JB Hi-Fi Limited Half Year Results Presentation 31 December 2013 3 - PowerPoint PPT Presentation

For personal use only JB Hi-Fi Limited Half Year Results Presentation 31 December 2013 3 February 2014

AGENDA For personal use only 1. Performance 2. Profit and Loss Statement 3. Trading Performance 4. HY14 Store Update 5. HOME 6. Out of Store 7. Cash Flow and Balance Sheet 8. Dividends 9. Trading Outlook 10. Growth Opportunities Terry Smart Richard Murray CEO CFO

1. PERFOR M ANCE – H Y 14 HIGHLIGHTS For personal use only  Total sales up 6.8%  Comparable sales up 2.8%  Gross margin up 11 bps  NPAT up 10.0%  EPS up 9.0%  Interim dividend up 10.0% to 55.0 cps 3

1. PERFOR M ANCE - SUMM ARY For personal use only HY13 HY14 Mvt   Total Sales $1.82b $1.94b +6.8%   Gross Margin 21.52% 21.63% +11 bps   Cost of Doing Business 13.82% 13.88% +6 bps   EBIT $123.7m $132.9m +7.5%   EBIT Margin 6.81% 6.85% +4 bps  NPAT 1  $82.1m $90.3m +10.0%   Earnings per share 83.0 cps 90.5 cps +9.0%  Interim dividend - fully franked 2  50.0 cps 55.0 cps +5.0 cps 1 Profit attributable to owners of JB Hi-Fi Limited (excludes non-controlling interest). 2 The interim dividend of 55.0 cents per share will be paid on 28 th February 2014 (record date 14 th February 2014). 4

2. PR OFIT AND LOSS STAT E MENT For personal use only 1 AUST NZ (NZD) CONSOLIDATED HY13 HY14 HY13 HY14 HY13 HY14 $m Growth Growth Growth Sales 1,724.0 1,836.0 6.5% 117.5 118.0 0.5% 1,816.2 1,939.9 6.8% Gross Profit 375.1 401.3 7.0% 20.1 20.7 3.3% 390.9 419.6 7.3% Gross Margin 21.76% 21.86% +10 bps 17.09% 17.58% +49 bps 21.52% 21.63% +11 bps EBITDA 136.8 146.8 7.3% 3.8 3.9 3.9% 139.8 150.3 7.5% Depreciation & Amortisation 15.2 16.3 7.4% 1.2 1.2 3.5% 16.1 17.4 7.9% EBIT 121.6 130.5 7.3% 2.6 2.7 4.0% 123.7 132.9 7.5% EBIT Margin 7.05% 7.11% +5 bps 2.21% 2.28% +8 bps 6.81% 6.85% +4 bps NPAT 2 82.1 90.3 10.0% Headline Statistics: Earnings per share (basic ¢) 83.0 90.5 9.0% Cost of doing business 3 13.82% 13.86% +4 bps 13.87% 14.26% +38 bps 13.82% 13.88% +6 bps 5 5 5 Stores 4 164 169 +5 stores 13 13 - 177 182 +5 stores 1 Refer to Appendix II(b) for NZ P&L in AUD. 2 Profit attributable to owners of JB Hi-Fi Limited (excludes non-controlling interest). 3 Refer to Appendix II(d) for reconciliation of consolidated CODB. 4 In HY14, six new stores opened (Aust: five JB HI-FI and one JB HI-FI HOME, NZ: Nil) and seven JB HI-FI stores in Australia were converted to JB HI-FI HOME. The one remaining Clive Anthonys store was closed during HY14. 5 As at 30 June 2013. 5

3. T R ADING PERFOR M ANCE For personal use only Sales Total consolidated sales grew by 6.8% to $1.94b, with comparable Sales Growth sales up 2.8%. HY14 Total Comps. Australia Australia 6.5% 2.3%  Total sales grew by 6.5% to $1.84b, with comparable sales up New Zealand (NZD) 0.5% 0.3% 2.3%. 6.8% 2.8% Total  The newly converted HOME stores 1 achieved comparable sales growth of 13.6% in HY14 post conversion. Sales Category Splits by Value (Total Aust)  Hardware 2 sales in HY14 were up 11.0%, with comparable sales up 6.6% driven by growth across the majority of categories 20.4% including Visual. 23.7%  Software sales (Music, Movies and Games) in HY14 were negative 7.9% and on a comparable basis were negative 11.3% (HY13: -10.8%). New Zealand 79.6% 76.3%  Sales grew by 0.5% to NZ$118.0m, with comparable sales up 0.3%. HY13 HY14 2 Hardware Software 1 11 stores were converted to JB HI-FI HOME in the 12 months to 31 December 2013. 2 Hardware is defined as all sales excluding the Music, Movies and Games Software categories. Note that the Hardware category includes Games Hardware. 6

3. T R ADING PERFOR M ANCE . . . For personal use only Gross Margin  Consolidated gross margin was 21.6%, an 11 bps increase on Gross Margin HY13 HY14 the pcp. Australia 21.8% 21.9%  In Australia, the gross margin increased by 10 bps on the pcp New Zealand 17.1% 17.6% to 21.9%. Total 21.5% 21.6%  The market remains very competitive - consistent with the pcp.  In New Zealand, gross margin increased 49 bps to 17.6% due to improved buying terms as we continue to gain market share. Gross Margin 21.5% 21.6% HY13 HY14 7

