Wrap Text
Reviewed Interim Results For The 6 Months Ended 30 June 2018
Libstar Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2014/032444/06)
(JSE share code: LBR)
(ISIN: ZAE000250239)
("Libstar" or the "Company" or the "Group")
REVIEWED INTERIM RESULTS FOR THE 6 MONTHS ENDED 30 JUNE 2018
Salient features:
- Successful listing on the JSE Limited in May 2018, raising R3 billion primary and secondary capital;
- Revenue increased 14.2% to R4,529 million from R3,967 million;
- Gross profit margin of 20.9% (H1 2017: 22.4%), impacted primarily by lower price realisation in mushrooms,
traditionally lower margins in Sonnendal Dairies and six -week industrial strike action at Dickon Hall Foods;
- Operating profit decreased 13.8% to R223 million from R259 million, impacted significantly by unrealised
foreign exchange losses of R32m relative to unrealised foreign exchange gains of R30m in the comparative period;
- Normalised EBITDA* increased 4.3% to R398 million;
- EPS and HEPS from continuing operations of 13 cents (H1 2017: 25 cents);
- Integration of three new acquisitions, viz Sonnendal Dairies (Perishables), Millennium Foods (Perishables)
and Khoisan Tea (Niche Beverages) to build capacity and enter new high-growth sub-categories; and
- Consolidation in the Ambient Groceries category (three Denny Foods factories into Montagu Foods).
* Normalised EBITDA is a performance measure presented in accordance with the accounting policies set out in
Libstar's pre-listing statement dated 24 April 2018, the details of which are set out in the segmental information
disclosure below.
Andries van Rensburg, CEO, remarked on Libstar's maiden interim results "Notwithstanding the fact that the results
reflect the impact of a challenging trading environment, we were able to generate positive volume and organic
revenue growth. Our focus remains on developing our existing categories and channels with capacity and yield-
enhancing projects, supported by a strong emphasis on innovation.
"Our Lancewood brand continues to deliver exceptional performance, bolstered by the recent launch of a range of
yoghurts and cook-in-sauces. We will further enhance our many growth-initiatives across the Group with significant
investment in projects to drive operational efficiencies."
ABOUT LIBSTAR
Libstar is a leading producer and supplier of high quality products in the consumer packaged goods ("CPG") industry
and markets a wide range of products in South Africa and globally. The Group provides a multi-product offering in
multiple categories across multiple channels, while strategically positioning itself within the food and beverage and
home and personal care ("HPC") sectors and maintaining the flexibility to capitalise on growth areas in the CPG industry.
The Group operates in a number of business units, each with varying autonomy. Although the Group operates a
decentralised business model, the business units are supported from the central office by an experienced team in
all functional business activities such as human resources, finance, sales and marketing and supply chain. Growth is
driven from the central office both organically and through expansion projects, as well as acquisitions. Libstar drives
the broad group strategy, frameworks, guidelines and governance policies and procedures, and generally provides
the platform benefits that assist small to medium-sized business units to grow exponentially. Key to this growth is
the strategic allocation of capital by Libstar to fund investments in working capital and infrastructural development
that builds manufacturing capability and operational efficiencies.
GROUP TRADING AND FINANCIAL PERFORMANCE
Operating conditions in South Africa remain challenging against the backdrop of lower consumer spending and
economic growth in most sectors. Despite this, the Group delivered organic revenue growth of 3.7%, organic volume
growth of 2.7% and total sales growth of 14.2% during the first half of the year.
Gross profit margins of 20.9% were negatively impacted due mainly to the lag effect between rising input costs and
the implementation of price increases to customers. Lower production volumes and lower price realisations of fresh
mushrooms impacted both revenue and gross profit. Sonnendal Dairies, which was acquired in late 2017 for the
strategic purpose of providing manufacturing capacity and expertise in the yoghurt category, experienced lower-
than-Group-average margins. New product innovation in the period under review saw the launch of an exciting range
of premium yoghurt products under the Lancewood brand in August. In addition, the effect of price increases to
customers and the results of cost-saving initiatives resulted in the Group's gross margins being returned to prior
period levels by the end of August which are expected to be maintained through to the end of the year.
Operating expenses were well controlled at 16.4% of net revenue (2017: 16.8%). The impact of unrealised foreign
exchange losses of R32 million on profit before taxation was significant relative to the comparative period in which
an unrealised foreign exchange gain of R30 million was recorded. This resulted in net realised and unrealised foreign
exchange gain in the current period of R3 million relative to R41 million during H1 2017. The Group continues to
purchase foreign exchange contracts on a six to nine month forward-looking basis in order to minimise the impact
of realised foreign exchange losses. Finance costs increased relative to the comparative period, mainly due to higher
levels of borrowing resulting from acquisitions made in the latter part of 2017 and the additional facility utilised to
fund a distribution of capital to shareholders in the first quarter. Net indebtedness following the initial public offering
reduced to R1.3 billion from R1.9 billion at 31 December 2017.
