Maggie Beer Holdings Limited (MBH) Earnings Call Transcript & Summary

On today's presentation, I will provide an overview of the results and an update on the progress of our strategic priorities. Craig will provide more detail on financial year '24 results, including P&L, segment performance, cash flow and balance sheet. Penny will provide an update of key priorities we're implementing to return the company to profitability and growth, focusing on key strategies in Maggie Beer Products and our E-commerce business. I will conclude with closing statements, after which we will be happy to take questions. First, a summary of full year '25 results. Full year '24 -- financial year '24 was a very challenging year for the business. However, despite that, we made progress in Hampers & Gifts Australia and Maggie Beer Products. In Hampers & Gifts, we had a strong Christmas trading period, leading to a revenue increase in Q2 of 8%. Total revenue growth of 6.3% was achieved for the Maggie Beer business. We increased our product range and introduced new partners to deliver higher revenue and also expanded our range in the cooking and ice cream categories driving sales growth. We're incorporating the Right To Win Framework across our business through our brand portfolio and channel strategies. Our in-year category expansions and in particular, the success of Bone Broths' service proof of concept of our Right To Win growth plans and our ability to gain share of basket. This is because we've been able to enter a large-scale category and take a significant share of the premium segment. The Right To Win Framework encapsulates the Right To Play, which captures our brand and product imperatives and the ability to win, which captures growth in Everyday Premium markets while being commercially feasible. Further details on this principle will be discussed later in the presentation. We're enhancing our technology in line with road map. This includes the Shopify migration with the new Maggie Beer website being launched pre-Christmas, followed by the Hampers & Gifts in Q3. We also announced that the Board has resulted that the Paris Creek business is an asset for sale and have appointed an adviser to assist in this process. We have also successfully settled the HGA earn-out dispute. We continue to focus on our key priorities to strengthen the business to become Australia's leading purveyor of premium food and gifting products. These are focused on building the scale of our e-commerce platform, the Right To Win mindset on the Maggie brand and optimizing and unifying our asset base. We have made progress in each of these key areas, including successfully executing our Christmas plans, strong corporate sales, especially through the personalized approach and improvement to corporate ordering platform. Customer service focus, which delivered a Net Promoter Score of 71 and we were awarded the Canstar 2024 Award for customer satisfaction for the category Online Gift Delivery. Launched new categories and partnerships in Hampers & Gifts in Q2, including Penfolds, Maggie Beer and Grazing, and we focused on conversion rate optimization reducing friction in the purchase funnel for e-commerce platforms. In Maggie Beer, we've proceeded with the Right To Win Framework. We've refreshed the marketing plan with "Make it a Maggie Celebration" platform with major campaigns launched, including digital, social, outdoor and magazines. We've expanded the Maggie Beer living range in online, in hampers and at David Jones. And we've had retail growth through new product development and ranging. I'd point to the portfolio of new cooking products with new launches in full year '24 and further launches planned for financial year '25. As mentioned, the Stocks and Broths performed particularly well in H2. The Hard Cheese delivered double-digit growth and we've had the launch of ice cream in Woolworths and Coles. In terms of optimizing and unifying assets, we've had cost optimization initiatives, which were commenced and there will be an accelerated focus in financial year '25 across the group. We've got a group focus on range simplification and revenue synergies. As a business, we aspire to give our customers more choice and enable them through our investment in technology, especially as they move effortlessly between digital platforms and real-world interactions. From in-store visits to e-mail campaigns and web/mobile experiences, our aim is to deliver touch points that represent a holistic experience in customers' minds through the omnichannel model. Post balance date, we also appointed the adviser to sell PCF. Penny will provide further detail on our key strategic growth priorities for Maggie Beer Products and E-commerce in her section. I will now hand over to Craig to present the financial slides. Thank you, Craig.

