I would now like to hand the conference over to Mr. Martin Nickolas, the Group's CFO. Please go ahead.
Good morning to everybody joining today's call. I'm Mark Nicholas, Breville's Group CFO. And it's my pleasure to welcome you to our Financial year 2021 results, Chris. I'll start by walking you through the group's trading performance and then Jim Clayton, our CEO, We'll provide an operational and strategic update. We'll be talking to the slide pack that was updated on the ASX about 30 minutes ago.
So turning to Slide 3 and our headline results. Firstly, sales. We had a remarkable year With total sales of nearly $1,200,000,000 This accelerated demand we saw in the first half carried on into the second half. Increased consumer demand driven by both the requirement and the wish to work from home, coupled with our continued geographic expansion, Outweighed logistical challenges and a weakening U. S.
Dollar in the second half to deliver 24.7% sales growth And 37% growth in our key global product segment in constant currency. Our gross margins improved year on year as our increased average selling price, driven by improved mix and lower promotional activity, Outpaced the headwinds of cost inflation, including increased manufacturing and shipping costs. In FY 2021, the tailwinds more than balanced these inflationary headwinds. As we look to FY22, Insultionary pressures seem set to continue, and we will take price rises where appropriate to protect our margins. In FY 2021, With core overheads kept in check, we reinvested our operating leverage into medium term growth drivers of R and D, Marketing and IT, while still delivering and accelerating absolute profit growth.
FY 'twenty one EBIT grew 24% over normalized FY 'twenty EBIT or 39% over SaaSentry EBIT. We had a couple of accounting policy and estimate changes in the second half, SaaS capitalization and NPD amortization. These two vastly offset each other at the EBIT level, so I won't spend much time on these technicalities today, but a full explanation of their impact Included both within the results announcement and notes to the accounts. In terms of cash flow, We ended the year with net cash in line with prior year despite funding strong business growth and the purchase of Baratsa. Our working capital remains below equilibrium by approximately $80,000,000 as delivery challenges including the Suez Canal blockage, The 4 week closure of Jantian Port in China and inbound port delays suppressed our in country stock levels and customer deliveries late in the half.
With EPS at $0.658 our full year dividend of $0.265 per share, 100% Frank reflects the group's previously announced target payout ratio of 40%, designed to encourage Our ability to internally fund numerous growth opportunities. In summary, FY 'twenty one was an operationally challenging A positive year. Sales grew strongly, and we reinvested these gains into future growth drivers. And overall, I must say I'm delighted by how our team and processes absorbed the volatility experienced during the year And kept delivering for our retail partners and customers. Turning to Slide 4, we see key segment performances.
Our Global Product segment carried sales momentum from the first half through to the second half, delivering 37% sales growth for the year on a constant currency basis. The continued working from home reality, even outside of lockdowns, Supported broad based category growth and we continued our strategic geographic expansion even during lockdowns. Our Distribution segment grew 8.4 percent with double digit growth in the more premium Breville local offering Offset by lower growth in Cambrook and Les Gresse. And of course, most importantly, the distribution segment fulfilled its strategic role are delivering $2,400,000 in incremental EBIT to reinvest in the global segment. Turning to Slide 5.
In terms of global product sales by geography, all theaters delivered strong double digit growth We've gained across all categories. Working from home reality, accelerated growth in all our geographies, The impact varying with different consumer and retailer experiences as well as lockdown patterns across the key markets. In the Americas, the group delivered 27.6 percent constant currency growth. The bricks and mortar retailers largely opened by the end of the period, But disrupted during the year. The theater was somewhat constrained by deliveries late in the year, but still posted growth Comfortably above the long term average for the geographies.
We also entered Mexico in the Q4. In EMEA, Despite on off retail lockdown disruption, the region performed well, delivering 58.4% growth. UK sales held up across the year and Mainland Europe posted strong growth in both new and EBSG markets. Our entry into France was completed in quarter 1 and Portugal and Italy were added in quarter 4. In dollar terms, EMEA's global product growth outstripped both the Americas and APAC.
Apache itself achieved good second half growth of 24% after remarkable first half of over 49% To deliver full year constant currency sales growth of 37%. In APAC, retail stayed largely to consumer throughout the year and the region was supported by nimble supply chain management with inventory levels almost restored to normal By the end of the period. Nothing special to say about relative gross margins, which remain similar across the key geographies. Jim will cover this more in his section, but it is noteworthy that in the Global Product segment, EMEA is now larger than APAC And the 2 together now match the Americas. Turning to Page 6, funds generation and usage.
