University Managerial Finance Report: Breville Group Analysis

This report presents a comprehensive managerial finance analysis of the Breville Group. It begins with an introduction and company overview, followed by an assessment of the company's risk profile, differentiating between systematic and unsystematic risks. The core of the report focuses on the company's financial performance, evaluating profitability, liquidity, solvency, and efficiency ratios over a three-year period. The analysis extends to the time value of money, considering its implications for accounts receivable and long-term debt. The report also examines the company's sources of finance, contrasting equity and debt financing, and concludes with an overview of Breville's pay-out policy. Overall, the report offers a detailed evaluation of Breville's financial health and management strategies.

Running head: MANAGERIAL FINANCE
Managerial Finance
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Introduction................................................................................................................................2
Company Overview...............................................................................................................2
Risk Profile.............................................................................................................................3
Financial Performance...........................................................................................................4
Time Value of Money............................................................................................................6
Sources of Finance.................................................................................................................7
Pay-out Policy........................................................................................................................7
Conclusion..................................................................................................................................8
References..................................................................................................................................9
Appendix..................................................................................................................................11

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Introduction
The financial analysis of the Breville Group was conducted for the purpose of
analysis and relevant details were extracted for the company for analysing the financial
performance. The financial data for the company for a set of three-years were taken for the
purpose of analysis. The Breville Company focuses on premium kitchen appliances where it
makes a unique designed and developed product to enhance simplicity. Two great
Entrepreneurs from Sydney founded Breville in 1932. Since the year 1960, the aim of the
company was to drive innovation in daily working life. The Company’s focus on delivering
its customer the best premium class kitchen appliances and have made the management of the
company focus on its research and development and challenges for overcoming the new
technology innovation ongoing in the global markets.
Company Overview
Breville has been a major player in the kitchen appliance segment, it has his presence
in 65 countries through its group companies, and it collaborates with other companies for
distribution and as a licensing partner. Breville caters its products also by becoming an
appliance partner for the food and beverages company to provide them with the best products
they require like the Breville company tied up with the Nespresso Coffee Machines to
provide them with the Equipment’s or Assets they require. The major goal of the company is
to capture a significant market share on a global scale basis in the small house appliances
sector (Breville Group Ltd, 2019).
The company’s product distribution is simple through a local third party distributor or
through its group companies like:
1) Polyscience based in North America caters to both commercial and professional markets
by providing its temperature controlling equipment that helped the Breville Company

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develop products such as smoke gun, vacuum sealer, cold plates and vacuum evaporation
systems.
2) Aquaport that the Breville Company acquired from Australia provides a wide range of
Water and Air Purification products.
3) Kambrook was the other company the company acquired to expand its portfolio of
products that helped it serve products such as heating and cooling, vacuums and many more.
4) Stage owned by Breville Global Kitchen products helped the company deliver its
innovation in Europe and the rest of United Kingdom.
Risk Profile
Risk assessment for the company can be done with the help of the systematic risk
which is directly related to the economy or the industry where macro-economic and industry
factors plays a crucial role. On the other hand side the unsystematic risk for the company can
be well defined with the help of the company factors relating to production, revenue cost and
management factors.
Systematic Factors/Risks:
The systematic risk for the company can be in the form of rising inflation, interest
rates and changes in the policy of the government that can significantly affect the operations
of the company. Changes in the macro-economic factors of a company can significantly
affect the operations and the financial performance of a company. The financial performance
of a company can significantly affected with the rise in inflation rate and level of inflation
rates. If there is a significant rise in the interest rate the same can affect the interest cost for
the company whereby the profitability in the income statement of the company can come
under pressure for the company. On the other hand the rise in the inflation rate will not

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increase the raw material cost for the company but also increase the selling price of the
various products that are sold by the company. The rise in the selling price of the company
will make the prices of the product more competitive in the international market and the same
can similarly affect the revenue base for the company.
Unsystematic Factor/Risk
The unsystematic risks or factors for the company can be in the field of the company
specific risks in relation to Breville Company. The approach of management towards the
company, the cost effective approach in the form of utilisation of resources and policies
development of the company are some of the key factors. If the assets and resources deployed
in the company are not optimally utilized by the management of the company with the help of
the policies of the company then the same will be significantly affecting the operations of the
company and the financial performance of the company.
Risk Management
The risk management of the company should be such that it helps the company in
tackling the hurdles faced by the company in their operations. Various factors and
considerations needs to be accounted for while designing the risk management policy of the
company.
Financial Performance
The financial performance of the Breville Company can be well evaluated with the
help of the financial ratios including the profitability, liquidity, solvency and market
valuation ratios for the company (Robinson et al., 2015).

