For personal use only

Transcription

1 JB Hi-Fi Limited Full Year Results Presentation 30 June August 2011

2 Agenda 1. Performance Summary 2. Historic Performance 3. Profit and Loss Statement 4. Trading Performance 5. Share Buy-back and Clive Anthonys Restructure 6. Outlook 7. Cash Flow and Balance Sheet 8. Dividends 9. Store Update 10. Investment Checklist Terry Smart CEO Richard Murray CFO

3 1. PERFORMANCE SUMMARY Strong performance for 12 months to 30 June 2011 FY10 FY11 FY11 Growth Statutory Statutory Normalised 1 Normalised 1 Sales $2.73b $2.96b $2.96b 8.3% Gross Margin 21.8% 22.0% 22.0% +28 bps Cost of Doing Business 14.5% 15.6% 14.5% 0 bps EBIT $175.1m $162.6m $196.0m 11.9% EBIT Margin 6.4% 5.5% 6.6% +21 bps NPAT $118.7m $109.7m $134.4m 13.3% Earnings per share cps cps cps 13.6% Total dividend - fully franked 660cps cps cps cps cps (Final dividend - fully franked 2 = 29.0 cps) - 1 FY11 normalised excludes the Clive Anthonys one-off restructuring charge announced in March 2011 ($24.7m post tax). 2 Final dividend represents a payout ratio of 60% of normalised 2HY11 earnings - to be paid on 2 nd September 2011 (record date 23 rd August 2011). 3

4 2. HISTORIC PERFORMANCE Continuation of strong growth in sales and earnings since MBI in July 2000 SALES +8% EBIT +12% NPAT +13% EPS +14% 2.73b +17% 2.96b +8% 175.1m +23% 196.0m +12% m +26% 134.4m +13% 109.7cps +24% 124.7cps +14% 1.28b +36% 1.83b +43% 2.33b +27% FULL YEA AR GUIDANCE ~$3.2b 65.5m +47% 102.3m +56% 142.0m +39% 40.4m +57% 65.1m +61% 94.4m +45% 38.8cps +55% 61.8cps +59% 88.3cps +43% FY07 FY08 FY09 FY10 FY11 FY12F FY07 FY08 FY09 FY10 FY11 FY07 FY08 FY09 FY10 FY11 FY07 FY08 FY09 FY10 FY11 Normalised (excludes Clive Anthonys one-off restructuring charge) 4

5 3. PROFIT AND LOSS STATEMENT AUST NZ (NZD) 3 CONSOLIDATED $m FY10 FY11 Growth FY10 FY11 Growth FY10 FY11 Growth Sales 2, , % % 2, , % Gross Profit % % % Gross Margin 22.1% 22.3% +21 bps 15.6% 17.3% +171 bps 21.8% 22.0% +28 bps EBITDA % (2.4) % % Depreciation & Amortisation EBIT % (4.3) (1.6) 64.0% % EBIT Margin 1 69% 6.9% 70% 7.0% +13 bps (2.6%) (0.8%) +177 bps 64% 6.4% 66% 6.6% +21 bps Normalised NPAT % Significant item 4 - (24.7) NPAT after Significant Item % Headline Statistics: Earnings per share (basic ) % Cost of doing business % 14.4% +0.4 bps 17.0% 16.9% -11 bps 14.5% 14.5% -0.1 bps Stores stores stores stores 1 FY11 has been normalised (excludes significant item - Clive Anthonys one-off restructuring charge). 2 In FY11, 18 JB Hi-Fi stores opened (Aust: 15, NZ: 3), four Clive Anthonys stores were converted to JB Hi-Fi stores and two Clive Anthonys stores were closed. 3 Refer to Appendix II(c) for NZ P&L in AUD. 4 Significant item (Clive Anthonys one-off restructuring charge). 5

