Our opinion on the current state of LBR

Libstar (LBR) is a recently listed decentralised food and beverage company producing "consumer packaged goods" which raised R3bn in an initial public offer (IPO) in May 2018. It owns the Denny brand which is a leading mushroom supplier, and Lancewood which is known for dairy products and other food brands. Altogether it makes over 9000 products and has launched 88 new products in the past six months. The company makes private label brands for retailers like Spar, Woolworths, Pick 'n Pay and Shoprite. A centralised head office supports and invests further in autonomous production units. It supplies capital and expertise and makes acquisitions. The company has spent R60m on coping with COVID-19.

Consumer spending is under pressure because of load-shedding, civil unrest, retrenchments, high unemployment the residue of COVID-19 and now developments in central Europe. This company is entirely dependent on consumer spending. In its results for the six months to 30th June 2023, the company reported revenue up 4% and diluted headline earnings per share (HEPS) down 58,2%. The company said, "Pricing and mix changes, contributing 11.0% to Group revenue, could only partly mitigate the impact of significant raw material, packaging material and production cost inflation. These inflationary pressures were exacerbated by lower volume production."

In a trading statement for the year to 31st December 2023, the company estimated that normalised HEPS would decrease by between 9,7% and 12,7%. The company said, "The decline is mainly attributable to increased borrowing costs during the year and compares to the decline of 44.9% reported for H1 2023." Libstar trades on a multiple of 11 and a dividend yield (DY) of 5,18%. Technically, the share has been in a downward trend for some time. We suggest waiting for a clear break above the long-term downward trendline.