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Breville shares rise as guidance withdrawn amid coronavirus crisis

Breville Group Ltd (ASX: BRG) is the latest ASX company to withdraw earnings guidance in the face of the coronavirus pandemic. This morning, Breville announced that given the disruption coronavirus is driving across its major markets, it no longer felt it was appropriate to provide earnings guidance. Breville shares are currently trading for $15.07, up 1.48%.

Previous guidance 

In mid February, Breville had advised it expected FY20 earnings before interest and tax (EBIT) to be consistent with the then market consensus of $110 million. Today that guidance was withdrawn in the face of increased market interruptions attributable to the spread of coronavirus.

Breville said its year to date performance has been consistent with guidance previously provided, but withdrew guidance nonetheless. Breville sells consumer electronics across Australia and New Zealand, Europe, North America, as well as elsewhere. As the global economy grounds to a halt, sales will likely slow. 

First half performance 

In the first half, Breville achieved double digit growth in Australia and 60% growth in Europe, boosted by expansion into Switzerland and Spain. This growth saw Europe surpass Australia and New Zealand to become Breville’s second largest geographic region in the global product segment. Now, of course, Europe is in the grip of the pandemic. 

The bulk of Breville’s revenue in the first half came from North America, which recorded $258.1 million in revenue. Europe contributed $83.7 million in revenue, while Australia and New Zealand contributed $82.3 million. Revenue of $18.6 million was recorded for the rest of the world. 

In February Breville had anticipated continued growth in the second half of FY20 driven by momentum in Europe and a more certain tariff backdrop in the United States. Breville advised that its Chinese manufacturers were coming back online having implemented safety procedures mandated by the Chinese government. Now, of course, it is demand that is an increasing concern, rather than supply.

Current position 

Today, Breville advised that it was in a strong position to continue to supply its retail partners and support consumers through these difficult times. The relevance of its products to customers spending more time at home has been shown in recent sell out trends. Breville said it was supported by its cash balance, working capital facilities, and minimal fixed costs. These factors will help ensure Breville keeps capabilities in place to emerge running strongly when the economy emerges from the current difficult period. 

As at 26 March, Breville had a consolidated cash balance of $64 million. It had drawn $98 million on its committed $273 million working capital facility with $175 million still available. The company also has a further committed seasonal working facility of up to $112 million available during its peak season of August to January. 

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Motley Fool contributor Kate O'Brien 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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