The local reporting season for the December period is picking up steam – here are the important bits from the announcements by Breville Group, Temple & Webster and Seven West Media.
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Kitchen appliance group Breville (ASX: BRG) managed a tiny 1% rise in earnings for the six months to December 31 which turned out to be not a bad performance given the long list of negatives (or ‘headwinds’ in the current stockmarket parlance) it had to confront in the period.
Breville had to deal with rising energy costs, rising interest rates and their impact on already jaded consumers (especially in the US), rising transport costs because of those higher energy costs, a components shortage, and the impact of China’s restrictive Covid policies (now eased).
To counter the higher costs, Breville raised prices to try and recover the higher charges and in the end that helped it to report a net profit of $78.7 million.
Breville said it lifted prices this year for its premium category appliances by around 4%, which saw revenues in that category jump by 5%, to $770.4 million.
That helped produce a 1% rise in sales to a record $888 million for the half. EBITDA rose 13.1% (well above inflation) to $141.9 million for the six months to December.
As a result, directors kept interim dividend at 15 cents per share.
Investors gave this result a thumbs down as well and pushed the shares down close to 5% to $20.68 by the close.
That was despite a solid performance and guidance for the rest of the year.
It wasn’t that demand was weak for the toasters, air fryers, espresso machines and other kitchen and lifestyle gewgaws – the company still expects full-year earnings before interest and taxation (EBIT) will rise 5%-10% per cent to $165 million and $172 million.
Air fryers have become the appliance of choice and CEO Jim Clayton said in Tuesday’s release that “with ovens back in supply we enjoyed the ‘air fryer tailwind’, making cooking our fastest growing product category in the half.”
Mr Clayton also said a “more benign inflationary environment” in the current (June) half would help by easing pressure on costs and prices.
The company saw a 21% jump in employee benefit expenses in the half, due to salary adjustments, incentives to retain existing staff and the hiring of new employees. This accounted for $101 million in additional costs over the six months.
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The reversal in the fortunes of online retailers continues – already every bricks-and-mortar retailer has confirmed that the sharp falls in online sales that started appearing in mid-2022, accelerated in the six months to December, and have continued sliding into early 2023.
Super Retail, JB HiFi, Myer and more have all reported that consumers have moved from the at home and online to the physical act of in-store shopping. Sales are still happening, but at a reduced rate.
Online specialists like Kogan (a 32% plus fall in December sales) have reported growing damage from the return to normality and on Tuesday one of the success stories, Temple & Webster, confirmed that it was now switching strategy to accommodate a slowdown.
And on Tuesday, Temple & Webster (ASX: TPW) told the ASX that trading for the first five weeks of this year down 7% as it cycled out of the strong online demand from the early 2022 period a year ago.
That news saw TPW shares hammered, down more than 26% to $3.62 and a long way from the highs of more than $13 each in the middle of the late 2021 online trading boom.
December half revenue fell 12% to $207.1 million for the December half from just over $235 million a year earlier thanks to the ending of the impact of the Covid lockdowns which significantly impacted the December, 2021 half.
Directors told the market in Tuesday’s statement “As foreshadowed in August, H1FY23 was going to be the most difficult period for revenue comparisons as a result of H1FY22 being impacted by Covid-19 lockdowns.”
“Although the half was down 12% year on year, importantly, revenue trended in a positive direction throughout the half as comparisons normalised with Dec-22 being positive in terms of year-on-year revenue growth.
As a result of a number of margin improvement initiatives and cost management strategies, profitability improved throughout the half with Q2FY23 EBITDA up 11.8% vs Q2FY22, despite short term revenue headwinds.
There is no dividend.
That saw the company report a 47% slump in net profit after tax for the December half to $3.87million from $7.2 million, as COVID receded and shoppers went back to conventional shopping.
And this slowdown has in turn seen it haul back on investment in its new DIY hardware site called The Build which is supposed to take on the likes of Bunnings.