On this slide, we pictorially show how we've reinvested our gains in gross profits, while still delivering an accelerating EBIT growth. All the numbers on this chart are showing movements against the normalized FY 2020, which was $12,000,000 above our statutory EBIT in net clear. In FY 2021, sales were strong and gross margins were boosted by a premiumization of mix and lower promotional spend, More than offsetting inflationary pressure. Overall gross profit dollars grew by $92,000,000 or 29%. However, with the objective of driving medium term growth, more than 50% of this incremental gross profit or $49,000,000 We've reinvested in go to market capability and specifically our digital events, in new product development And in our IT team and corporate platform.
This is consistent with our strategy of increasing our investment Year on year to enhance our go to market effectiveness, to upgrade our new product development capability And to increase our technology based competitive advantage. Outside of these three priorities, Core overheads in OpEx were well controlled, delivering operating leverage. We did invest in extra customer service heads And supply chain heads, incremental Bharatza overheads were acquired and the team were awarded bonuses in FY 2021. Outside of these increases, overheads were kept largely flat and overall declined as a percentage of sales. Our resulting EBIT was increased by $26,500,000 growing at 24.1 percent, An acceleration from the 16.2% in the prior period.
We both generated and invested incremental funds Healthily accelerating our bottom line. Turning to Slide 7 on the balance sheet. Here we see the impact of our below equilibrium working capital flowing through our reported numbers. Under normal conditions, the group structurally invest working capital to drive growth. However, despite 24% sales growth, FY 'twenty one working capital Was on par with the prior year, which itself was low.
June 30, 2021 working capital Yes, as I said before, approximately $80,000,000 is our normal or equilibrium levels. Reported inventory levels were covered a little towards the end of the year. However, over a third of this was still on the water at June 30. With in house, so in warehouse inventory, only recovering 10% in the low of June 2020. Our receivables balances actually dipped below prior year with an excellent improvement in collections and debtor days across the group, Coupled with the weakening U.
S. Dollar and constrained deliveries at the tail end of the half, our payables balances largely grew in line with the business. And collectively, this resulted in working capital flat on prior year and about $80,000,000 below equilibrium With cash about $80,000,000 higher than the norm. This imbalance should unwind during FY 'twenty 2 As we aim to rebuild our inventory balances and receivables normalize. Our intangible assets of 230,000,000 by $86,000,000 over the prior comparable period due to the acquisition of Baraksha in September 2020 And our continued NPD, new product development investment.
IT capitalization has largely been removed from both this and last year's balance And the new SaaS accounting policies. At 30th June 2021, the group had a net cash position of 129 $900,000 which reflects below above mentioned equilibrium working capital position. We are planning for a significant rebuild of working capital and cash outflow in FY 'twenty two as we transition back To a more efficient state. We have adequate cash and debt facilities in place for this time of rebuild. And now finally turning to Slide 8.
I hope that, unpacking of our reported numbers has been helpful in what I can only describe as an interesting year. And the key messages I'd like you to take away from this year's financial results are: Firstly, we had a strong sales year The global working from home trend driving the year of accelerated revenue and gross profits. We use this accelerated gross profit To lean into our key medium term growth drivers, namely marketing, product development and IT, We are still delivering a 24% increase in EBIT. Outside of these priorities, other costs were well contained, And our working capital and net cash provisions are not at equilibrium, and we plan to correct this in FY 'twenty two. So with that summary and on that note, I'll now pass to Jim Trayton, our CEO, to provide an operational and strategic update.
So thank you, Martin, and good morning to everyone. Turning to Slide 9. Now that Martin has Covered the results from what was a very dynamic and interesting year. I'm going to summarize our execution in FY 'twenty one, take you through an analytic back Testing of our acceleration program, and I will end with an update on COVID and the current state of play. Before we get started, I want to touch Based on what you won't see, as we have grown, we have become more visible.
It appears as though some of our competitors are not Almost everything we do, both in our go to market and product. While we appreciate the attention, there's no point in making things any easier than they need to be. Considering this, I will revert to the reporting approach we used in FY 'sixteen through FY 'eighteen, Meaning, I will only disclose things after they have happened. Specifically, you will not see product that is not launched, Nor will I discuss geographies on the to do list. I will report out on these activities once they've occurred.
Turning to Slide 10. In first half of FY 'twenty one, I said that COVID had not materially impacted the cadence of our acceleration program execution. I believe the next few slides will support this statement. In FY 2021, we launched 3 new colors across the range. I'm using the toaster as an example, but these new colors are available across many SKUs.
