Breville Group Limited (BRG) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Breville Group Limited '23 Half Year Results Investor and Analyst Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Martin Nicholas, Group CFO. Please go ahead.

Thank you, and good morning to everyone for joining today's call. It's my pleasure to welcome you to our first half 2023 results call. I'll walk you through the group's trading performance and then Jim Clayton, our CEO, will provide an operational and strategic update. I would like to start our presentation today by acknowledging and paying our respects to the traditional custodian on whose land we meet today. I would like to pay respect to their elders, past and present and further to extend that respect to all aboriginal and Torres Strait Islanders presence today. We celebrate the continuing contribution of their food culture and their connection to and custodianship of this country. Turning to Slide 4. We start with an overview of our results. In the first half '23, we again reliably delivered steady EBIT growth, a well-controlled results against particularly dynamic backdrop. Sales hit another record high for the first half with relative sales performances panning out broadly as we expected. Americas solid growth, APAC steady and EMEA volatile. Sales growth was more modest than in recent periods at 1%. But as a group, we consolidated the exceptionally strong sales growth seen in the last 2 years. Moreover, we saw the foundation of continued growth with successful innovative new products, NPD, a growing direct-to-consumer channel, DTC and robust results from our new geographies. Gross margins were well managed and strengthened nicely in the face of significant inflationary pressures and exchange rate volatility. Operating expenses were well controlled and aligned with sales to deliver sustained EBIT to operate of 13.1% and EBIT growth of 7.6%. NPAT and EPS were steady versus the prior year after absorbing the impact of increased finance costs from seasonally elevated borrowings and increased interest rates. Cash flow and net debt were in line with our expectations, reflecting the normal seasonal receivables increase, tactical inventory build and the unique purchase in early July. We expect to see a healthy cash inflow in the second half '23 as the peak receivables are collected and a more predictable supply chain allow us to return to a more normal inventory flow model. Turning to Slide 5. We see our key segment performances. As expected, our performance diverts between the 2 business segments. Our strategically important global product segment grew revenue by 5% and gross profit by nearly 7%. In constant currency terms, we successfully consolidated the exceptional revenue gains of 39% in the first half '21 and 24% in the first half '22. Getting ovens back into supply allowed us to enjoy the air fryer tailwind, making cooking the fastest-growing product category in the half. Coffee also grew with the tailwind of at home quality coffee still driving sales. And as expected, the food preparation category is rebasing post COVID. Group-wide new product development launches landed well with strong sales from both the Barista Express Impress and the Joule Oven Air Fryer Pro. While our investment in the group's digital platform pay dividends with our direct-to-consumer sales growing 66% to become our fifth largest customer globally. The price rises in this premium segment and a normal level of promotional activity improved our gross margin percentage in the face of widespread inflationary pressures. In contrast to the Global segment our smaller mass market distribution segment declined in both revenue and in gross margin, where recovering cost increases proved more challenging. The primary driver of this reduction was the Nespresso product line, which faced a major supply disruption during the product changeover involving sourcing from the Ukraine. The Distribution segment still delivered over $26 million of gross profit to cover its direct expenses and to reinvest in the Global Products segment. Turning to Slide 6. Here, we see the relative theatre selling performances in the Global Products segment. The Americas, our largest region, grew 22% or 12% in constant currency, with U.S. consumers proving resilience at the premium end of the market. Ovens led the charge, Coffee delivered solid growth, and our NPD landed very well. Mexico also accelerated in its second year. Sell-in and sell-out were broadly aligned in the Americas. We were pleased with APAC performance consolidating the exceptional growth of the first half '21 at 49% and the first half '22 at 22%. Our NPD again performed well and our first direct entry into Asia, South Korea, is performing above our expectations. In APAC, sell-out moderately exceeded selling, and we held our market share position. EMEA's sellout or consumer purchases actually grew in the first half '23. In contrast to the reported 22% selling decline, which largely reflects retailer destocking. We didn't participate in discounting to artificially drive retailer buyer, and we will look to consumer offtakes to pull through stronger retail orders in future periods. For EMEA, the first half '23 is a reflection of retailer behavior quite disconnected from end consumer behavior. Turning to Slide 7. Although today, we naturally focus on first half '23 performance, given the turbulence at the last 3 years, we thought it would be useful to place this performance in a longer-term context. Here you see first half global segment sales at constant exchange rates over the last 7 years. In the pre-COVID period, '17 to 2020. The global segment grew at a CAGR of constant average growth rate of 16%. During COVID, this accelerated to a 31% CAGR in the first half '20 and the first half '22. And in the later half, even after accounting for retail destocking, the Global segment still grew by 1%. This means at least through the first half '23, we've been able to consolidate the step change in growth we experienced in 2020 to 2022 landing us well ahead of the 2017 to 2020 growth trajectory. And at the same time, despite tariffs, inflationary pressures, increases in FOBs, freight rates and currency swings, we've taken our gross margin back