First candles, now treats. The inflationary environment has well and truly settled in, pulling people away from luxuries, as small as they may be. Premium food company Maggie Beer (ASX: MBH) seems to be the latest casualty.
Both of the Company’s divisions—Maggie Beer Products (MBP) and Hampers & Gifts Australia (HGA) (which was touted as the arm to ring in profitability)—have suffered revenue declines in H1 FY23. MBP’s revenue stood at $17.1 million, down from $17.6 million in H1 FY22. HGA’s revenue declined from $34.7 million to $32.8 million. Overall, the Company’s EBITDA fell from nearly $10 million in H1 FY22 to $5.6 million in H1 FY23.
The trading EBITDA for MBP and HGA is expected to be between $3.5 million and $4.5 million and FY23 revenue is expected to be between $70 million and $75 million respectively.
The Company blamed the current “macroeconomic factors”, including rising interest rates and inflation. Customers are reevaluating their spending patterns, pinching their wallets and avoiding what they can, especially in the grocery retail sector and e-commerce channel. Maggie Beer also cited higher energy, freight and labour costs as having a dampening effect on its earnings.
The sales performance in the second half is looking alright, with revenue experiencing a 5.3% increase by the end of April. This growth can be attributed to the revenue growth of 13.7% in Maggie Beer Products.
However, HGA sales revenue has declined by 12.2% during the second half of the year until April. This decline is consistent with the overall e-commerce market bust and a shift towards traditional retail. Unfortunately, this trend has persisted into May, with disappointing sales during Mother’s Day resulting in a 13.2% decrease in sales compared to the same period last year.
Three months ago, Maggie Beer got a new CEO, Kinda Grange, to reimagine the Company. Her plate has been full ever since. She said, “I am enthusiastic about the future of MBH. With a foundation built on strong assets and the iconic Maggie Beer Brand, a healthy balance sheet free of debt, and an e-commerce platform with untapped potential, we possess the necessary ingredients to fuel our growth.”
When HGA was acquired in 2021, a clause was included that stated the vendors would receive an additional payment, known as an earnout, if HGA achieved $10 million in Trading EBITDA for the fiscal year 2023. On 31st December 2022, the value of this provision was adjusted from $14 million to $10 million. Based on HGA’s year-to-date performance and the projected Trading EBITDA for the entire fiscal year, the Company feels that the earnout target won’t be met. As a result, the net profit after tax (NPAT) for the Group in fiscal year 2023 is expected to increase by $10 million when the provision is reversed.
The Board is assessing the value of HGA’s goodwill, and initial indications suggest that no impairment is necessary. It is also expanding its product offerings, particularly Cheese Hampers, which have been highly popular and have generated $2.9 million in revenue for the year-to-date of FY23.
But will cheese be enough to get Maggie Beer back on people’s grocery lists?
Alinda is a Business Reporter for The Sentiment
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