Of particular note is black stainless steel. Given the association between stainless steel and our brand, this one will be interesting to watch. We launched a series of new products across beverage, cooking and food prep. The Fast Slow Pro is a more approachable pressure cooker. The Bambino solidified the bottom of the coffee range, Delivering the 4 elements of cafe quality coffee in a compact footprint and the Createchista Pro redefined the top of the range for our Nespresso capsule products.
The HydroPro and HydroPro Plus deliver commercial quality sous vide performance and the food cycler is a product designed to help customers recycle food waste. With the CombiWave 3 in-one, the Compact Wave and the PTO, we launched the 2 40 volt versions Into Europe and Australia. Turning to Slide 11. FY 2021 was an active year for geographic expansion. COVID extended much of the France entry into FY 'twenty one.
The EMEA theater then followed with both Portugal and Italy, While the Americas went live in Mexico. This was the 1st year we have 2 theaters executing geographic expansion simultaneously. All new geographies are performing as expected this early in their lock cycle. Turning to Slide 12. We acquired and integrated Bharatza.
Bharatza brings a team that extends our coffee expertise and it delivers a coffee grinding range from entry to light commercial. Bharatza is performing exceptionally well first course. Bharatza also gave us the opportunity to test our new corporate software. Did we design the system to quickly integrate an acquisition? Answer, yes.
Lots of transactions are executing 100% on the corporate platform, All the remains reporting the website to our infrastructure. Turning to Slide 13. FY 'twenty one was a busy year for the technology services team. With Canada and Bharatza going live on August 1 this month, All that remains is Australia, which we will take live in the second half of FY 'twenty two as well as any new geographies we enter in FY 'twenty two. With the corporate platform not fully deployed in the Northern Hemisphere, we are well prepared for future acquisitions.
While it's a touch The next few years may hold interesting opportunities on this front. Turning to Slide 14. In FY 'twenty one, we achieved a few milestones with our acceleration program. Breville as a whole crossed the $1,000,000,000 revenue mark. In our Global segment, EMEA is now larger than Asia Pac and Mainland Europe is now bigger than the UK.
While we still have a long way to go, all appears to be heading in the right direction. Turning to Slide 15. We've been executing the acceleration program since FY 'seventeen. Enough time has passed for us to analytically backtest the success of this program. Slide 16.
In FY 17, I used this framework to describe the acceleration program, selling more product into a larger market On a scalable platform with a growth oriented business model. Slide 17. I followed with a slide that showed if we pulled this off, We would create a reinforcing loop, which would sustain the acceleration. Slide 18. Typically, when a company adopts a strategy of invest heavily with the promise of a revenue hockey stick years later, EBIT tends to suffer in the early years.
While our acceleration program shared the investment characteristics, I made a commitment at the beginning of the program that we would execute the business model transformation without Stealing from EBIT and at least on this, we have held our commitment. Not only have we not stolen from EBIT, But we have grown EBIT at an increasing rate over the period we've been executing the acceleration program. Turning to Slide 19. As I mentioned when we started the program, public companies typically don't execute business model transformations. Instead, the company has taken private the business model is fixed And then it is refloated.
But given the strength of Breville's innovation engine, I believe we could fix the plane while it was flying. The core challenge was figuring out how to evolve the business model, moving from spending 8% of net sales and marketing and R and D to 12% as the floor, I'll simultaneously growing EBIT. There are 4 EBIT neutral levers you can pull to accomplish this We have pulled all of them over the last 5 years. 1st is operational efficiency, find ways to improve to be in non growth related functions and reallocate those savings to marketing and R and D. 2nd, Leverage the distribution segment as an internal funding mechanism, turn the segment around so that it grows and take the incremental EBIT growth and reinvest dollars into the growth engine of the global segment.
3rd, create operating leverage in the business as it Sales and reinvest the incremental dollars in the marketing and R and D. And finally, 4, grow the business in constant currency faster than EBIT growth And invest the incremental gross profit dollars into marketing and R and D. The table on the slide shows the relationship between the constant currency growth rate of the global Segment and our annual EBIT growth. While we have not yet achieved our target business model spending at least 12% of net sales and marketing R and D, We've made significant progress against this goal using all four EBIT neutral levers. COVID certainly threw a wrench into the program timing, I'm confident we will get there.
Turning to Slide 20. Before analytically testing the success of the acceleration program, I want to first set some context. Acceleration program began in earnest in FY 'seventeen. We have 3 levers we can pull to accelerate the top line. 1st, investing more into marketing and R and D as a percentage of net sales, which gives us more product and more market.
