AUSTRALIAN APPLIANCE CO BREVILLE LIFTS GUIDANCE, GUD DROPS OFFER
Breville Group Ltd (ASX:BRG) has upgraded earnings guidance after better than expected Christmas trading as GUD Holdings Ltd (ASX:GUD) backs down from its attempted takeover of the Australian electrical appliance seller.
GUD’s A$292 million (US$262.77 million) offer to buy Breville had been opposed by the consumer watchdog, and the Melbourne-based company said in a statement on Wednesday that it would not challenge the decision.
Breville said it now expected earnings before interest, tax, depreciation and amortisation (EBITDA) of A$43 million to A$46 million for the 12 months to June 30, 2010.
That would be up to 37 per cent more than the A$33.6 million reported in 2008/09 and the previous guidance of A$38.7 million given in November, Sydney-based Breville said in a statement.
“Our performance in November and particularly December was well ahead of expectations, and affirms our strategy of focusing on innovative products,” Breville chief executive Stephen Audsley said in the statement.
“Breville’s performance in North America was especially pleasing, with a substantial improvement in what remains a challenging retail environment.”
Breville’s earnings upgrade justifies the company’s rejection of GUD’s one for four all stock offer, saying the owner of electrical brands including Sunbeam and Emjoi could pay significantly more.
Breville supplies the Breville, Kambrook, Ronson and Philips ranges of products.
Shares in Breville rose five cents, or 2.98 per cent, to A$1.73 by 1011 AEDT as GUD slipped 11 cents, or 1.21 per cent, to A$9.00.
The All Ordinaries index declined one per cent.
GUD separately announced it would not challenge the decision to block its attempted takeover of Breville by the Australian Competition and Consumer Commission (ACCC).
“While we are surprised by the extent of the ACCC’s concerns and strongly disagree with the decision, GUD does not intend to challenge that decision, due to the likely significant cost and delay involved,” GUD chairman Clive Hall said.
GUD had offered Breville shareholders one GUD share for four Breville shares, valuing Breville’s stocks at A$2.25 based on Wednesday’s price.
Breville stock plunged 27.6 per cent from A$2.14 to A$1.55 on December 16, the day the ACCC announced its opposition to the takeover.
The ACCC said the proposed acquisition would reduce competition in the wholesale supply of small electrical appliances.
GUD, which will allow its offer to lapse on February 5, said the ACCC’s conclusions ignored evidence provided by the company.
“We believe the proposed transaction would have delivered benefits to both GUD and Breville shareholders and to consumers, enabling the merged group to leverage our existing expertise to pursue global scale and vigorously compete with significantly larger offshore industry participants,” GUD chief executive Ian Campbell said.
“While the ACCC decision is very disappointing, management continue to focus on improving returns from our existing businesses.”
Breville also upgraded its first-half guidance.
EBITDA for the six months to December would be about A$30 million, up from A$25.1 million in the prior corresponding half.
The improved earnings performance also translated to stronger cash flow, which together with working capital management, had led to a material reduction in both inventory and net debt levels, Breville said.
Breville said its full-year guidance assumes no significant changes in economic conditions or consumer sentiment in its key markets.
The company will release first-half results on February 26.
