Libstar reports 17.7% decrease in H1 HEPS. Here’s how COVID-19 impacted the business

South Africa's food group, Libstar, has navigated through challenging times as the COVID-19 pandemic wreaked havoc on the economy. The company recently declared a dividend of 25 cents per share for the year ended 2019, despite grappling with COVID-19-related costs amounting to R44 million for its interim period. The group reported a 17.7% decrease in headline earnings per share, with its retail and wholesale division experiencing a 10.7% increase, reflecting South Africans spending more time cooking at home during the lockdown. Robin Smith, Executive Director at Libstar, sat down with CNBC Africa to discuss the company's financial performance and the impact of the pandemic on its operations. Smith expressed satisfaction with the results, highlighting the resilience of the company during a turbulent period. He explained that analyzing the half-year performance on a quarterly basis revealed a mixed picture, with revenue increasing by 1.9% overall. The introduction of the pandemic in the second quarter led to a 4.9% decline after a promising start in the first quarter, where revenue was up by 9.7%. Despite the challenges, Libstar managed to improve its gross profit margin by 0.2% and enhance its cash position. The company's cash generation increased to 64% from 62% in the prior year, while its net debt position improved to 1.3 times EBITDA compared to 1.4 times last year. Smith noted that the company incurred significant COVID-19 expenses, including donations to media organizations, personnel benefits, transportation costs, PPE, and enhanced sanitization protocols. These expenses totaled R44 million and continued to rise, reaching R55 million by the end of August. However, Smith emphasized that the safety of the workforce remained a top priority. Despite the challenges, Libstar's decision to defer the dividend payment was deemed appropriate given the uncertainty surrounding the pandemic's impact. The company witnessed increased demand in its retail and wholesale divisions, offsetting the decline in the out-of-home or food service sector. Smith reassured shareholders that the dividend payment was being made without compromising the company's balance sheet. Looking ahead, Smith acknowledged the shift towards home cooking and baking during the lockdown, predicting a continued trend in the second half of the year. The company reported a significant increase in sales in the baking category during the lockdown, indicating a potential ongoing demand for such products. When questioned about potential acquisitions, Smith revealed that while there were always opportunities on the radar, there were no immediate plans in place. Libstar remains open to evaluating good bolt-on opportunities to further enhance its diverse product mix. Despite the uncertainties brought about by the pandemic, Libstar's resilient performance and strategic decision-making have positioned the company well for future growth and expansion.