My Food Bag shares tumble as half-year profit falls

Mark Winter, chief executive of My Food Bag. Photo / Supplied

My Food Bag’s net profit for the six months ended Sept 30 fell 37 per cent and revenue dropped 4 per cent in its weakest half-year result since 2020.

Shares in the company fell more than 16 per cent to a new low of 48.5 cents per share as the New Zealand share market (NZX) opened this morning.

The meal-kit company had reported net profit of $5.9 million in the first half of its financial year, down from $9.4 million the year before.

Underlying earnings fell to $11.5m from $15.8m, and revenue was down $4m at $94.4 million.

Chair Tony Carter said My Food Bag made 732,000 deliveries with an average order value of $129, compared with 808,000 last year when it had a lower average order value of $121.80.

Expanded kitchen product sales and price increases to offset inflation contributed to the higher average order value.

Despite increasing its prices, My Food Bag said its products had actually become more affordable relative to the food price index.

Discount deliveries

Deliveries were down 9.4 per cent on the first half of 2022 to the lowest they've been since 2020.

Bargain Box deliveries bucked the trend with 2.1 per cent growth year-on-year as it won new customers and some existing customers migrated to the cheaper option.

My Food Bag's newly appointed chief executive, Mark Winter, said discounts were playing a big role in attracting new customers.

"However, we've experienced higher-than-average churn from customers starting with us via discount deals," he said.

This change in behaviour led to more volatile active customer numbers, which finished September at 69,091.

That number was up from the end of the 2022 financial year, when the company reported 61,731 active customers, but still lower than in the 2022 interim result.

My Food Bag said trading since the interim balance date was similar to the result period and full-year earnings would be lower than last year.

The board declared a fully imputed interim dividend of 3 cents per share, payable on 15 Dec, but warned the final dividend will be lower than last year.

"Action is being taken to improve trading performance with a priority on growing active customer numbers and retention, and cost pressures continue to be managed and mitigated, where possible," Winter said.

Investments

My Food Bag said it is installing assembly pick technology as part of its investment in supply-chain improvements.

The business has engaged a European vendor with previous experience implementing ingredient-level pick technology in the global meal-kit industry.

Winter said the technology will allow the company to simplify its operating processes and be less dependent on temporary labour.

It will also allow it to offer a broader recipe choice and more personalisation.

The gains from the investment are expected to be seen from the 2024 financial year on.