Libstar Holdings Ltd. · JSE:LBR
Libstar — FY2019 Earnings Presentation
57 slides from Libstar's earnings presentation, March 2020
Slide 1: Results presentation, year ended 31 December 2019
LIBSTAR THE LIBSTAR FAMILY From our Home to Yours Results presentation Year ended 31 December 2019
Slide 2: Presentation overview
Presentation overview 1 Strategic Achievements 02 Introduction to Financial Results & Corporate Matters 03 Financial Review 04 Category Review And Outlook 9 Group Outlook 06 Questions and Answers
Slide 3: Lancewood Mature Cheddar
LANCEW /OOD’ MATURE CHEDDAR
Slide 4: Libstar Strategy
LIBSTAR Libstar Strategy Purpose: Enriching people’s daily lives Brand promise: From our Home to Yours. Strategic Achievements Entrepreneurial Culture Strategic Initiatives te 4 se) \4 “0 our CAPABILI™
Slide 5: 2019 Strategic Achievements
2019 Strategic Achievements penta 5 Entrepreneurial Culture Grow Our Categories Expand Ou! Operational Excellence Commercial Excellence Strategic Initiatives Strategic Acquisitions Focused category approach New technologies Healthwise acquired * Completed Elvin disposal (niche beverages) * Amaro Foo
Slide 6: Introduction to Financial Results & Corporate Matters
02 Introduction to Financial Results & Corporate Matters Robin Smith, Group Commercial Director
Slide 7: Market conditions & highlights
Market conditions & highlights Against this backdrop: Organic revenue A 1.8% 2019 results Improved demonstrate B margins resilience GP margin A 1.6pp to 24.0% Normalised EBIT margin A 0.1pp to 8.6% Normalised EBITDA A 5.1% Normalised EBITDA margin A 0.3pp to 10.5% Improved earnings Normalised EPS A
Slide 8: 2019 Food vs other performance
Introduction to 2019 Food vs other performance GopoateNates «8 Food Categories* of group of group group normalised 92% rou o enue normalised genie revenue EBITDAA EBITDA’ A Organic A Normalised Vv Organic Vv Normalised fe) revenue fe) EBITDA’ 0 revenue 0 EBITDA’ 2./ % growth 8.5 % growth 6.8% declin
Slide 9: H1 vs H2 2019 performance
H1 vs H2 2019 performance Food Categories* Household and Personal Care FY Introduction to Financial Results & Corporate Matters 9 A 4.5% A 0.7% A 2.7% Organic revenue growth A A 7.0% 9.5% A 8.5% Normalised EBITDA’ growth v 1.2% Vv 11.3% V6.8% Organic revenue decline 9 A 5.5% Normalised v 4.4% EBITDA
Slide 10: Contribution to group revenue & EBITDA by category
Introduction to 2019 - Contribution to group Revenue & EBITDA by category Comorte hates 10 Food: +2.4% 1.2% 0.3% 0.2% 0.7% Organic (0.6%) Revenue A 0 Food bolstered by dairy, meat, groceries, dry condiments & baking. 1.8% Wet condiments lagged. HPC under competitive pressures. Revenue Perishables Gr
Slide 11: HEPS historic performance
Introduction to HEPS historic performance Corporteattrs, 11 Normalised HEPS 87.0 85.4 (0) a6 A 14.1% 63.5 99.9 Diluted HEPS 487 A 30.4% IPO increased WANOS increased F18 base impacted by R32.8m WANOS by 5.5% unrealised FX loss by 21% (diluted: 5.7%) 2017 2018 2019 — Normalised HEPS — Diluted HEPS NO
Slide 12: Shareholder matters
Shareholder matters Introduction to Financial Results & Share repurchases, board matters & B-BBEE Corporate Matters 12 B-BBEE * Scheme implementation: — Registration process of ESOP delayed — Unfavourable issue price vs current market price * Options: 1. Restructure current ESOP on more favourable t
Slide 13: Financial Review
LIBSTAR
Slide 14: Income Statement - Revenue & Gross Profit
Income Statement - Revenue & Gross Profit FinancialReview 14 2019 Organic Revenue 2019 Gross Profit Food categories organic revenue Price / mix Volume -5.1% +7.8% HPC organic revenue Price / mix Volume -13.8% +7.0% GP% increase supported by: + Favourable sales mix changes in dairy, value-added groce
Slide 15: Income Statement - Operating expenses
Income Statement - Operating expenses Financial Review 15 Operating expenses (R’000) 2019 % ch. 2018 Comment Opex 1754015 +12.3% 1 562 419 Long-term incentives (6 948) 13208 Provision for SARS, LTIP and GSP Retrenchment & restructuring costs (16 646) (7050) Predominantly HPC cluster Other non-operat
