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UPDATE 1-Bang & Olufsen again considering capital raising to fund growth outside Europe
June 19, 2014 / 10:27 AM / 3 years ago

UPDATE 1-Bang & Olufsen again considering capital raising to fund growth outside Europe

* Firm looking for fresh capital to boost growth

* Will be hard for company to do so - analysts

* Shares rise 8.5 percent (Adds details, analyst comment, share price)

By Shida Chayesteh

COPENHAGEN, June 19 (Reuters) - Denmark’s Bang & Olufsen said on Thursday it was considering raising capital via the stock market, a move key for funding its plan for growth, particularly in the United States, China and emerging markets.

It is the second time in three months that the company has said it is investigating such a move, to try to overcome difficulties in Europe, where a long recession and austerity budgets put consumers off buying luxury items such as the expensive, high-quality audio systems and televisions Bang & Olufsen produces.

The group, which issued two profit warnings during its 2012/13 financial year because of sluggish European sales, is fighting back with restructuring efforts, growth in emerging markets and new, cheaper products

Bang & Olufsen, which was loss-making in the last financial year, said fourth quarter revenue was 801 million Danish crowns ($145.80 million), compared to 740 million crowns in the same quarter in the 2012/13 financial year a year ago, adding that it still expected to break even this year but now expects a rise in operating profit margin next year.

The company did not give any profit numbers but said fourth quarter gross margin was significantly higher than in the same quarter a year earlier.

Shares in the company jumped 8.5 percent in early trade and were up 7 percent at 69 crowns by 1024 GMT, though volume was thin. The Danish benchmark index was flat.

However analysts remained cautious.

“We continue to find B&O aggressively valued and do not believe that the release supports the very positive share price reaction today,” brokerage Nordea said in a note to clients.

Aanalysts from both Sydbank and Alm Brand Bank said they expected the company would struggle to raise money despite its improving results outlook.

“The results are better, yes, but it’s not enough to say they have overcome all hurdles,” Sydbank analyst Soren Lontoft said.

Although the economic outlook is improving in Europe and elsewhere, analysts say Bang & Olufsen’s new, more affordable brand, still lacks innovative products.

“If Play (B&O’s cheaper brand) is to generate growth, we must soon see some new products,” Lontoft said, adding that the challenge for B&O is to get the younger generation into their stores.

As an example of how tough business in the sector is B&O’s German competitor in the high-end TV market, Loewe AG , filed for insolvency in October last year and agreed in March to be taken over by Munich-based investor Stargate Capital.

“(Bang & Olufsen) tried to increase the capital base three month ago without luck. I don’t see anything in this statement that can change that, so I expect it will be difficult for the company,” said Alm Brand analyst Jesper Christensen.

$1 = 5.4938 Danish crowns Additional reporting by Ole Mikkelsen; Editing by Sophie Walker

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