to 37%. Each [indiscernible] has its own story that over this same period of first half '17 through first half '23. All 3 regions have delivered solid growth. APAC at a 15% CAGR, Americas at a 16% CAGR and EMEA at a 27% CAGR. The COVID period certainly have brought some noise into our growth trends. But throughout these 7 years, our acceleration program, increased investment in NPD and marketing, geographic expansion and a single global platform or digital ecosystem has continued to deliver and make the foundations for continued growth. Turning to Slide 8. This slide shows how gross margin strengthened over the last 12 months. Focusing on the red bars, you can see that the magnitude of the gross margin headwinds caused by our manufacturing partners increasing FOBs, to punitive ocean and domestic freight rates and the strength of the U.S. dollar. Collectively, they reduced gross margin by approximately 3%. This was more than offset by price rises we took in the premium Global segment were approximately 4% and a slight benefit in mix netted against the more normal promotional cadence. Looking forward, we appear to be entering a more benign inflation environment for our products with recent substantial decreases in freight rates and FOB reductions coming through and a moderating U.S. dollar, all of which should support ongoing healthy gross margins. Turning to Slide 9. This EBIT bridge give it the flexibility of our business model or put another way, the control we have over our expense signs, with top line revenue growing approximately 1%, EBITDA grew at 13.1% and EBIT at 7.6%. The incremental benefit we captured in sales growth and gross margin improvement, covered a small increase in overheads with the rest of dropping straight to EBIT. Total marketing, R&D and technology services spend was held broadly flat for the half after a number of periods of rapid acceleration. The completion of major digital platform projects and accelerated content creation in FY '22, gave us the headroom to do this without materially impacting consumer-facing spend. Investment levels in R&D and innovation were strategically maintained. And with every year before this month, in the second half '23, we will work to align our expenses with our gross profit trajectory to deliver sustained EBIT growth. Slide 10. Turning to the balance sheet. When comparing December '22, against December '21, you can see the impact of our purchase of the lease as well as our approach to inventory planning flowing through this balance sheet. Inventory and net debt levels are both within our planning parameters and expectations. The negligible obsolescence risk of our products enables us to tactically build and release inventory or the hedge against supply chain [indiscernible]. With growing supply chain stability, the scale of that hedge will begin to reduce and inventory levels can actually decline. Our December 2022 inventory balance was $172 million higher than in the prior period and broadly steady on June 22. Breaking this into its component pieces, our core inventory increased approximately $66 million as a natural outcome of our inventory planning process, whereby we land a maximum level willing to hold and then sell for the first half. Then as with prior year as we adjust our purchase factor in the second half to guide each product back towards its equilibrium point. We'll work through this exact process in the second half of FY '23. Of the remaining $106 million increase, $73 million relates to the addition of Lelit inventory and new inventory forms for Mexico and South Korea and $33 million relates to inventory held for MPD launches. Jim will discuss the launch version 2.0 process and our increasing upfront investment inventory to maximize the ROI on our new product launches later in his presentation. December receivables were in line with the prior period and 195 million above June '22. We collect the seasonal build in January and February. And pleasingly, days outstanding are well controlled and in line with the prior year. Our PPE increase is driven by both production tooling investments and manufacturing assets acquired with Lelit. Other intangibles reflect our ongoing investment in R&D projects. The increase in goodwill and brand is also the result of the Lelit acquisition and exchange rate fluctuations. Overall, our overall 12-month swinging net debt is driven by our inventory planning process over the second half of '22 and the first half of '23, coupled with our purchase of Lelit. As we now collect peak season receivables and as the more predictable supply chain reemerges allowing a transition back to our normal inventory flow model, we expect to see a healthy cash inflow and reduced net debt in the second half of '23. Lastly, our ROE period-on-period change is a result of the shares issued also as part of the Lelit acquisition, which is pleasingly performing to plan. Finally, turning to Slide 11. Before I turn over to Jim, a few key points I'd like to reiterate about our first half '23 performance. Firstly, despite the volatility in our markets, inclusive of retailer behavior in those markets, we delivered another record sales number and sustained our track record of delivering solid EBIT growth. We saw encouraging growth from new product development, direct-to-consumer channel and new countries, and our product portfolio benefited from both the quality coffee and air fryer tailwinds all supporting our medium-term growth trajectory. Gross margins were well managed with a healthy 100 basis points increase. Price and control promotional spend outweighed cost increases, a reflection of the value our premium products deliver to our customers. We demonstrated the ability to control expenses to deliver sustained EBIT growth even in a moderated sales growth environment. And lastly, our December '22 net debt position is a result of the purchase of Lelit coupled with our approach to inventory planning when supply chain is unpredictable. With the supply chain now behaving more reliably, we will transition back towards a more normal working capital model. We expect this to drive a cash inflow in the second half of '23. On that note, I'll now pass to Jim Clayton, our CEO, to provide an operational and strategic update.

