BRG - Breville Group

skc said:

A bit harder with appliances. There are innovation but really on the margin. With an iphone, if I don't upgrade I can't load new apps and get better cameras. With a toaster, my sliced bread is still the same shape and fit into a toaster made in the 70s. My water still boils the same way into the kettle.

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I know it is a bad comparison to Apple but reliability is important, people won't pay premium when they experience reliability issue, it certainly the case for me ....I found a brand doesn't last I tend not to buy it;

I dont expect it to last forever but long enough for you to satisfied that it build to last 5-10 years is an acceptable time frame.

I certainly accept if I buy cheap and nasty stuff I expect it can blow up any time and have no issue with it
but for me to pay quality and premium I expect it to last.

another example which I think is more closer to the mark, I had a holden about more than a decade ago when they on fire, first Holden and will be the last I ever own in this lifetime.

it is a good car price is the same as Japanese counterpart, but I have so many little issues that pretty much rule me out from ever buying holden again... I since has 3 Japanese cars and would again buy another Japanese car.

How many aussie owning holden today? not many and I reckon it come down to they build car that won't last and it pay no attention to little details that can be annoying.

it not about them not building the right car, they have all sort of models, small, large, SUV but the public has move on because their stuff don't last.

ROE said:

How many aussie owning holden today? not many and I reckon it come down to they build car that won't last and it pay no attention to little details that can be annoying.

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Holden is the second highest selling make in Australia.

McLovin said:

Holden is the second highest selling make in Australia.

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Do you think that's a 'national interest' phenomenon because until recently it has been an Australian icon of manufacturing?

another example which I think is more closer to the mark, I had a holden about more than a decade ago when they on fire, first Holden and will be the last I ever own in this lifetime.

it is a good car price is the same as Japanese counterpart, but I have so many little issues that pretty much rule me out from ever buying holden again... I since has 3 Japanese cars and would again buy another Japanese car.

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Me also. I bought an Astra because it was a medium sized wagon and allows for dog to be confined to tail space with cargo barrier instead of having dog hair throughout the car. Previously had Japanese or European cars.
The Holden cuts corners with crap like flimsy plastic trim at front that just falls off for no apparent reason, and wide mirrors that come off in pieces if they brush by a shrub. Never again.

Julia said:

Do you think that's a 'national interest' phenomenon because until recently it has been an Australian icon of manufacturing?

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I doubt it. Ford seems to have been pummelled over the last ten or so years.

Julia said:

Me also. I bought an Astra because it was a medium sized wagon and allows for dog to be confined to tail space with cargo barrier instead of having dog hair throughout the car. Previously had Japanese or European cars.
The Holden cuts corners with crap like flimsy plastic trim at front that just falls off for no apparent reason, and wide mirrors that come off in pieces if they brush by a shrub. Never again.

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The Astra is a European car. It's just an Opel with a Holden badge on it. Depending on where in the world you happen to be an Astra is a Chevy/Vauxhall/Saturn/Holden/Opel. Made in Belgium, I think.

OK, now I'm even more disappointed! All the other European cars I've had were great. Must admit a different price bracket, however.

McLovin said:

Personally, I wouldn't buy anything electrical that's made in Italy. They're absolutely hopeless at electrics, doesn't matter if it's a car or a cheese grater.

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You own/have owned an electric cheese grater?

tinhat said:

You own/have owned an electric cheese grater?

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My Mum had one. Something like this, which she bought in Italy. Can't remember the brand though.

Notwithstanding the significant price drop, it's still a fair bit higher than my calculation for fair value, so I'm not purchasing it.

Results seemed to be pretty good to me, but I note that their ROE fell almost 200bps in 12 months while their net debt to equity fell about 100bps in 12 months.

Interestingly, BRG's equity at 31 December 2013 was greater than it was at 30 June 2014, although BRG appeared to pay off some debt in the six months interval.

Anecdotally, a lot of chatter in the break-out room at my employer is about the Thermomix. Everyone seems to desire a Thermomix because it can (apparently) "do it all", although it's quite expensive at a tick under $2,000 apparently.

McLovin said:

Holden is the second highest selling make in Australia.

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mostly commonwealth/state/local government purchase
none of the people I know own a Holden

McLovin said:

Personally, I wouldn't buy anything electrical that's made in Italy. They're absolutely hopeless at electrics, doesn't matter if it's a car or a cheese grater.

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Have you ever own their espresso machine? the smaller manufacturer of these, they are awesome like Ferrari of car

McCoy Pauley said:

Anecdotally, a lot of chatter in the break-out room at my employer is about the Thermomix. Everyone seems to desire a Thermomix because it can (apparently) "do it all", although it's quite expensive at a tick under $2,000 apparently.

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Expensive and people pay for them, I know people who has them but my wife say she doesnt use enough to justified the purchase, top notch German made stuff and it build to last
that the theme people who buy these stuff they want quality and they want it to last.

