Breville Group increases dividend on double-digit growth

Global small appliances maker Breville Group Ltd (ASX: BRG) has defied the naysayers to post a robust increase in half year sales and profits.

The BRG share price has good a strong start to 2019 but it’s still down by nearly 3% over the past 12-months when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index is 4% ahead.

Some brokers had flagged the potential for the company to disappoint given the volatile macroeconomic environment but this morning’s half-year profit announcement should quell some of these concerns and may even trigger consensus forecast upgrades.

Brewing a good cup

The US exposed consumer goods group posted a 15.4% increase in revenue to $440.4 million and a 19.7% uplift in net profit to $43.5 million for the six months ended December 2018.

Further, management is guiding for double-digit earnings before interest and tax (EBIT) growth for the 2019 financial year that is slightly higher than current consensus of around 11% growth.

The falling Australian dollar surely helped as it’s now fetching around US71 cents versus circa US79 cents a year ago, but even in constant currency terms, sales grew a respectable 9.2%.

The US is the most important market for Breville as it accounts for 60% of group sales, and the group recorded a 7.1% increase in sales to that country in 1HFY19. Australia is the second biggest market and local sales increased by a similar amount.

The standout is Europe where sales where sales surged 32% to $51.4 million (driven by its expansion into Germany and Austria) although sales to the rest of the world fell 11.2% – but that is a tiny segment.

The good performance has prompted management to lift its interim dividend by 12.1% to 18.5 cents per share (franked at 60%).

Still a tough market

But one area the sceptics could jump on is cost pressure. Group EBIT margin dipped slightly to 14.2% in the 1HFY19 from 14.5% for the same time in the previous year due to pressure in its Global Product segment.

These are challenging times for stocks exposed to discretionary spending. Recent results and updates have thrown up a mixed bag for the sector with Kathmandu Holdings Ltd (ASX: KMD) and Lovisa Holdings Ltd (ASX: LOV) losing favour while stocks like JB Hi-Fi Limited (ASX: JBH) held its own.

Those looking to invest in a sector with more tailwinds than headwinds should read the latest free report from the experts at the Motley Fool.

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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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