My Food Bag Group Limited ($MFB)

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

Thanks, Kaley. Kia ora. And welcome, everybody. I'm Mark Winter, the CEO of My Food Bag. And today, I'm presenting alongside our CFO, Louise Newsome. Thanks for joining our update around our full year results for the period ending March 31, 2026, which going forward through the presentation, we'll refer to as FY '26. In terms of today, we'll cover 3 key areas. I'll provide an update on our business through FY '26, a review of our financial performance for the year, and then we'll talk about our outlook for FY '27. So turning to FY '26 review. Today, we're reporting revenue of $170.2 million for FY '26. This represents growth of 5% on last year. EBITDA came in at $16.4 million, and net profit after tax was $6.7 million, up from $6.3 million in FY '25. We've maintained gross margin in line with prior years and grown and improved the lifetime value of active customers by continuing to be more relevant through greater flexibility, convenience and value. A final dividend of $0.0115 per share has been declared by the Board, and that will be paid in June. Turning over. FY '26 has been a year focused on growing quality active customers through the ongoing delivery of our strategy. Over the past 12 months, we've maintained our focus on quality, convenience and value. And this has contributed to improved customer retention, loyalty and higher order frequency. These are all attributes of a stronger customer base. Our gross margin of 49% was above our 5-year average, and this reflects supply chain optimization work, innovation, as well as our pricing. My Food Bag Shop continued to grow, expanding our range of gifting care package and ready-made meal products, while also helping us attract new customers with a more flexible operating model. We also continue to expand our health led offering, leveraging our strong nutrition expertise and partnerships, helping more New Zealanders find meal solutions suited to their lifestyles and well-being goals. Our employee engagement continued to increase, and this is a result of our commitment and investment in the organization culture and capability, the key contributor in our ability to execute on our strategy. And financially, we further improved our free cash flow generation to $8.5 million, and that allowed us to further strengthen our balance sheet by reducing our net debt by more than $5 million while also increasing the dividend payments to our shareholders. Our purpose remains to help Aotearoa New Zealand eat and live well. This purpose guides our customer-centric decision-making and shapes how we innovate across our brands, our products and ultimately, our customers' experiences. As health, convenience and personalization become increasingly important to consumers, we believe My Food Bag is well positioned to continue to meet these changing needs. Business update. Our strategy remains focused on growing active customers with the objectives of strengthening our leadership in meal kits and continuing to expand into the wider online grocery category. Everything we've delivered during FY '26 has been underpinned by our 4 strategic areas of focus shown on this slide. Firstly, brand value and advocacy. We continue to leverage our portfolio of brands to drive higher customer engagement and loyalty, while continuing to communicate and demonstrate our value for money. Secondly, convenience. We'll further help customers save time through flexible delivery options, a wider ready-made meal range, faster recipes and a seamless digital experience. Ultimately, we solve the problem of what's for dinner tonight. Thirdly, flexible solutions. We provide customers with more flexibility and tailored options to suit their different lifestyles, dietary preferences and health needs, personalizing their experience with us. And finally, our focus is around unlocking new customer segments and occasions. And we've expanded beyond subscriptions and into new channels, audiences and purchasing occasions throughout the year. Now all of this is underpinned by an efficient operating model with ongoing investment into our supply chain, data and technology and culture, core enablers of our strategy. On the next few slides I'll talk through some of the progress we've made on their strategic objectives during FY '26. So turning to Slide 9, clear strategy, consistent execution. Our portfolio of brands are aimed at meeting New Zealand household needs across a range of consumer segments. As New Zealand's highest-rated meal kit My Food Bag continues to be our leading brand, and we've continued to build trust and loyalty with customers by providing the flexibility they want. For example, we've continued to invest in the menu to expand recipe variety and further personalize options for our customers. Bargain Box remains very well positioned as New Zealand's most affordable meal kit. We continue to appeal to customers' sense of value by providing everyday savers, a range of grocery extras and with campaigns like Saver Flavor, well received by customers on a budget. During FY '26, we further expanded our health led offering through the diabetes plan in partnership with Diabetes New Zealand and launched a GLP-1 support product. We've also seen continued growth in our gluten-free, low carb and high protein offerings. And FY '26 will strengthen convenience to customers through the My Food Bag Shop, which has delivered reduced lead times and allows for one-off deliveries. And within meal kits, we've implemented the likes of smart packaging to allow customers to have rightsized packaging, reducing waste and lowering costs. The customers wanting more flexibility, one of our successful initiatives this year was the launch of double protein across all of our brands where customers have the ability to increase the protein in their chosen recipe. This is just 1 example of many customized enhancements that were undertaken and more planned ahead. Stepping back, what I can say is that collectively, our brand initiatives are growing consumer engagement across multiple segments and occasions. Turning to Slide 10. The My Food Bag Shop has continued to unlock demand by offering one-off purchases beyond subscription with shorter delivery times to consumers. Over the past year, we've continued to develop our range of products and categories to widen the appeal and are seeing this offering unlock new customers and create leads for our meal kit business. In addition to targeting new audiences via the shop, we've also grown our network of corporate partners during FY '26 to capture further demand. This is about utilizing our existing operating model and technology to drive incremental revenue through B2B customers to further meet their organizational needs. And finally, another small example of targeting new customers and exploring other channels has been our new ventures pilot with WM Robotics, which has provided ready-made meal vending machines to offices, apartments and hotels. Early results validate the demand for our convenience and healthy ready-made meals. Over the page, I'll talk more to our unique health positioning, recognizing that our health credentials provide a clear competitive advantage by helping consumers achieve their health goals. We had 3 New Zealand registered dietitians supporting us. We're well placed to support customers evolve their health and well-being needs. During FY '26, we developed a range of solutions to meet the needs of New Zealanders, including the diabetes plan, which was launched in partnership with Diabetes New Zealand. The new high protein and diet-friendly preferences and a tailored meal plan and product to support customers on GLP-1 weight loss medications. We continue to nurture our partnerships with the range of organizations and health professionals to help build awareness of these solutions with new customers. Health is at the heart of our purpose and we'll continue to help New Zealanders by providing access to high-quality nutrition to improve their well-being, lifestyle and meet their goal and dietary needs. Turning to Slide 12. We're very proud to continue to improve our customers' experience with improved performance in product quality, picking and delivery accuracy. This is reflected in our Net Promoter Scores. Recently, we've implemented an ingredient management system into our supply chain to further strengthen inventory and quality controls and improve traceability. This was an important investment benefiting our customers and our business resilience, providing further optionality around extending convenience into the future. Health and safety remains at the forefront of all processes, resulting in a sustained reduction in injuries during the year compared with the prior year, with our TRIFR at 0.88, down from 1.2 in FY '25. And as I highlighted earlier, the delivery of our strategy very much relies on our team, which through FY '26, we saw a stable with improved engagement scores. Our data and technology platform has scaled this year, enabling personalized experiences from customers, efficient and optimized operations and real-time decision making across our business. We continue to utilize AI to further enable our business, and we're seeing positive impacts, including AI-assisted productivity from things such as internal LLM tools. We're also seeing AI help with optimizing menus, assisting recipe development, and we're embedding automation end-to-end across a number of our key business processes. Finally, on Slide 13, aligned with our purpose of helping Aotearoa New Zealand eat and live well, we continue to focus on minimizing waste and supporting our communities during FY '26. For example, as I mentioned earlier, our smart packaging solution, [ now meal ] boxes and ice fit to what each customer has ordered, reducing cardboard use and waste, improving the customer experience. We've continued to play our role in the community, supporting charities like the City Missions, the Heart Foundation and Garden to Table, while continuing to deliver nutrition education to partners and dietetic students via events and resources. We're able to do this because of the internal capability and foundations that we have in the business. As always, over 98% of our proteins and produce remain locally sourced. And on top of this, we've expanded our range of local and sustainably sourced fish across the year. I'll now hand you over to Louise, who will take you through the financials.

