Breville share price: where next following record FY21 results?

Breville share price stumbles

Despite passing a significant sales milestone during the year, the Breville Group (ASX: BRG) share price plunged after releasing its FY21 results to the market on Tuesday.

The stock opened at $32.50 per share and continued to drift lower during the first half hour of trade. Even when factoring in that selldown, the stock remains up more than 20% for the year. Breville last traded at $30.58 per share.

FY21 results in focus

Despite the reaction from investors, Breville posted a decisively strong set of full-year results, posting solid growth across both the top and bottom-line.

From a sales perspective, the company announced it had passed the $1 billion in annual revenues for the first time, reporting FY21 revenues of $1,187 million, representing a year-on-year increase of 24.7%.

Better still, growth in gross profits outpaced inflationary pressures, with the company booking gross profits of $413 million against a gross margin of 34.8%. Management said this margin performance was driven by higher average prices, a focus on premium product mix and a reduction in promotional activity.

As a result of all this, the company posted solid double-digit growth across all of its core earnings metrics: Earnings (EBITDA) rose 36% to come in at $163.3 million while NPAT accelerated even faster, climbing 42.3% to come in at $91.0 million.

Looking towards the future, management said they boosted their total investment spend by $49 million in FY21, placing a medium-term focus on R&D capabilities, marketing, and information technology resourcing.

Dividends slashed

There were some casualties from Breville’s high growth strategy however, namely the company’s dividend.

Here management revealed a final dividend of 13.5 cents per share, taking the company’s full-year FY21 dividend to 26.5 cents per share – fully franked.

This may form part of the negative reaction from investors today, with the FY21 dividend coming in some 35% lower than the dividends paid the year prior.

However, as the company noted, this was ‘in line with a revised 40% payout ratio to support continued funding of growth agenda.’

FY22 outlook in focus

Looking forward, management said they expected fiscal 2022 to be a transitional year, highlighting the impact that shifting consumer trends and inflationary pressures might have on the business.

On that first point, the implication seemed to be that FY21 comps would be somewhat challenging, with it being noted that ‘consumers have pent up savings and economies are growing as they open, but consumers will begin spending on services’, and potentially less on high-end coffee machines.

From the costs side, management provided some important insight, noting that the company had witnessed ‘supplier cost increases and parts challenges’, while also noting that ‘logistics delays’ were triggering price increases. Such supply chain pressures also likely contributed to the negative atmosphere around the stock on Tuesday.

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