In morning trade the appliance maker’s shares have returned from their trading halt and jumped 10% higher to $20.54.
Why was the Breville share price in a trading halt?
Breville requested a trading halt on Wednesday while it undertook a $104 million equity raising.
This morning the company revealed that it has successfully completed the underwritten institutional placement component of the equity raising.
Breville has raised $94 million through the issue of approximately 5.5 million new shares to institutional investors for $17.00 per new share. This represents a discount of 9.1% to its last close price.
It will now push ahead with its share purchase plan which aims to raise a further $10 million.
The proceeds will be used to enhance Breville’s financial flexibility to continue to invest in the execution of its growth agenda while maintaining a strong financial position.
Why is the Breville share price rocketing higher?
Equity raisings rarely send share prices hurtling higher, so readers may be curious about today’s gains.
Investors have been buying the company’s shares after it released a trading update with its equity raising announcement.
According to the release, Breville has been performing very strongly during the second half of FY 2020, despite the pandemic and store closures.
Between January 1 and April 30, Breville’s revenue was up 32% on the prior corresponding period. Sales grew 25% in March and 21% in April.
Management commented: “At a segment level, Global Product has delivered 32% revenue growth, or 24% in constant currency terms, from 1 January to 30 April 2020.”
“In constant currency terms, March delivered 14% growth which strengthened to 18% in April. This is despite retailers in key regions closing stores during government mandated lockdowns. Sell-through exceeded sell-in growth in all key regions, as demand remained strong and retailers ran down their inventory,” it added.
Despite its sales growing strongly, the company has been quick to manage its cashflows and reduce cash expenses to minimum levels.
These cost savings are designed to temporarily reduce salary costs but protect capability, temporarily reduce marketing and increase its return on investment, while ensuring that its product development continues.
Pleasingly, the pandemic doesn’t look likely to stifle its expansion plans. Management revealed that it is in advanced planning for the entry into further international markets in FY 2021. The funds raised today are expected to support this growth plan.
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