Breville hit despite solid results

Breville said it was a good year given the turbulent backdrop and it had controlled expenses, but shares fell.

Breville said it was a good year given the turbulent backdrop.

Shares in Breville dropped as much as 12.5 per cent on Thursday despite resilient demand for its appliances.

Breville shares closed down 8.4 per cent at $25.00 a share, after the company announced a 1.8 per cent drop in full-year profit, but an 11 per cent lift in earnings for the full-year profit.

Breville said it was a good year given the turbulent backdrop and it had controlled expenses which would give it the momentum to invest in sustained growth in the new financial year.

“In the 2020 financial year we faced a cluster of headwinds in the form of Brexit uncertainty, exchange rates, US tariffs and COVID-19 and equally we had our share of good fortune in terms of our inventory levels and the relevance of our products to the ‘new normal’,” said chief executive Jim Clayton.

Breville CEO Jim Clayton. Picture: John Feder/The Australian.

“Overall, I am encouraged by the way our team and processes have responded, how our strategic projects have progressed, and by how we have strengthened our balance sheet against any future shocks.

“We emerge from fiscal year with momentum and a hardened foundation to build upon over the next five years.”

Net profit after tax attributable to shareholders fell 1.8 per cent to $66.2m for the full-year through June.

Meanwhile earnings before interest, tax, depreciation and amortisation lifted 11 per cent to $126.5m for the period.

The company declared a final dividend of 20.5c per share 30 per cent franked, up from 18.5c last year.

Breville said that in the second half of the 2020 financial year, it had been impacted by a reduction in coverage limits from insurers as well as customers, as the coronavirus crisis prompted a heightening of credit risks. The company recognised a step change in its doubtful debt provision of $13.6m in the second half as a result.

Breville said it cut back expenses to create a buffer and protect jobs. That included temporary pay cuts and the suspension of its short-term incentive program, saving the company $7.7m. Those measures were not expected to be repeated in the new financial year, Breville said.

The company started out making radios in Sydney suburbs nearly 90 years ago and is now at the cutting edge of kitchen appliances, selling its products around the world.

Analysts at OrdMinnett Research said the company faced a lot of uncertainties trading into FY21, particularly in the US.

“Breville management highlighted that its US business was probably most impacted through COVID-19 with the hard lockdown of physical stores (and comparatively poor ability to pivot to online distribution channels) as well as Amazon stepping out of the category for a period of time impacting sales in the division.

“Management noted that Amazon moving Prime Day from July to October in 2H20 also impacted the business and it is too early to understand how various selling events (Prime Day, Cyber Monday, Black Friday etc.) will take place in FY21, particularly given potential restrictions on physical stores.

“Regardless, Breville is seeing good sell-in across all regions and expects things to normalise towards the back-end of August 2020 (although that is when the industry starts moving to the Christmas selling period),” OrdMinnett said in a note released after the results report.