Thanks, Mark. Turning now to our financial performance on Slide 15. Overall, FY '26 represents a strong financial result, balancing growth with disciplined cost management and investment and growth initiatives. EBITDA landed at $16.4 million and net profit after tax was $6.7 million, up 5.3% on FY '25. This performance was driven by a 5% revenue growth, supported by higher delivery volumes, improved order frequency and a 2.8% increase in average order value. The uplift in average order value reflects a favorable brand mix shift towards the My Food Bag brand alongside modest pricing actions during the year. Momentum strengthened in the second half of the year with revenue increasing 6.3% compared to the prior period. Gross margin remained strong at 49%, despite continued food price inflation pressures across produce and proteins. Contribution margin is in line with the prior year at 21.2%, and we'll go into more detail about this on later slides. Additional investment in growth initiatives, including the My Food Bag Shop and marketing activity as well as project costs contributed to higher overheads during the year. Turning over to Slide 16. Deliveries increased by 2.1% during FY '26, supported by strong customer response to targeted campaigns, product innovation and continued improvements in customer experience. The second half of the year saw accelerated momentum with delivery growth of 2.9%. In particular, health food offerings, including our diabetes plan, GLP-1 support meals and gluten-free range have continued attracting new customers and supporting incremental growth. Customer retention continues to trend upwards with frequency increasing to 5.5%, and this reflects stronger engagement with our product, which we attribute to our strategic focus on providing convenience and flexibility for our customers. This focus has also contributed to growth in average order value. For example, enhanced flexibility features such as the introduction of double protein options, enable customers to increase spend with each order. Year-on-year, our retained customer base, defined as customers taking deliveries across consecutive quarters, has continued to increase as a proportion of our total active customers. Alongside a reduction in cancellation rates, this reflects strong levels of customer engagement and loyalty across our customer base. This has been supported by increasingly targeted and refined marketing strategies aimed at both retaining our loyal customers and acquiring new customers. In addition, despite the impact of an earlier Easter and April, limiting new customer acquisition, total active customers increased compared to the prior year. Turning to Slide 18. Gross margin remained stable at 49% above the 5-year average of 48.5%. Ingredient cost inflation remained elevated through FY '26 at 3.4%, particularly across produce and proteins, which represent a significant portion of our product composition and cost base. We mitigated these pressures through procurement initiatives such as direct sourcing relationships and recipe optimization alongside modest pricing actions. Importantly, these price increases resulted in minimal customer churn, enabling us to balance margin protection while maintaining quality and value for our customers. Contribution margin was maintained in line with the prior year at 21.2%. Cost pressures were partially offset through labor efficiencies, driven by higher throughput rates and reduced downtime following optimization of production planning. We also delivered cost savings through packaging initiatives, including right sizing boxes to customer orders and optimizing our ice usage. In addition, initiatives with our delivery partner, New Zealand Post, to consolidate depots operations resulted in distribution cost efficiencies. Turning now to the balance sheet. We continued strengthening our balance sheet through FY '26, reducing net debt to $1.9 million at year-end. This represents a $13.4 million reduction over the past 3 years, including $5.1 million in FY '26. This improvement was supported by strong free cash flow generation and disciplined capital expenditure with no significant capital outlays during the year. The reduction in debt enhances our financial flexibility and positions the business well as we enter FY '27. Free cash flow increased to $8.5 million during FY '26, supported by strong operating cash flow and lower capital expenditure requirements as mentioned in the previous slide. This cash generation enabled continued debt reduction while also supporting dividend payments to shareholders. The Board has declared a final dividend of $0.115 per share for FY '26, reflecting confidence in the underlying strength and cash generation capability of the business. This represents a total FY '26 dividend of $0.019 per share with an approximate yield of 10.1%. I'll now hand back to Mark, who will talk through the outlook for FY '27.

