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Shriro – Solid foundations

It is better to be sure of a good result rather than hope for an excellent one. After Shriro Holdings (SHM) reported a 6.6% first quarter sales increase, traditionally the year’s quietest trading time, and where 70% of revenue booked in the second half, the company has laid solid foundations for a healthy June profit result.

A dash of caution is deserved for the full year. But if current trends prevail Shriro could book a record profit of close to $15 million this calendar financial year. The big contributor is expected to be the Northern Hemisphere’s take up of the Everdure by Heston Blumenthal award winning range of charcoal barbeques.

Shriro, as readers of Kimber Capital blog recall, was tipped a buy at 85 cents. Currently trading at $1.20 on a fully franked dividend yield of 8% and an undemanding P/E multiple of 9. A price target of $1.50 a share, we think is realistic this year.

The patented global intellectual property of the Everdure range by Heston  (an electric element which ignites charcoal and has it at 300degree C , ready to cook in 9 minutes) plus cool award winning retro Scandinavian design,  this year will see a strong push into Scandinavia , United Kingdom, New Zealand, Belgium, Netherlands, Luxemburg and Slovenia . Australian sales are strong (go to Good Guys, Harvey Norman and Bunnings to see the range or online at Shriro’s website www.shriro.com.au)

The big daddy of BBQ markets –something in the order of $US6 billion a year – the USA, should come late in 2018. Other targeted markets are Germany, Canada, Spain, Portugal, South America and South Africa.

Everdure by Heston has one global competitor, Weber, and that BBQ juggernaut is nothing to be sneezed at. The combined European BBQ market is almost as large as the USA.

As Shriro expands further its overseas foothold with the Everdure range, then current revenue of $184 million could rise significantly. BBQ sales in five years could exceed total sales of all other   Shriro’s divisions. Were that to occur, annual dividends could exceed 15 cents a share.  The global BBQ market is estimated annually at between $10 and $11 billion by forecasting group IBIS.

And nowhere in company presentations, is China or Asia sales growth mentioned. Bigger markets potentially, again. The Heston Blumenthal deal is for 10years and Shriro has a number of other BBQ products in the pipeline bearing his name.

The SHM balance sheet is very healthy Net Debt at the end of last year fell to $5.5 million and debt as a ratio of EBITDA is a ridiculously low 0.2%. Net assets stood at $53 million and there no intangibles on the balance sheet. Strong cash inflows from second half of last year saw net debt fall to zero at the end of January. But this is expected to rise as retailers restock for the stronger second half.

And the best bit – Shriro shareholders can get a 5% discount on the Everdure range. Ring Chris or I to ask how.

Have a read of the recent presentation from the CEO: Chairman address

 

 

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