Breville Group (ASX:BRG), the 28%-owned global appliance group led by Solomon Lew, reported a strong financial performance for the 2023-24 fiscal year. The company experienced higher sales, earnings, and dividends.
In a statement to the ASX on Wednesday, Breville announced a 7.5% increase in net profit to $118.5 million for the 12 months ending June. This was driven by a 3.5% rise in revenue to a record $1.53 billion. Earnings before interest and tax climbed 8% to $185.7 million, exceeding the company's guidance.
To reward shareholders, Breville increased its final dividend to 17 cents per share, up from 15.5 cents a year ago. This brought the total annual payout to 33 cents per share, compared to 30.5 cents in the previous year.
The positive news sent Breville's shares soaring to a new 52-week high of $32.23 in early trading. While they retreated slightly, they remained up more than 5% in mid-afternoon.
The company's strong performance was fuelled by double-digit revenue growth in the Americas, Europe, the Middle East, and the coffee machines category, particularly in the second half of the year. Despite sluggish demand for discretionary products among consumers, Breville managed to achieve positive sales and earnings growth, a feat that many of its competitors have struggled to replicate.
Looking ahead to the 2024-25 fiscal year, Breville expects the headwinds and uncertainty in the market to persist. However, the company remains committed to growth and is focused on increasing production and inventory levels.
CEO Jim Clayton highlighted the role of new product launches, market expansion, and the ongoing popularity of coffee in driving the company's top-line growth. He also acknowledged the impact of cost-of-living pressures and mean reversion on the business.
Two key factors contributed to Breville's strong financial results and positive outlook: lower working capital and increased development spending.
The company's lower net working capital position at the end of June 2024 was primarily due to reduced inventory levels. By carefully managing purchases and avoiding excessive discounting, Breville was able to strengthen its gross margin and reduce inventory balances by 24.3%. Receivables remained relatively stable compared to the previous year.
The reduction in working capital had a positive impact on the company's financial performance, as it lowered interest costs and bank fees. By aligning sales more closely with orders and stock levels, Breville was able to achieve a "cleaner result."
Regarding development spending, Breville believes that its increased investment in new products and solutions will drive future growth. The company's capitalised development costs have been rising, indicating a pipeline of innovative projects in the works.
