Appliance distributor and marketer Breville has raised eyebrows by cutting its first-half dividend by a third in order to invest more of its earnings in growing the company following a bumper COVID-boosted December half year performance.
The company, which makes and sells appliances such as coffee makers, blenders and juicers, told investors it would drop its dividend by 36.6% to 13 cents a share to fund future what it called in Tuesday’s release, “growth opportunities”.
Coming at a time when interest rates are at record lows, even for corporates, the decision to fund expansion via shareholders is a bit of a shock.
This was despite the company’s net profit after tax rising 30% to $64.2 million for the half off the back of a similar 28.8% jump in revenue to $711 million.
Sales were made up of Global Product revenue growth of 34% to $592.9 million and Distribution revenue growth of 7.9% to $118.1 million. EBITDA was up 28% to 4112 million for the half year.
Breville’s decision to slice its dividend will see major shareholder Solomon Lew pocket a far reduced amount of $4.7 million.
CEO Jim Clayton said the results reflected a good half for the group, aided by the “working from home 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,” he said.
“Geographic expansion is delivering an increasingly diversified and balanced global portfolio, adding growth and resilience in a dynamic market environment.”
Breville joined other companies in the retail sector (like JB HiFi)in complaining about the currently difficulty in acquiring stock due to extremely high levels of demand, which the business does not expect to normalise before the end of the financial year.
The company raised its full-year guidance, predicting earnings before interest and tax to be around $136 million.
Besides cutting the dividend, It also advised that the previously activated dividend reinvestment plan has been suspended until further notice.
The shares jumped 7% to $32.85, despite the dividend cut. But that gain was trimmed and the shares ended up 2.7% at $31.35.
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Unlike Breville and its self-imposed dividend cut, protective equipment maker Ansell will reward its shareholders after posting what are stellar first-half earnings as the company rides the COVID-19 demand for personal protective equipment.
The company posted a 22.9% jump in sales for the first half of 2021, to $US937 million ($A1.2 billion) which translated into a much larger, 61.3% jump in net profit to $US106.5 million.
Earnings before income and tax (EBIT) jumped 60.6% over the previous corresponding period.
That saw Ansell boost interim dividend 52% from a year ago to a new high of 33.2 US cents a share.
The growth was driven by continued demand for single-use gloves, which Ansell had the ability to deliver globally as demand continued to outstrip supply.
The company says it expects to see continued demand for PPE products well into next year, with a need for products even as COVID’s impacts lessen.
CEO Magnus Nicolin told an analyst briefing on Tuesday that the situation had caused outsourced suppliers to increase costs, but that Ansell had been able to pass on price increases so far.
The only segment to go backwards in the half was the mechanical division, where sales dropped just 1% as products like impact gloves were in lower demand due to industrial shutdowns linked to wider pandemic driven lockdowns.
Ansell has also warned that there could be shortages of nitrile, the key material in many protective gloves, into the coming months due to demand.
Nicolin said the business would be working to manage this and balance any further price increases.
“We don’t want to be viewed as a price gouger and we’re not,” he told the briefing.
And shareholders can look forward to another dividend reward in August, if anything like the current growth rates in sales and earnings are maintained.
The interim payout represents a roughly a 40% dividend payout. Ansell plans for a 40-50% dividend payout ratio in the future from its profit attributable shareholders line in the accounts.
That suggests flexibility to maintain a high level of payouts in good times, unlike Breville.
The shares closed at $39.28, up 1.8%.