Slide 16: Income Statement
Income Statement 16 Financial Review Rm 2019 Ch(%) 2018 Other income* @ + Realised FX gains of R88m (2018: R56m) (forex gains/losses) 52.6 |+192.0% 18.0 | , Unrealised FX gains of RO.2m (2018: R45m loss) Operating expenses - 1754.0 gy, |-1562,4 | . F , (margin) (17.8%) | *173% | (16.29%) | ° Previou
Slide 17: Underlying margin performance vs targets
Underlying margin performance vs targets Financial Review 17 Perishables Groceries Snacks & Confectionery Baking & Baking Aids Household & Personal Care 2019 EBITDA margin EBITDA near term 2019 achieved margin target Performance 10.9% 10% to 13% Within target 13.7% 11% to 14% Within target 15.4% 14%
Slide 18: Income Statement (contd)
Rm Income Statement (contd) Financial Review 2019 Net interest paid Profit before tax Income tax (effective rate) -144.9 (27.7%) Profit after tax 378.8 Normalised earnings Normalised headline earnings 18 Ch (%) 2018 * New banking facilities (Nov 2018) @ 0.8% lower weighted avg. -30.7% | -221.7 cost
Slide 19: Normalised EPS, HEPS & DPS
Income Statement Normalised EPS, HEPS & DPS Financial Review 19 2019 Ch (%) 2018 Normalised earnings (R million) +20.5% 419.9 WANOSSX (million) 5.5% 566.4 Like-for-like Normalised EPS (cps) +14.3% 74.1 Normalised HEPS (cps) +14.1% 74.6 DPS (cps) 25 +13.6% 22 Dividend cover 3.4 maintained 3.4 Dividen
Slide 20: Cash Flow summary
Cash Flow summary Financial Review 20 2019 (Rm) 2018 (Rm) a 829 Opening cash balance HE 35 Ee 976 Cash generated from ops Ee 958 -173 il Working capital changes -92 -154 Net finance charges -220 7 191 i Tax paid -139 HN 453 Cash generated from operating activities HE 505 -305 Investment activities*
Slide 21: Cash Flow - Working capital days
Cash Flow - Working capital days FinancialReviow 21 14.4% Net working capital : revenue 13.6% 13.2% 50 Net working capital days: 45 46 — Remain within target of 13-15% of revenue Creditors * Refinanced 3rd-party supply chain facilities with bank facilities at lower rates (contributed to lower intere
Slide 22: Cash Flow - Net investing activities
Cash Flow - Net investing activities Financial Review 22 Rm 2019 2018 Capex -401 -349 Other financial assets advanced / proceeds from discontinued ops 6 3 Cash flow from investing activities -395 -346 Main capex items 2019 Capex + Expansion and operating efficiencies - Milk-receiving, cheese-packagi
Slide 23: 5-year net debt trend
5-year net debt trend Financial Review 23 R > 500 Net Gearing calculation = Net debt : EBIT 2000 1500 1 000 500 2014 2015 2016 mm Normalised EBITDA (LHS) mam Net interest-bearing debt (LHS) «@= Net gearing % (RHS) NOTES: 1. Despite expansionary capex, gearing remains low 2. R1.3bn in unutilised fund
Slide 24: Key financial ratios
Key financial ratios Financial Review 24 2019 2018 Targets eed gears! EBITDA) U2 Below 20x Cash from operations before working capital changes R958m Cash generative Cash generated from operations R505m Cash generative Above 60%, impacted by 65% : expansion capex Cash conversion Net working capital 1
Slide 25: faa)
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Slide 26: Our focussed category approach
Our focussed category approach Category Review & Outlook 26 DENNY) MONTAGU saa, malti-cép CHAMONIX KSnAcks Food Categories Non-Food . . Snacks & Baking & Perishables Groceries Confectionery) Baking Aids HPC we Cea CONTACTIN Glenmor#Soap
Slide 27: Category revenue and EBITDA contributions
Category revenue and EBITDA contributions ies"""* ar good categories 920, good categories 970, PERISHABLES GROCERIES Revenue Normalised EBITDA* BAKING AND BAKING AIDS HPC 8% HPC 3% ‘ Before allocation of corporate costs
Slide 28: 2019 Performance by category: Perishables
ri LIBSTAR PERISHABLES 89% of category EBITDA 2019 Performance by category Category Review & Outlook 28 Organic Revenue (Rm) Gross profit margin % Normalised EBITDA (Rm) EBITDA margin % Weighted contribution to 12.3% normalised EBITDA increase Laneewood +103% Finlar +1.3% (Meat) Rialto (Value-added
Slide 29: 2019 Performance by category: Groceries