Thank you, Martin, and good morning to everyone. Slide 12. Today, I'm going to take you through 2 topics: our launch Version 2.0 process, an abstractive view of Breville, then conclude with some thoughts on FY '23 and our outlook for the year. Turning to Slide 13. When we launched the Barista Express Impress this year, we used the new launch process what we call launch 2.0. To help you understand the step-change improvement, this new process has delivered or set up an analytics drive race between the Barista Pro, which was launched under the old process and the Barista Impress. As work would have it, they have very similar price points neutralizing the elasticity variable. Turning to Slide 14. At the highest level, there are 2 main differences between the launch processes. One, the elapsed time from the first country launch to the last and two, the go-to-market approach within the country. In this example, launched 2.0 at 3 months off the total launch time, which is a revenue accelerator. The major driver for shortening the total loss time is inventory position. In launch 1.0, we've launched in the first country and begin to ramp production to support the existing country and the next. With 2.0, we've built material inventory ahead of time to support a big bang launch in each country. This played a role in our FY '22 inventory number and is embedded in our first half '23 inventory number for launching in the second half of '23. Looking at the country level on this chart, you can see a difference in the width of the last part. Picking Australia as an example, the Barista Pro, went into the first retailer in November of 2018. The last retailer in Australia, however, do not receive a new product until April 2019 . The production ramp approach drives this incremental step-by-step rollout. With 2.0, we preloaded all launch inventories so that all retailers went live with the new product on the same day. That was an actual launch date. Why does this matter? In launch 1.0, the burden in marketing the new product falls on Breville alone, supporting the product throughout the retailer rollout. With version 2.0 Breville and all our retail partners, we're marketing the new products on the same date, giving a leverage effect on our marketing side. In theory, this should accelerate the numbers of consumers evaluating the new products versus the 1.0 approach. Let's see if that happened. Turning to Slide 15. Let me help you understand what you're looking at here. This is a 4-week trailing average of the weekly sell-out data of the Barista Pro and the Barista Impress in a single country. Both curves are anchored on each product's first week of launch. This means we are apples-to-apples on kind end market, but we are not aligned against seasonal patterns because they launched in different months. I've highlighted the core Christmas window in purple for each. With the Barista Pro, it launched in its first retailer and steadily climbed for 2 years. At the end of the second year, it hit its run rate for future years. A proxy for the revenue we reported for the Barista Pro from this country is the area under the grey line. I say proxy because this is sell-out data not sell-in. With the launch 2.0 process, the Barista Impress came online quickly and may have reached its long-term run rate 7 weeks after launch. Two quick footnotes, the flat debt on the left side of the curve is a function of using the [ forward ] trailing average, and the spike is driven by the holiday season. The net-net of this analysis is our launch 2.0 process is driving material revenue acceleration within a country. Turning to Slide 16. Looking at the aggregate sell-out data across all markets, you can see the combined impact of countries launching more quickly, coupled with the accelerated capital run rate for the curve. This chart shows you the 4-week trailing average of the aggregate weekly sell-out data for each product with both products anchored on their first week of launch. I've also included an indication of when each country came online. By the 40th week after launch, the Barista Impress had a weekly unit sellout that was 8.5x larger than the Barista Pro. Slide 17. In the last 2 slides, I ran the analytic drag rates based on each product have an equal time in market. If instead, I cut the data based on the calendar year, we can normalize out seasonality. The Barista Pro will have an advantage because it has more time in market. In this race, the Barista Pro has a 5-month head start, focusing in on Barista Pro's 35th week from launch. You can see that by this time, Barista Pro had launched in at least one retailer in all countries. As we launched 2.0, the Barista Impress had a higher weekly unit sellout, having only launched in Australia and New Zealand. We saw a 4.5x sell-out delta at the peak and a 2.5x delta exiting the half. No matter how I cut the data and seeing that we launched 2.0 process is a material improvement in our acceleration program. If MPD is a core strength, Launch 2.0 process is storing fuel on the fire. Slide 18. Now to look at Breville equivalents you may now have considered. Slide 19. Breville is and for quite some time, has been a global small domestic appliance company. But looking through a different lens, it is also a virtual intellectual property and information management company. Slide 20. With limited exceptions, it's our footnote at the bottom of the chart, the following statement is true. Breville doesn't make anything, move anything, store anything, sell anything or service anything. You may have to sit with a statement for a bit to see the Breville I'm talking about. If we don't do any of that, what do we do? We generate and protect intellectual property and support its go-to-market and aftermarket support through the management of roughly 2,500 third parties in multiple languages and time zones to deliver the numbers Martin reports to you each year. Through a market analyst view, you can see the virtualization in our numbers. Our property, plant and equipment is approximately 3% of total assets, and our EBIT dollars per employee is $160,000. Both metrics are quite unique when compared to other companies in this vertical. This is because we don't really use