SEGMENTAL RESULTS
6 months 6 months
ended 30 June ended 30 June
2018 2017 Change
R'000 R'000 %
Segmental revenue
Perishables 2 172 598 1 673 933 29,8
Ambient Groceries 1 107 388 1 225 206 (9,6)
Snacks and Confectionery 212 322 193 125 9,9
Baking and Baking Aids 255 766 225 627 13,4
Niche Beverages 296 607 187 513 58,2
Household and Personal Care 377 519 357 795 5,5
Specialised Food Packaging 106 537 103 957 2,5
6 months 6 months
ended 30 June ended 30 June
2018 2017 Change
R'000 R'000 %
Segmental EBITDA
Perishables 189 388 181 448 4,4
Ambient Groceries 143 352 148 920 (3,7)
Snacks and Confectionery 34 977 30 483 14,7
Baking and Baking Aids 39 758 34 034 16,8
Niche Beverages 16 697 836 1 897,2
Household and Personal Care 15 922 14 016 13,6
Specialised Food Packaging 4 139 6 817 (39,3)
Perishables
Perishables revenue increased by 29.8% to R2,173 million, driven by volume growth, mainly due to the acquisition
of Sonnendal Dairies and Millennium Foods during the last quarter of 2017. The revenue growth excluding these
acquisitions was 12.5%, due mainly to increased volumes in cheese in the retail, food service and export channels.
Revenue and gross profit margins were negatively impacted by increased promotional activity and discount in
chicken products as well as low price realisation in fresh mushrooms. Production and sales levels of fresh mushrooms
improved during the second quarter, following a particularly slow first quarter. Normalised EBITDA increased by
4.4% to R189 million whilst Normalised EBIT decreased by 1.2% to R162 million.
The Group expects continued strong cheese performance during the second half of the year, bolstered by the launch
of new yoghurts, spreads and sauces. Initiatives are being implemented to control the margins in fresh mushrooms
and focus sales on the upper end of the market.
Ambient Groceries
Ambient Groceries revenue decreased 9.6% to R1,107 million because of production stoppages and industrial action
at Dickon Hall Foods that resulted in six weeks lost production and sales. The effect of the industrial action on
revenue amounted to approximately R63 million. Despite strong growth in the local herbs and spices market, the
Group experienced slow shipments to certain international markets. The consolidation of three wet-condiment
plants into the Montagu manufacturing facility was completed during March. However, commissioning delays
impacted negatively on first quarter results, resulting in approximately R16 million lost sales. Normalised EBITDA
and Normalised EBIT decreased by 3.7% and 8.2% to R143 million and R120 million respectively.
Production at Dickon Hall Foods and Montagu is now fully online with the Group looking forward to the launch of
new private label wet condiments. Exports of herbs and spices are expected to normalise in the second half of the year.
Snacks and Confectionery
Snacks and Confectionery revenue increased 9.9% to R212 million, driven mainly by the introduction of new
products. Normalised EBITDA and Normalised EBIT increased by 14.7% and 14.6% to R35 million and R30 million
respectively.
Baking and Baking Aids
Baking and Baking Aids revenue increased 13.4% to R256 million, due to the transfer of the NCP yeast and Cook 'n
Bake products from the Ambient Groceries category to the Baking and Baking Aids category April 2018, as well as
growth in the baking aids category in the retail channel. Normalised EBITDA and Normalised EBIT increased by 16.8%
and 22.3% to R40 million and R31 million respectively.
The launch of new private label baking aids in the retail channel and commissioning of a par-bake artisanal breads
and rolls facility during the fourth quarter, is expected to support the category's growth trajectory.
Niche Beverages
Niche Beverages revenue increased 58.2% to R297 million, driven by increased water sales in the first quarter as a
result of the drought in the Western Cape and the acquisition of Khoisan Gourmet during the last quarter of 2017.
Normalised EBITDA and Normalised EBIT increased to R17 million and R12 million respectively.
The Group expects continued strong performance from tea products.
Household and Personal Care
Household and Personal Care revenue increased 5.5% to R378 million, mainly due to improved sales volumes.
Normalised EBITDA and Normalised EBIT increased by 13.6% and 29.2% to R16 million and R7 million respectively.
The cost-savings and efficiency initiatives within the category have borne fruit during the first half of the year, with
these savings expected to continue into the latter part of the year supported by the launch of new private label
cotton products.
Specialised Food Packaging
Specialised food packaging revenue increased 2.5% to R107 million, driven primarily by price increases. Volumes
have been under pressure because of the loss of key accounts in the second half of 2017. Normalised EBIT decreased
44.3% to R3 million. Normalised EBITDA decreased 39.3% to R4 million. Initiatives focusing on environmentally-friendly
packaging solutions are expected to bolster second half performance.
CASH FLOW AND CAPITAL EXPENDITURE
During the period under review, the Group invested R152 million in capital expenditure, representing 3.3% of net
sales, and made a capital distribution of R800 million to shareholders on 28 February 2018. Of the proceeds from
the initial public offering of R1.5 billion, R1.1 billion was utilised to repay term loans. Net working capital at the close
of the period was well managed at 50 days (2017: 54 days), although higher inventory levels were maintained
throughout the period to improve service levels in dairy and HPC products which resulted in a net investment in
working capital of R86 million (2017: net reduction of R31 million). The Group generated R80 million from
operating activities (2017: R233 million).
STRATEGY
Libstar's strategy is to remain focussed on:
- Channel and category growth;
- Export growth;
- Supply chain optimisation;
- Significant enhancement of our go-to-market and execution capabilities; and
- The active pursuit of value and earnings enhancing acquisitions.
OUTLOOK
Although market conditions are expected to remain tough, the Group is looking forward to a stronger
performance in the second half of the year.
