By Justin Woerner

Our stock in focus comes from our Emerging Leaders portfolio. As most people know, Beacon Lighting Group sells lighting, ceiling fans and light globes with an extensive range of over 3,000 products. The business was founded in 1967 and today operates 121 stores across Australia as well as distributes product to over 30 countries internationally.

We’re attracted to Beacon because of their:

• long and very successful track record under the current management team.
• easy to understand, vertically integrated business model which provides the ability to generate market leading profit margins.
• market leading position with limited competition.
• strong value proposition to customers centered around range, innovation, and expertise.

Within the Emerging Leaders portfolio we seek businesses with the ability to grow at rates greater than GDP. We believe Beacon has several growth avenues including:

• Store network expansion: management should be able to rollout 5 stores per year adding 25 stores, over the coming 5 years.
• Store optimisation: the network is shifting to larger super-stores capable of generating higher revenue and profit per store.
• Increasing penetration of the trade market.
• Strong, medium-term growth opportunities in the USA, Europe, and China.

Beacon has a strong balance sheet, and generates high levels of return on invested capital and high profit margins. Naturally, no business is riskless. For Beacon, we see the key risks as: short-term downturn in consumer spending, weaker trade related revenue growth and a less successful international expansion.

In this regard, we believe Beacon’s multiple growth opportunities assist in offsetting any short-term weakness in consumer spending while balancing longer term risks. For a more in-depth discussion on Beacon please refer to EEL Quarterly Report – Elston Financial Solutions.

If you would like more information please call 1300 ELSTON or contact us.