New product development, insulation from adverse exchange rates and strong growth in international markets have resulted in The Breville Group recording a 17.7 per cent increase in sales for the first half of the 2014 financial year.
During the 6 months to December 2013, Breville registered $311.3 million in sales, up from $264.4 million in the previous corresponding half. This fine performance was tempered, however, by a decline in profitability, caused by the termination of Breville’s high margin Keurig distribution business in Canada. Net profit after tax was $31.2 million for the half, down 1.6 per cent.
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Sales in Breville’s Australian and New Zealand business grew 10.4 per cent during the half, while North America was up 16.3 per cent and the rest of the world surged 69.1 per cent, albeit off a low base. Non-Australian and New Zealand sales comprised 53.5 per cent of Breville’s total revenue.
Discussing the local market, where Breville markets its eponymous brand and Kambrook, CEO Jack Lord said strong product portfolios, “enabled both brands to increase their average sell prices during the half and grow revenue, partially offsetting the reduced margins on existing products due to the weaker Australian dollar”.
Breville’s Australia and New Zealand earnings before interest, tax, depreciation and amortisation (EBITDA) was down 4.9 per cent for the half, reflecting this reduced margin.
Unlike several of its rival small appliance brands that are exposed to fluctuations in the exchange rate, Breville’s large international business creates a natural hedge against severe fluctuations. Lord reports that Breville achieved “a small net foreign exchange benefit” during the reporting period.
In addition to the Breville and Kambrook brands, the Group also distributes some Philips appliances and was appointed a local machine partner for Nespresso 12 months ago. Sources at Breville say sales in Philips personal care products have been very strong, especially in male grooming during the important Father’s Day and Christmas periods.
In the Nespresso business, Breville reports that, “The launch of the Breville co-branded Nespresso range continued to strengthen its position in the domestic appliance market”. Breville is set to benefit from the upcoming Easter and Mother’s Day sales periods. Nespresso traditionally releases new products to meet expectant demand at this time.
Much of Breville’s future success hinges on its international business, a point highlighted in the company’s outlook for the rest of the financial year. In a presentation to investors, Breville said it is, “Firmly focused on continued investment in international expansion strategy”.
In the United Kingdom, Breville has rolled out the Sage by Heston Blumenthal collection of premium appliances (there is already a mass merchant house brand called Breville in the UK). This expansion is being overseen by experienced Australian Dave Gubbin. Breville reports that its understanding of European market dynamics has grown significantly since this launch and that the new Sage brand has received encouraging support from the mainstream and cooking media.
The North American office, which is run by former Sunbeam and Hoover pro Damien Court, is experiencing growth in the cooking, food preparation and juicing category, and Breville reports that there is good growth in the online shopping segment.