Why the Breville (ASX:BRG) share price is charging 7% higher today

The Breville Group Ltd (ASX:BRG) share price is on the move on Tuesday following the release of its half year results…

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

sdf

The Breville Group Ltd (ASX: BRG) share price is on the move this morning following the release of its first half results.

At the time of writing, the appliance manufacturer's shares are up 7% to $32.85.

How did Breville perform in the first half?

For the six months ended 31 December, Breville reported a 28.8% increase in revenue to $711 million. This comprised Global Product revenue growth of 34% to $592.9 million and Distribution revenue growth of 7.9% to $118.1 million.

Management advised that its strong top line performance was driven by growth in all regions and categories. This was supported by the working from home (WFH) and premiumisation trends, as well as its operational decision to invest in inventory in May following its capital raising.

Things were even better for its operating earnings. Breville posted a 32% lift in earnings before interest, tax, depreciation and amortisation (EBITDA) to $112.4 million.

It notes that this was driven by its strong revenue growth and improved gross margins. The latter was thanks to lower promotional spend, a swing in mix to premium products, and a weaker US dollar, which more than offset increased freight costs.

On the bottom line, the company delivered a 29.2% increase in net profit after tax to $64.2 million.

However, despite this strong profit growth, the Breville board decided to slash its interim dividend by 36.6% to a fully franked 13 cents per share. The company advised that this reflects its decision to reduce its target payout ratio to allow continued funding of growth opportunities on a cash-neutral basis.

It also advised that the previously activated dividend reinvestment plan has been suspended until further notice.

Management commentary

Breville's CEO, Jim Clayton, was pleased with the half.

He said: "A good half for the Group, building on the momentum seen over the last few reporting periods and benefiting from the WFH phenomenon. All regions and categories delivered growth, despite experiencing very different and erratic retail backdrops."

"We continued to accelerate our double-digit EBIT growth, while tactically investing in selected growth drivers and capabilities. Geographic expansion is delivering an increasingly diversified and balanced global portfolio, adding growth and resilience in a dynamic market environment."

Outlook

Positively, the strong first half has led to the company upgrading its guidance for the full year. This appears to have offset any disappointment around the dividend cut and helped drive the Breville share price higher today.

According to the release, assuming no significant change in economic conditions in its major trading markets, it expects FY 2021 EBIT to be approximately $136 million. This compares to its previous guidance of $128 million to $132 million.

It also advised that its investment in New Product Development and Go To Market (NPD & GTM) as a percentage of net sales is approaching the strategic goal of 12%. In light of this, investment levels "will be flexed in 2H 21 depending on the sales growth delivered."

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers

Person pretends to types on laptop drawn in sand.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors managed to ease out a gain from the markets today.

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Share Gainers

Why Paladin Energy, Santos, Tourism Holdings, and Woodside shares are racing higher

These shares are starting the week with a bang. But why?

Read more »

The silhouettes of ten people holding hands with their arms raised against the sky, as the sun rises or sets in the background.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors were nervous this Friday, ending the week on a sour note.

Read more »

A young man punches the air in delight as he reacts to great news on his mobile phone.
Share Gainers

Why EOS, Evolution Mining, Renascor, and Woodside shares are jumping today

These shares are ending the week on a high. But why?

Read more »

Fancy font saying top ten surrounded by gold leaf set against a dark background of glittering stars.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a volatile, but negative day for ASX investors this Thursday.

Read more »

Woman with an amazed expression has her hands and arms out with a laptop in front of her.
Share Gainers

Guess which ASX 200 stock turned $5,000 into $34,264 in just three years!

Investors have been piling into this ASX 200 stock for years, sending the share price soaring.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Share Gainers

Why Beach Energy, Meeka Metals, Monash IVF, and Qantas shares are racing higher today

These shares are having a better day than most on Thursday. But why?

Read more »

Rising gold share price represented by a green arrow on piles of gold block.
Share Gainers

2 ASX All Ords stocks that would already have more than doubled your money this year

These ASX All Ords stocks have gained 126% and 145% year to date. But how?

Read more »