PP&E, and we don't have many employees on a relative basis. We are a virtual company. I appreciate that each time we have these discussions I've drawn all about the corporate platform. I do this because it is the corporate platform that makes this virtualization possible. It's what we use to coordinate the line 2,500 third parties every day. The stretch and analogy, it's a bit like comparing the total employees at the Sydney Airport to the number of employees in the control tower. The control tower can run with just a few employees because of 3 things: one, the skill and capabilities of those employees; two, the standardization and predictability of processes; and three, the underlying sense and respond technology platform. Slide 21. So what are the advantages of virtualization? Speed, agility and business model flexibility. We can go into new countries quickly and integrate acquisitions fairly easily because we don't have physical assets in play. It's a framework and data game. With the new countries, it's contracting with the right third parties and connecting them to our corporate platform for acquisition integration, it's cleansing and loading data, the core global processes of the platform are already in place. The advantage of agility cannot be overstated in the current environment. How did we manage our way through the shops of COVID? By quickly seeing the alignment problems and directing and project managing third parties to fix them. If we relied on physical assets, our flexibility and adaptability would collapse. Lastly, the business model. As our launched and reported numbers of other companies navigating their way through this macro environment. Negative operating leverage is more the rule than the exception. Small reductions in gross profit are equating to material reductions in EBIT, negative operating leverage at work. In a virtual company posture, a lack of fixed assets and their associated operating costs makes the business model more malleable, much like a software company. It certainly doesn't mean you are immune to the challenges of growth of holding gross profit, but it does mean you have more degrees of freedom to adapt and respond. Slide 22. And lastly, a bit about FY '23 and our outlook. Slide 23. In COVID first year, I held the town hall with all employees and told the team we were at the beginning of a marathon and we needed to pace ourselves accordingly. During this current leg of the race, where central banks are using their tools to beat back inflation, thus driving the economic cycle. I told the team that we would be running in the rain emphasis on running. Looking at the first half of '23, I reflected a bit on the acceleration program progression despite the backdrop, landed on the following: As we went through COVID, I told many of you that I did not trust the data. I am analytic by nature, so this was a frustrating period. As I look at the first half of '23, I'm seeing indications that we are back on the model. The 3 theaters behaved as predicted on a relative basis. The consumer sellout pattern or shape was normal. The supply chain on the whole behaved predictably, enabling us to begin transitioning back to our inventory flow model. The primary driver of noise in the first half came from retailers. Specifically, the spread between sell-out growth in EMEA versus the sell-in decline, but this should naturally ride itself as retailers get their footing. Second, the acceleration levers of NPD, geographic expansion and acquisitions are performing well. The NPD pipeline looks solid on a forward basis. The Launch 2.0 process is magnifying the financial impact of e-commerce. The new geographies are firing and the Lelit integration and plans are on track. Third, our innovation-driven product focus, theater diversification, and business model virtualization has, so far, given us the flexibility to ride the undulating economic waves washing through various countries. As well as the depth to the behavior of retailers in the value chain, all while holding our gross margins. And finally, after a couple of years of effort, we've removed the supply constraint that we're experiencing in ovens, enabling cooking to be the fastest growing product category globally, and our multiyear effort and investment into our digital offensive paying dividends with DTC ascending to our fifth largest customers globally. This is not to say that we are not in a very challenging and dynamic environment. But as I look to the next 5 years, I see that the team is continuing to lay the foundation to support continued acceleration. We are running in the rain. Slide 24, focusing specifically on the second half. Some of our manufacturers is running at reduced capacity as COVID rolls through China. From all that we see today, we believe the inventory insurance policy we took out last year will prevent this hiccup by materially impacting our second half numbers. Because I believe we are now on the model, we will begin the transition back to an inventory flow model. This will be a measured cadence with a top adjustment phase, but we expect working capital to begin to release. Along with everyone else in the market, we are seeing reduced input and logistics costs. This tailwind benefit will begin to flow through our numbers as we turn our inventory. We expect to launch 3 new products in the second half, 2 of which will be going through the Launch 2.0 process. All this will execute in the second half. It's more of a tailwind set up for the first half of '24 because all 3 should be fully distributed for holiday '24. And lastly, as always, we'll continue to invest in marketing, R&D and technology consistent with our gross profit trajectory. Slide 25. Our outlook guidance for FY '23 as we expect EBIT to land between $165 million and $172 million, which is 5% to 10% growth in [ FY '22 ]. In prior periods, I've seen a bit of excitement kicked off by the caveat below our outlook. In an effort to dampen some of this excitement, you'll see these are the same bullets we use every time I provide our outlook statement, nothing new this year. With that, I will now hand back to the operator. We will open the call up for any questions you might have about our first half '23 results.