Thanks, Louise. Our strategy remains growing leadership in meal kits and within the wider online grocery market. And as I've talked to earlier, there's 4 key pillars associated with brand value, convenience, flexibility, and targeting new audiences and occasions, which underpins us. In FY '27, we have a pipeline of initiatives tied to these pillars, all focused on driving active customer growth. This growth will be supported by health-led innovation as well as the expansion of the My Food Bag Shop and corporate partnerships. With regard to a trading update, revenue through the first 7 weeks of FY '27 was up 5.1% on the previous period, reflecting continued sales growth from the execution of our plan and strength of our customer base. On the cost side, recently, we're seeing distribution and certain packaging costs increase, with further ingredient cost pressures now beginning to emerge, driven by higher fuel prices. We're actively mitigating these impacts through supply chain optimization and cost control, where possible. Consistent with prior years, we'll take a balanced approach to pricing. And finally, as previously announced, the My Food Bag Board has commenced a review to evaluate its ownership, capital structure and strategic options. My Food Bag has engaged Cameron Partners as its financial adviser, but the review at this stage remains in its preliminary stages, and there's no certainty that any transaction involving My Food Bag will eventuate. My Food Bag will continue to keep shareholders and the market updated in accordance with its continuous disclosure obligations. I'll now pause there, and I'll hand it over for questions. Thank you.

