Libstar H1 2026 Profit Drops Amid Revenue Growth

Libstar Holdings Limited reported its first-half 2026 results on September 8, 2026, revealing a contraction in normalized operating profit despite revenue growth driven by retail and food service segments. Group revenue rose 0.7% year-over-year to ZAR 5.8 billion, excluding the impact of a Dickon Hall Foods contract loss, it climbed 2.7%. Normalized EBITDA fell 4.3% to ZAR 453.2 million, with margins slipping from 8.2% to 7.8%, while normalized operating profit decreased 10.9% to ZAR 273 million, reducing its margin from 5.3% to 4.7%. Gross profit margins also contracted to 21.5% from 22.2%. Headline earnings per share (HEPS) from continuing operations declined 2.4%, while net finance costs improved to ZAR 77.1 million, down 22.4%, and gearing ratio tightened to 1.2 times from 1.3 times, though it remains above the medium-term target of below 1.5 times. Interest coverage strengthened to 8.7 times from 5.8 times, and cash conversion improved to 70% from the target of over 65%. Return on invested capital rose to 10.3% from 9.3%, while net working capital remained flat at 18.2% of revenue, equating to 71 days of operating cycle. Total capital expenditure was ZAR 145.3 million (2.5% of revenue), split between capacity-enhancing projects (ZAR 51.1 million), replacement/maintenance (ZAR 46.5 million), and quality improvements (ZAR 47.7 million). Capital items expense totaled ZAR 33.2 million, including impairments of ZAR 19.5 million at Contactim and ZAR 11 million from asset scrapping at Dickon Hall Foods. Operating expenses rose 4.3% to ZAR 1.09 billion, though excluding selling/distribution and retrenchment costs, growth was only 0.3%. Property proceeds from the Phesantekraal disposal added ZAR 65 million, while procurement savings contributed ZAR 10 million annually. During the period, Libstar repurchased ZAR 83 million in shares, including ZAR 62 million in H1 2026 and ZAR 21 million in the closed period. The company’s retail and wholesale segment grew 3.2%, contributing 57.8% of revenue, while food service expanded 11.2%. Exports declined 9.6%, with ambient exports falling 11% and perishable exports down 4.9%. Industrial and contract manufacturing revenue dropped 17%, though ambient contract manufacturing fell 22.2% and perishable 9.1%. Underlying group volumes rose 1.1%, but total reported volumes fell 3.8% due to contract items. In ambient products, revenue declined 0.9% to ZAR 2.9 billion, with normalized EBITDA down 15.2% to ZAR 291.7 million (margin at 10%). Select products saw revenue gains of 7.9% and EBITDA increases of 7.2%, while wet condiments revenue fell 13.2% and dry condiments 1.4%. Baking revenue rose 7.5% with EBITDA gains of 6.2%. Perishable products contributed 48% of revenue, with revenue up 2.5% to ZAR 2.8 billion and EBITDA growth of 13.5% to ZAR 198.4 million (margin up 0.7 percentage points to 7.1%). Dairy revenue fell 0.5%, but value-added meats grew 9.4% with EBITDA gains of 8.6%, while convenience meals rose 2.9% but saw EBITDA decline 16.1%. Key projects included the ZAR 56 million integration of Dickon Hall Foods into Montagu Foods, targeting a 2-3 year payback, and Cape Herb & Spice consolidation, expected to deliver annual bottom-line benefits of ZAR 12-22 million from mid-2027. The Lancewood George water recovery project is set for completion in November 2026, while Cape Herb & Spice facility consolidation is targeted for H1 2027. Medium-term targets include EBITDA margins of 9-10%, cash conversion over 80%, gearing below 1.5 times, and net working capital under 18.5% of revenue. Despite the profit contraction, Libstar’s shares surged 5.88% in trading, rising from $340 to $360, marking a $20 gain. The shares traded 31.4% below their 52-week high of $525 and 11.4% above their low of $323. Libstar has maintained dividends for eight consecutive years.