There are growth opportunities across our business driven by the completion of several earnings-
enhancing projects and the introduction of higher-margin innovative new products. We have started
producing a new range of dairy products which are already selling extremely well and are launching other
products, including private label wet condiments and prepared meals. We are commissioning a par-bake
artisanal breads and rolls facility in the fourth quarter.
We are focused on margin improvements through lower cost manufacturing and packaging as well as
procurement and other supply chain efficiencies. We are also concentrated on the more resilient upper-
end of the market.
Benefits from the integration of recently acquired businesses are coming through. Additionally, the
integration of Denny Foods into Montagu Foods has been a success and there are further consolidation
exercises underway.
We are not expecting any repeat of the once-off incidents from the first half of the year which reduced
our revenues quite considerably. Dickon Hall's trading is catching up following the strike earlier in the year.
Libstar's Normalised EBITDA is typically weighted 60% towards the second half of the year, particularly in
the fourth quarter.
DIVIDEND
The Board will, at the next year-end reporting date, assess the full year operational performance of the Group and
make an appropriate recommendation as to the declaration of a dividend to shareholders. Accordingly, the
Company will not declare an interim dividend. The Company has an initial target dividend pay-out ratio of 30-40%
of profit after tax. The amount, timing and frequency of future dividends will be at the sole discretion of the Board
and will be a function of the profitability, growth opportunities and strategy of the Group.
CHANGES TO THE BOARD AND COMMITTEE COMPOSITIONS
With effect from 9 May 2018:
- Wendy Luhabe was appointed as Chairperson of the Board, and the Nominations Committee;
- Phumzile Langeni was appointed as Chairperson of the Audit and Risk Committee and Social and Ethics
Committee;
- JP Landman was appointed as Lead-independent Director and Chairperson of the Investment and Strategy
Committee; and
- Wahid Hamid was appointed as Chairperson of the Remuneration Committee.
By order of the Board
W Luhabe A van Rensburg R Smith
Chairperson Chief Executive Officer Financial and Commercial Director
Johannesburg
4 September 2018
FORWARD-LOOKING STATEMENTS
Any forward-looking statements included in this results announcement involve known and unknown risks,
uncertainties and other factors, which may cause the actual results, performance or achievements of the Group to
differ materially from any future results, performance or achievements expressed or implied by such forward-looking
statements. Any reference to forward-looking information included in this results announcement does not
constitute an earnings forecast and has not been reviewed or reported on by the Group's external auditors.
REVIEWED CONDENSED INTERIM CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
6 months 6 months Year ended 31
ended 30 June ended 30 June December
Notes 2018 2017 2017(1)
Restated
Reviewed Reviewed Audited
R'000 R'000 R'000
CONTINUING OPERATIONS
Revenue 4 528 738 3 967 156 8 796 450
Cost of sales (3 584 172) (3 079 789) (6 788 632)
Gross profit 944 566 887 367 2 007 818
Other income 5 7 053 50 019 146 653
Operating expenses (728 130) (678 102) (1 558 640)
Operating profit 6 223 489 259 284 595 831
Investment income 21 027 10 816 25 754
Finance costs (154 493) (122 084) (254 431)
Profit before tax 90 023 148 016 367 154
Income tax expense (24 882) (34 737) (134 174)
Profit for the period from continuing operations 65 141 113 279 232 980
DISCONTINUED OPERATIONS
Loss for the period from discontinued operations (2 849) (13 350) (43 283)
Profit for the period 62 292 99 929 189 697
Other comprehensive income for the period, net of tax (247) - (459)
Defined benefit plan actuarial (losses)/gains (247) - (459)
Total comprehensive profit/(loss) for the period 62 045 99 929 189 238
Profit/(loss) attributable to:
Equity holders of the parent 63 820 101 914 188 354
Non-controlling interest (1 528) (1 985) 1 343
62 292 99 929 189 697
Total comprehensive income attributable to:
Equity holders of the parent 63 573 101 914 187 895
Non-controlling interest (1 528) (1 985) 1 343
62 045 99 929 189 238
Basic and diluted earnings per share (cents)
From continuing operations 7 13 25 49
From continuing and discontinued operations 7 12 22 40
Headline earnings per share (cents)
From continuing operations 7 13 25 60
From continuing and discontinued operations 7 12 23 57
(1)The December 2017 numbers have been restated to reflect Pasta Nova as a discontinued operation.
