Maggie Beer Holdings (ASX: MBH) expects earnings will fall by 60 per cent in FY23 after rising interest rates and inflation continued to put downward pressure on consumer spending, coupled with the impacts of higher energy, freight and labour costs.
Revenue for the group's Maggie Beer Products (MBP) segment was up 13.7 per cent by the end of April, but this was offset by a 12.2 per cent drop for the Hampers & Gifts Australia (HGA) subsidiary which since then has had even worse sales in May with a "disappointing" Mother's Day performance.
This combination of factors means FY23 EBITDA is likely to land at between $3.5 million to $4.5 million, compared to a result of $11.3 million in FY22.
While the result is a significant drop, the silver lining for the group is that it means HGA will be nowhere near hitting its $10 million earnings target required for a $10 million earn-out for the hamper company's former owners.
Initially acquired in March 2021 for $40 million, HGA was bought in a bid to boost Maggie Beer’s sales for its online segment. In the year to date to April FY23 the business generated $38.2 million in revenue and is anticipated to hit $40-43 million for the full year, compared to $45.2 million in FY22.
“Based on the HGA’s YTD performance and expected full-year EBITDA, the board does not believe that the earnout hurdle will be met,” the company told shareholders today.
“Accordingly, the FY23 NPAT for the group is expected to be positively impacted by $10 million when the provision is reversed.”
Maggie Beer also forecasted that revenue will sit between $70 million to $75 million for FY23 – a result just short of the $75.2 million generated in FY22.
Maggie Beer Products (MBP) are expected to deliver between $30 million to $32 million of total revenue.
The company notes group sales in the second half remained strong, with revenue up 5.4 per cent at the end of April, primarily driven by MBP revenue growth of 13.7 per cent.
Meanwhile, sales were down 12.2 per cent for HGA, which MBH attributes to a shift back to bricks and mortar retailing and disappointing sales during Mother’s Day.
“Macroeconomic factors, including rising interest rates and inflation have continued to impact consumer spending patterns across the grocery retail sector and e-commerce channel,” the group added.
“Higher energy, freight and labour costs have also had a dampening effect on trading EBITDA.”
The news comes five months since Maggie Beer welcomed Kinda Grange as its new top boss, with the CEO previously spending 18 years at FMCG (fast moving consumer goods) firm Goodman Fielder.
During her two-year stint as Australia joint managing director for the firm, Grange had responsibility for e-commerce, digital marketing and product categories that included plant-based foods, spreads and oils, bakery, in-home baking and dairy.
Grande succeeded Chantale Millard, who had been with the group for eight years, first joining as CEO of Maggie Beer Products before being appointed to the same role for MBH in November 2019.
“I am enthusiastic about the future of MBH,” Grange said.
“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”.
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