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CA
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Consumer appliances and electronics will likely return to normal trading conditions, as lockdown measures are lifted across the world gradually. At the same time, e-commerce channels have provided a footing for the businesses, with growing number of consumers embracing digital services.
Let’s discuss four businesses operating in these segments.
Breville Group Limited (ASX:BRG)
Recently, small electrical appliances provider, BRG raised $94 million through an equity capital raising from institutional clients. The Company is also raising $10 million through an underwritten Share Purchase Plan for retail investors. Share Purchase Plan due to open on 21 May will close on 11 June 2020.
BRG also received a commitment from its financiers for refinancing $373 million of its debt facilities from the total $385 million of existing debt facilities. Combining $12 million in overdraft facility, the Company has total liquidity of $385 million in debt facilities.
Fresh equity capital would allow business to execute on arising tactical opportunities from COVID-19. Also, the Company could continue to invest in brand building, capital expenditure, and working capital.
Capital Raising in the Wake of COVID-19: Must Read
Since the beginning of 2020 to 30 April 2020, the group revenue grew 32% against the same period last year. On a segment basis, global product revenue was up by 32% and 24% in constant currency terms against the previous corresponding period (pcp).
BRG noted that revenue growth was achieved at a time when retail stores in key regions were closed due to lockdowns. Gross margin was consistent with 1H20. The Company is optimising cash expenses to manage cash flows by temporarily lowering salary costs, temporarily reducing marketing expenses thus increasing ROI.
BRG is committed to continued product development. With capital raising, the Company would allow the business to invest in marketing and people over the near term, depending on revenues. It has impaired a receivable worth $4.5 million as a customer entered voluntary administration.
At the end of April, excluding impaired receivable, just over 90% of its client base includes customers with strong creditworthiness. Further, the carrying value of intangible assets will be assessed at the year end.
Over the medium term, the business intends to continue investing in marketing and products development, converting R&D spend to revenue growth. Management would continue to drive international expansion. With extension of debt facilities and fresh capital, the Company is positioned to execute on short-term as well as a long-term vision.
On 19 May 2020 (AEST 02:26 PM), BRG was trading at $ 20.010, up by 2.458% from the previous close.
JB Hi-Fi Limited (ASX:JBH)
Earlier this month, home consumer products retailer, JB Hi-Fi reported Q3 updates for the three-month period ended 31 March 2020. Its Australian business, which includes The Good Guys and JB Hi-Fi Australia stores, was trading through online and commercial channels. The Company shifted employees from the airport, CBD, and shopping centres to other locations due to minimal foot traffic. Due to COVID-19, online sales for The Good Guys increased significantly.
In NZ, the business started trading through commercial and online channels starting from early April with limited number of products deemed as essentials. Late in April, the business resumed trading for all products, but with online and commercial channels.
In Q3 FY20, JB Hi-Fi Australia stores delivered a total sales growth of 11.6% while its NZ business experienced a sales decline of 3.3%. Also, total sales in The Good Guys were up 13.9% during the quarter.
JBH was taking a conservative stance for its balance sheet management. The Company secured approval for $260 million short-term facilities on favourable terms, and it does not anticipate using these facilities, but these facilities would provide headroom in the uncertain environment.
On 19 May 2020 (AEST 02:33 PM), JBH was trading at $35.090, up by 3.176% from the previous close.
Audio Pixels Holdings Limited (ASX:AKP)
Audio Pixels has developed a disruptive technology to change the face of speakers. The new technology is believed to be exceeding design and performance specification demands of consumer electronics manufacturers, globally.
Its patented technologies generate sound waves using micro-electrotechnical structures (MEMS) that allow manufacturers to provide significantly better performance compared to traditional speakers at an affordable package.
As a business, the Company intends to only sell a single or in multiples. It is the manufacturer of the end sound system that will decide on the number of chips to be used. The products deliver great value to customers, including production, innovation, economies of scale and cost control.
AKP’s chip eliminates the need for digital analog converter and power amplifier. It uses a tiny bit of space and consumes a fraction of energy. Also, the chip provides a wider frequency range, lower frequencies, immeasurable distortion, and louder sound volume.
Its chip could be used in audio speakers, mobile phones, televisions, computers, and laptops. AKP noted that manufacturers and consumers are looking for technologies in the audio industry, especially related to sound quality.
Recently, the Company reported that its manufacturing delivered a second wafer with required changes, and the electromechanical and acoustic testing has confirmed comparable results with earlier tests. It has worked with European vendors to advance manufacturing. Now, the business is moving to individual chips from wafer, which enables additional sound testing.
On 19 May 2020 (AEST 02:42 PM), AKP was trading at $17.650, down by 3.499% from the previous close.
Ainsworth Game Technology Limited (ASX:AGI)
Headquartered in Sydney, Ainsworth Game Technology is a manufacturer and supplier of gaming solutions. It has a presence in Latin America, North America, Asia, and Europe.
In March, the Company cancelled its FY20 guidance where it expected to report a profit in FY20. Due to lockdown and closures, AGI experienced capital expenditure deferral from its clients, making it uncertain to predict revenue. However, its game development programs, key to the Company’s long-term sustainable profitability, remain unaffected and on track.
Earlier in March, the Company completed acquisition of MTD Gaming Inc., a US-based gaming business. The consideration for the acquisition was US$ 13 million and deferred payments of US$ 13 million, depending on achieving financial targets and contract renewals. It was going to fund the acquisition with existing debt facilities.
In the half-year ended 31 December 2019, the Company posted a loss after tax of $4 million. Revenue for the period was 9% lower at $107.3 million. It was noted that international business contributed strongly, with international sales constituting 82% of total revenues.
On 19 May 2020 (AEST 02:58 PM), AKP was trading at $0.455, up by 2.247% from the previous close.
