Libstar Holdings Ltd. · JSE:LBR
Libstar — H1 2023 Earnings Presentation
54 slides from Libstar's earnings presentation, Jun 30, 2023
Slide 1: Interim Results Presentation: Six months ended 30 June 2023
LIBSTAR From our Home to Yours Interim Results Presentation Six months ended 30 June 2023
Slide 2: Presentation overview
Presentation overview Executive Summary 02 Financial Review Category Performance 04. + Strategy Update 05 Outlook
Slide 3: 01 Executive Summary
01 Executive Summary
Slide 4: Executive summary
LIBSTAR Executive summary Macro factors SA & global GDP decelerating > declining household consumption = Volumes | 7.0% vs H1 2022 > Discontinuation of unprofitable HPC lines Lower mushroom production due to H2 2022 fire Weak contract manufacturing demand Full-period effect of supply localisation by
Slide 5: Executive summary highlights
Executive summary Highlights EB pec performance = Commitment to improving business performance = H1 2023 EBITDA > full-year 2022 B Capital projects = Successful commissioning of new wrap line Operating expenses contained = 1.4% t on H1 2022 | 4 | Cash preservation = Cash conversion improved due to l
Slide 6: Direct impact of load-shedding
Direct impact of load-shedding 4 Days with load-shedding: ‘2mm 8 & D8 202 MTWTESS wItWtess MTWTESS uTwress MTWTESS MTWTESsS MTWTES Ss MTWTFSs Pit on = a i MTwress utwrtess wowtrss L ee Ne Source: Eskom se Push Libstar generator capacity A Diesel spend in H1 2023 fi 2021 2022 2023 H1 2022 H1 2023 kVA
Slide 7: Summarised results H1 2023
Summarised results H1 2023 +4.0% 20.0% -26.6% -18.3% -44.4% he GP margin Normalised* Normalised* Normalised* Price/mix +11%) eo ee: 22.1%) EBIT EBITDA EP -44.9% -57.3% 5.2x 58.0% Normalised* Total Gearing Interest cover HEPS HE (H1 2022: 1.5x) (H1 2022: 9.2x) * Normalised EBIT/EBITDA, Normalised EPS
Slide 8: Channel performance
Channel performance Revenue by sales channel Retail & Wholesale Food Service Export Industrial & Contract Manufacturing Total Group H1 2023 +4.8% +13.1% +10.0% -18.0% +4.0% Y-o-y change Volume Price/ -3.3% +8.1% +0.5% +12.6% -15.6% +25.6% -17.7% -0.3% -7.0% +11.0% Revenue contribution H1 2023 59.8%
Slide 9: 02 Financial Review
Slide 10: Income statement summary
Revenue 5 774.6 +4.0% 5 551.6 Gross profit margin (%) 20.0 -2.1pp 22.1 Other income 22.3 10.2 FX and P/L on disposal of PPE -25.1 -15.2 Operating expenses -969.7 +1.4% -956.0 Margin 16.8% 17.2% Operating profit 184.8 -30.2% 264.8 Margin 3.2% 4.8% Normalised operating profit 257.6 -26.6% 350.9 Margin
Slide 11: Financial position - Gearing & capex
Financial position - Gearing & capex Key financial Hi H1 2022 t my ratios 2023 2022 argets Capex back within target (2%-3% of net revenue) Gearing ratio 2.1 1.5 1.6 <2.5 Interest cover 5.2 9.2 7.7 >3.5 Capex % of net revenue H1 2020 2020 H1 2021 2021 H1 2022 2022 H1 2023 ROIC* 8.0% 12.5% 10.4% ple 3
Slide 12: Working capital days
Working capital days 16.8% Net working capital (12-month rolling) reduced to 4 18% 16.0% 16.0% 16.0% of revenue (16.8% in H1 2022) > 14.5% Percent of revenue 63 NWC target for 2023 was revised upward to 14% - 16% in 2022 final results, responding to short/medium term operating conditions 61 59 r— 53
Slide 13: Cash summary
Cash summary Cash flow analysis % Cash flow conversion higher due to reduced investment in net working capital Cash conversion ratio improved from 15% in H1 2022 to 58% in H1 2023 Target: >65% H1 H1 H1 H1 {2020 2020 2021 2021 2022 2022 2023 H1 2023 (R’m) H1 2022 (R’m) = 249 Opening cash balance Ms:
Slide 14: 03 Category Review
Slide 15: Product and market highlights
Product and market highlights LANCEWOOD* Lancewood remains the most awarded soft cheese manufacturer in South Africa (SA Dairy Champs) CREAMED smooth (1 COTTAGE CHEESE “Qu PLAIN ICON BRANDS 20222023 ICON BRAND. NNER LANCEWOOD* Lancewood is the proud winner of the title SA’s no. 1 soft cheese brand i
Slide 16: Underlying margin performance vs targets
Underlying margin performance vs targets ma “4 w a & Ne Normalised EBITDA margin PERISHABLES GROCERIES SNACKS & CONFECTIONERY BAKING & BAKING AIDS HOUSEHOLD & PERSONAL CARE H1 2023 achieved 6.0% 9.8% 18.1% 8.4% 5.7% H1 2022 achieved 9.1% 11.7% 18.4% 9.4% 1.1% 2022 achieved 2023 target 8.4% 12.2% 18.
