Choosing investments is a complicated process. Proper research is an important tool in the process, whether you're a basic amateur or a seasoned investor.
Understanding your investments allows you to keep a┬ábird’s┬áeye┬áview┬áon your portfolio┬áto┬ámake┬áquick┬ádecisions┬áon┬áhow to react to any changes in its performance.┬áBelow is an example of how┬áwe would analyse a share’s┬áreport┬á(also known as┬áa stock report).
Looking at┬áBreville’s┬áoverview:┬áBoiling off the cold brew trend┬á
Breville┬áwas┬áfounded in Sydney in 1932 as a local Australian┬ábrand,┬áspecialising in┬ákitchen appliances.┬áToday, it has an immense global presence across 70 countries including the US, Canada, China,┬áSouth Africa and Israel. The company┬áaims┬áto┬áenhance people’s lives through thoughtful design and brilliant┬áinnovation,┬áempowering them to do things in their own kitchen more impressively,┬áor easily,┬áthan┬áthey thought possible.┬á
Breville┬áannounced their underlying FY21 Earnings Before Interest and Tax (EBIT) of $136.4┬ámil.┬áThis figure┬áis up 24.1% year on year (YoY) and in line with┬áthe┬ácompany guidance. The Net Profit After Tax (NPAT) of $91.0┬ámil,┬áwas up 25% from the previous financial year and in line with analysts’┬áforecasts.┬á
Looking at┬áBreville’s figures┬á
Breville’s┬áfigures show┬áa strong revenue growth throughout FY21.┬áThe company’s┬áglobal┬áproduct┬ásegment achieved 37.0% constant currency revenue growth,┬ádespite the weakened US dollar┬áduring the year.┬á┬á
The regions contributing strongly to the growth were America, up 27.6%, Europe, Middle East and Africa regions up 58.4% and Asia-Pacific regions increasing by 37.4%. We can hypothesise that this growth was stimulated by consumer demand, driven by work-from-home populations, attributable to the COVID-19 pandemic. 
Travelling across the world
Despite the pandemic impacts,┬áBreville┬ástill┬ásaw strong global expansion across the┬áUK, Germany,┬áAustria,┬áBenelux,┬áSwitzerland,┬áSpain┬áand┬áFrance.┬áIn the FY21 fourth quarter,┬áBreville┬áalso┬álaunched in Portugal,┬áItaly and Mexico.┬áBreville’s┬ásuccessful geographic expansion managed to offset the impact of intermittent supply challenges that hampered its competition in FY21.┬á
Noting the company’s hurdles
Although the company’s inventory levels improved from $154m to $217m, a third of this inventory was still┬áΓÇ£goods in transitΓÇ¥,┬ádetrimentally affected by┬áthe Suez Canal incident and partial shutdown of the China Yantian port.┬á┬áIt’s important to┬ánote that many parts of the world are still experiencing┬áspill over┬áeffects┬áfrom┬áthese┬álogistical┬áchallenges.┬á┬á
Breville itself has also acknowledged other obstacles that include issues with sourcing parts for manufacturing its products and increasing supplier costs. 
Looking to the future
With the sales bonanza of FY21, CEO Jim Clayton’s plans of increasing┬áBreville’s┬áannual investment in the growth initiatives of marketing and product development┬á(from 8% to 12%)┬áwere┬ásuccessful, and┬áBreville┬áis nearly at the 12% mark. If┬áBreville┬áis able to maintain this ratio and deliver new, innovative products for FY22, it should be able to┬áincrease selling price┬áand offset input cost inflation.┬á┬á
With nearly $130m in the war chest, Breville also has the option to continue to fund entry into new markets and entertain possible mergers & acquisitions.  
Given supply chain risks and a potential transitional demand outlook, big guns such as Bell Potter and Morgans have lowered growth forecasts. They advise that,┬áalthough┬áthis┬áevidence may present as┬áa positive view on┬áBreville’s┬álong-term growth prospects, they are mindful of the near-term macro risks and thus the valuation.┬á
Interested in finding out more? Speak to one of our team on 1300 815 921 or at info@greenassociates.com.au
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