My Food Bag Group Limited (MFB.NZ) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the My Food Bag FY '26 Half Year Financial Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Mark Winter, Chief Executive Officer.

Cool. Thank you, [ Cura ], and welcome, everyone. I am Mark Winter, the CEO of My Food Bag. I'm presenting today with Louise Newsome, our CFO. Thanks for joining us for an update of our half year results for the period 30 September 2025, which we'll refer to as half year FY '26. In terms of today, we'll cover 3 key areas. We'll provide a business update, a review of our financial performance and our outlook for the second half of FY '26. There will also be an opportunity to take some of your questions at the end. Turning to Slide 4. Today, we're reporting revenue of $85.4 million for the 6 months to 30 September 2025. This represents growth of 3.8% on last year. EBITDA came in at $7.2 million and net profit after tax was $2.9 million compared to $3 million net profit after tax in H1 last year. In terms of the 6 months in review, it's been busy with a lot of focus on meeting the evolving needs of our customers, particularly in the health space. For example, we've recently introduced a Diabetes Plan and GLP-1 Support meal kits. These have been really well received by our customers. We've continued to maintain a strong focus on quality and value, implementing price adjustments carefully to reinforce the value for money perception. These efforts helped lift revenue year-on-year, driven by more active customers and improved purchasing frequency. The My Food Bag shop continues to grow, especially around seasonal occasions, and we've expanded delivery routes to make it even easier for more households to access our meal kits and shop products. Importantly, cash flow has allowed us to reduce net debt to $5.5 million, which puts us in a further solid position heading into the second half. An interim dividend of $0.075 per share fully imputed has been declared to be paid in December, and our dividend reinvestment plan will also operate for this interim dividend. Our purpose is helping Aotearoa New Zealand to eat and live well, and this continues to guide our customer-centric decision-making. It sets the scene for our strategy, which I'll talk to next. Our strategy is focused on growing active customers with the objectives tied to being growing our leadership in meal kits and continuing to expand into the wider online food category. Everything we've done this half year has been about reinforcing this via 4 pillars, which you see here. Brand love and advocacy, which is about customer engagement and ultimately leveraging our brands to win in meal kits; convenience, which speaks to key consumer trends around customers' busy lifestyles, for example, providing ready-made meals or faster recipes to make customers' lives easier. Personalization, which is about creating a customer experience that provides flexibility to suit varying lifestyles or dietary needs; and finally, unlocking new customer segments, and that's an area that enables My Food Bag to reach new audiences and new customers. In the coming slides, I'll talk to some of the initiatives we've delivered so far in the first half of FY '26, which are underpinned by these pillars. Our brands continue to perform strongly, which has been a key driver in active customer growth. My Food Bag's focus in the first half of the year has been on health and well-being. For example, we've continued to see growth in our gluten-free bag and low carb meal options and have successfully launched the diabetes plan in partnership with Diabetes New Zealand. We also strengthened family engagement through initiatives like our Dinner with Nadia series and our partnership with the Auckland Football Club. This has helped driven larger bag purchases. We're pleased that my Food Bag has been rated #1 overall for meal kit delivery services in New Zealand by Canstar Blue. Bargain Box remains New Zealand's most affordable meal kit, supported by strong supermarket price competitiveness and the new bargain win advertising campaign. We continue to appeal to customer sense of value by providing the Everyday Savers range of grocery extras available to add to customers' orders after selecting the recipes. Fresh Start introduced GLP-1 support meals, which is a carefully curated selection of appetite appropriate nutrient dense meals designed for people using weight loss medications like Wegovy. We're also working with a number of health professionals, influencers and partner brands to highlight the taste and health credentials of Fresh Start and our other health targeted offerings to new and existing customers. Moving over to the next slide, Page 10. Customer experience and satisfaction are always a key focus for us. Some examples of initiatives we've undertaken so far this year include enhancements to the layout of our recipe cards in response to customer feedback and reconfiguring of our packaging to reduce waste by ensuring customers receive the right-sized box of their order. We've also implemented an AI tool within our customer service experience, delivering a more seamless and faster result for customers when they need to interact with us. We were pleased to recently win the Excellence in AI Implementation award in the 2025 Contact Center CRM Awards for using innovation to create enhanced customer experiences. We partnered with New Zealand Post to open up more delivery routes with nearly 10,000 addresses being added in the past 6 months. That's more than what we added in all of last year and allows us to reach even more customers nationwide. Our investment in pick technology and continuous improvement programs continues to pay off, improving accuracy and reducing customer compensation costs further. This is reflected in improved NPS scores, which reflects high customer satisfaction and trust in our brands. The My Food Bag shop continues to grow, offering care packages, gifts and ready-made meal bundles designed to suit a variety of customer needs and occasions. Seasonal events like Mother's Day and Easter have driven further growth and supported our expansion into the wider online food category. The shop is key to helping us reach new audiences and expand beyond subscriptions through a more flexible offering. It provides new customers with another way to interact with our brand. For example, by trying our ready-made meals, we're experiencing our gifting services as a one-off purchase with a shorter delivery cycle. We're pleased with how the shop is performing and most importantly, the underlying capability we've developed as a foundation for future growth. We've continued investing in leadership development and capability across our business. We're focused on fostering a culture of curiosity and confidence around AI, supporting our people to explore how it can enhance productivity and create better customer experiences. Engagement scores are at record highs, and we're proud to win the 2degrees Supreme Award for Employer of the Year in April, reflecting our commitment to people, safety, well-being and inclusion. Our DE&I and wellness initiatives remain a priority with strong recognition across the business for efforts like celebrating Martarki and Mental Health Awareness Week. We've championed community initiatives like the Starship Foundation's Big Bake Off in June, where we created a special cake that customers could add to their order to donate instantly. We also launched our first winter food drive in partnership with New Zealand Post, enabling our customers to donate leftover food to City Missions and other local charities across New Zealand. Our procurement approach continues to be centered around local and sustainable sourcing with over 98% of our fresh proteins and produce sourced from within New Zealand, reducing food miles and supporting local New Zealand growth. In addition, we've added new premium New Zealand fish species to the menu, including Snapper and John Dory. We've prioritized trusted and ethical partnerships with Kiwi suppliers as well as organizations like Diabetes New Zealand, Coeliac New Zealand and Heart Foundation, reinforcing our credibility and expanding our reach in the health space. That concludes the business update section of our presentation, and I'll now hand you over to Louise, who will go into more detail on our financials.