REVIEWED CONDENSED INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June At 30 June At 31 December
2018 2017 2017
Reviewed Reviewed Audited
R'000 R'000 R'000
ASSETS
Non-current assets 6 031 717 5 687 698 6 033 319
Property, plant and equipment 1 103 649 857 005 1 041 225
Goodwill 2 521 058 2 445 579 2 521 058
Intangible assets 2 376 992 2 379 953 2 449 507
Other financial assets 8 860 - 9 600
Operating lease asset 4 248 3 686 5 439
Deferred tax assets 16 910 1 475 6 490
Current assets 3 667 931 2 762 296 3 459 378
Inventories 1 188 231 971 397 1 137 107
Trade and other receivables 1 482 091 1 350 053 1 618 108
Biological assets 26 990 23 118 26 162
Other financial assets 24 562 22 921 115 647
Current tax receivable 61 031 54 125 11 646
Cash and bank balances 885 026 340 682 550 708
Assets classified as held for sale 21 834 12 000 -
Total assets 9 721 482 8 461 994 9 492 697
EQUITY AND LIABILITIES
Capital and reserves attributable to equity holders of the parent 5 260 384 4 145 150 4 559 273
Share capital 4 829 235 3 886 410 4 187 177
Defined benefit plan reserve (1 587) (881) (1 340)
Retained earnings 509 716 365 966 445 896
Premium on acquisition of non-controlling interests (67 484) (18 390) (63 624)
Put options exercisable by non-controlling interests and executive
management (9 496) (87 955) (8 836)
Non-controlling interests 10 028 7 538 7 696
Total equity 5 270 412 4 152 688 4 566 969
Non-current liabilities 2 439 078 2 785 485 2 878 889
Other financial liabilities 1 604 677 1 981 405 2 014 548
Deferred tax liabilities 805 761 768 131 815 948
Employee benefits 8 197 6 854 8 372
Share appreciation rights 12 342 20 689 34 019
Operating lease liability 8 101 8 406 6 002
Current liabilities 2 001 834 1 523 821 2 046 839
Trade and other payables 1 388 058 1 110 872 1 498 817
Other financial liabilities 372 077 254 425 348 146
Current tax payable 3 442 1 520 495
Bank overdraft 238 257 157 004 199 381
Liabilities directly associated with assets
classified as held for sale 10 158 - -
Total liabilities 4 451 070 4 309 306 4 925 728
Total equity and liabilities 9 721 482 8 461 994 9 492 697
REVIEWED CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Put options
exercisable by
Premium on non-
acquisition of controlling
Defined non- interests and Non-
benefit plan controlling Retained executive controlling
Share capital reserve(1) interests(2) earnings management(3) interests Total
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 1 January 2017 3 886 410 (881) (18 390) 264 052 (55 129) 9 523 4 085 585
Total comprehensive income for the period - - - 101 914 - (1 985) 99 929
Profit or loss for the period - - - 101 914 - (1 985) 99 929
Transactions with owners of the Company
Movement in put options - - - - (32 826) - (32 826)
Fair value adjustment taken through equity - - - - (32 826) - (32 826)
Balance at 30 June 2017 3 886 410 (881) (18 390) 365 966 (87 955) 7 538 4 152 688
Total comprehensive income for the period - (459) - 86 440 - 3 328 89 309
Profit or loss for the period - - - 86 440 - 3 328 89 768
Other comprehensive income for the period - (459) - - - - (459)
Transactions with owners of the Company
Contributions and distributions 300 767 - - (33 816) - - 266 951
Share buy back (25 530) - - (33 816) - - (59 346)
Issue of shares 326 297 - - - - - 326 297
Changes in ownership interests - - (45 234) - - (3 170) (48 404)
Purchase of non-controlling interest in
subsidiary - - (45 234) - - (3 170) (48 404)
Movement in put options - - - 27 306 79 119 - 106 425
Put options exercised - - - - 97 458 - 97 458
Fair value adjustment taken through equity - - - - 14 777 - 14 777
Transfer from retained earnings on exercise
of put options by executive management - - - 27 306 (33 116) - (5 810)
Balance at 31 December 2017 4 187 177 (1 340) (63 624) 445 896 (8 836) 7 696 4 566 969
Total comprehensive income for the period - (247) - 63 820 - (1 528) 62 045
Profit or loss for the period - - - 63 820 - (1 528) 62 292
Other comprehensive income for the period - (247) - - - - (247)
Transactions with owners of the Company
Contributions and distributions 642 058 - - - - - 642 058
Capital distribution (800 000) - - - - - (800 000)
Issue of shares 1 500 730 - - - - - 1 500 730
Held as treasury shares (730) - - - - - (730)
Capitalisation of costs directly attributable (57 942) - - - - - (57 942)
to issue of shares
Changes in ownership interests - - (3 860) - - 3 860 -
Purchase of non-controlling interest in subsidiary - - (3 860) - - 3 860 -
Movement in put options - - - - (660) - (660)
Fair value adjustment taken through equity - - - - (660) - (660)
Balance at 30 June 2018 4 829 235 (1 587) (67 484) 509 716 (9 496) 10 028 5 270 412
Notes
1. Defined benefit plan reserve: Reserves comprises actuarial gains or losses in respect of defined benefit obligations that are recognised
in other comprehensive income.
2. Premium on non-controlling interests: Represents the difference between the carrying amount of the non-controlling interests and the
fair value of the consideration given on acquisition of non-controlling interests.
3. Put options exercisable by non-controlling interest and executive management relates to the liability raised in respect of put options
exercisable by non-controlling interests and executive management.