2nd, geographic expansion, which is more market, and acquisitions, more product and maybe more market is the 3rd lever. This slide shows which levers have been in play across each of the 3 theaters over time. In Asia Pac, Whatever growth it has experienced has come entirely from improving the business model. In the Americas, apart from the non material acquisition At divest ups in FY 2020, the Americas has been solely dependent on increased spending on marketing and R and D through FY 2020. In FY 'twenty one, the Americas entered Mexico at the end of the year and we acquired Bharatza.
EMEA initially did not benefit from the business model change except for the U. K. Because we had a distributor led go to market model across the region. In FY 2018, we started the transition to a direct model in Western Europe by entering Germany. As we flipped countries to a direct model, The region was able to leverage the increased investment in marketing and R and D.
So to summarize, for Asia Pac in the Americas, Any acceleration would come solely from increased spending on marketing and R and D. And for EMEA, it would be a mix of geographic expansion and increased spending on marketing and R and D beginning in FY 'eighteen. Turning to Slide 21. Looking at Asia Pac, At theater, we're relying solely on the growth lever of increased spending on marketing and R and D. We see the average annual growth rate The global segment has increased from 3.3% during FY 'fourteen through FY 'sixteen to 11.1% During FY 'seventeen through FY 'twenty, this is a 7.8% increase in the average annual growth rate.
At least raise the pack, the historical performance data suggests that our decision to invest more into marketing and R and D has resulted in annual revenue acceleration. You'll notice that while I've included FY 'twenty one on the slide, I have not used it in the CAGR analysis. FY 'twenty one is a COVID year I'm excluding from the CAGR analysis. Applied 21 data is COVID infected data and thus not considered valid for year over year analysis. Turning to Slide 22.
Prior to changing the business model, the global segment in the Americas was growing at 8.7% in constant currency, The CAGR from 14 through 16. As we began incrementally improving the business model year after year, the average Annual top line growth accelerated to 12.3%, the CAGR from 'seventeen through 'twenty. This is a 3.6% increase in the annual growth rate for the theater. Looking beneath the numbers, the impact is understated. The FY 'fourteen through FY 'sixteen growth in the Americas was driven by Canada coming online.
To help you appreciate the magnitude, the U. S. Grew 1% in constant currency from FY 'fourteen through FY 'sixteen. Again, another data point suggesting the drive to spend 12% of net sales and marketing and R and D is working. Turning to Slide 23.
With EMEA, we see a much more dramatic change. From FY 2014 through 2017, The period where we were in a distributor led go to market model except for the UK. The average annual growth rate for the global segment was minus 2.1%. It's worth noting that the UK was growing during this period. Once we kicked off the transition to a direct model, the tables turned and they began growing rapidly in the theater.
This go to market change coupled with increased investment in marketing and R and D drove the average annual top line growth rate from minus 0.1% to 34.4%. Turning to Slide 24. Rolling all 3 theaters together From FY 2014 through 2016, the global segment had an average annual top line growth rate of 3.1%. Once we started investing more in the marketing R and D and pulling the other growth levers, the average annual growth rate increased to 14.6% across the financial year of FY 'seventeen through 'twenty. Turning to Slide 25.
Focusing on our new geography offense, We can see improvement there as well. In this slide, I'm comparing Breville's entry into the UK With Breville's entry into Germany and the other Western European countries, this bar chart starts at the 1st full year of revenue for each geography. Using our more aggressive approach for entering new geographies, Western Europe has generated more revenue in its 3rd year In the UK, I think, yes. If you look at the TABOR lines for the UK, you will see that the UK showed the same acceleration pattern The Americas and Asia Pac from our decision to invest more in the marketing and R and D. Turning to Slide 26.
Put all of this together and you get an accelerating business that is improving the geographic diversification of its revenue base. While the Americas has grown at a steady clip FY 'seventeen to FY 'twenty one, it now represents 50% of the business, down from 57% from FY 'seventeen. If all theaters continue the current trajectory, this diversification will continue to improve. Turning to Slide 27. Looking at the company's performance from FY 2014 through FY 2020, the data thus far supports the following conclusion.
1st, The strategy of an innovation driven company, migrating its business model to spending more on marketing and R and D is working. 2nd, geographic expansion is helping to drive the top line and further diversify the revenue base and third, The more aggressive approach for entering new countries is delivering accelerated performance. Turning to Slide 28. Now on to the topic of the day, which is COVID, Slide 29. Before we get to the tactics of COVID, It's worth mentioning that this once in a 100 year pandemic is touching everyone in one way or another.
