Libstar flags a mixed first-half performance


Libstar flags a mixed first-half performance

Published Date: 2019-08-13 | Source: Stephen Gunnion | Author: Stephen Gunnion

Libstar flags a mixed first-half performance

The group has improved its profit margins but has been impacted by impairments and the adoption of new accounting standards.

Libstar says it will report a satisfactory first-half performance despite the current weak retail and consumer environment. Its shares declined as much as 7.2%.

In a trading statement, the food producer and distributor said organic revenue rose 4.5% in the six months to end-June due to strong performances in dry condiments, snacks and confectionary, and baking and baking aids. Trading conditions in its non-core categories, which make up 12% of group revenue, remained subject to significant competition pressure and were expected to deliver a 1.5% decline in revenue, the group said.

Libstar's brands include Amaro Foods, Ambassador Foods, Denny Mushrooms, Finlar, Lancewood and Montagu Foods, amongst others. The company also represents global brands including Kiri, Arla, Bel, Laughing Cow, Act II, Lurpak, Tabasco, Kikkoman and Maille.

It said its gross profit margins benefitted from favourable changes in the sales mix of value-added dairy products after it launched new yoghurts in the second half of last year and due to the full integration of Sonnendal Dairies, bought in 2017. Better procurement practices, efficiencies and lower dry condiment input costs also boosted margins.

Normalised earnings before interest, tax, depreciation and amortisation (EBITDA), which exclude currency gains and losses, non-recurring items and the adoption of accounting standards, are expected to be between 6% and 11% higher.

Under the new accounting standards, which affect the treatment of currency hedges and property leases, basic earnings per share (EPS) for the period are expected to be 23.7% to 33.7% lower, while headline EPS will be 45% to 55% higher. Normalised EPS will be up by between 5.2% and 10.2% and normalised HEPS will be 4.4% to 9.4% higher.

The group said it booked a R42 million pre-tax impairment loss following a restructuring in the second half of last year, which saw it relocating the production, marketing and sales functions of non-beverage products into some of its wet condiments facilities. It said the restructuring would result in future cost savings for the group. A further R72 million pre-tax impairment loss was taken on its non-core dairy-blend and beverage operations after it reached an agreement to sell them.

Also contributing to the decline in EPS was a 14.5% increase in the weighted average number of shares in issue (WANOS) for the period.

In March, the group declared a maiden cash dividend for its 2018 financial year. It was listed by parent company Abraaj Group in May last year.

Its shares closed 3% lower at R7.99 yesterday. They listed at R12.50.

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