REVIEWED CONDENSED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2018 2017 2017
Notes Reviewed Reviewed Audited
R'000 R'000 R'000
NET CASH FLOW FROM OPERATING ACTIVITIES 80 104 233 232 572 614
Cash generated from continuing operations 10 308 219 430 701 955 204
Finance income received 21 027 10 816 25 754
Finance costs paid (154 493) (122 084) (254 431)
Taxation paid (91 645) (91 173) (145 191)
Cash (utilised by) / generated from discontinued operations (3 004) 4 972 (8 722)
NET CASH FLOW FROM INVESTMENT ACTIVITIES (150 845) (138 861) (605 779)
Purchase of property, plant and equipment and computer software (151 582) (138 861) (315 115)
Sale of property, plant and equipment and computer software 737 - (6 914)
Acquisition of businesses (net of cash acquired) - - (283 750)
NET CASH FLOW FROM FINANCING ACTIVITIES 362 533 (28 576) 266 609
Proceeds from issue of equity shares 1 500 000 - 132 151
Capital distribution (800 000) - -
Share issue costs (5 483) - -
Share buyback - - (39 961)
Loans (repaid to)/advanced by shareholders (19 384) - 19 384
Loans repaid by/(advanced to) shareholders 41 767 - (43 059)
Proceeds from other financial liabilities (35 040) - 35 040
Repayment of loans from non controlling interests (28 880) (915) (6 518)
Proceeds from term loans and asset based financing 846 206 51 478 300 274
Repayment of term loans and asset based financing (1 136 653) (79 139) (130 703)
Net increase in cash and cash equivalents 291 792 65 795 233 444
Cash and cash equivalents at the beginning of the period 351 327 117 883 117 883
Cash and cash equivalents at the end of the period 643 119 183 678 351 327
Continuing operations 646 769 183 678 351 327
Discontinued operations (3 650) - -
REVIEWED CONDENSED INTERIM CONSOLIDATED SEGMENTAL INFORMATION
BASIS OF SEGMENTATION
The executive management team of the Group has chosen to organise the Group into categories and manage the operations in
that manner. The information reported to the chief operating decision maker for the purposes of resource allocation and
assessment of segment performance is based on seven categories.
The following summary describes each segment:
- Perishables
Perishable products are products that are likely to decay or spoil within a short period of time.
- Ambient Groceries
Ambient groceries (also known as "shelf-stable" groceries) is a category of foods that can be stored and preserved at room
temperature.
- Snacks and Confectionery
Premium snacks and confectionery products.
- Baking and Baking Aids
Baked goods, specialised gluten free offering and baking aids.
- Niche Beverages
The niche beverages product category consists of beverages that do not fall within the mainstream beverage market.
- Household and Personal Care
Detergents and household cleaning products.
- Specialised Food Packaging
The specialised food packaging product category is made up of custom-made packaging solutions for various food and drink
products sold largely in the food services industry.
6 months 6 months Year ended
ended 30 June ended 30 June Change 31 December
2018 2017 2017
R'000 R'000 % R'000
INFORMATION ABOUT REPORTABLE SEGMENTS
Revenue
Perishables 2 172 598 1 673 933 29,8 3 729 670
Ambient Groceries 1 107 388 1 225 206 (9,6) 2 614 824
Snacks and Confectionery 212 322 193 125 9,9 428 505
Baking and Baking Aids 255 766 225 627 13,4 515 406
Niche Beverages 296 607 187 513 58,2 428 278
Household and Personal Care 377 519 357 795 5,5 826 887
Specialised Food Packaging 106 537 103 957 2,5 252 879
4 528 738 3 967 156 14,2 8 796 450
Operating profit (EBIT)
Perishables 137 810 152 324 (9,5) 371 759
Ambient Groceries 53 517 119 612 (55,3) 284 270
Snacks and Confectionery 30 221 22 855 32,2 51 569
Baking and Baking Aids 25 893 20 028 29,3 52 383
Niche Beverages 8 086 (4 468) 281,0 (57 057)
Household and Personal Care 489 (1 815) 126,9 4 847
Specialised Food Packaging 2 399 5 283 (54,6) 13 872
Corporate (34 925) (54 535) 36,0 (125 812)
223 489 259 284 (13,8) 595 831
Reconciliation of operating profit per segment to profit before tax
Operating profit 223 489 259 284 (13,8) 595 831
Investment income 21 027 10 816 94,4 25 754
Finance costs (154 493) (122 084) (26,5) (254 431)
Profit before tax 90 023 148 016 (39,2) 367 154
The chief operating decision maker reviews the revenue and operating profit on a regular basis. The chief operating decision
maker does not evaluate any of the Group's assets or liabilities on a segmental basis for decision making purposes.
