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Shriro (ASX:SHM) share price tumbles 7% despite profit surge

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Shriro Holdings Ltd (ASX: SHM) shares were tumbling today after the consumer product distributor announced its 2020 full-year (FY20) results late on Friday. By today’s market close, the Shiro share price had fallen 6.7% to 97.5 cents. 

Let’s take a look at how the company has been performing.

Shriro share price falls on 180% profit increase

The Shriro share price was tanking today despite the company reporting that total revenue across the group increased by 11.2% to $191.3 million during FY20. Shriro markets and distributes a range of brands spanning kitchenware, range hoods, instruments, watches, and BBQs. Although revenue was subdued during the first half due to COVID-19 lockdowns, the second half rebounded strongly.

The company noted that with people unable to travel, more spending went towards household items. Shriro witnessed significant growth in some of its products, such as the Everdure by Heston Blumental range, which grew by 65.2% compared to the prior corresponding period. 

Shriro also continued with its cost-cutting strategy during the year. Operating expenses declined by 11.8%, excluding government subsidies. The combination of increased revenues and reduced costs led to a substantial lift in profit. The company noted a 180% increase in net profit after tax to $18.2 million.

As a result of the plentiful profits, Shriro declared a final dividend of 4 cents per share fully franked. 

Outlook 

In looking to the future, Shriro remains cautious of further COVID-19 lockdowns. However, the company intends to reinstate its marketing expenditure in line with previous years to support future growth.

Additionally, management expects to add additional resources to capture market share. This is assisted by the continuing success of the Omega range, which was rolled out to retailers in the first quarter.

Furthermore, Shriro foresees international BBQ revenue to grow significantly as brand awareness of the Everdure range continues to grow.

At the end of December, the company recorded no debt and $17.6 million of cash on hand. 

Foolish takeaway

Despite underperforming today, the Shriro share price has risen by around 19% year to date and by more than 40% over the past year. Based on the current share price, Shriro has a market capitalisation of around $93 million.

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Motley Fool contributor Mitchell Lawler owns shares of Shriro Holdings Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. 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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