Category Review & LIBSTAR 2019 Performance by category Outlook 29 GROCERIES Volume Price/mix 2019 % ch. 2018 +8.3% 3 166.8 Organic Revenue (Rm) Gross profit margin % 26.7% +1.2pp 25.5% Normalised EBITDA (Rm) 435.0 +6.7% 407.9 EBITDA margin % 13.7% +0.7pp 13.0% Weighted contribution to 6.7% normalise
Slide 30: 2019 Performance by category: Snacks & Confectionery
Category Review & LIBSTAR 2019 Performance by category outook 30 SNACKS & CONFECTIONERY Volume Price/mix 2019 % ch. 2018 Organic Revenue (Rm) +1.2% +2.4% +3.5% Gross profit margin % +4.8pp 23.6% Normalised EBITDA (Rm) +13.6% 73.1 EBITDA margin % +0.1 pp 15.3% Weighted contribution to 13.6% normalise
Slide 31: 2019 Performance by category: Baking & Baking Aids
LIBSTAR 2019 Performance by category Category Review & Outlook 31 BAKING & BAKING AIDS Volume Price/mix 2019 % ch. 2018 +10.0% +11.5% Organic Revenue (Rm) +1.5% Gross profit margin % +2.2pp 27.6% Normalised EBITDA (Rm) 6.3% 92.6 EBITDA margin % -2.4 pp 14.8% Weighted contribution to 6.3% normalised
Slide 32: 2019 Performance by category: HPC
Category Review & LIBSTAR 2019 Performance by category Outeos 32 HPC Volume Price/mix 2019 % ch. 2018 -13.8% +7.0% Organic Revenue (Rm) Gross profit margin % +1.1pp 16.4% Normalised EBITDA (Rm) -0.1% 36.4 EBITDA margin % +0.3 pp 4.3% Normalised EBITDA decrease of * Volume declines (discontinuation o
Slide 33: Growing the category
• ‒ ‒ ‒ ▪ • ‒ – growing the category • • ‒ ‒ • • ‒ • ‒
Slide 34: Outlook by category: Groceries
LIBSTAR Outlook by category Category Review& GROCERIES Entrepreneurial Culture Grow Our Categories Expand Our Capabilities Acquire Operational Excellence Commercial Excellence Strategic Initiatives Strategic Acquisitions + Dry condiments * Investment in efficiency & |] * Integration of Healthwise ~—
Slide 35: Outlook by category: Snacks and Baking
LIBSTAR Outlook by category Gatego Review 8, SNACKS & CONFECTIONERY BAKING & BAKING AIDS Entrepreneurial Culture Grow Our Categories Expand Our Capabilities Operational Excellence Commercial Excellence Strategic Initiatives Strategic Acquisitions * Snacks & Confectionery * Investment in flatbread —
Slide 36: Outlook by category: HPC
Category Review & Outlook 36 LIBSTAR Outlook by category HPC Entrepreneurial Culture Grow Our Categories Expand Our Capabilities Acquire Operational Excellence Commercial Excellence Strategic Initiatives Strategic Acquisitions * Capitalising on eco-friendly trends * Phase 2 implementation — Full-yea
Slide 37: Group Outlook
05 Group Outlook Andries van Rensburg, CEO
Slide 38: 2019/2020 challenges
2019/2020 challenges Under-performance of HPC cluster, despite cost Group Outlook 38 rationalisation * HPC very working capital intensive * Continued market pressures Volume pressure from outsourced manufacturing channel in Groceries (wet condiments) product lines Montagu operational & logistics eff
Slide 39: Meeting consumers' needs with product innovation
Meeting consumers’ needs with product innovation seiscuic 39 _ ———— New products IANCEW SPRING ONION reo est oN Reto Renovated products Total —
Slide 40: Libstar's growing market share
Libstar’s growing market share Value-based Private Label Dealer-own Brand Strategies Low-cost Production to Scale Innovation Category Insight Management World-class CPG Manufacturing Libstar advantages Customer Partnership & Delivery * SA is 2"4 most price-sensitive country in the world* — PLnow R54
Slide 41: Capitalising on key market trends
Capitalising on key market trends Group Outlook 41 Libstar well positioned to meet changing consumer lifestyle & dietary needs through strong focus on Health & Wellness, Convenience, Eco-friendliness & DOB/PL Health & wellness * Health conscious shoppers propping up vitamin & supplement sales, plus
Slide 42: Source: Reuters, Nedbank research Source: Nedbank research
• • • Source: Reuters, Nedbank research • • • ‒ ‒ ‒ Source: Nedbank research
Slide 43: F2020 Group Outlook
F2020 Group Outlook * Weak economy & consumer spending pressure * Weak demand for outsourced manufacturing channel wet condiments * Reduction in export tea selling prices despite volume improvement * Covid-19 risk (risk to export channel & imported products) * Perishables, Snacks and Confectionery &