Slide 17: H1 2023 Performance by category: Perishables
H1 2023 Performance by category a 51% of Group revenue ) Revenue by channel H1 2023 = Contribution Margin drivers Retail & Wholesale +1.3% 56.4% « Denny fire impact on volumes i 0, 0, Food Service +11.8% 80.3% = Raw material increases & under Exports +1.7% 8.1% recovery of overheads in Industrial &
Slide 18: Performance by category: Groceries
2023 Performance by category | GROCERIES 30% of Group revenue ) Revenue by channel H1 2023 Contribution Margin drivers Retail & Wholesale +12.5% 46.8% = Volume decline in Dickon Hall Foods Exports +10.9% 23.9% = Under recovery of manufacturing Industrial & Contract Manufacturing -23.4% 16.9% overhea
Slide 19: Performance by category: Snacks & Confectionery
2023 Performance by category SNACKS & CONFECTIONERY 4% of Group revenue ») Revenue by channel H1 2023 Contribution Margin drivers Retail & Wholesale +1.6% 95.9% * Kellogg’s Pringle manufacturing Exports +27.9% 12.0% terminated in prior year Industrial & Contract Manufacturing -91.2% 1.6% = Change in
Slide 20: Performance by category: Baking & Baking Aids
2023 Performance by category @2 BAKING & BAKING AIDS 9% of Group revenue ) Revenue by channel H1 2023 Contribution Margin drivers Retail & Wholesale +9.4% 85.6% = Amaro volumes reduced due to: Food Service *8.9% 10.3% > Load-shedding disruptions Exports +33.9% 3.2% Factory shutdown to > ur wi Indust
Slide 21: Performance by category: Household & Personal Care
2023 Performance by category & BOSE Sees 6% of Group revenue ) Revenue by channel H1 2023 Contribution Margin drivers Retail & Wholesale +2.0% 91.5% = Discontinuation of unprofitable lines Industrial & Contract Manufacturing -0.2% 6.4% * Procurement savings and production Exports +44.3% 2.1% efficie
Slide 22: 04 Strategy Update
LIBSTAR Strategy Update 22
Slide 23: Comprehensive strategic review completed in H1 2023
Comprehensive strategic review completed in H1 2023 Our strategic " Deliver accelerated, profitable growth & stakeholder returns objective: = Still underpinned by existing strategic pillars ENTREPRENEURIAL CULTURE Key elements designed to improve execution capabilities highlighted by strategic revie
Slide 24: Simplification of Group portfolio composition
Simplification of Group portfolio composition Reduce exposure to Actively reduce exposure to unprofitable product lines, non-food categories underperforming business units & marginal return businesses through: a GB ec = Formalisation of divestment mandates = Intent to dispose of HPC remains; in proc
Slide 25: Simplification of the Group's operating model
Simplification of the Group’s operating model Strategic priority Execution progress The Group will actively seek to: Group-wide integration initiative = Align the Group organisational = Reduce reporting & operating complexity structures to simplified, category-led & brand-driven approach = Improve c
Slide 26: Growth of categories & channels
Growth of categories & channels Strategic priority Execution progress = Accelerate growth of Retail channel 1 | Retail channel offerings = Continued exit of unprofitable product lines * Implement dedicated a TE) = Successfully commissioned new wrap manufacturing line at Amaro Foods develop under-ind
Slide 27: Sustainability