[Operator Instructions] Your first question comes from Tom Kierath from Barrenjoey.

Just a question on inventory and just where you see retailer inventory I guess, what following on from that, just how you see sell out tracking around the different regions? Is it improving, decelerating, et cetera?

So from a Breville perspective, retailer inventory is in a good position, meaning coming out of the half. I say good position. It's in the position that they put it in, meaning, to my knowledge, no detailer has too much Breville inventory. So I think that's right. I mean, from a sell-out perspective, we -- I think we put it in the deck, which is in Americas sell-in and sell-out, we're pretty close to one another. In Asia Pac sell-out was running faster than sell-in, marginally. And then in EMEA, that's where we saw the biggest spread where sellout was positive, single-digit positive. And so in, I think whatever we reported minus 22 on the selling.

But is it getting better or worse, I guess, is the question is obviously a 6-month period, there's a bit of time what can happen. Just trying to get a sense of whether things have bottomed and they're improving or potentially still getting a little softer?

Yes. It doesn't quite work that -- sorry, I'm just trying to turn on the question. I mean, it doesn't quite work that way because you've got holiday, right? So we all have a decent read on the second half, probably, I don't know, March-ish. Sometimes when you look at January, February, March together, they can give you a pretty good run rate for the second half. But in general, in this business, the second half is pretty stable, predictable, I don't know how to describe it. I disclosed on lots of presentations sell-out curves for lots of SKUs, and you can look at the second half. So it seems to be relatively boring.

Your next question comes from Lisa Deng from Goldman Sachs Partners.

Just one question on gross profit margin outlook. As we are moving into lower cost environment, as you had pointed out, and we've taken up the prices to the effect of 4 percentage point improvement on the first half. Is that price going to be sticky even though the cost is going to be increasingly favorable? And how do we think about the GP tracker margin trend into the second half?

Okay. Thanks, Lisa. Look, I'd rather have those cost decreases coming through then not having them coming through because it puts something in our pocket. So far, you haven't seen us need to lean into any abnormal discounting or promotion, and that's how we landed the 1% gross profit increase in the first half. And now we've got declining input costs. So I think I put the statement in the presentation that we see a quite benign, if not positive position for gross margin moving into the second half. So no, we don't see it coming as a threat from pricing or discounting.

But the potential is actually an even more positive expansion than what we thought in the first half, right?

I think what I was trying to say is, you've got headwinds and you've got tailwinds. They are at least balanced and maybe the tailwinds are slightly outweighing the headwinds. Yes, so there could be some gross margin progression.

Your next question comes from Alexander Mees from Morgans.

Just a question about -- your comment around Europe where you said the declining sell-in reflects retailers destocking across Europe and North consumers buying patterns. I'm just wondering why you think there's been that disconnect? And is there a reasonably heavy implication that retailers are going to start restocking soon?