Slide 44: Libstar's investment proposition
Libstar’s investment proposition A portfolio capitalising on key health, wellness, eco- friendly & convenience trends Strong culture of innovation, differentiation Strong category management | Deep customer relationships capabilities in niche product categories Low-cost manufacturing, improving marg
Slide 45: Questions and Answers
LIBSTAR 06 Questions and Answers
Slide 46: Disclaimer
LIBSTAR Disclaime 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
Slide 47: Appendices
LIBSTAR , PORTABELLINI » | MUSHROOMS Firm, witha mild nutty favour. isd Appendices
Slide 48: Listed details
Listed details 48 JSE JIS. Share price Listed on 9 May 2018 Market capitalisation: in Food Processors R4 473 bn sector Market ratios Price HEPS* DPS‘ sae | ite ie [1 | te | som * Normalised HEPS ‘ Dividend paid once p.a. at final results
Slide 49: Breakdown of open FEC exposure
Breakdown of open FEC exposure Appencices 49 Quarter (Rn microrticeme | -FEGRate Not FEC Gover FEC spotrate an FEC rovelucad at 2020-Q1 101 102 AUD =i 10.5 -16 9.8 =15 EUR 7 16.1 115 15.7 112 GBP -1 19.8 -13 18.5 -13 USD 1 12.6 15 14.0 17 2020-Q2 31 34 AUD =i 10.8 -12 9.8 -11 EUR 4 16.4 60 15.7 58 G
Slide 50: Income Statement: adoption of new accounting standards, IFRS 16
Income Statement Adoption of new accounting standards 2019 impact of 1st time adoption of IFRS 16 Income Statement Appendices 50 Balance Sheet in rental expense & similar A in R127M V_ normalised EBITDA R655.6M_ A inlong term lease asset (before normalisation adjustments) R1 03m A in depreciation ex
Slide 51: 2019 — Results summary
2019 — Results summary Appendices 51 Pre impact of new accounting standards Normalised EBITDA (group) Normalised EBITDA (food categories) Normalised EBITDA (non — food category) Total Diluted EPS Total Diluted HEPS Diluted EPS from continuing operations Diluted HEPS from continuing operations Normal
Slide 52: Income Statement: adoption of IFRS 9 hedge accounting
Income Statement Adoption of new accounting standards Appendices 52 2019 impact of 1st time adoption of IFRS 9 (hedge accounting) Recognition of gain in hedge accounting reserve Other Income (statement of comprehensive income) Other Comprehensive Income (hedge reserve in statement of comprehensive i
Slide 53: Balance sheet summary
Balance sheet summary Accounting changes reconciled for implementation of new accounting standards Appendices 53 New 2019 Accounting 2019 Rm reported Standards Like-for-like 2018 | Comment ASSETS PPE _Lease asset ERS 16 lease gastg mn Goodwill Other non-current assets Current assets EQUITY & LIABILI
Slide 54: Income Statement: accounting changes reconciled
Income Statement Accounting changes reconciled for implementation of new accounting standards Appendices 54 New Like-for-Like 2019 Accounting 2019 2018 % ch vs Rm reported Standards —_Like-for-Like reported 2018 Comment Revenue 9 892.5 9 659.6 +2.4% Cost of sales -7 513.7 - -7 493.7 40.3% IFRS 1 R38
Slide 55: Cash flow conversion remains strong
Appendices 55 100% 75% 50% 4 940 25% 0% -25% -50% -75% -100% 2017 2018 2019 Ml Rm Normalised EBITDA (left hand axis) Mmmm Rm CAPEX (left hand axis) —s % (Normalised EBITDA less CAPEX) / Normalised EBITDA (right hand axis) Cash flow conversion remains strong
Slide 56: Breakdown of net investing & net financing activities
Breakdown of net investing & net financing activities Apandies Rm 2019 Net investing activities 395 Capital expenditure 401 Acquisition of Healthwise 50 Less Proceeds from the sale of discontinued operations & other financial 49 assets disposed of Sale of PPE 7 Net financing activities 32 Settlement
Slide 57: Debt structure
ne \: Rm 1300 800 300 - 200 - 700 -1 200 debt structure Avanex 57 1000 1000 670 670 02018 #2019 285 425 50 41 43 mm - 829 - 855 Facility A Facility B Facility C Other term loans Vehicle & Asset Net overdraft/ (Jibar +1.68%) (Jibar +1.75%) (Jibar +1.85%) finance facility (Cash) (variable) * Renegotia