So far, we are thankful We have not lost a Breville team member to the virus, but we have lost family members. We now find ourselves in a global drag race between vaccine rollouts and the To repeat commentary from my first half report out, we are not done with COVID. This is a marathon, not a sprint. Assuming the vaccines are successful in significantly reducing the mortality rate of the Delta variant and whatever the next variant will be, FY 'twenty two looks like it is shaping up to be a transitional year of sorts. We're moving from the entire world being in lockdown To come through specific vaccine rollout cadences with different rates of opening up, while still experiencing regional lockdowns.
At the macro level, Consumers have pent up savings and economies grow as they open. But as they open, consumers will begin to diversify the spending pattern to include services. It's too early to tell how these countervailing forces will play out for the small domestic appliance market or how it would play for Breville specifically As we sit on top of the constant currency prior year comp of plus 37% for the global segment. On the front lines, we are wrestling with everything reported in the news. The U.
S. Dollar has fallen across all currencies, though it has stabilized as of late. Supplier costs have increased in the way of intermittent parts shortages, though so far we have resolved each instance that has arisen. The global logistics backbone is stretched and erratic as it is impacted by local events, which coupled with increased demand drives up transportation prices. Finally, as the delta variant spreads across the world, the unpredictability of how countries or local regions will respond is on the rise With the potential to further disrupt supply or demand or drive additional delays in the logistics.
From a Breville perspective, COVID is a tactical ripple in demand supply line like Trump's tariffs or Brexit. The primary difference being it is global, A global multiyear phenomenon. As such, we have seen nothing during the COVID period that has had any measurable impact on our go forward strategy. More products into a larger market on a scalable platform with a growth oriented business model. To offset some of the net input price increases net of currency, we will raise price incrementally where appropriate.
Our tactical approach to the uncertainty of FY 'twenty two is a more refined and targeted approach to the offense we ran In FY 'twenty one, which is high low, on inventory for the high side of planned variance With the goal of overshooting and then selling back to the demand line in the second half, while running costs tight at the hedge against the low side of the range. As long as actual demand falls within these 2 high low goalposts, we will converge our execution across the year to meet the actual demand line. With that, I will now hand back to the moderator who will open the call for questions.
Any further questions, you will need to rejoin the queue. Your first question comes from Alexander Mees with Morgan. Please go ahead.
Thanks so much. Good morning, Jim and Martin. So my one question will be around average selling price. Martin, you mentioned that they're up on the basis of improved mix and lower promotional activity. I just wondered if you could comment on your experience with like for like Sales price increases for the same product, please?
Yes. Thanks, Andre. 2021, we didn't take any significant price increases product to product. It was much more about the lower promotional spend. There were a few that flowed through In Australia, during the year, it was more around less promotional spend rather than an increase in existing prices in FY 2021.
Great. Thank you.
Your next question comes from Tim Lawson with Macquarie. Please go ahead.
Hi, Jim and Martin. Thanks for
taking my question. Just on Slide 6, that EBIT bridge FY 'twenty to FY 'twenty one. Can you just expand on your comments around Marketing, R and D, IT and overhead in regard to whether and you can sort of talk through what's the person and what's pull forward, what's COVID. Just trying to understand So it's a question. I'm asking for something to think about that going forward, please.
Yes. So shall I start with that, Jim?
Yes, go ahead.
Okay. So of the $49,000,000 looking forward, about $29,000,000 was in Marketing or go to market and about 10 and 10 across tech services in global product. But at the Amount that was in marketing, about twothree of that was on platforms, experience hubs, Content development items that, yes, were pulled forward, but didn't necessarily drive demand In that period, so as we move into FY 2022, if we spend about a similar amount on marketing, More of it will be orientated towards demand generation or media in the market. So the stuff we pulled forward is about capability development.
Okay. That's clear. Thanks.
Your next Question comes from Apoor Seagal with UBS. Please go ahead.
Good morning, Jim and Martin. Guys, clearly, some continued strong top line momentum in the second half of the year. Just interested in the outlook commentary for FY 'twenty two. In your slide deck, you talked about the challenges of cycling FY 'twenty one comps And consumers likely to shift share of spend to services. Have you actually seen any changes in customer behavior or demand trends over the last couple of months in places like the U.
S. And Europe where vaccination programs
are well developed and people are sort of going out
to Yes. Redstone and Bubs and Bubs.
So I mean, look, the window that you called is very tight. So I think the best I can tell you is we've started 'twenty two in a solid position. And I just I don't think there's enough data honestly to judge it one way or the other. So, so far we haven't, but I could flag it as a
Your next question comes from Sam Haddad with Bell Potter. Please go ahead.
