Breville Group Limited Financial Report 2019
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For personal use only Annual report 2019TM Spot: PMS518C Process: 55/86/20/63 Display RGB: 72/40/60 Display HEX: 48283C Breville Group Limited Annual report 2019 Contents: Chairman’s review 1 CEO’s review 3 Strategy and brands 5 Financial report 13 Shareholder information 100 Company information 102 Annual general meeting: Wednesday 13 November 2019 at 10am Ground Floor, Suite 2, 170-180 Bourke Rd, Alexandria NSW 2015. For personal use only (this page and outside covers) the Smart Oven® Pizzaiolo Chairman’s review “Another strong year of growth, geographic expansion and execution of our acceleration program.” The 2019 financial year was a significant year for The Board increased the full year dividend to 37.0 the Breville Group with continued double-digit cents from 33.0 cents in the prior year, in line with sales and profit growth, European expansion the ongoing commitment to providing strong and ongoing implementation of the Group’s returns to shareholders. acceleration program. On behalf of the Board, I would like to take this The Group delivered a 17.5% increase in revenue opportunity to thank Jim Clayton and his team of with the core Global Product segment growing talented, motivated and passionate team members by 17.2%, or 12.0% in constant currency terms, to around the world for their continued hard work $612.0m. The Distribution segment revenue grew and enthusiasm. 18.8% to $148.0m. Finally, I would like to thank my Board colleagues Group EBIT of $97.3m, represented a 12.0% increase and our shareholders, customers and suppliers on the prior year. Group EBIT margins of 12.8% were for their continued support. I encourage all slightly lower compared to 13.4% in the prior year shareholders to attend our annual general due to the strong USD. Net profit after tax increased meeting in November. by 15.2% to $67.4m. Net cash flow generated from operating activities of $30.3m was lower than the $88.7m in the prior year primarily due to an investment in inventory to support growth. The group tactically increased stock in the USA by bringing forward seasonal stock, in the UK as an insurance against potential Brexit disruption and in Europe to support Steven Fisher accelerated expansion. Net cash at 30 June 2019 Non-executive chairman decreased to $9.8m. Under the leadership of CEO Jim Clayton, we also made significant progress in our business model transformation, increasing our marketing and R&D spend to 11.0% of revenue and expanding into Benelux and Switzerland whilst still accelerating earnings growth. For personal use only Breville Group Limited annual report 2019 1 For personal use only the Bambino™ Plus CEO’s review “The Group delivered another strong year in FY19 with double digit EBIT growth, robust revenue growth, increased investment in Marketing/R&D, and successful European expansion.” Financial summary REVENUE EBIT $ Millions except where indicated FY19 FY18 % Change FY19 FY18 % Change Global Product segment 612.0 522.2 17.2% 78.3 73.3 7.5% Constant currency growth 12.0% Distribution segment 148.0 124.6 18.8% 18.5 13.6 36.0% TOTAL 760.0 646.8 17.5% 97.3 86.9 12.0% Minor differences may arise due to rounding In FY19 Breville Group delivered robust revenue 12.9% from 13.4% primarily because of the strong growth of 17.5% driven by successful European US dollar. In constant currency our EBIT margin expansion and a strong year of growth in the USA was unchanged. as well as translation gains from a strong US dollar. The 2019 financial year saw continued progress Global Product segment revenue increased by on the Group’s acceleration journey, with notable 17.2%, or 12.0% in constant currency, with North achievements including launching the Sage® America growing by 12.8%, ANZ by 7.0% and Europe brand direct into Switzerland and Benelux; by 35.1% with the first full year of German sales the development of a product information and expansion into Benelux and Switzerland. Our management (PIM) system to centralise all product Rest of World (ROW) segment, which is lumpy in related data; a middleware platform improving nature, saw a decline caused by reduced purchases flexibility and scalability; and a point of sale from our Russian partner in the face of a weaker (POS) module giving access to sell-out data for Ruble. Excluding Russian export sales, our Global better decision making. The Group also acquired Segment revenue grew by 14.2% on a constant ChefSteps in early FY20 to further category-based currency basis. innovation in the sous vide cooking space. Our growth was balanced across product On a personal note, I am encouraged by the categories, with Beverage, Cooking, and Food progress we have made during the year, and I Preparation all posting positive growth in FY19, thank the Breville | Sage team for their spirit benefiting from new product