Thanks, Mark. Turning now to our financial performance on Slide 15. Overall, we've delivered a solid result in a challenging environment, balancing growth with disciplined cost management. Revenue was up 3.8% compared to the last year for the half, driven by an increase in deliveries and higher average order values. This uplift reflects customers gravitating towards the My Food Bag brand as well as larger bag sizes and adding extras to their orders alongside modest price adjustments. Gross margin was 48.5%, down 1.2 percentage points due to food price inflation, which also impacted the contribution margin. EBITDA was $7.2 million, alongside strategic investment in the shop to drive brand awareness and future growth. Our net profit after tax was $2.9 million, which is broadly in line with the prior year. Over the page on Slide 16. Active customers are up 2% year-on-year, and we've maintained strong loyalty with our retained customer base, which remains the greatest proportion of our active customers consistent with last year. We continue to focus on rewarding quality customers through a targeted approach to incentives, which has led to lower churn rates and improved frequency. We've been very considered in our approach to price adjustments, for example, deferring price increase on Bargain Box until late September to support value perception. Brand campaigns such as highlighting Bargain Box's competitiveness with supermarkets and new health-focused products have also helped attract new customers to the brand. On Slide 17, our deliveries grew by 1.5%, adding around 9,000 more compared to last year. This was driven by a strong response to our targeted offers and a varied menu, which continues to be rated highly by our customers. Campaigns like our partnership with Auckland Football Club have also contributed, driving strong customer appeal, which we're seeing in the selection rates of the recipes connected to these campaigns. Product development, including GLP-1 support and the diabetes plan have provided more flexibility for customers, and we're seeing these trends come through in delivery numbers. For example, we have seen incremental growth from our gluten-free offering. The average order value increased by 2.3% on last year. This was driven by customers choosing higher-value brands such as My Food Bag as well as selecting larger bag sizes and reduced customer compensation, which has resulted from improved operating service levels, for example, in picking accuracy. Customers are also adding more extras than previously, a trend which we attribute to improvements in the product range and improved user experience in this area. Modest price adjustments have also been implemented across My Food Bag and Bargain Box to support recovery of input cost pressures, particularly in ingredients. Turning to Slide 19. Gross margin came in at 48.5%, down from 49.8% last year, reflecting the food price inflation of 4.1% over the past 12 months, partially offset by a higher average order value, as mentioned on the previous slide. Last year provides a challenging benchmark to compare against as it was a particularly favorable time for produce pricing due to positive growing conditions. Although food price inflation to September 2025 was 4.1% overall, the majority of our ingredients costs come from produce and meat, which rose by 5.8% and 6.4%, respectively, putting higher pressure on our cost base. We've mitigated some of these cost pressures through procurement initiatives like sourcing produce directly from growers, recipe development and ingredient substitution. Although these initiatives are providing some cost pressure relief, we are focused on maintaining consistent quality and value for our customers. Over on Slide 20. The contribution margin declined by 1.4 percentage points versus last year, mainly due to distribution and labor cost increases from contractual adjustments. Packaging initiatives have helped offset some of these costs by reducing cardboard and packaging consumption. In addition, our Pick to Light system continues to deliver efficiencies in labor, improving accuracy and pick speed. Moving on to our balance sheet now on Page 21. We've continued to strengthen the balance sheet further, reducing net debt by $1.4 million since March and $4.2 million compared to September last year. Free cash flow has been used to pay down debt, and we've kept capital expenditure low with no significant purchases in the first half. Over the page, looking at the summary cash flow, you will see that operating cash flow is $5.8 million, slightly lower than last year, but supported by reduced CapEx spend. The Board has declared an interim dividend of $0.075 per share fully imputed to be paid in December. The dividend reinvestment plan is also available with no discount for those who choose to participate. I will hand you back to Mark now, who will talk to the outlook on the rest of the coming year.

