MFB - My Food Bag

[Lego_Man]

Thought I would have a look to see if it was worth a punt. I came to the conclusion that there will be no dividend and better bets elsewhere, like 2CC, TWR, HGH etc.

Looks like the market agrees with you - price sliding into earnings which is usually not a good sign.

[Rawz]

Looks like the market agrees with you - price sliding into earnings which is usually not a good sign.

prices sliding everywhere. wish i had more money but fully invested. cant sell what i have to move around as what i hold i believe is super cheap.

[silverblizzard888]

Not much from the company lately, but I think they should deliver an alright profit in the second half. Cost pressures have eased a bit on food and given they haven't increased their pricing for their meal kits, it looks like its stable enough for them not to make price increases. They will have continued to focus on reducing cost and finding more efficiencies along with reducing debt. 2nd half usually delivers a higher profits than the 1st half due to lower seasonal food prices.

2nd Half Expectations
Revenue: $70-75m
NPAT: $2.5-3.5m

[Recaster]

They test for goodwill impairment annually and they are due a big write-down.

They should report a large loss unless they have bullied a compliant auditor.

[ralph]

Not much from the company lately, but I think they should deliver an alright profit in the second half. Cost pressures have eased a bit on food and given they haven't increased their pricing for their meal kits, it looks like its stable enough for them not to make price increases. They will have continued to focus on reducing cost and finding more efficiencies along with reducing debt. 2nd half usually delivers a higher profits than the 1st half due to lower seasonal food prices.

2nd Half Expectations
Revenue: $70-75m
NPAT: $2.5-3.5m

I will go with that & agree totally ,would be a good result again

[bulltrap]

They test for goodwill impairment annually and they are due a big write-down.

They should report a large loss unless they have bullied a compliant auditor.

The 2023 FY report went into some detail about how the impairment test works. It apparently has some fairly wide guard rails, within which no impairment is needed. Higher interest rates this year, combined with lower than forecast revenue growth, could indeed be a concern.

That said, the intangibles have been on the books and withstanding scrutiny since the company was smaller and less profitable than it is now (as at 2024H1). Maybe it's justified if you view it as around $80M of 'assets' that have been 'producing' around $20M operating earnings annually.

It doesn't appear that impairment would be needed just to account for the drop in market cap, if that's what you're suggesting. I'm mystified though that low market capitalization really is treated as an 'indicator of impairment' (as per NZ IAS 36). Trusting the market over auditor scrutiny of yet-to-be-released financials smacks of magical thinking, making market expectations of write-downs a self-fulfilling prophecy.

[silverblizzard888]

Results to be announced 23rd May prior to market opening and a conference call to be followed at 11am.

https://www.nzx.com/announcements/430766

[carrom74]

Should help a bit in keeping costs down.No wonder there was a price freeze..

https://www.rnz.co.nz/news/country/5...ing-conditions

[silverblizzard888]

Should help a bit in keeping costs down.No wonder there was a price freeze..

https://www.rnz.co.nz/news/country/5...ing-conditions

Yup that should bode well for them, as long as prices are stable then they have a clear margin and can make a profit. Businesses like MFB suffer the most when prices are rising and it takes out their margin before they can make any increases or reduce cost. All the pressure seems to have eased a bit now, so they should have more control over their profits.

If we look at the past reported 12 months we see a clear trend between the 6 months for the first half of this financial year and the last half of the previous financial year. Both generate revenue in the 80s and profit consistent around $2 to $2.5m mark. Those two halves were probably the toughest for the business in terms of managing cost and I'd expect either the upcoming financials should be a bit better or the next half after that should show some good results. As long as they can forecast how much business they will have and be able to reduce cost accordingly then they will always make a decent profit, its simply the nature of this type of business.

1H FY24 - Revenue $83.8m Profit $2.5m
2H FY23 - Revenue $81.3m Profit $2m

[silverblizzard888]

Just for fun I decided to run an exercise for the assumption of cost savings and benefits we could expect from the upcoming financial report.

Expense reducing factors underpinning upcoming results:

Lower vegetable cost as much as 25% lower in some months compared to prior years. If we conservatively assume 15% savings on vegetables over the period and assume out of $63m cost (on $70m revenue) that 1/3 is vegetable cost, we’d have a saving of $3.15m from a similar time last financial year.
Savings $3.15m

New pick technology enables reduced overall labour needed to assemble meal kits. Last reported half year only saw 4 months benefit, while upcoming results see full benefits from this technology.
Conservatively likely no addition savings, just efficiencies to add more recipes

Highbrook assembly centre closed at the end of September 2023, meaning we will see the savings in the upcoming financials of up to $500k since leasing cost was about $1m per year.
Savings $500k

Additional sales from new offerings like ‘The Butcher’ and ‘BBQ Box’ will help add to declining sales and maintain active customer interest during the summer period when sales are usually lower. Due to the short period of the offering profit contribution may be low.
Profit contribution $150k

Reduced debt will reduce financial costs, last report net debt was $14m, which was reduced from $15m, with financial cost of the last reported half year at $1m, which might suggest interest on their loan could be as high as 13-14%. With less capital expenditure and lease cost, more capital is available to repay debt. Net debt should be able to reduce by $2m to $12m net debt, saving around $200k since repayment happens throughout the 6 months and not at the beginning so full savings is not likely.
Savings $200k

Total savings $3.85m + added profit $150k = $4m

Conservatively if assume $2m of that is added to the bottom line, which after tax would be $1.44 NPAT, add that to 2H FY23 of $2m NPAT, we end up with $3.44m NPAT and within my expected range, however I would not be disappointed if they exceeded that.

*Factors that would cut into the savings are increased cost observed in meat and sauces, employee wages, current lease sites and potential increase in interest rates over the period.