Sustainability Strategic priority Execution progress Scope & implement strategic initiatives in a responsible manner, ensuring maintenance of: = Sustainable operations = Sustainable cash flows = Sustainable business practices @ Sustainable Operations = Improvements in technology & price have provide
Slide 28: FY23 FY24 FY25
FY23 FY24 FY25 ▪ Reduce NWC ▪ Return gearing to <1.5x ▪ Operating model ▪ Reduce capex ▪ Earn right to consider change finalised and buy-backs operational ▪ Formalise divestment mandates ▪ Finalise divestment and ▪ Scope and quantify closure mandates operating model ▪ Implement operating process, in
Slide 29: 05 Outlook
Slide 30: Short term Actions Strategy
Short term ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ Actions Strategy
Slide 31: Short term Actions Strategy
Short term Actions ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ Strategy
Slide 32: Short term Actions Strategy
Short term Actions Strategy ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪
Slide 33: Questions & Answers
06 Questions & Answers
Slide 34: Supporting data
LIBSTAR i Supporting data > Balance sheet and cash > Balance sheetand cash | | Reentry > Category contributions
Slide 35: Rising input costs and under-recovery of overhead costs
↓ > Rising input costs of raw materials & packaging > Under-recovery of overhead costs in export-facing divisions > Unprecedented levels of load-shedding
Slide 36: Income statement reconciliation
Income statement reconciliation Reconciliation between Normalised EBITDA, Normalised earnings & Normalised headline earnings (R’m) Normalised EBITDA Less: Depreciation and amortisation Interest Taxation and normalisation adjustments Normalised earnings Gain on disposal of property, plant and equipme
Slide 37: Income statement - Normalised EPS & HEPS
LIBSTAR Income statement - Normalised EPS & HEPS H1 2023 Normalised earnings (R’m) Normalised headline earnings (R’m) WANOS (million) Normalised EPS (cps) Normalised HEPS (cps) 117.9 116.8 595.8 19.8 19.6 -44.4% -44.9% -44.4% -44.9% H1 2022 211.9 211.9 595.8 35.6 35.6 NOTE: Further detail available
Slide 38: Breakdown of open FEC exposure
Breakdown of open FEC exposure Quarter Dealt Amount (m) Forward Rate FEC Cover (m) FEC spot rate on 30 June 2023 Buy (Imports) 2023-Q3 -269.8 +EUR 9.6 20.35 -196.2 20.67 +THB 1.5 1.90 -0.8 0.53, +USD 4.0 18.36 -72.8 18.93 2023-Q4 -120.3 +EUR 27 20.84 -56.0 20.90 Sell (Exports) 2023-Q3 +AUD 3.3 12.14
Slide 39: Supporting data
LIBSTAR Supporting data > Income statement > Balance sheet and cash > Category contributions
Slide 40: Financial position - snapshot
Financial position - snapshot Non-current assets 5 807.0 5 757.1 Property, plant and equipment 1 765.4 1 499.1 Right-of-use-assets 477.8 387.4 Other non-current assets 3 563.8 3 870.6 Current assets 4050.6 3 636.1 Assets classified as held for sale - 460.7 Equity 5119.2 5 355.7 Non-current liabiliti
Slide 41: Breakdown of net investing & net financing activities
Breakdown of net investing & net financing activities en | oe Net investing activities -104.7 -122.4 Capital expenditure -109.4 -122.4 Sale of PPE +4.7 +1.0 Acquisition of subsidiaries, net of cash acquired - -1.0 Net financing activities -131.2 -488.9 Principal elements of lease payments -84.7 -79.
