My Food Bag's chief executive is "very mindful" of its share price falling 88 per cent since listing, and is laser-focused on returning it to growth. Video / NZ Herald
The company’s net profit came in at $2.5 million for the six monthsending September 30, down 60.8 per cent on last year.
No dividends were declared for the half-year as revenue fell 11.2 per cent on last year at $83.8m, while earnings before interest, taxes, depreciation and amortisation (ebitda) also dropped 35.7 per cent on last year to $7.4m.
Chairman Tony Carter was upbeat, however, stating the half-year “has been a successful period of transition as we stabilised demand and began to steadily grow active customer numbers”.
Exit surveys for leaving customers showed an uptick in the option “it’s out of my budget” in recent months.
When asked by Jarden’s Guy Hooper about Bargain Boxes rolling off the six-month price freeze, Winter said food price inflation, fuel and labour costs impacted the decision in the half-year but maintained gross margins were “reasonably firm”, staying at around 20 per cent since 2020.
My Food Bag chief executive Mark Winter placed a six-month price freeze on the less expensive My Bargain Box, which is now rolling off.
Cost cutting
When asked about efforts to cut costs, Winter said the consolidation of its two Auckland sites would lead to fewer overheads.
He said the company ended its lease in Highbrook, Auckland in September, the site having opened in 2020 following an uptick in demand at the time and the closure of a Wellington site.
“It’s a case of having the appropriate capacity to meet demand,” Winter said, stating the company has achieved higher productivity since 2020.
When asked about cost savings from moving out of the Highbrook site by Forsyth Barr’s Margaret Bei, Winter said he was “reluctant” to give any numbers.
Winter was also unable to clarify the maximum number of deliveries across the sites, but said there is “adequate capacity for growth” by adding extra delivery days. However, they are currently focused on “optimising current capacity to minimise downtime”, he said.
Winter said the company rolled out new technology in Christchurch and “consolidated Auckland operations into one facility to further reduce overheads” in the half-year.
Investments in the company’s brand reset and price freeze for its value-oriented Bargain Box have led to a 12 per cent increase in delivery volume for Bargain Box, he added.
Deliveries for the company were down 11 per cent on last year at 652,000 deliveries in the half-year, while contribution margins were at 22 per cent ($18.5m), down from last year’s 25.3 per cent.
No dividends declared
Carter said the company’s focus is on debt reduction, capital management and right-sizing the business, which means it will not declare an interim dividend this year.
“Against this backdrop, the board has decided not to declare an interim dividend,” Carter announced in a statement on the NZX this morning.
“While the board intends to resume dividend payments with a final full-year 2024 dividend, this is subject to both net debt position and financial performance across the remainder of full-year 2024.”
Outlook
Winter said the company’s consolidation of its two Auckland sites, cuts in non-operational staff and implementation of its picking technology meant “more labour savings” are on the cards for the rest of the year.
Chief financial officer Leanne Dekker said the company also plans to be more strategic in marketing spending: “We’re not spending on customers who won’t stick around.”
Winter said there is room to operate more delivery days but lead times with suppliers are an obstacle.
He said due to the made-to-order nature of the business, “We have to work with suppliers for longer lead time to get products to customers even sooner.”
Alka Prasad is an Auckland-based business reporter covering small business and retail.