American who buy upper end stuff is fairly demanding lot and if you cheat them on reliability they aren't coming back.

I will monitor the American sale, if it ain't picking up they are losing the premium battle before they even gain a foothold..

It seems that many still think BRG is expensive and above their fair value calculations.

While I agree that it is not cheap, I do not think its expensive at the moment...not much of a margin of safety but not overly expensive in my book.

Of course this is entirely dependant on the individual assumptions that one chooses and the rate of success that he/she chooses to ascribe to to the newly formed international operations.

Some other things that influence the BRG valuation is the $70m cash balance, the treatment of R&D - which isn't a big factor as R&D spend is only ~$8m, and the treatment of operating leases...which have an off-balance sheet value of over $25m, which if capitalised effectively double the debt outstanding.

Another factor that I find interesting to contemplate is the level of reinvestment that BRG will have to make over the coming years to sustain revenue growing at double digit rates. As previously spoken about with BRG, they do alot of their investment in the brand via the PnL through advertising and marketing. Looking at depreciation and amortisation to get a rough feel for stay-in-business-capex and then comparing this with actual capex spend since 2009 it can be confirmed that this seems to be the case. The capex is figure was actually running a little lower than D&A for a few years before ticking up a bit in the last 2 FY periods. Usually, I would expect a company growing at such rates would have capex much higher than D&A.
Thinking optimistically, if capex can remain close to D&A then the reinvestment required through this extended growth phase will not hamper the ability of the company to generate strong FCF. Watching the operating margins would then be equally important to see how much the company is investing in the brand and if the payoffs are continuing with increasing sales.


As a side note: It will be interesting too see if this trend of increasing capital expenditure continues, and perhaps shows a trend of management taking some expenses away from the PnL and onto the balance sheet (thanks McLovin for drawing my attention to this in the PVFCF thread).

Just some ramblings as I try to get a fuller understanding of the company and the accounts...

Julia said:

OK, now I'm even more disappointed! All the other European cars I've had were great. Must admit a different price bracket, however.

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I think Euro car the reliability are the upper end model and the lower end the Japanese car seem
to rule the street though toyota and the big guys seem to have some issues lately but

the smaller one like Mazda and Subaru still very good ... I got a Mazda 8 years on now, not a single issue.
when I had a Holden year 2 small thing start to play up, I decided to end their life early and got rid of it in year 4

ROE said:

Have you ever own their espresso machine? the smaller manufacturer of these, they are awesome like Ferrari of car

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No, I don't drink coffee. I own a coffee plantation though.

ROE said:

I think Euro car the reliability are the upper end model

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Hmm...Have you ever owned an upper end model? My experience owning an M3 was anything but reliability. They work when they work but they need a lot of TLC and you better bring your cheque book when it's time for a service.

The low end Japanese cars a light on features but the car will keep going and going. The average punter who finances their car doesn't care about if they can own the car for 8-10 years because they'll be getting rid of it at the end of the lease. So there's a tradeoff, some people want more features others want a car that they'll own for twenty years. There's so many segments in the car market, I don't think you can make broad statements about the average buyer.

PMV increased their stake. That gives me a bit more confidence around the CEO's departure.

McLovin said:

PMV increased their stake. That gives me a bit more confidence around the CEO's departure.

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Yeah it is a vote of confidence. They didn't rush in either, buying started on 26th after the fall on the 21st. So enough time for Sol Lew to ask a few questions at least.

It's the first time they have increased since 2010, so perhaps it gives a bit of insight into their intentions going forward, which has to be considered seeing as they own nearly a third of the company...

BRG ran really hard on the back of the Premier Inv. purchasing...right up to $8.20ish...but has since falling right back and is testing the slump of the first day since the result.

Interestingly NVT has also slumped quite hard. Both companies are regarded by many as high quality, have suffered big SP plunges only to recover...and now slump again going ex-div..

I think the fall will continue for a bit. Sales seem to not be very strong, and a big focus on the decrease on juicing in the US. Underlying growth good of course, and seems to have plenty of room to grow the business long term, but I think the FY15 results (at least first half) won't be great. Increase in divvy despite profit reduction seems a bit odd, but I guess it's to keep punters like me happy.

Looking to buy in - just hoping it gets cheaper.

Could somebody tell me why they were adversely affected by USD increase? I would have thought that's a good thing...

herzy said:

Could somebody tell me why they were adversely affected by USD increase? I would have thought that's a good thing...

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When they repatriate USD profits, they only get 86c Aussie for each USD;
If the Aussie was stronger, they'd get more.

pixel said:

When they repatriate USD profits, they only get 86c Aussie for each USD;
If the Aussie was stronger, they'd get more.

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Wouldn't you get 14% MORE profit converting USD (profits) to AUD now than when they were at parity?

When they repatriate USD profits, they get 1.14 AUD, not .86 (I think you have that the wrong way around).