6 months 6 months Year ended
ended 30 June ended 30 June Change 31 December
2018 2017 2017
R'000 R'000 % R'000
Normalised EBIT and EBITDA
Group - continuing operations
Operating profit 223 489 259 284 (13,8) 595 831
Amortisation of customer contracts 70 420 65 551 131 486
Due diligence costs 738 1 899 4 428
Expenses relating to share appreciation rights granted (21 677) 13 330 26 660
Fair value adjustment to put options - 1 667 (1 436)
Government grants - (137) (256)
Impairment losses on goodwill and customer relationships - - 50 000
Loss on disposal of property, plant and equipment 1 383 306 959
Costs and fees attributable to the Initial Public Offering 7 303 - 22 583
Retrenchment and settlement costs 1 459 5 479 15 193
Securities transfer tax - - 275
Straight lining of operating leases 2 181 136 (459)
Strategic advisory fees 77 1 662 2 291
Unrealised loss/(gain) on foreign exchange 32 173 (29 761) (40 211)
Normalised EBIT 317 546 319 416 (0,6) 807 344
Amortisation of software 2 816 2 030 8 120
Depreciation of property, plant and equipment 77 329 59 875 124 901
Normalised EBITDA 397 691 381 321 4,3 940 365
Perishables
Operating profit 137 810 152 324 (9,5) 371 759
Amortisation of customer contracts 22 338 18 675 37 873
Due diligence costs 81 - 17
Gain on disposal of property, plant and equipment (177) (584) (425)
Retrenchment and settlement costs 747 3 015 3 807
Straight lining of operating leases 1 765 - 511
Strategic advisory fees 3 - -
Unrealised gain on foreign exchange (619) (9 469) (1 633)
Normalised EBIT 161 948 163 961 (1,2) 411 909
Amortisation of software 293 77 87
Depreciation of property, plant and equipment 27 147 17 410 34 284
Normalised EBITDA 189 388 181 448 4,4 446 280
Ambient Groceries
Operating profit 53 516 119 612 (55,3) 284 270
Amortisation of customer contracts 30 575 30 576 60 408
Government grants - (137) (137)
Loss/ (gain) on disposal of property, plant and equipment 1 775 (9) 1 102
Retrenchment and settlement costs 491 1 568 7 704
Straight lining of operating leases (79) (319) 72
Strategic advisory fees - 1 309 1 716
Unrealised loss/(gain) on foreign exchange 34 192 (21 338) (43 217)
Normalised EBIT 120 469 131 262 (8,2) 311 918
Amortisation of software 453 173 582
Depreciation of property, plant and equipment 22 430 17 485 37 763
Normalised EBITDA 143 352 148 920 (3,7) 350 263
Snacks and Confectionery
Operating profit 30 221 22 855 32,2 51 569
Amortisation of customer contracts 2 201 2 201 4 402
Government grants - - (24)
Loss on disposal of property, plant and equipment 24 49 124
Retrenchment and settlement costs - - 354
Straight lining of operating leases - - 448
Strategic advisory fees 74 - -
Unrealised loss/(gain) on foreign exchange (2 353) 1 213 4 831
Normalised EBIT 30 168 26 318 14,6 61 704
Amortisation of software 365 323 257
Depreciation of property, plant and equipment 4 444 3 842 9 590
Normalised EBITDA 34 977 30 483 14,7 71 551
Baking and Baking Aids
Operating profit 25 893 20 028 29,3 52 383
Amortisation of customer contracts 4 703 4 703 9 406
Gain on disposal of property, plant and equipment - - (51)
Retrenchment and settlement costs 117 56 306
Straight lining of operating leases (51) 219 (2 268)
Unrealised loss/(gain) on foreign exchange (67) 1 21
Normalised EBIT 30 594 25 007 22,3 59 797
Amortisation of software 397 384 669
Depreciation of property, plant and equipment 8 766 8 643 16 659
Normalised EBITDA 39 758 34 034 16,8 77 125
Specialised Food Packaging
Operating profit 2 399 5 283 (54,6) 13 872
Amortisation of customer contracts 1 133 1 133 2 267
Government grants - - (95)
Gain on disposal of property, plant and equipment (45) (135) (141)
Unrealised loss gain on foreign exchange 9 - -
Normalised EBIT 3 496 6 281 (44,3) 15 903
Amortisation of software 54 - 155
Depreciation of property, plant and equipment 588 536 1 162
Normalised EBITDA 4 139 6 817 (39,3) 17 220
Household and Personal Care
Operating profit 489 (1 815) 126,9 4 847
Amortisation of customer contracts 6 092 6 092 12 183
Loss/ (gain) on disposal of property, plant and equipment (192) 991 994
Retrenchment and settlement costs - 92 2 118
Straight lining of operating leases 546 236 653
Strategic advisory fees - 63 212
Unrealised loss/(gain) on foreign exchange 160 (168) 468
Normalised EBIT 7 095 5 491 29,2 21 475
Amortisation of software - - 4 052
Depreciation of property, plant and equipment 8 827 8 525 18 202
Normalised EBITDA 15 922 14 016 13,6 43 729
Niche Beverages
Operating profit 8 086 (4 468) 281,0 (57 057)
Amortisation of customer contracts 3 377 2 172 4 948
Impairment losses on goodwill - - 50 000
Gain on disposal of property, plant and equipment (29) (14) (651)
Retrenchment and settlement costs 105 371 527
Straight lining of operating leases - - 125
Unrealised loss on foreign exchange 851 - (681)
Normalised EBIT 12 390 (1 939) 739,0 (2 789)
Amortisation of software - 4 21
Depreciation of property, plant and equipment 4 307 2 771 5 894
Normalised EBITDA 16 697 836 1897,2 3 126
Corporate
Operating profit (34 925) (54 535) 36,0 (125 812)
Due diligence costs 656 1 899 4 411
Expenses relating to share appreciation rights granted (21 677) 13 330 26 660
Fair value adjustment to put options - 1 667 (1 436)
Loss on disposal of property, plant and equipment 28 7 7
Costs and fees attributable to the Initial Public Offering 7 303 - 22 583
Retrenchment and settlement costs - 377 377
Securities transfer tax - - 275
Strategic advisory fees - 290 363
Normalised EBIT (48 615) (36 965) (31,5) (72 572)
Amortisation of software 1 253 1 068 2 297
Depreciation of property, plant and equipment 820 664 1 347
Normalised EBITDA (46 542) (35 233) (32,1) (68 928)
Export revenue
The Group mainly operates in South Africa. Revenue derived from customers domiciled within South Africa is classified as
revenue from South Africa. Revenue from customers domiciled outside of South Africa is classified as export revenue.
