- Revenue Growth: 2.0% increase in the first half of FY '24.
- Gross Profit Dollar Growth: Nearly 7% increase.
- Gross Margin Percentage: Improved by 160 basis points year-on-year.
- Operating Expenses (OpEx): Increased by 5.7% period-on-period.
- EBIT Growth: 8.2% increase.
- Net Profit After Tax (NPAT): Grew by 6.7%.
- Interim Dividend: $0.16, an increase of 6.7% on the prior period.
- Global Products Segment Revenue: Grew by 1.6% (decline of 1.3% in constant currency).
- Global Products Segment Gross Profit: Grew by 4.8%.
- Distribution Segment Revenue: Grew by 4.6%.
- Distribution Segment Gross Profit: Grew by 26.7%.
- Inventory Reduction: Reduced by over $85 million.
- Net Debt: Reduced to $97.5 million at the end of the half, further reduced to $34.7 million as of January 31, 2024.
- New Geographies Growth: 73% growth in countries entered during and since COVID.
- Americas Region: Flat sales but growth in gross profit dollars.
- APAC Region: Strong growth in Asia, weaker first quarter in Australia and New Zealand followed by a stronger second quarter.
- EMEA Region: Sales and gross profits grew, particularly strong in key direct markets.
- EBIT Growth Drivers: Strong gross profit delivery, well-managed operating expenses, increased depreciation and amortization.
- Receivables: Reduced to $323 million as of January 31, 2024.
- EBIT Growth Forecast for FY '24: Expected to be between 5% and 7.5%.
Release Date: February 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Breville Group Ltd (ASX:BRG, Financial) delivered revenue growth of 2.0% in the first half of FY '24 despite a subdued consumer backdrop.
- Gross profit dollars grew by nearly 7%, with gross margin percentage improving year-on-year by 160 basis points.
- EBIT grew by 8.2%, comfortably ahead of sales and in line with the company's plan.
- The company successfully reduced net debt and inventory, with further reductions forecasted for the second half.
- New product launches, such as the Barista Touch Impress and Vertuo Creatista, performed well, contributing to growth.
Negative Points
- Revenue growth in the Global Products segment was only 1.6%, and actually declined by 1.3% in constant currency.
- The food preparation category, including juicers, blenders, and food processors, saw a decline period-on-period.
- The Americas region experienced flat sales, although there was growth in gross profit dollars.
- Australia and New Zealand had a weaker first quarter, although this was followed by a stronger second quarter.
- The EMEA region's growth was tempered by lower performance in indirect markets still served by distributors.
Q & A Highlights
Q: Are we able to quantify in the first half, how much has actually contributed from the NPD as well as the new regions and then, therefore, the underlying business, sales -- first half sales?
A: We don't normally break that out, but the new coffee machines, the Vertuo Creatista and the Barista Touch Impress went extremely well in the first half. We did give a growth number for the new territories at 73%, but off a relatively small base.
Q: Are we thinking more marketing investments to drive up the second half sales? Or are the investments more for 2025 and onwards?
A: The investments are for 2025 and onward.
Q: Just on the U.S., excluding Bed Bath, where do you stand? And are you starting to get any feedback from your customers around replacement cycles starting to kick back in?
A: Excluding the impact of Bed Bath out and Target in, we would be in positive growth. Regarding replacement cycles, I don't have any fact base to disaggregate sellout into replacement cycles versus new customers.
Q: Can you quantify where investment OpEx sat in this period and where it might go in the second half?
A: The investment growth is up in the first half of '24 over first half '23, both as a percentage and as a total absolute spend, mainly due to amortization from past investment decisions. It was about 12.5% for the first half of '24.
Q: Could you talk a bit about what's driving the slowdown in EMEA?
A: EMEA laid down the first half that we thought they would. The direct countries grew stronger than the overall average, while indirect countries lagged. This trend is expected to normalize as the full year plays through.
Q: Can you talk a little bit more about the food prep segment and its weakness?
A: The mean reversion cycle is impacting food prep. We have NPD rolling out in the second half, which should help flatten out or grow the segment next year.
Q: How much of the gross profit dollar increase is from managing GP dollars and not participating aggressively in promotions?
A: The gross profit dollar increase is 100% from managing GP dollars. We chose not to heavily discount and promote, focusing instead on maintaining a strong gross profit margin.
Q: How much is left in FOB and freight costs to release?
A: Our gross margins are now at a new normal level. We are seeing some mild headwinds in freight costs as we go into FY '25, but nothing significant.
Q: Can you give any color on the strong growth in new countries and underperforming regions in Europe?
A: We don't have a weak part in Europe; the growth is spread across the region. We will continue to move into a direct posture in geographies where it makes sense.
Q: Is Lelit a contributor to growth in the region still?
A: Lelit is on plan, focusing on transforming into a global company with direct markets in Australia and the U.S.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