Hi, Jim. Hi, Martin. My question is in terms of the supply chain, can you talk about what you're seeing now through July August and How do you plan to build your inventory ahead of the key trading period in Black Friday and Christmas? From memory, you like to plan ahead early I heard some of the other global players. So I just wanted to see how you're going to have to adjust the strategy to given the constraints you're seeing and what you're actually seeing now.
Thank you.
I mean, it's not Sam, it's not we're not adjusting the strategy. You're just you're living with the reality, so to speak. So one of the things that Martin talked about was this kind of tail that we saw a tightening that we saw At the end of this period, another place where we end up being short shutting down for 4 weeks. So that's kind of like pull Pulling the rope while you're water skiing or something, right? So I just created some slack.
So what we were seeing as we went in, and this is March, April, Right on plan. We saw April inventory past the year before and we were up into the right. And then you see this kind of 4 week lag. So that just pushes everything to the right, so to speak. And so you just the orders are there.
The good news, I mean, if you really break this thing down into its pieces that you have to manage, it's first of all, are you going to get the parts you need? 2nd, are you going to get them made? And then 3rd, get them on the water and across. And the good news for us so far As we have completely managed 12, and now it's just about putting them on the boat and moving it across. So it's the orders are there, the products are there, now we can move them.
You'll be it's container rates going up all this a little bit, but we're in the move it stage.
Okay. Thank you.
Your next question comes from James Casey with Ord Minut. Please go ahead.
Good morning, gentlemen. I just wonder if you could make a comment On new potential new geographies for this financial year, obviously, you added Multiple territories in FY 2021. Have you got enough on your hands at the moment? Or are there plans to add further Geographies for FY 'twenty two.
I really do the best I can to make sure my team doesn't get bored. So if I had them going into new countries in FY 'twenty one during hard lockdown, you can guess that we will be going into more countries in FY 'twenty two.
Okay. And I guess your comments earlier with not flagging things to your competition, we'll just see those Announced as you, I guess, enter those countries. Is it fair?
Exactly.
Yes. Okay. Thanks, James.
Your next question comes from Ben Gilbert with
Just a question just around just some of The structural changes we've sort of said for COVID and what a few of the global leaders such as yourself are talking to in brands is Seems like some sort of Nike, Samsung, etcetera, talking about sort of 2 big opportunities, 1, around online and more direct to consumer and secondly, around Trying to sort of make this more structural in terms of reduced levels of promotional activity. Do you think so if you could talk to those two opportunities for your business in terms of B2C and ability to sort of Bank, some of the reduced levels of promotional intensity you've
been under the last 12 months. So we've been working on kind of improving our online execution since FY 'seventeen. So there's nothing about COVID that had changed other than our ability to pull some of the to do list forward into FY 2021, What Martin was talking about, which is pulling accelerating capability building on the digital offense. So In that world, I mean, the good news is we didn't wake up and at COVID and say, my goodness, we should focus on online. We were always doing that.
And it's just a function of what we thought was going to be the right answer in the long run anyway. So effectively kind of No change there. And then on banking, the kind of the reduced promotional spend, I mean, effectively, that was If you look at the waterfall chart that Martin showed, that's exactly what we did. And then we took that and reinvested The lion's share of it back into the median growth drivers. So I guess I would say I agree with Mikey and Samsung in that way.
Mean that was the advantage of FY 'twenty one at some level.
Do you think you got to hold on to that looking forward? I know
you talked to sort of I'm not ready
to come back. I think you
think you've got to hold on to some of that.
So I look, The answer is either yes or no. So from my and I honestly, I approach it that way, Which is, we continue to accelerate Supporting digital and we want customers to be able our end customers to be able to learn about our products in whatever way they want to. And the better we get at that, across all the touch points, the better off they are. So that's not going to stop anyway. If it turns out that There's some structural event that now all of a sudden consumers are going to stick with more digital.
Well, great, We were going to do that whether they do or don't, honestly. And same with the promotional side of the equation, If there isn't a need to promote, then why would you? But kind of at some level and that's effectively what we did for 2021, which stopped it Because we were having enough trouble keeping up with demand as it is, we certainly didn't want to explore it. So to me, promotion is a very tactical thing anyway, and Breville is, In general, not terribly promoted to begin with. So there's a couple of times a year when we'll do something, but We don't do it that often anyway.
So within that model, if demand keeps Driving to shelf and we don't need to. We'll still kind of invest in launching products and different things like that. But the promotion wasn't has never been a really big driver in our top line anyway. So I'm not quite sure how much benefit they're grabbing
The next question comes from Apoor Segal with UBS. Please go ahead.
Hey guys, thanks for taking my follow-up question. Just a question on the marketing and R and D as a percent of sales. It looks like in the presentation that you hit the 12 number in FY 2021. Could you please confirm that? And also, is that likely to go up further in FY22 or will it stay?