Export revenue for the year 586 126 510 234 14,9 1 004 528
Major customers
During the period under review, revenue from certain customers exceeded 10% of total revenue.
Customer A 19% 17% 18%
Customer B 14% 14% 14%
Customer C 12% 13% 10%
NOTES TO THE REVIEWED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. Reporting entity
Libstar is a leading producer and supplier of high quality products in the CPG industry and markets a wide
range of products in South Africa and globally. The Group provides a multi-product offering in multiple
categories across multiple channels, while strategically positioning itself within the food and beverage and
HPC sectors and maintaining the flexibility to capitalise on growth areas in the CPG industry.
2. Financial preparation and review opinion
These reviewed condensed consolidated interim financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS), including the disclosure requirements of IAS 34
Interim Financial Reporting (IAS 34) and comply with the Financial Reporting Guides as issued by the
Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial
Reporting Standards Council, as well as the JSE Listings Requirements and the Companies Act, No 71 of 2008.
These condensed consolidated interim financial statements have been prepared by R Dhlembeu CA(SA) and
P Makate CA(SA) under the supervision of R Smith CA(SA), the Group Financial and Commercial Director,
and CB de Villiers CA(SA). The results were approved by the Board of Directors on 3 September 2018 and
the Directors take full responsibility for the preparation thereof.
The financial results presented have been reviewed by the Group's independent external auditors, Moore
Stephens, who expressed an unmodified review conclusion. A copy of the auditor's review report is
available for inspection at the Company's registered office.
The auditor's report does not necessarily report on all of the information contained in this announcement.
Shareholders are therefore advised that in order to obtain full understanding of the nature of the auditor's
engagement they should obtain a copy of that report together with the accompanying financial information
from the Company's registered office.
3. Accounting policies
The accounting policies applied by the Group in these reviewed condensed consolidated interim financial
statements are consistent with those applied in the consolidated annual financial statements for the year
ended 31 December 2017 except as detailed below:
- The Group adopted IFRS 15 - Revenue from contracts from customers with effect from 1 January
2018. The new standard features a contract-based five step analysis of transactions to determine
whether, how much and when revenue is recognised. The new standard has not had any effect on
the timing or quantum of revenue recognition for the Group.
- The Group adopted IFRS 9 - Financial instruments with effect from 1 January 2018. Given the
nature of the Group's financial instruments, there has been no change to the classification and
measurement as a result of the adoption of IFRS 9.
4. Accounting judgements and estimates
Management is required to make estimates and assumptions that affect the amounts presented in the
financial statements and related disclosures. Use of available information and the application of judgement
is inherent in the formation of estimates. Actual results in the future could differ from these estimates.
In preparing these condensed consolidated interim financial statements, the significant judgments made
by management in applying the Group's accounting policies and the key sources of estimation uncertainty
were the same as those that applied to the consolidated annual financial statements for the year ended 31
December 2017.
5. Other income
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2018 2017 2017
R'000 R'000 R'000
Other income
Bad debts recovered 13 27 173
Commissions received 16 20 39
Gain on foreign exchange 2 851 41 472 129 337
Realised gain on foreign exchange 35 024 11 711 89 126
Unrealised gain / (loss) on foreign exchange (32 173) 29 761 40 211
Fair value adjustment to put options exercisable by executive management - 1 667 1 436
Government grants(1) - 450 684
Insurance claims received 159 1 439 552
Recoveries - - 11
Rental income 2 256 2 581 4 311
Sundry income 1 758 2 363 10 110
7 053 50 019 146 653
(1) Income from government grants includes income received under the Manufacturing Competitiveness Enhancement Program,
Skills Development Program and the Employer Tax Incentive program
6. Operating profit
Operating profit from continuing operations is calculated after taking into
account the following:
Operating expenditure
Depreciation of property, plant and equipment 77 874 61 277 125 104
Amortisation of computer software 2 842 2 036 8 120
Amortisation of customer relationships 70 784 66 235 132 462
Impairment loss on goodwill - - 50 000
Loss on disposal of property, plant and equipment 1 383 306 959
Employee benefits 552 265 500 089 1 038 333
Salaries and wages 550 806 494 610 1 022 457
Retrenchment and settlement costs 1 459 5 479 15 876
Strategic advisory fees 78 1 662 2 291
Due diligence costs 738 1 899 4 428
Charges relating to/(reversal of) share appreciation rights granted (21 677) 13 330 26 660
Securities transfer tax - - 275
Operating lease charges 40 209 23 323 91 478
Premises 32 551 19 789 80 534
Straight-lining of operating leases 2 181 136 (459)
Motor vehicles & equipment 5 477 3 398 11 403
7. Earnings per share
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2018 June 2017 2017
R'000 R'000 R'000
Earnings per share
The earnings and weighted average number of ordinary shares used in
the calculation of basic earnings per share are as follows:
Earnings used in the calculation of basic earnings per share 63 820 101 914 188 354
From continuing operations 66 669 115 264 231 637
From discontinued operations (2 849) (13 350) (43 283)
Weighted average number of ordinary shares for the purposes of basic
earnings per share ('000) 523 347 468 915 468 189
Basic earnings per share in cents
From continuing operations 13 25 49
From discontinued operations (1) (3) (9)
From continuing and discontinued operations 12 22 40
Diluted earnings per share
There are no convertible shares, share options, warrants or any other
instruments in issue that have a potential dilutive effect on the earnings
per share.