So I think the driver of the disconnect is pretty simple, which is a war in the Ukraine, coupled with inflation in central banks doing everything they tend to be it back. So I think that's what all retailers in Europe on the back foot and cause them to not to leave kind of forward data. So they're attempting to plan for the worst. I think, look, what happens when retailers run. So a retailer on a normal week, let's say, 9 to 5 kind of week needs a certain set of inventory in their warehouse to keep their stores filled and so forth. And so if the trade is going to get the forklift and this and that and so forth, there's a certain amount of inventory that he executes in that warehouse for that to happen. Same with Breville. When you run it really tight, which we've all gone through at Breville as I went through COVID, you end up having to work that warehouse a whole lot harder because trucks are all operating in the morning and then you've got to get them out the next day and you start cross-docking and all kinds of things to meet that time line. So what you see is there is some -- for every single retailer, there is some minimum level that they need to hold to get into a more kind of steady normal operating environment. My hypothesis in Europe specifically is that some of the retailers are below that water line. You can do it for a while, but eventually, you'll start to want to balance that back out. When that happens? I don't know. But for, I think, 90 years of Breville, and [ too heavily ] all of those retailers ran on excellent amount of weeks of cover, let's say, or days cover in their warehouse. I don't think they've all suddenly said, gosh, we could run the whole thing just the same with a whole lot less. So eventually they'll help, but I think that will happen when they start trusting their data, right? And they believe they can start to predict their future and then set the screen and stabilize against that with some sense of confidence.

Your next question comes from John Hynd from Wilsons.

Good morning, Jim and Martin. Just touching on APAC perhaps. The -- a great result given the strength over the last couple of years. But I guess despite the difficult conditions, we had expected a little bit more growth. Cyber periods were pretty -- like a pretty favorable by our reports. And you've also added in South Korea, which to your account is performing ahead of expectations. How should we unpack the results at the constant currency line for APAC, please?

Yes. So John, the capital with us is very low, because it's the last small numbers, right, which is a different year. So they have come out of the gate a lot faster than we thought they would. But against the weight of the entire rest of the theaters, they're not there to move the number, so to speak. And I think the bit that, when you look at an Asia Pac, I mean, if I just pick on ANZ, when I started, every analyst called and said a 2% to 3% grower, it already reached terminal. And that region has grown between 8% and 12%, let's call it -- or I guess the CAGR from [ '17 to '20 ] was 16 or 15, whatever it was, which was, I think, a little bit surprising relative to original expectations. But a region that was clocking at 50, all of a sudden, dropped to 49 -- 49 and then stuck at 22 on top of that. So that's a lot to hold on to. And as I said, when we were going through that and I was trying to get my head around it. I thought some of that was driven by competitors putting ANZ at the bottom of their supply chain to be with and that I thought we were probably picking something up just because they weren't there. Now the counter argument of that one is, our market share held. I expected it to go back or just to get back to the offices were there. So within that model, I think you've got to look at Asia Pac over a 3-year period and kind of start to forecast what we think the run rate is going to be. And to what extent are we going to be able to take a plus whatever, it was 60%, 70% increase and then push that through. The main driver for the ANZ portion of Asia Pac is always NPD. And so that plus 49 and plus 22, same without NPD in COVID, and so now what we're going to be watching over the next little period is this intersection of where does that thing stabilize kind of on to own, let's call it, the core. And then where does NPD come in to drive [ shut the arm ].

Your next question comes from Keegan Booysen from Jarden Group.

Just one for me. Just regarding the Lelit acquisition, I was hoping you could talk a bit more, give some color, just on the benefits of the P&L, both from a sales line as well as a margin standpoint as well. Particularly given the stock term and what it would be versus the core Breville products might be a bit different. So if you could expand on that a bit? And then also with the regions, I think it's mainly in the EMEA that would benefit, please.

Yes, sure. So there's -- we're pleased with how Lelit has started. Clearly, it's early days, been in our hands for 6 months. We haven't yet really taken the brand with any anger into the Americas or into the APAC regions. That would be opportunity. Integration has gone well and the business is being recapitalized. Why didn't we -- we thought about putting sales numbers or profit numbers in the announcement. And we didn't really because it wasn't the story of the half. In the half, we had to absorb Nespresso declines, we spoke about. We had to absorb Euro retailer decline, food prep reset. We didn't really talk about the [indiscernible] and beyond as well and then we had offsetting tailwinds of new product development and really firing DTC, firing, other firing in the Americas. In each of those -- within a [ 4% ] sales growth in the end, each of those were more important than the sales and the profit that Lelit brought to the party. I look forward to talking about Lelit acquisition that is probably more at the full year, Jim, than at the half.

A little bit. I think the other bit in the year-over-year net out is, it's pretty close to the back out from Russia.

Correct.