Libstar supported by robust retail demand

In a trading update, Libstar said revenue rose 1.2% for the six months to end-June as a 10.7% improvement in retail and wholesale turnover made up for a 35% decline in sales to the food services sector and an 8% drop in export revenue. It incurred extraordinary Covid-19 expenditure of R44 million to maintain a safe working environment for its employees. As a result, it said normalised earnings before interest, tax, depreciation and amortisation (EBITDA) would be 4-7% lower than the R483 million reported last year.

Its investment in working capital increased to 14.8% of revenue as a result of holding higher inventory of imported meal ingredients to ensure product availability during Covid-19. Despite that, it said it remained highly liquid, improving its cash flow conversion ratio to 64% from 62%.

It expects to report a 16.5-21.5% decline in normalised earnings per share (EPS) from continuing operations for the period, while diluted headline EPS are likely to be 11.7-16.7% below the 19.7c previously reported.

While the group was still feeling the impact of reduced out-of-home dining, it said the resumption of operations by the quick-service restaurant industry during lockdown level 3 had resulted in a better performance from its largest food service division, Finlar Fine Foods. In July, retail and export channel demand was strong with a big improvement in export shipment completion rates.

The demand for food service and industrial/contract manufacturing channel products strengthened relative to (the first half), although the recovery to pre-Covid levels of performance is expected to materialise over a longer period,” the company said.

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