launches and and collaborative efforts in the execution of the geographic expansion. transformation. I also would like to thank the Board for their ongoing support and counsel. Distribution segment revenues of $148.0m were 18.8% higher than the 2018 financial year, driven by strong Nespresso® growth in North America and improved performances for Breville Local and Kambrook® in ANZ. Jim Clayton Group EBIT for the year finished at $97.3m, with For personal use only Chief executive officer EBIT growth accelerating to 12.0% from 10% in the prior year. The Distribution segment fulfilled its strategic role and grew EBIT by $4.9m, which was reinvested in the Global segment marketing and NPD. The overall Group EBIT margin reduced to Breville Group Limited annual report 2019 3 For personal use only the Barista Pro ™ Strategy and brands Breville Group’s primary strategy is the design and development of the world’s best kitchen appliances together with expanding distribution and dynamic marketing on a global scale. The Breville and Sage brands are at the core of this Europe strategy, representing the majority of the Group’s In the United Kingdom and Europe, the Group revenues and marketing activities. There are, markets and distributes its premium designed however a number of additional company owned and developed global kitchen products under the brands and brand partners in different geographies company owned brand, Sage®. It is also a supplier that assist in the delivery of the business strategy. for Sage® branded goods to certain distributors In line with its global strategy, the Group’s is located throughout Europe. focused on the design, development and sale In Europe the Breville brand is not owned or of Breville branded and Sage branded products operated by the Breville Group. supplied in currently 69 countries to the premium kitchen segment of the market (‘Global Product’). Rest of the World The Distribution segment sells products that are distributed pursuant to a license or distribution In the Asia Pacific region and the Middle East, agreement, or they are sourced directly from the Group markets its premium designed and manufacturers. Products in this business unit may developed kitchen products under the Breville be sold under a brand owned by Breville® (Breville®, brand as well as selected products under the Kambrook®, Aquaport®, Cli-mate®) or they may be Kambrook brand in parts of Asia and Africa. distributed under a third-party brand (Nespresso®). Distribution in these regions is managed using local third party distributors supplied via the North America Group’s Hong Kong office. In North America, the Group distributes its range of internally designed and developed kitchen A History of Innovation products under the Breville brand through premium channels and its own direct-to-consumer On Melbourne Cup day in 1932, two Australian e-commerce platform. From the second half of the entrepreneurs, Bill O’Brien and Harry Norville, 2018 financial year, the Breville brand included combined their surnames together to form a range of Breville co-branded Nespresso coffee the name ‘Breville’ and founded a company machines as one of Nespresso’s machine partners manufacturing radios out of Sydney. in North America. During the 1960’s, Bill’s son John focused the North American revenues also include a USA based organisation on solving common kitchen problems culinary division - PolyScience, one of the world’s and founded the Breville small appliance research market leaders in premier sous vide cooking in and development centre, which led to the invention both the commercial and professional markets. of the now iconic Breville toasted sandwich maker. The toasted sandwich maker kick-started a long Australia and New Zealand list of award-winning innovative Breville products In Australia and New Zealand, the Group primarily developed in Australia and distributed throughout trades under its company owned brands, Breville®, the world. From the original Kitchen Wizz™ food Kambrook®, Aquaport® and Cli-mate®). processor and High-Wall Wok, to the launch of the world’s first wide feed chute Juicer, Breville For personal use only The Kambrook brand extends to categories has become synonymous with ground-breaking beyond the kitchen; offering not just a full range innovation in the kitchen. of kitchen appliances, but also irons, vacuums, heating and cooling products, all at an affordable price point without any compromise on quality and performance. Breville Group Limited annual report 2019 5 For personal use only the Super Q ™ Strategy and brands continued Growth of the Brand At the heart of this proposition lies a passionately- held belief that consumers should feel empowered In 2000, Breville embarked on a project to expand to share these results with those who are most its design and innovation capabilities, building a important to them; their family and friends.