Local performance falters.
It was Breville’s North America and UK operations which led profit growth in the company’s half year results which were posted yesterday. Its reported revenue for the half year increased by 30.8% to $151.8m compared to the prior corresponding period. EBIT in the North American segment increased by 39.9% to $28.8m. In constant currency revenue for the half grew by 10.9%. (Constant currencies are exchange rates that eliminate the effects of exchange rate fluctuations).
The higher US revenues were driven by sustained growth in the core categories of beverage and cooking, from both new products and the continued momentum of existing products.
However, closer to home the company said that the Australian and New Zealand (ANZ) segment had a challenging half year, “…impacted primarily by an extremely price sensitive marketplace.”
Revenues of $138.8m were 2.8% lower than 2015 and EBIT decreased by 30.7% to $11.3m. The company said that the results were affected by a stronger US dollar which was only partially offset by price increases, a positive sales mix shift to higher margin Breville designed and developed products, and cost efficiency savings.
CEO, Jim Clayton explained, “We are currently working on a number of initiatives to improve the future profitability of our ANZ business. The benefits of these will commence in the second half of the 2016 financial year.”
One of the moves the company had already made to reduce costs was to make the Kambrook management team redundant earlier this month and that saving is expected to be recorded in its next results. Breville is yet to reveal its future plans for the Kambrook brand.
However, both the North American and ANZ business experienced growth of 4.3% on Breville designed and developed products.
Breville’s Rest of World segment encompasses the distribution business supplied from Hong Kong as well as the Group’s UK business, which distributes Breville designed and developed products under the company-owned brand, Sage.
Total revenue in this segment increased by 15.9% to $40.6m. In constant currency, revenues were marginally lower than the pcp. The company said that lower Rest of World distribution business revenues in constant currency in the half were partly offset by higher constant currency revenues from the US business, which continues to build momentum and report solid growth.
In a sign of its commitment to its global markets, the company said it was currently in the process of implementing a global “sales and operations planning (S&OP) process, the benefits of which will begin to flow through within the next twelve months.”
Breville’s net cash at December 31, was $3m compared to $11.7m at the same time last year. The company said that the translation effect of a weaker local dollar negatively impacted the net balance by approximately $2.1m.
“Net cash has also been impacted by the investment in capital expenditure projects completed in the second half of the 2015 financial year. These projects included the relocation of the Sydney-based Australian business and corporate head office and the implementation of the new Enterprise Resource Planning system in ANZ.”
Appliance Retailer will publish an investigation into Breville’s global plans on Monday 29 February, 2016.