Thank you, Sue, and good morning. Here is an overview -- first of all, on Slide 8, here is an overview of the financial results for FY '24. The results are consistent with our trading update that was provided in June. Net sales were $89.4 million, up slightly from the prior year. By segment, Maggie Beer Products revenue was up 6.3% from category expansion; Hampers & Gifts Australia was up 0.7%. However, Paris Creek Farms declined 9.5%, primarily driven by lower milk supply. Trading EBITDA of $0.3 million, was down $2.9 million, with gross margin down $0.6 million and the cost of doing business increasing by $2.3 million. The business had a net cash position of $4.7 million at the year-end with no debt. Now on to Slide 5. Here is an overview of the P&L for the year. Revenue increased slightly with growth in retail of 0.7% and online 0.8%. Gross margin for online was impacted by cost increases incurred in the first half, which were not recovered through price increases until the second half. We've taken steps to improve gross margin in the second half with online gross margin improving from the first half of 54.7% to the second half of 57.4%, primarily through price increases. Advertising costs were higher, including a one-off brand building in Q2 for Maggie Beer Products and increased online advertising costs in a competitive market. Labor costs increased as we build capability in e-commerce, which was partly offset by labor savings and efficiencies across the balance of the business. Trading EBITDA of $0.3 million compared to the $3.2 million for FY '23, as mentioned before, which is consistent with the trading update in June. Statutory EBITDA includes the noncash impairment of goodwill of HGA of $13.8 million and the impairment of property, plant and equipment, or PCF, of $4.6 million. It also includes provisions for earn-out for the HGA settlement and legal fees of $2.6 million and PCF-onerous contract provision, which was raised in the first half of $0.8 million. Inclusion of these one-offs resulted in a statutory loss of $24.8 million after tax. On to Slide 10, net revenue and gross margin. This slide shows the revenue by entity and gross margin by channel. As previously mentioned, the online margin in the first half was impacted by delayed recovery of cost increases through pricing and, again, the gross margin in online improved in the second half from 54.7% in the first half to 57.4%. Slide 11, the FY '24 trading EBITDA waterfall shows key movements at the trading EBITDA line. Stepping through these impacts, PCF $0.5 million lower. The gross margin lower in the first half, as previously mentioned. In terms of some additional costs related to growth initiatives included the Maggie Beer Products, one-off investment in brand building in Q2 and higher level of investment in supermarket activation to support increased distribution. In E-commerce, increased online advertising due to increased competition. Labor increase includes building e-commerce capability in our HGA business, which was partly offset by cost savings initiatives within the business. And as mentioned before, trading EBITDA was $0.3 million for FY '24. Slide 12, balance sheet and cash flow, $4.7 million cash and no debt. The goodwill reduction includes $13.8 million impairment of HGA and $2.7 million of cost optimization on the intangibles line. The property, plant and equipment includes $4.4 million in dollar impairment of the PC assets. And net assets were reduced as well during the period to $57.8 million. The negative operating cash flow was lower than the trading EBITDA due to timing of creditor payments and the one-off costs previously mentioned, and we continue to be a capital-light business. On Slide 13, the snapshot by entity. Here are the sales and gross margin by segment. Maggie Beer Products, Cooking up 16.3% with strong growth in Stocks and Broths; Dessert was up approximately 50%, including further launch of ice cream in supermarkets; Entertaining down $4.7 million, cost of living challenges, in particular, were impacting the discretionary spend with this category. We had solid growth in the Cooking and Desserts category, in summary, highly offset by Entertaining. I've mentioned the increase in the gross margin previously. On the sales line, HGA was up 0.7% in the challenging market, sales driven by new product development, new partnerships and marketing program optimization. In PCF, sales declined primarily due to lower milk supply. I'll now hand over to Penny.

Thank you, Craig. Good morning, everyone. It's great to be joining you today. Building on what Sue spoke about earlier, I'm now going to talk about the next evolution in the journey for Maggie Beer Holdings. Our vision is to become Australia's leading purveyor of premium food and gifting products, transforming everyday moments into extraordinary celebrations of joy and connection for corporate clients and households. But what do we mean by this? Today, we are a company that has some very powerful owned brands. We own one of Australia's most iconic premium food brands and one of Australia's leading e-com gifting businesses and brands. We have powerful digital asset and capability across the organization underpinned by our exceptional infrastructure. In the future, however, we want to continue to build on this foundational capability and strengthen our positioning across products and channels to become an Everyday Premium market-leading portfolio business. The next slide outlines the key strategic priorities we are undertaking to restore profitability in the business. We are continuing to re-focus the cost base of the business and that includes executing the Paris Creek Farms' decision. We are focused on building scale in our e-commerce platform and leveraging growth in our B2B to accelerate growth in that segment. We have an absolute priority focus on maximizing trading and profitably through the key Christmas trading period with a targeted product range supported by activation strategies to drive increased traffic and conversion. We aim to simplify the business by reducing complexity and enabling faster decision-making to drive productivity gains. And finally, we will launch an expanded portfolio of new products across strategic occasions in FY '25, while building a stronger innovation pipeline for FY '26 and beyond. I will now hand back to Sue.

Thanks, Penny, and thanks, Craig. We have restructured the senior management team to focus on the key strategic priorities Penny has just outlined. Sam Reece has been appointed Head of E-commerce and Brand Partnerships with Laila Khalid appointed as Head of the Maggie Beer Products, Commercial and Strategy. Both Laila and Sam are highly experienced executives with proven track records in driving growth and profitability. They are joined by Penny as CFO and COO, who brings significant experience in driving optimal financial and operational results. So in closing, I will finish with some brief remarks. Our primary focus is returning the business to profitability and capitalizing on our unique assets and capabilities, our iconic Australian brand Maggie Beer and our leading online Gifting business in the E-commerce department to deliver on our vision to become Australia's leading purveyor of premium foods and gifting products. Our strategy includes lifting the customer experience and engagement through the scaling of the E-commerce platform, focusing on the B2B strategy and product innovation, implementing the Maggie Beer Product strategy within the Right To Win Framework and develop on our brand partnerships. That concludes the presentation -- sorry, we are excited about the future and the company will continue to invest and leverage our market-leading brands to harness growth opportunities and to become Australia's leading purveyor of Everyday Premium foods and gifting products. That concludes the presentation. Thank you once again for attending, and we look forward to further updates in the future. Thank you.