Hi, Joe. I'll tell you the honest truth, which is we didn't talk yet. So It's something I should have asked Martin. But when COVID started, I said we were not going to measure that metric, Because it doesn't given how we spent marketing, it's not the same in the way that we spent marketing dollars in 2017, 2018 2019. So I Martin, you may actually know the answer to the question.
I never looked because I said I wasn't going to look at that metric for During COVID, it was really when we got on the other side, then we're apples to apples. Martin, I'll hand it back to you if you've got more to add.
Not much more to add, Jim. But yes, Paul, I would say nearly, but not quite. So we're getting very close to the 12%, although we're not quite there yet. We spent a lot on IT rolling out the global platform this year, and that's why we've shown that spend as well. But on marketing And NPD together, not quite at our 12%, given the 24% sales growth this year.
We didn't quite make it.
Sure. Thanks.
I mean, just to kind of chase off the back of that, for me, it doesn't count. So which is it's great if we got close, but those marketing dollars were not spent The way you would expect them to be spent in a normal year. So if we put enough headroom in the business model to do it, that's great. But for me, we're not apples to apples.
The next question comes from Alexander Mees with Morgan. Please go ahead.
Thank you. Just a quick follow-up question. Martin, you mentioned that working capital is about $80,000,000 below equilibrium. I wonder if you could just split that out between Inventories and receivables, please?
Yes.
They're both a bit down. You can see inventory Stepped up towards the end of the year, but a lot of that was still on the water rather than in the warehouse. But receivables was particularly low At the end of the period, so I would be putting about half and half, which I haven't done the split out for sure, but about half and half, the inventories would like to rebuild Higher and receivables naturally will rebuild from a very low position because we had some constrained sales at the end of June. So probably Half and half, a little bit more inventory and a little bit less receivables.
That's very clear. Thank you.
Your next question comes from Annabel Diamond with Credit Suisse. Please go ahead. Good morning, Jim and Martin. A couple of quick questions for me. Just firstly, your comment around not announcing So that's the new product launches.
It's interesting. Obviously, our competitors are watching you far more closely now. Aside from that, are you able to talk To how your business might be building more competitive moats or how you might have to change strategy a little bit, sort of go unnoticed Or sort of more strategically enter region to avoid that attention?
So let's see what's the best way to answer that question. I would say we don't need to I haven't changed anything we're doing because we were naturally heading down that path Anyway, so it's just playing a rearview game instead of a forward view. So it hasn't it honestly I'm just Thinking about it real fine, let's do more of what we were going to do. And we're to be fair, we're running about as fast as the team can run. So I don't really think there's an adjustment we need to make.
Okay. Fair enough. And just secondly, obviously, you're seeing some cost increases and there's been some challenges sourcing parts. I just wanted to check, are you comfortable sort of with your footprint in terms of where you're sourcing manufactured products? Do you feel like you need to diversify sourcing at all?
I know in the past you said that where you are sourcing, Obviously, you're comfortable with that, but sort of given recent developments, do you see any sort of need to change that in the future?
Yes. I mean, I Anamal, I answered that question a little bit like Trump's tariffs, which is When you're in the middle of a COVID driven, ripple, like, it's kind of rippling all over and it's moving around in places. I don't know that, that drives long term thinking. It's kind of more just dealing with the short term, whatever it is, wherever it happened It's relatively random and how it's rolling around. So we can, Over the long term, think about diversification and that becomes a function of 2 things, which is 1, when do you have enough Flow out the front to support multi site manufacturing.
And then back end then becomes Kind of the longer task of where would you land it and do they have the capability and how do you build the capability and so forth. So I think that's A normal thing that happens when companies get bigger and the question just becomes a function of whether revenue whether Breville Has enough revenue and velocity to support kind of multi site manufacturing.
Okay, great. Thanks very much. Your next question comes from John Hinde with Wilsons. Please go ahead.
Good morning, Jim and Martin. Thanks for taking my question. On the new products, perhaps we could talk about the Baratza acquisition. You've said it's performing ahead of expectations and has brought some pretty good expertise to the category. Can we perhaps discuss some of the key learnings you've made so far from that acquisition, both, I guess, internally and externally?
And Where are you seeing the main traction and the potential you've got or the plans you've got for the brand in the medium term?
So you had me all the way until the last question, which is I'm not going to talk about future. For me, sorry, but it's your job to mind to say no. When I think about the learning, the cool part about it is and I know I talked about the platform a lot, But it was another opportunity to test the platform. And this is the first acquisition we have done Where we integrated into the new technology platform as opposed to the old one. And that was the big learning, Which is, look, it wasn't a huge company, but you still have to go through all the steps.
