My Food Bag's full-year profit fell 60.5% on last year while the company cut 10% of their non-operational staff. Photo / File
My Food Bag has cut 10 per cent of its “non-operational” team and plans to delist from the ASX due to “poor liquidity and low daily trading” after its net profits plunged 60 per cent in the last 12 months.
The Kiwi meal-kit company posted its full-year results to March 31 today showing net profit after tax of $7.85 million, down from $20m in the prior financial year.
My Food Bag’s share price rose 8.11 per cent to 20c in trading after the profit update.
Chief executive Mark Winter told investors today that the board expects to resume dividends in 2024.
The company completed a restructure in March this year which cut 10 per cent of non-operational staff.
Winter declined to confirm the number of staff made redundant, the size of My Food Bag’s non-operational team or the size of the team as a whole.
Earnings before interest, tax, depreciation and amortisation (ebitda) fell 46.5 per cent in the same period to $18.2m, with revenue down 9.4 per cent at $175.7m.
Winter and chair Tony Carter said ebitda was impacted by low customer retention and active customers while costs lifted due to increasing supply chain constraints.
Deliveries were down 11.8 per cent on the full-year 2022 at 1.35m which Winter attributed to inflationary pressure on households.
Winter and Carter said the company planned to cut overheads by delisting from the ASX, “right-sizing lending facilities” and ending an employee share ownership scheme (ESOS) for eligible staff in 2024.
Carter said the NZX was My Food Bag’s primary or “home” exchange while the ASX listing was a secondary listing.
“If removal from the official list of ASX is approved, the company will continue to be listed on the main board of the NZX and trading on the NZX will continue after the ASX de-listing process.”
Carter added: “Delisting from the ASX will save the business money and is consistent with the review of our cost base to identify cost-saving initiatives.
“Trading in the company’s shares on the ASX has poor liquidity and low daily trading volumes, so the board considers the cost of continuing a listing on the ASX outweighs the benefits.”
“Inflationary pressure on households and low consumer confidence have resulted in more subdued demand over the second half of the year,” Winter and Carter said.
They said deliveries were down 11.8 per cent on last year with lower active customers and retention rates pulling down revenue.
Winter and Carter said the company delivered more than 15.7 million meals and an average value of $130.11 per box, up 2.7 per cent on $126.63 for the previous period.
Winter told investors today that the company’s ebitda was in line with the company’s market update in February.
He said the Bargain Box is “well-placed to grow in the current economic conditions” with the meal kit option price frozen for six months.
He said this would help with household budgeting and encourage more active customers.
Forsyth Barr analyst Margaret Bei said the result was in line with My Food Bag’s guidance range while the cost-cutting initiatives should have a positive impact on its 2024 financial year.
“The initiatives are prudent considering the inflationary pressures and consumer demand challenges facing the company.”
She said staff reductions were painful for any business but make sense in the current economic environment as other discretionary retail companies are also taking similar cost-cutting measures.
Ahead of the result, Forsyth Barr analysts commented: “My Food Bag may demonstrate continued weakness in delivery volumes and adverse product mix shifts.”
Bei said My Food Bag’s product mix meant some offerings would have lower margins like the company’s Bargain Box option, which the company highlights as a key growth opportunity in the current economic climate.
Forsyth Barr said the company was likely to exhibit sensitivity to the economic cycle as consumers’ discretionary incomes are adversely impacted through downturns and cut back on meal-kit subscriptions.
The company upped marketing for the bargain option, increasing television advertising in quarter four and promoted the kit as a cheaper delivery alternative to Countdown and New World which grew sales by 5 per cent in the same quarter.
At the same time, Winter reiterated the company’s moves to cut operational costs.
My Food Bag highlighted its focus on “pick technology” implemented across Auckland and Christchurch which Winter said will reduce labour costs.
Winter and Carter said pick technology uses software “to enable efficient picking at an ingredient level rather than a recipe level, with automated prompts to make picking very clear and simple”.
They said the automation was completed in Christchurch in early May while the technology was rolled out in Auckland just before the end of the financial year.
“Pick technology enables a vast improvement in customer choice, productivity and quality. Within the first week of installation, our accuracy of picking ingredients for boxes improved,” Winter and Carter said.
Winter also said the company plans to freeze advertising spending which rose by $1.3m in the last 12 months.
He said however that Bargain Box deliveries were 1.6 per cent up year on year driven by stronger marketing and migration from other My Food Bag kit options.
The company planned to promote discount options to sustain customer growth after a “heavy discount option” was used in the year’s first quarter to drive active customers.
Winter said the Bargain Box “continues to see strong consumer engagement in the current consumer environment” despite the addition of surcharges and price increases on all meal kit options.
My Food Bag’s gross margins came in at 48.4 per cent, down from 49.3 per cent in the previous period.
Chief financial officer Leanne Dekker said the company’s net debt went from a $2.5m surplus down to minus $15.3m between the full-year ending March 31, 2022 and March 31, 2023 because of the company’s dividend payout and investment in picking technology.
The company said it would continue a fully-imputed dividend of $0.03 per share after it didn’t pay out a dividend in the last half-year. The dividend was down from $0.08 per share declared in the last period.
The total dividend payout was at 92 per cent of net profit after tax, outside the company’s distribution target of 70-90 per cent.
The board decided not to pay a final dividend for the full year.
Winter and Carter said the company intended to “stabilise sales and execute a disciplined plan to drive sustainable active customer growth” in the next year.
“Our investment in pick technology, initiatives to increase choice, flexibility, customisation and value for customers, and our focus on cost will drive performance over the coming financial year,” they said.
“We look forward to FY24 where we can demonstrate the strength of the business with a focus on leveraging our strong understanding of Kiwis’ needs, our digital platform and our nationwide supply chain to grow demand.”
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