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

It's a solid result. So well done on that. Can I just ask about the acceleration in deliveries growth in the second half or reacceleration given it was a reasonable underlying growth in the second half in the prior period. Can you give us a sense of how the core subscription base is going versus some of the initiatives and occasions and health focus and where that growth is really coming from?

Thanks, Guy. And yes, look, we have seen that acceleration play through in H2 at 6.3% top line growth. What we have seen is that improvement around more retained customers and those retained customers more engaged, taking orders more frequently. And so the combination of those 2 has really strengthened our delivery performance. Over and above that, we've seen a continued shift towards the My Food Bag brand in terms of our overall brand mix. And that's obviously come with an improved average order value as well. So that's kind of the key components. Within that, there's no doubt the appeal of not only the convenience of My Food Bag about the benefit of the healthy eating and some of the different dietary offerings that we're providing is seeing further engagement. And typically, those products have a higher order frequency associated with them. So people that are going on our GLP-1 support range, for example, are typically taking their product on a higher frequency compared to normal customers because it's very much suiting their lifestyle, becoming more of a habit for them. We can see the same around gluten-free, for example. So health is definitely strengthening not only the engagement and retention of customers, but also the frequency of their purchase habits.

What portion of customers or portion of deliveries of those sort of [ health ] products off the double protein and GLP-1 et cetera versus say regular products? And how has that mix changed over the last couple of years?

Well, all of our products are healthy. My Food Bag at its core is nutrition and healthy eating. And so what we've been more overt is obviously marketing that message and creating that awareness with the New Zealanders that whether it's Bargain Box and selecting a low-carb option, whether it's My Food Bag and high protein or whether it's fresh start and one of the dietary preferences there improves not only your convenience and your time saving, but also your well-being in your lifestyle and help support your health goals. So on the 1 hand, it's across the portfolio. Specifically within the brands, each of them have different health offerings, and we are seeing the growth of those sort of out-index -- the kind of core -- core kind of offerings that have already existed.

Thank you for that additional color there. In terms of the mix shift towards the My Food Bag brand, is that you say, reactivating or gaining new customers to that brand? Or is there a bit of trading up going on? Like, do you have a sense of what, say, a meal kit customer generally is doing and whether or not that market is growing again?

We do have some sense of that guy. And -- what we're seeing is -- yes, we're seeing the strength of having a portfolio of brands and customers that may have come in as the Bargain Box customer because it suits their stage of life, migrate into My Food Bag. But we're also seeing with My Food Bag a good level of reactivation of lapsed customers who are coming back, having had a break from us for a period of time. And then coming back to the health piece, we're also seeing that drive new customers in terms of the acquisition because of those core offerings appealing to where they're at in their lifestyle. So it is a bit of everything to be honest with you. And we do see that migration within the portfolio of brands. The other area we see it is between Fresh Start and My Food Bag, where customers depending on where they're at with their lifestyle, migrate Fresh Start and they might have a specific objective around that or it might be at certain time of year and then move back to My Food Bag. So it talks to the strength of having a portfolio of brands, but it also talks to the fact that we're able to reengage lapsed customers and also bring in new ones as well.

Maybe just one last one for me on the operating cost base. I appreciate you're getting some ingredients -- product inflation coming through and you have some levers to try and offset that. How should we think about the risk of the cost base? I mean, there was a reasonable step up, say, marketing and project costs in this year. How much of that is repeatable into next?

Yes. From a marketing perspective, we continue to remain very disciplined around our level of marketing spend and when we look at that spend sort of indexed to the proportion of revenue, that stayed flat or slightly decrease. And so the focus is around efficiency and making sure that it's working hard for us to get the right growth outcomes that we're looking for. And that will continue in terms of that disciplined approach in that indexation, I actually expect it to be slightly more favorable from an index perspective heading into FY '27. And the reason for that is that we're continuing to get more targeted and more efficient in how we market, particularly around promotion and incentives. And with that, we're able to obviously spend less money. So that's sort of how I see that part. And from an overhead perspective, more broadly, there was some one-off project costs that were incurred in FY '26, which I don't expect to repeat. And we obviously had the implementation of the Factory Track system, which was expensed. As I talked to earlier, to kind of really strengthen the resilience of the business, that's the ingredient management system.

That does conclude our question-and-answer session. I'll hand the conference back to Mr. Winter.

Well, thank you, and thank you to everybody for dialing in. That concludes our call today. Thank you for your support. And if there's any follow-up questions, please feel free to get in contact. We've got the e-mail address, [email protected]. Have a great day.