wrap volumes ▪ Mix effect of higher value speciality ▪ Significant growth in rusks breads and related products Value/volume/mix information has not been reported on by the Group’s auditors 49
Slide 50: Snacks and Confectionery
Snacks and Confectionery H1 2017 H1 2018 ▪ Strong performance accelerated by new 9.9% product development in health bars and granola’s ▪ Kellogg’s breakfast bars 212,322 193,125 Outlook ▪ Strong performance expected to continue ▪ Continued focus on higher-margin innovative products 14.7% 30,483 34,9
Slide 51: Snacks and Confectionery
Snacks and Confectionery Organic revenue = Volume + Price/mix 9.9% 13.8% -3.9% ▪ Strong growth across entire product range ▪ Impacted by lower margin bulk ▪ Numerous new product launches peanuts and raisins Value/volume/mix information has not been reported on by the Group’s auditors 51
Slide 52: Niche Beverages
Niche Beverages H1 2017 H1 2018 ▪ Niche Beverages revenue driven by acquisition of Khoisan Tea 58.2% ▪ Strong H1 water sales, offset by lower sales of dairy and fruit concentrate products 296,607 Outlook ▪ Continued strong performance expected 187,513 in tea >1000% 16,697 836 REVENUE NORMALISED EBIT
Slide 53: Niche Beverages
Niche Beverages Organic revenue = Volume + Price/mix -1.3% 0.6% -1.9% ▪ Strong water sales during Western Cape ▪ Lower than targeted price increases in drought dairy blends ▪ Declined demand for dairy blends, fruit ▪ Change of mix in water due to higher concentrates sales of 5L’s ▪ Competitive marke
Slide 54: HPC
HPC H1 2017 H1 2018 ▪ Improved sales volumes in home products 5.5% ▪ Improved product availability and service levels 377,519 ▪ Cost-savings and efficiency initiatives 357,795 bearing fruit Outlook ▪ Turnaround in home products expected to continue ▪ Launching new cotton products 13.6% 14,016 15,922
Slide 55: HPC
HPC Organic revenue = Volume + Price/mix 5.5% 2.9% 2.6% • Improved volume sales in home • Moderate price increases care products across all products Value/volume/mix information has not been reported on by the Group’s auditors 55
Slide 56: Specialised Food Packaging
Specialised Food Packaging H1 2017 H1 2018 ▪ Low volume growth 2.5 % ▪ Increased sales and distribution cost due to import planning 103,957 106,537 Outlook ▪ New plant - local production to replace imports (40%) 39.3% 6,817 4,139 REVENUE NORMALISED EBITDA 56
Slide 57: BEE
BEE ▪ No IFRS 2 charge until units are allocated ▪ Once units allocated, expected IFRS 2 charge: - R8m Employee Scheme in FY18 (assessed annually) - R75m Strategic Trust in FY18 (once-off) ▪ Current level 8 rating (verification 31 December 2017) ▪ Since verification, have implemented 13% BEE transac
Slide 58: Introduction and Salient Features / Financial Results / Strategy and Outlook
INTRODUCTION AND SALIENT FEATURES Andries van Rensburg, Chief Executive Officer FINANCIAL RESULTS Robin Smith, Financial and Commercial Director STRATEGY AND OUTLOOK Andries van Rensburg, Chief Executive Officer
Slide 59: Growth Drivers
Growth Drivers ACQUIRE Acquire businesses through targeted M & A activity to grow or access identified high growth categories or expand current categories EXPAND Expand our capabilities and create competencies by investing in market and technical knowledge to expand and optimise our brand solution a
Slide 60: The heart of an entrepreneur with the mind of a corporate
We bring to life our motto of: “ the heart of an entrepreneur with the mind of a corporate 60
Slide 61: Strategy Initiatives
Strategy Initiatives • Brand Solutions team • Significant brand investment Channel and category growth • Channel development • Market data and consumer insights • Innovation • Consolidating export initiatives Export growth • Growing existing and new markets • Procurement efficiencies Supply chain op
Slide 62: Resilience in Tough Markets
Resilience in Tough Markets INNOVATION COST CONTROL SUCCESSFUL INTEGRATION GROWTH ▪ Product innovation ▪ Supply chain ▪ Sonnendal Dairies ▪ Robust market at optimisation upper-end ▪ Range extensions ▪ Khoisan - Procurement, factory - Par-bake frozen rolls rationalisation ▪ Millennium - Food service
Slide 63: New Product Development
New Product Development Launched to date in 2018 Approximately 200 new line items 63 WWW.LIBSTAR.CO.ZA
Slide 64: Group Outlook
Group Outlook Projects and product innovation Margin improvements Positive outlook ▪ Par-bake artisinal breads and rolls ▪ Lower cost manufacturing and packaging ▪ New premium dairy range and stronger ▪ Procurement and other supply chain ▪ Private label wet condiments initiatives performance ▪ Prepa
Slide 65: Group Outlook
Group Outlook Integration and Non-repeat of once- Focus on the more Seasonality expansion benefits offs from H1 resilient upper-end of ▪ Normalised EBITDA the market ▪ Denny Foods and typically weighted Montagu foods ~60% in H2 ▪ Sonnendal Dairies ▪ Further consolidation 65
Slide 66: Notice
Notice This document contains forward-looking statements, market information, information regarding the organic sale volumes of the Group and quantification of various extraneous factors which may have impacted on the results presented (“Non-IFRS Information”). Forward-looking information included i
Slide 67: Annexures
SLIBSTAR innovatiye . A creation Pe x > ANNEXURES
Slide 68: Our Purpose
Our Purpose To lead by anticipating needs of shoppers, consumers and customers and deliver on-trend innovation We use our go to market capabilities, scale and flexible low cost manufacturing to market differentiated, value for money brand solutions Our broad channel, customer and category base diver
Slide 69: Investment Case
Investment Case ▪ Superior operational platform, which gives rise to the following strengths: - A diverse business model with flexibility and resilience; - A culture of entrepreneurship and innovation; - A proven track record of identifying industry trends, and accessing innovative product categorie
Slide 70: Capex: H1 2018
Capex: H1 2018 Category R'000 Perishables 61,578 Facility upgrades, buildings Ambient Groceries 31,289 Facility upgrades Snacks and Confectionery 29,373 Facility upgrades Baking and Baking Aids 4,436 Facility upgrades Niche Beverages 9,081 Macha capability Home and Personal Care 10,324 Facility upgr