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Bang & Olufsen shares jump after strategy update
August 17, 2011 / 2:24 PM / 6 years ago

Bang & Olufsen shares jump after strategy update

STOCKHOLM (Reuters) - Shares in Bang & Olufsen A/S (BO.CO) jumped on Wednesday after the Danish luxury electronics maker said it hopes to triple sales and boost margins to pre-crisis levels on the back of a five-year strategy plan that includes a shift in focus toward China.

B&O said the effort to boost its core audio-video systems business would include more cooperation with partners in product development and more shops in developing markets such as China but fewer in mature markets.

“A substantial part of the future sales growth is to be driven by a geographic refocus toward growth markets. This includes an aggressive growth strategy in China,” B&O, whose main markets are Denmark and Britain, said in its fiscal full-year report.

Shares in the group, which had plunged earlier this month to a 10-month low, rose 15 percent at 8:35 a.m. EDT while the wider market in Copenhagen was down 1 percent .OMXCPI.

As part of the strategy, B&O said it would also launch a new category of stand-alone products to be sold in Apple Inc (AAPL.O) shops and online toward the end of the year.

The audio-video business, which accounts for most of group sales, makes sound systems and high-end televisions such as the top-of-the-line 103-inch BeoVision4 TV that costs roughly 100,000 euros ($143,984).

Other products include telephones, digital media and car audio equipment. The latter, in particular has been a growth business, supporting group turnover in recent quarters while audio-video has sagged.

“The aim of the strategy plan is to realize the company’s full potential, which is believed to be in the range of 8-10 billion crowns in turnover with EBIT margins exceeding pre-crisis levels of 12 percent,” B&O said in its fiscal full-year report.

Full-year 2010/11 revenue rose to 2.87 billion crowns, so the strategy target represents as much as a tripling of revenue.

AMBITIOUS PLAN

“It’s a very ambitious plan and, if it is realized it will multiply the market value by five,” Jyske Markets analyst Rune Moller said, repeating a “buy” rating on the shares.

“The company, to a larger extent, will focus on the things they are good at, which is mainly sound and design, and to a larger extent use outsourcing for other parts of the business,” Moller said in a note to clients.

The speed of implementation of the plan will depend on how group finances develop, B&O cautioned.

During the first two years, attention will be on regaining a leading position within its key strength areas and building a more effective, global organization, it said.

B&O, which has grown as a supplier of audio systems for upmarket cars including Aston Martin, Audi, BMW and Mercedes, said it would also strengthen its automotive business.

Fourth-quarter pretax profit shrank to 8 million crowns ($1.5 million) from 22 million a year earlier, lagging an average forecast of 17 million in a Reuters survey of analysts, as sales shrank 9 percent.

B&O said the drop should be seen in light of product launches and the soccer World Cup that boosted year-ago sales.

It said its main markets Denmark and Britain shrank in the year, but markets in Asia, North America, Germany, France, Belgium, Russia and Norway grew.

The global luxury goods market has been surprisingly buoyant in spite of concerns about consumer spending will slow. Last week, sources said fashion brand Hugo Boss BOSG_p.DE would raise its margin target, helped by the vigor of the market.

B&O on Monday said it expected a full-year 2011/12 pretax profit of around 100 million crowns, up from 40 million in 2010/11, with sales exceeding 3.0 billion compared with 2.9 billion.

($1 = 5.174 Danish Crowns)

($1 = 0.695 Euros)

Editing by David Holmes

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