Thanks, Louise. So as mentioned earlier, our strategy is to remain focused on growing active customers and continuing to expand into the wider online food category. Recent trading reflects a continuation of the trend seen in the first half of the year with year-to-date revenue growth of 4.6%. This compares to year-to-date revenue growth of 3.8% as at the end of September. Following the pricing adjustments implemented as at the end of September, we've seen a positive impact on gross margins post balance date. However, we're mindful that ingredient cost pressure will continue to remain. We expect full year profitability to be broadly in line with prior year and CapEx requirements to remain low with a continued focus on reducing debt. We're confident that the steps we've taken in the first half position us well for the remainder of FY '26. So with that, I'll now pause and turn it over to the operator for any questions. Thank you.

[Operator Instructions] Your first question comes from Guy Hooper with Jarden.

Well done on a solid result. Can you talk a little bit about that post -- or the trading update and the strength in revenue post balance date? It seems like you would have had a fairly strong October and into November. Can you give us a bit of color around the drivers, whether or not it's just the price increases that you put through or whether or not you're seeing any sort of underlying change in activity?

Thank you. Yes, I mean we've been really pleased with the momentum that's continued to build through September and then post balance date. The reality is that within our portfolio, we're continuing to see growth on the My Food Bag brand. So delivery volumes increase and also a better bag mix within My Food Bag as well. So that's obviously providing deliveries and AOV benefit, which has been great. Order frequency has also been pretty strong. And then to your point, we did move price on bargain box at the end of September. So that's also had a little bit of an impact. But underlying volume has sort of been the key driver there, supported with brand mix. So yes, good momentum.

Great. In terms of the order frequency and maybe the customers that are growing into the My Food Bag brand, are they coming from within the sort of My Food Bag portfolio and they're just moving up in terms of the brand? Or are these sort of net new customers?