“The Build by Temple & Webster is a pure play online retailer for home improvement. Sharing the same mission as its leading furniture and homewares sister site Temple & Webster, The Build helps Australians make their homes more beautiful and turn home renovators’ visions into reality by providing the biggest and best range, a beautiful and easy shopping experience, and inspirational content,” TPW said in Tuesday’s statement.
CEO Mark Coulter said in Tuesday’s statement: “We remain committed to our profitable growth strategy and will continue our focus on margin optimisation and cost management to ensure we end the year within our 3-5% EBITDA range.
“While we dialled back spend in the half, we continued investing in our digital capabilities, product range and target verticals, with our Trade and Commercial and Home Improvement businesses growing 17% and 12% respectively.
“We have the flexibility to phase longer term investments as we leverage our previous step up in people and platforms, and a highlight during the half was opening our new headquarters in St Peters, an important part of our proposition to attract and retain talent.
“Pricing remains a key differentiator for the business, growing our gross margin through strategic pricing initiatives and better sourcing. Similarly, with 72% drop ship that carries no inventory risk and 28% private label inventory, through our supply chain model we further improved flexibility and our product range, placing us in a strong position to continue growing market share.”
“Furthermore, we have over $100m of cash to expand our roadmap of sales initiatives and pursue inorganic opportunities to support sustainable growth. Longer-term, ecommerce in the Australian furniture & homewares category remains highly under-penetrated, and we have a much larger addressable market to go after in our new target verticals.”
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Tuesday was another Groundhog Day for Seven West Media (ASX: SWM) as it again revealed lower sales and earnings, along with more cost cuts.
The company’s experience in the six months to December 31 looked like a repeat of its trading for much of the past seven or eight years, even as it continued to claim ratings success or domination.
Seven said it was the Number 1 network across calendar 2022 and won 38 of the 52 weeks.
And to the sense of déjà-vu (all over again) there’s no dividend for coming up on the 7th year in a row – the last was the final paid for 2016-17.
Seven said the board “has determined that the dividend will remain on hold given prevailing market conditions.”
But there’s one small bright spot – low debt at December 31 compared to some of the burdens in previous years.
The lacklustre performance saw the shares fell 4.4% to 43 cents.
SWM said earnings for the group fell 4.8% per cent in the half to $205 million on a 0.5% fall in reported revenue of $815.4 million.
SWM blamed that on a weaker advertising market across total TV sectors and judging by the state of the economy and the reporting from other companies, there’s little chance of that recovering in the June half year.
Net debt at the end of the half year was $186.4 million, which included the acquisition of Prime Media Group’s assets at the end of December 2021.
Seven said that to date, $7.5 million worth of shares have been purchased in the group’s on-market buy-back.
Seven CEO James Warburton said in the release that “Despite some of the negative economic commentary, the market has been relatively robust, with growing demand from our core advertisers.
“We believe the results we have delivered today are strong, despite tracking against the Tokyo Olympics in the prior year.
“Revenue is relatively flat year-on-year at $815 million; expenses have been controlled tightly despite the inflationary environment, up only 1%; and our net debt continues to decline. We also commenced our capital management program during the half with our on-market buy back.
Analysts said they may need to lower forecasts after Mr Warburton flagged a “mid to high single digit” decline in advertising revenue.
Seven said its digital earnings soared from $3 million in the first half of FY19 to $80 million in the December half and digital now accounts for approximately 40% of group earnings.
“The BVOD market continues to grow strongly, up 18% in CY22, even with the Olympics in CY21. We expect our share of this market to grow significantly from the new digital content and sports rights secured.
“Operating costs have been managed tightly and $15-20 million savings have been identified to partly offset market conditions. Reported operating costs guidance range is between $1.22 billion and $1.23 billion, incorporating the new content deal with NBCUniversal,” Seven said.
Major shareholder, the Kerry Stokes-controlled Seven Group Holdings reports on today; 30% controlled Beach Energy doubled its dividend to 2 cents a share fully franked this week but dividend-less Seven West Media will once again be the laggard.
