1. PROFITABILITY RATIOS Profitability ratios which are concerning sales, expenses, equity, and assets, are utilized to calculate and determine a company's ability in producing profit or loss for a fixed period. 1.1. Revenue Growth Growth of revenue is the rise (or decline) in revenues of a firm over a fixed period. Revenue growth from 2017 to 2019 20.00% 15.00% Breville Electrolux Industry 16.50% 10.00% 5.00% 0.00% -5.00% 5.14% 0.80% 2017 -3.28% 7.70% 1.70% 2018 -0.99% 2019 -4.15% -2.46% -10.00% In terms of Breville during 2017-2019 period, the company had a good performance in revenue with an upward trend. While revenue growth of industry continuously dropped from
2017 to 2019, the revenue growth rate of Breville increased from 5.14% in 2017 to 16.5% in 2019. The growth of revenue in Electrolux experienced a downward trend for three years. However, the market scale of Electrolux is larger than that of Breville, which means that while Breville has more room to develop and boost sales in other markets, Electrolux finds it hard to improve its revenue. On the other hand, in 2015-2019, Household Appliance Wholesaling industry in Australia also witnessed negative changes which lead to a significant drop in revenue growth. First, the depreciation of the Australian dollar has placed a burden on profitability of the industry because it makes imported products become more expensive and results in an increase in material price. Moreover, the rise in competition from retail and online sales put pressure on wholesale companies to decrease product price to compete that leads to a drop in revenue growth of the industry. While Electrolux had to face the higher in material cost, trade tariffs and currency, which lead to a significant decrease in its profits in 2019, Breville had impressive years with quite stable ratios of profits. The company had expanded its market to other markets like the UK, Europe and invested heavily in R&D activities. Breville has introduced a variety of new product including a benchtop pizza oven, a portable espresso machine, and a coffee maker that was advertised "the world's fastest flat white" which makes the company more competitive to consumers. 1.2. Margins Margin applies to three different estimates of the Income Statement in financial statements including gross margin, operating margin and net profit margin. However, in this writing, it is
focused on two main margins which are net and gross profit margin. These margins are measures of the efficiency in producing profits of a company. Breville Group Limited Extract from statement of profit or loss (and analysis) for the year ended 30 June 2019 06/17 06/18 06/19 Operating Revenue Other Revenue Total Revenue Excluding Interest Total cost of sales -405,465 -66.95% Gross Profit 200,268 33.07% Operating Expenses EBITDA Depreciation Amortisation Depreciation and Amortisation EBIT Interest Revenue Interest Expense Net Interest Expense -1,797 PreTax Profit 77,223 Tax Expense -23,389 Net Profit 1.1.1 Gross profit Amount ('000) 605,599 947 Amount ('000) 652,348 689 606,546 -516,757 85.20% 89,789 -2,817 -7,952 % 99.84% 0.16% 100.00 % 653,037 14.80% -0.46% -1.31% 420,088