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Profitability Ratios: The profitability position of the company were evaluated with the help
of the net profitability generated, gross margin of the company and the return generated by
the company for the shareholders of the company (Altman et al., 2017).
Gross Profit Margin: The gross profit margin for the company shows the operating margin
of the company which was around 32.78% in the year 2016 that steadily increased to around
35.60% in the year 2018. The rise can be well contribute to the rise in revenue for the
company (Uechi et al., 2015).
Return on Equity Shareholder’s: The return generated by the company for the shareholders
of the company has been around 20.39% in the year 2016 that marginally increased to around
20.66% as the rise in the equity base of the company was much higher than the rise in net
profitability of the company (Boyas & Teeter, 2017).
Liquidity Ratio: Liquidity ratio shows the solvency position of the company in managing
short-term obligations of the company.
Current Ratio: The current ratio for the company shows the coverage of the current assets
for the current liabilities of the company. It also reflects the paying ability of the Breville
Company in paying off the liabilities. The current ratio for the company was around 2.39
times that increased to around 2.90 times in the year 2018 reflecting wide coverage of assets
(Rakićević et al., 2016).
Activity/Efficiency Ratio
Inventory Turnover Ratio: The ratio reflects the ability or days taken by the company in
quick transformation of inventory into sales. The inventory turnover in days for the company
was around 101 days in 2016 which has steadily fallen to around 94 days a positive outlook.

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Receivable Turnover Ratio: The receivables turnover ratio for the company shows the
ability of the company in well reflecting the time taken by company in collecting its receipts.
The average time taken by the company was around 57 days in 2016 and the same increased
to 68 days in 2017 and to 59 days in the year 2018. The same is not good for the company
reflecting the inability of the company in collecting the due outstanding amount of the
company.
Solvency Ratio:
The solvency ratio for the company shows the debt of the company in contrast to the
total assets of the company.
Debt to Total Assets: The debt to total assets of the company shows the overall debt in
contrast to the total asset of the company. The total debt of the company in percentage terms
was around 33.51% in 2016 and the same increased to around 36.40% in the year 2018. The
same shows that the financial risk inherited in the company has increased with the rise in the
debt of the financial position of the company (Rodrigues & Rodrigues, 2018).
Time Value of Money
It is important to consider various financial perspective when evaluating financial
position of a company and the same can be in the field of the financial management done by
the Breville Company. Accounts Receivables or the Long term debt of the company can be
well considered for understanding the implication of time value of money. In the one hand
side the company pays interest for getting loans in the form of long-term debt for the
company and on the other hand side the Breville Company is giving credit sales whereby
receiving the amount of sales at a later point of time (Chan & Rate, 2018). In this situations
the accounts receivable collection period for the company should be very minimal where easy
collection of cash can be done and the same amount be invested for earning superior returns.

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On the other hand rising long-term debt as seen in the Breville Company and significant
increase in the receivable collection period can significantly affect the financial performance
of the company (Muda & Hasibuan, 2018).
Sources of Finance
It is essential that the funding of the operations and the investing activities of the
company be done by the equity shareholders of the company or with the help of debt holders
of the company in the form of long-term loans. While examining the Breville Company it
was found that the Breville Company has applied both equity and debt financing sources for
the purpose of funding the financing sources of the company. While examining the overall
total liabilities of the company with equity shareholders of the company it was found that the
company has reliably increased debt funding from 50% in year 2016 to 61% in 2017 and to
57% in the year 2018 (Annual Reports.com, 2017).
The sources of finance is well applied by firstly sing the various options available
with the company and utilising the same for the purpose of financing (Gadenne, 2016).
Financial risk and the business risk of the company are the two important perspective that
should be well considered while selecting equity or debt sources. The current debt level for
the company stands out at 30% however the company should execute the risk benefit analysis
of the same and keep the same at a very minimal rate (Balaban, Župljanin & Ivanović, 2016).
Pay-out Policy
The pay-out policy that is followed by the company is the constant dividend pay-out
policy whereby the company has paid out the same constant percentage. While assessing the
pay-out percentage followed by the company it was seen that on a continuous basis a sum of
74% of the EPS has been paid out as the dividends for the company. As the revenue base for
the company has increased along with the same the equity base for the company has

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increased which has made the DPS for the company remain the same in the three-years of
time frame. There are various factors and considerations that are made by the company while
paying out the dividend pay-out strategy for the company (Annual Report, 2018).
It is well important and safe to keep a constant pay-out policy where the company
pay-out the dividends of the company at a well stable rate so that the expectation and the
required rate of return can be well meet by the company.
Conclusion
The financial analysis of the company was conducted by taking the three year trend of
the company where the profitability position and the financial performance of the company
stands out to be well stable and growing. On the other hand the financial risk of the company
also in terms of the overall debt was also very less for the company. On an overall basis the
company’s financial position and performance were found to be stable and consistent.