Slide 42: 5-year net debt trend
5-year net debt trend Net Gearing calculation = Net debt : Normalised EBITDA (Excluding IFRS 16) (R'm) 2.0 Notes: 15 1. R1.2bn in unutilised funding facilities 1.0 2. Gearing: 2.1x normalised EBITDA (Debt covenant <2.5)* 0.5 3. Net interest cover to EBITDA: 5.2x (Debt covenant >3.5x)* 0.0 2020 H1 20
Slide 43: Net debt structure
Net debt structure Facility Maturity Raa H12023 fey (R’m) date . Utilised Utilised margin Debt structure Facility A 1000 Dec-26 1.70% 1000 1000 = Renegotiated debt package Facility B 150 Dec-24 1.60% 150 150 implemented Dec 2021 Facility C 200 Dec-25 1.65% 200 - Facility D 350 Dec-26 4.70% = = Debt
Slide 44: Summary of key financial ratios
Summary of key financial ratios H1 2023 H1 2022 Targets Gearing ratio (net debt to normalised EBITDA) Bibs 1.5x Optimal range 1 - 2x Cash from operations before working capital changes R403m R476m Cash generative Cash generated from operating activities R125m R42m Cash generative Cash conversion rat
Slide 45: Supporting data
LIBSTAR ( CHOICE GRADE Hi PURE | HONEY it c Supporting data i ae eecnel > Balance sheet and cash e - a
Slide 46: Libstar categories
Libstar categories FOODS ld FOODS a FOODS PERISHABLES LANCEWOOD & pIALTQ DENNY. caw = Umatie (Value-added dairy) (Meat products) (Value-added dairy and deli) (Fresh mushrooms) (Convenience) (Baby food, Ne ready-made frozen meals) Mipeerbo dice RIALTQ cet Ne (Dry condiments) (Groceries) (Teas) (Wet c
Slide 47: Category revenue contributions
Category revenue contributions H1 2023 H1 2022 F<] PERISHABLES 50.6% 50.4% | GROCERIES 30.4% : Revenue Revenue fe) BAKING & BAKING AIDS » 4.2% -_— 5.0% 6.3% %5% 8.0% 2 6.4% |‘ HOUSEHOLD & PERSONAL CARE XN 30.2% 47
Slide 48: Category Normalised EBITDA contributions
Category Normalised EBITDA‘ contributions H1 2023 H1 2022 F<] PERISHABLES 46.4% 37.9% 35.9% | GROCERIES Normalised Normalised = ll Ce 46% 9-1% 0.7% 7.6% |‘ HOUSEHOLD & PERSONAL CARE NS ’ Before allocation of corporate costs
Slide 49: Divisional contribution to EBITDA
Divisional contribution to EBITDA F<] PERISHABLES 104% of category EBITDA Weighted contribution to change in Normalised EBITDA Lancewood -8.6% Finlar Fine Foods 6.2% Rialto -0.1% Millennium Foods +0.5% Umatie -0.1% Denny Mushrooms -16.6% 49
Slide 50: Divisional contribution to EBITDA
Divisional contribution to EBITDA Sj crocenes =] Weighted contribution to change in Normalised EBITDA 20% of Rialto -4.7% category Cape Herb & Spice +0.3% EEIIDA Montagu Foods +1.2% Cecil Vinegar -0.6% Dickon Hall Foods -13.8% Khoisan Gourmet +0.4% Cape Coastal Honey +1.4% Cape Foods +3.4% Chamonix
Slide 51: Divisional contribution to EBITDA
Divisional contribution to EBITDA SNACKS & CONFECTIONERY Weighted contribution to change in Normalised EBITDA 100% of Ambassador Foods -11.4% category EBITDA K Snacks -2.9% 4 43%
Slide 52: Divisional contribution to EBITDA
Divisional contribution to EBITDA 9.8 BAKING & BAKING AIDS 100% of category EBITDA Weighted contribution to change in Normalised EBITDA Amaro Foods -0.2% Cani Artisan Bakers +7.0% Retailer Brands -7.6% 52
Slide 53: Divisional contribution to EBITDA
Divisional contribution to EBITDA | HOUSEHOLD & PERSONAL CARE Weighted contribution to change in Normalised EBITDA 100% of category HPC 412.6% EBITDA Total 412.6%
Slide 54: Forward-looking statements disclaimer
LIBSTAR 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 enviro