3. T R ADING PERFOR M ANCE . . . For personal use only Cost of Doing Business (CODB) CODB  Consolidated CODB was 13.9%, up 6 bps over the pcp. HY13 HY14 Australia 13.8% 13.9% In Australia, CODB increased by 4 bps to 13.9%.  New Zealand 13.9% 14.3%  Operating costs were in line with Company expectations. 13.8% 13.9% Total  Store wages remained well controlled, while absorbing the latest award increase of 2.6% that was effective on 1 July 2013.  In New Zealand, overall costs continue to be well controlled CODB however reduced leverage has resulted in an increase in the CODB in HY14 to 14.3%. 13.9% 13.8% HY13 HY14 8

3. T R ADING PERFOR M ANCE . . . For personal use only Earnings  Consolidated EBIT was up 7.5% to $132.9m and margin was up 4 EBIT MARGIN HY13 HY14 bps on the pcp at 6.8%. Australia 7.1% 7.1%  In Australia, EBIT was up 7.3% to $130.5m and margin was up 5 New Zealand 2.2% 2.3% bps on the pcp at 7.1%. 6.8% 6.8% Total In New Zealand, EBIT was up 4.0% to NZ$2.7m as we continue to  build the JB HI-FI brand.  EPS was up 9.0% to 90.5 cents per share. Note that 1.3m employee share options were exercised during HY14 (HY13: nil). EPS (cps) 90.5 83.0 HY13 HY14 9

4. H Y 14 STOR E UPDAT E For personal use only Six new stores opened in HY14  Six new stores opened in HY14 (five JB HI-FI and one JB HI-FI HOME):  NSW : Roselands, Castle Towers, Homebush (HOME)  VIC : Melton, Craigieburn HY14 182 stores  TAS : Rosny Park 177  Seven JB HI-FI stores in Australia were converted to JB HI-FI HOME in HY14. 168 13 13  The final Clive Anthonys store was closed in HY14. 157 13 13 141 10 123 NZ 14 105 AUST 12 89 169 12 164 Target 155 144 of 214 131 stores 109 93 77 66 48 32 26 21 15 10 Acquired FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 HY14 July 2000 Total Stores 10

5. HOME For personal use only HOME – Growth Driver!  The home appliance category is a circa $4.6 billion market!  Results to date support annualised incremental sales per store of circa $3m in Year 1, increasing to circa $5m in Year 2, with the longer term sales opportunity still to be fully quantified.  In HY14, one new HOME store was opened and seven existing stores were converted, bringing the total number of HOME stores to 16 as at 31 December 2013.  In 2HY14 we anticipate converting a further six existing stores. By the end of FY14 we expect to have a total of 22 HOME stores across Australia.  We see the potential for approximately 50 HOME stores by the end of FY16.  We expect gross margins to be above the Company average over the medium term. 11

6. Out of stor e For personal use only Online  We continue to leverage the benefits of a strong online presence combined with our bricks and mortar locations.  In HY14, online sales grew 15.4% on the pcp to $42.9m or 2.2% of sales (HY13: 2.0%). Unique visitations grew 17.8% over the pcp to an  average of 1.23 million per week 1 .  The new HOME categories present a good sales growth opportunity. Digital  Entertainment anywhere, anytime!  We need to stay relevant and follow consumers’ present and future content consumption behaviour.  Allows us to stay engaged with our customers after the physical purchase has been made. Commercial  JB HI-FI has continued to see strong growth in its Commercial business.  We remain on track to deliver on our longer term sales target of $500m per annum, through both organic growth and strategic acquisitions. 1 Rolling 52 weeks to 31 December 2013. 12

7 . C A SH FLOW AND BAL ANCE SHEET For personal use only Cash Flow Statement Working Capital HY13 HY14 HY13 HY14 AUDm AUDm (Increase)/decrease in current assets EBITDA 139.8 150.3 Inventory (101.1) (159.0) Change in Working Capital (9.2) (45.8) Receivables (55.0) (63.0) Net Interest Paid (4.9) (3.7) Other current assets 0.9 1.3 Income Tax Paid (15.3) (25.9) Other 3.1 3.3 Increase/(decrease) in current liabilities Net Cash Flow from Operations 113.5 78.3 Payables 144.6 174.0 Other current liabilities 1.4 0.9 Purchases of P&E (net) (23.1) (20.7) Investments - (3.0) Net Movement in Working Capital (9.2) (45.8) Net Cash Flow from Investing (23.1) (23.7) HY13 HY14 Performance Indicators: Free Cash Flow 1 90.3 57.6 Inventory Turnover 5.9x 5.9x Debt Repayments (net) (60.0) (75.1) Creditor Days 61.1d 57.6d Proceeds from issue of Equity (net) - 19.6 Fixed Charge Ratio 2 3.1x 3.3x Dividends Paid (15.8) (22.0) Interest Cover 22.8x 32.0x Net Cash Flow from Financing (75.8) (77.4) Gearing Ratio 2 0.45 0.22 Net Change in Cash Position 14.5 (22.8) Return on Invested Capital 42.8% 39.3% Effect of exchange rates 0.1 0.4 Cash at the end of Period 54.3 44.9 1 Free Cash Flow = Net Cash Flow from Operations less payments for store related assets (excludes investments). 2 Rolling 12 months. 13