And That tells us that this new corporate platform that we're rolling out is what we thought it was, and that this can be you can fold in Acquisitions on a time line that we expected to be able to do that. So I think that's great. I think for the BIroxa Company itself, what I thought was just great, the 2 founders spent 20 years, building an outstanding coffee grinding range from kind of 100 and Whatever $50,000,000 $70 all the way up to almost $1,000 So we've got a really nice range, Which was something that on the Breville side, we have 1 and kind of 2, but basically 1. So I know we've talked a lot about category Thinking and so forth and what was really great was that with that one transaction, we were able to pull in what I thought was An important piece of the overall offense with a really outstanding team behind it.
Great. Thank you very much.
You bet.
Your next question comes from Joseph Michael with Morgan Stanley. Please go ahead.
Good morning, Jim. Good morning, Martin. Just had a question on the gross margin outlook. And I think you've sort of partly touched on this. But I'm just trying to understand the sort of cost pressures or the cost headwinds.
Will they be fully offset by price increases? So should we expect a flat Gross margin into 'twenty two or will the price increases only partially offset them so we could actually see gross margins contracting Into FY 'twenty two.
I'd say, Joseph, that the cost pressures continue to surprise me, especially on the Container costs seem to, at the moment, hold my bounds as to where they will go to. So we will definitely You're looking to recover through price, whether that will exactly balance those cost pressures, which I think some of which are temporary in nature It will depend on how fast and how long they'll ask for. This year, we balanced quite nicely. In fact, we're actually ahead of The equation, the tailwinds were stronger than the headwinds. Looking into next year, the headwinds appear to be Growing the momentum and we'll see what we can net what consumers will tolerate and naturally take in the marketplace.
So It's difficult to call at this stage. Suffice to say, it's a very hot topic for conversation and management within the group.
So maybe two things to add just to put a little bit of context around that. And Martin, you can chase this if you want. But So one important piece to internalize because I know everybody with reporting has the same same story of container costs. Logistics is a relatively small percent of our COGS. So first, you need to frame it within kind of what percent of the COGS are we Truly wrestling with.
And then the second bit is the function of currency and how that plays through where in some instances because of Currency movement, that delta kind of can net you out on one country or another. So if the currency strengthens by 5% and your costs inbound costs went by 5%, then you're right where you were. So I think You've got to figure out first what's the net impact. And then secondly, what percent of the cost are you actually dealing with? And it's a relatively small percent for us.
So Obviously, if prices go up, they go up, right? So we're just not Trump's tariffs were much bigger. That's why they tried it. That was a much bigger beast to wrestle than dealing with incremental cost mid-six line. But Martin, you might want to clean some of that up.
Yes. No, I'd agree with that directionally, Jim. We're not in terms of volumes of containers moving across the world, we're not huge. We probably shift around 6,000 or so containers a year in a normalish year. So normally, you wouldn't find us talking about Ocean Trade.
It wouldn't be a big part of our FOB or COGS at all. Some of the spot prices we're seeing at the moment Our large and therefore you probably will this year for 1 year own, you hear us talking a bit about it, Joseph, but It's not the biggest number in our P and L by any means.
Okay, got it. Thank you.
Your next question comes from Sam Haddad with Bell Potter. Yes.
Thank you. Just one follow-up
for me. Can you talk a bit more about acquisition opportunities? You mentioned before vendor expectations may be inflated given where sales are at. What's the update on that front? And Timing wise as to whether you think it's the right time to be more active on that front?
Look, I mean, as I've always said, you never get to decide when somebody is ready to sell at a price you're willing to pay. But what I would say is On the sales side of the equation, there's 2 kinds of sellers. Sellers that appreciate how different The last 12 months have been and effectively off historical trend and can contemplate that within the construct of A transaction and then the sellers who, whether they actually internalize it, one of the things that they don't. So at least for the 2nd group, I think when they get 12 months down the road and they get to comp it And the year after that, when they get back on kind of their CAGR loan, if you want to call it that, The gig is up and everybody is reasonable across all the bits and pieces. So that's kind of one theory.
The second theory becomes, look, this is a tactically challenging environment to work through And it's possible that Sun might not navigate it very well. In that instance, time is not on their side. So I think that may also get some players a bit more interested in finding someone to partner up with. Again, this is all abstraction. So we'll see if it comes through.
All right. Thank you.
There are no further questions at this time. And that does conclude your conference for today. Thank you for participating and you may now disconnect.