10 reasons why I think Breville Group Ltd should be in your portfolio

Breville Group Ltd (ASX:BRG) continues to outperform. Here are 10 reasons why I think it should be in your portfolio.

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Breville Group Ltd (ASX: BRG) engages in the development, marketing and distribution of small electrical appliances. The company's products are sold in a number of markets, with the principal markets being Australia, New Zealand, North America, and Hong Kong.

Breville's products are mostly traded under the Breville and Kambrook brands. It distributes the Breville brand in North America and the Asia-Pacific region. It is also the exclusive distributor for Philips personal care and garment care appliances in Australia and New Zealand.

Here are ten reasons why I think Breville should be in your portfolio:

1. Revenue trend

Its revenues are positive and growing.

Amounts in Millions 2011 2012 2013 2014
Revenue 393 427 486 541

2. Net profits trend

Its net profits are positive and generally growing.

Amounts in Millions 2011 2012 2013 2014
Net Profit 31 45 49 48

3. Return on equity (ROE)

Its return on equity has continually been around 20% or above.

Amounts in Millions 2011 2012 2013 2014
ROE % 20 27 26 23

 4. Debt

It has very little debt compared to its cash.

Amounts in Millions 2011 2012 2013 2014
Cash 27 53 68 70
Debt >1 (6) (11) (23)

5. Margins

It has great operating and net profit margins.

2011 2012 2013 2014
Operating Margin % 11.4 11.2 11.4 12.5
Net Profit Margin % 8.06 11.26 10.59 9.03

6. Cash flow

It has positive free cash flows.

Amounts in Millions 2011 2012 2013 2014
Operating cash flow 46 51 36 51
Capex 6 5 9 12
Free cash flow 40 46 27 38

7. Earnings per share (EPS)

Its earnings per share have grown and are forecast for growth.

Amounts in cents 2011 2012 2013 2014 2015 2016
Earnings per share $0.25 $0.36 $0.37 $0.38 $0.38 $0.42

8. Dividends per share (DPS)

Its dividends are around 4-5% and sustainable based on its free cash flow.

Amounts in cents 2011 2012 2013 2014
Dividends per share $0.17 $0.24 $0.26 $0.27
Dividend Yield % 5 5.48 3.64 3.97

9. Brand competitive advantage

Australia/New Zealand

Breville owns brands that are well known and number one or two in their category. Breville adopts a dual-brand strategy, with Kambrook a low-end product and Breville a mid-range brand with some upper-level products. This enables it to compete across the spectrum of price points.

North America

In North America, the group distributes the Breville range of internally designed and developed premium kitchen products through high end retail channels and its own online retailing platform. Shortly after the end of the 2014 financial year, the group acquired the USA-based culinary division of PolyScience, one of the world's market leaders in premier sous vide cooking products for the commercial sector.

Sous Vide involves a method of preserving food by partial cooking followed by vacuum-sealing and chilling.

UK

In Europe and the United Kingdom, the Breville brand is not owned or operated by the Breville Group. Within Europe, the group has a number of partners who market Breville's premium designed and developed products under their own brands.

In the United Kingdom, the group markets and distributes its premium designed and developed kitchen products under the new company owned brand Sage which is endorsed by Heston Blumenthal. The internationally acclaimed chef, Heston Blumenthal, in addition to endorsing the Sage brand is also Breville's global brand ambassador

10. New CEO

The recent appointment of Jim Clayton as the new chief executive officer is a good move given his extensive experience in the areas of consumer products, technology and innovation.

Mr Clayton was vice president of LG's new business division in home entertainment. He oversaw the company's entry into new markets and, given Breville's focus on international expansion and current spread of businesses across Australia and New Zealand, North America and rest of world, Mr Clayton's appointment will be a good fit.

Verdict

There's a lot to like about Breville. Any company that can maintain a high return on equity, while having little or no debt is great news for Buffett style investors. Breville is expected to report its full years results around August 28, and even if its revenue/earnings are down a little, it's worth 'cutting them some slack' until the new CEO can start to have an impact.

Motley Fool contributor John Hopkins has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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