Headline earnings per share Gross Net
Headline earnings is calculated based on HEPS Circular 2 of 2015 -
Headline Earnings issued by the South African Institute of Chartered
Accountants.
The headline earnings used in the calculation of headline earnings per
share are as follows:
Six months ended 30 June 2018
Basic earnings from continuing operations 66 669 66 669
Adjustments 1 383 1 073
Loss on disposal of property, plant and equipment 1 383 1 073
Headline earnings from continuing operations 68 052 67 743
Six months ended 30 June 2017
Basic earnings from continuing operations 115 264 115 264
Adjustments 306 237
Loss on disposal of property, plant and equipment 306 237
Headline earnings from continuing operations 115 570 115 502
Year ended 31 December 2017
Basic earnings from continuing operations 231 637 231 637
Adjustments 50 959 50 744
Impairment of goodwill 50 000 50 000
Loss on disposal of property, plant and equipment 959 744
Headline earnings from continuing operations 282 596 282 381
6 months 6 months Year
ended 30 ended 30 ended 31
June 2018 June 2017 December 2017
R'000 R'000 R'000
Basic earnings from discontinued operations (2 849) (13 350) (43 283)
Adjustments (net of tax) - 5 825 28 658
Impairment of property, plant and equipment - 5 825 5 825
Impairment of intangible assets - - 5 990
Impairment of goodwill - - 16 844
Headline earnings from discontinued operations (2 849) (7 525) (14 624)
Headline earnings from continuing and discontinued operations 64 894 107 977 267 757
Headline earnings per share in cents
From continuing operations 13 25 60
From discontinued operations (1) (2) (3)
From continuing and discontinued operations 12 23 57
8. Property, plant and equipment
During the 6-month period ended 30 June 2018, the Group acquired plant, equipment and computer
software in the amount of R152 million (2017: R139 million). R28 million related to Lancewood in respect of
capacity enhancing equipment and leasehold improvements. Further significant capital expenditure
related to capacity enhancing projects at Ambassador Foods comprising facility upgrades and new
expansionary machinery of R29 million.
There has been no major change in the nature of property, plant and equipment, the policy regarding the
use thereof, or the encumbrances over the property, plant and equipment as disclosed in the audited
financial statements for the year ended 31 December 2017.
9. Financial instruments
At the reporting dates, the financial assets and liabilities of the Group that are classified at fair value through
profit and loss comprise forward exchange contracts. These are classified at a Level 2 in terms of the fair
value hierarchy.
10. Cash generated from continuing operations
6 months 6 months Year ended
ended 30 June ended 30 31 December
2018 June 2017 2017
R'000 R'000 R'000
Cash generated from continuing operations
Profit before taxation from continuing operations 90 023 148 016 367 154
Adjustments for: 304 581 251 720 517 426
Depreciation, amortisation and impairments 151 500 129 548 315 685
Loss on disposal of property, plant and equipment 1 383 306 959
Investment income (21 027) (10 816) (25 754)
Finance costs 154 493 122 084 254 431
Fair value adjustment on put options exercisable by executive management - (1 667) (1 436)
Fair value adjustment on forward exchange contracts 36 794 1 513 (47 901)
Movements in employee benefits (175) (122) 1 396
Movements in operating lease assets and accruals 3 290 (2 456) (6 613)
Movements in share appreciation rights (21 677) 13 330 26 659
Changes in working capital: (86 385) 30 965 70 624
Inventories (54 517) 21 663 (34 373)
Trade and other receivables 126 781 109 416 (80 281)
Biological assets (828) (558) (3 602)
Trade and other payables (157 821) (99 555) 188 880
308 219 430 701 955 204
11. Subsequent events
There have been no material subsequent events from reporting date to the date of issue of this announcement.
CORPORATE INFORMATION
Address
1st Floor, 62 Hume Road, Dunkeld, Johannesburg, 2196, South Africa
(PO Box 630, Northlands, 2116)
Website
www.libstar.co.za
Directors
Wendy Luhabe (Chairperson)
Phumzile Langeni (Independent non-executive)
Wahid Suleiman Hamid (Non-executive)
Sandeep Khanna (Non-executive)
JP Landman (Lead-independent)
Andries Vlok van Rensburg (CEO)
Robin Walter Smith (CFO)
Company Secretary
Solach Pather
1st Floor, 62 Hume Road, Dunkeld, Johannesburg, 2196, South Africa
(PO Box 630, Northlands, 2116)
Investor Relations
Nicholas Williams, Patamola
+27 (0)82 600 2192
nicholas@patamola.co.za
Sponsor
The Standard Bank of South Africa Limited
30 Baker Street, Rosebank, Johannesburg, 2196, South Africa
(PO Box 61344, Marshalltown, 2107)
Auditors
Moore Stephens Cape Town Inc
Block 2, Northgate Park, Corner Section Street and Koeberg Road, Paarden Eiland, Cape Town,
7405, South Africa
(PO Box 1955 Cape Town, 8000)
Transfer secretaries
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196, South Africa
(PO Box 61051, Marshalltown, Johannesburg, 2107)
Date: 04/09/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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