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References
Altman, E. I., Iwanicz‐Drozdowska, M., Laitinen, E. K., & Suvas, A. (2017). Financial
distress prediction in an international context: A review and empirical analysis of Altman's Z‐
score model. Journal of International Financial Management & Accounting, 28(2), 131-171.
Annual Report 2018. (2018). Retrieved from http://member.afraccess.com/media?
id=CMN://2A1107645&filename=20181002/BRG_02029546.pdf
Balaban, M., Župljanin, S., & Ivanović, P. (2016). Sources of Finance for Entrepreneurship
Development. Economic Analysis, 49(1-2), 48-58.
Boyas, E., & Teeter, R. (2017). Teaching Financial Ratio Analysis using XBRL.
In Developments in Business Simulation and Experiential Learning: Proceedings of the
Annual ABSEL conference (Vol. 44, No. 1).
Breville Group Ltd - AnnualReports.com. (2017). Retrieved from
http://www.annualreports.com/Company/Breville-Groupltd
Breville Group Ltd. (2019). Retrieved from https://brevillegroup.com/
Chan, K., & Rate, E. A. I. (2018). & 6 The Time Value of Money. Financial Management.
Gadenne, L. (2016). Tax me, but spend wisely? Sources of public finance and government
accountability (No. 2068-2018-1275).
Muda, I., & Hasibuan, A. N. (2018). Public Discovery of the Concept of Time Value of
Money with Economic Value of Time. In Proceedings of MICoMS 2017 (pp. 251-257).
Emerald Publishing Limited.

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Rakićević, A., Milošević, P., Petrović, B., & Radojević, D. G. (2016). DuPont financial ratio
analysis using logical aggregation. In Soft Computing Applications (pp. 727-739). Springer,
Cham.
Robinson, T. R., Henry, E., Pirie, W. L., & Broihahn, M. A. (2015). International financial
statement analysis. John Wiley & Sons.
Rodrigues, L., & Rodrigues, L. (2018). Economic-financial performance of the Brazilian
sugarcane energy industry: An empirical evaluation using financial ratio, cluster and
discriminant analysis. Biomass and bioenergy, 108, 289-296.
Uechi, L., Akutsu, T., Stanley, H. E., Marcus, A. J., & Kenett, D. Y. (2015). Sector
dominance ratio analysis of financial markets. Physica A: Statistical Mechanics and its
Applications, 421, 488-509.
Appendix

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1) Ratio Analysis
2018 2017 2016
Ratio Absolute Absolute Absolute
Category $ Values $ Values $ Values
Current assets 3,15,705 3,00,934 2,58,512
Current liabilities 1,08,801 1,16,946 1,08,204
Ratio Ratio Ratio
2.90 2.57 2.39
Highly liquid current assets 2,16,036 1,84,372 1,50,790
Current liabilities 1,08,801 1,16,946 1,08,204
(EXCLUDES INVENTORY AND PREPAID ASSETS)
Ratio Ratio Ratio
1.99 1.58 1.39
Cost of sales 4,20,088 4,05,465 3,87,598
Average inventory 1,08,116 1,12,142 1,07,722
Ratio Ratio Ratio
3.89 3.62 3.60
365 365 365 365
Inventory turnover 3.89 3.62 3.60
Ratio Ratio Ratio
94 101 101
Net Credit Sales 6,52,348 6,05,733 5,76,576
Average net receivables 1,05,418 1,12,142 89,478
Receivables turnover
Ratio Ratio Ratio
6.19 5.40 6.44
365 365 365 365
Receivables turnover 6.19 5.40 6.44
Ratio Ratio Ratio
59 68 57
Profit after tax 58,519 53,834 50,172
Average ordinary shareholders' equity 2,83,235 2,59,609 2,46,005
Ratio Ratio Ratio
20.66% 20.74% 20.39%
Profit after tax 58,519 53,834 50,172
Average total assets 4,31,891 3,93,743 3,69,967
Ratio Ratio Ratio
13.55% 13.67% 13.56%
Gross profit 2,32,260 2,00,268 1,88,975
Sales revenue 6,52,348 6,05,733 5,76,573
Ratio Ratio Ratio
35.60% 33.06% 32.78%
Profit after tax 58,519 53,834 50,172
Net Sales 6,52,348 6,05,733 5,76,573
Ratio Ratio Ratio
8.97% 8.89% 8.70%
Profit before interest & tax 1,00,211 89,789 83,412
Interest expense 3,580 2,421 2,549
Ratio Ratio Ratio
28 37 33
Total liabilities 1,62,114 1,58,823 1,23,962
Total assets 4,45,349 4,18,432 3,69,967
Ratio Ratio Ratio
36.40% 37.96% 33.51%
Ratio Ratio Ratio
45.00 41.40 38.60
Share price 11.63 10.33 7.82
EPS 0.45 0.41 0.39
Ratio Ratio Ratio
26 25 20
Financing Debt to Equity Debt/Equity 57% 61% 50%
Payout Dividend Pay-Out Ratio DPS/EPS 74% 74% 74%
Market
Earnings per share (EPS) Given Basic EPS disclosed in the income statement
Price-earnings ratio
Profitability
Return on ordinary
shareholders' equity
Return on assets
Gross profit rate/margin
Profit margin
Ratio Analysis
Liquidity
Activity
Solvency
Times interest earned
Debt to total assets
Company: Breville Group Ltd Formula
Current ratio
Quick ratio
Inventory turnover
Average days in inventory
Average days receivables