6 4. TRADING PERFORMANCE Sales Sales continued to be impacted by subdued d consumer spending. However comparable sales for JB Hi-Fi stores were positive in the second half in both Australia and New Zealand (NZD). Our market share continued to grow throughout the period. Australia: JB Hi-Fi branded store sales grew by 9.9% to $2.7b. Sales Growth FY11 Comps. Total Comps. 1HY11 2HY11 JB Hi-Fi - Australia 9.9% (0.5%) (0.9%) 0.1% - New Zealand (NZD) 28.3% 2.4% 3.9% 1.0% Total JB Hi-Fi (AUD) 10.5% (0.5%) (0.8%) (0.1%) Clive Anthonys (15.5%) (13.5%) (13.3%) (14.8%) Consolidated (AUD) 8.3% (1.2%) (1.5%) (1.0%) (ii) - JB Hi-Fi stores consumer electronics (CE) sales, which represents approximately 75% of total sales, grew by 15.2% in the period. Comparable sales growth was 4.1%, with strong growth in Computers, IT and Telco. - JB Hi-Fi stores software (music, movies and games), which represents approximately 25% of total sales, declined on a comparable store basis by 9.1%, driven predominantly by the games category at negative 16.8%. This reduction came primarily from the casual gaming category of Wii, PSP and NDS. However we continue to gain market share and saw comparable store growth in PS3, Xbox and PC gaming. We continue to invest in all software categories, with it being an important part of our new store roll-out program. New Zealand: JB Hi-Fi branded store sales grew by 28.3% to NZ$188.7m. (ii) Consolidated FY11 total sales growth was impacted by the inclusion of the closed New Zealand H&S branded stores in the 2010 comparative period. Impacted due to exchange rate conversion. 6

7 4. TRADING PERFORMANCE Gross Margin Consolidated gross margin was 22.0%, a 28 bps increase on the prior period. FY10 FY11 Growth Australia 22.1% 22.3% +21 bps New Zealand 15.6% 17.3% +171 bps Consolidated 21.8% 22.0% +28 bps The strength in gross margin was pleasing given the increased discounting within the market. We remain passionate about our low price promise and based on regular monitoring of competitor activity, review our pricing daily. Increased scale drove improved levels of supplier support, with the majority of the benefit returned to customers in the form of lower prices. Accessories merchandising and add-on sales strategy concentrated on margin generating products. Continued management focus on inventory management: out of stocks, shrinkage and obsolescence. Gross Margin (5 yrs) 22.1% 21.9% 21.6% 21.8% 22.0% FY07 FY08 FY09 FY10 FY11 7

8 4. TRADING PERFORMANCE Cost of Doing Business (CODB) Consolidated CODB was flat at 14.5%. FY10 FY11 Growth Australia 14.4% 14.4% +0.4 bps New Zealand 17.0% 16.9% -11 bps Consolidated 14.5% 14.5% -0.1 bps In Australia, our CODB was flat at 14.4%. A pleasing result given the 4.28% retail award wage increase on 1 July 2010 and flat comparable store sales. New Zealand benefited from continued improvement in operating leverage as sales grew. This FY11 result demonstrates the strength and dynamic nature of our model. Our systems allow us to flex with the changing market conditions whilst ensuring that customer service is maintained at the highest level. CODB (5 yrs) 16.1% 15.4% 14.7% 14.5% 14.5% FY07 FY08 FY09 FY10 FY11 Normalised (excludes Clive Anthonys one-off restructuring charge). 8

9 4. TRADING PERFORMANCE Earnings EBIT increased 11.9% to $196.0m. FY10 FY11 Growth Australia ($m) % - margin (%) 6.9% 7.0% +13 bps New Zealand (NZ$m) (4.3) (1.6) 64.0% - margin (%) (2.6%) (0.8%) +177 bps Consolidated ($m) % - margin (%) 6.4% 6.6% +21 bps Overall EBIT growth was driven by a combination of improved gross profit and a flat cost of doing business. In New Zealand we increased EBITDA by NZ$3.2m to NZ$0.8m and reduced our EBIT loss by 64.0% to NZ$1.6m. Depreciation increased 17.2% on a consolidated basis and reflected our store rollout program and ongoing merchandising upgrades in our existing stores. NPAT was up 13.3% to $134.4m. NPAT EBIT Margin $40.4m $65.1m $94.4m $118.7m $134.4m 5.1% 5.6% 6.1% 6.4% 6.6% FY07 FY08 FY09 FY10 FY11 Normalised (excludes Clive Anthonys one-off restructuring charge). FY07 FY08 FY09 FY10 FY11 9

10 4. TRADING PERFORMANCE Online We continue to develop and refine our online presence as part of our multichannel strategy. Online sales grew 51.6% on the prior year. With our high number of unique visitations (average 800,000 per week in July 2011) our online site is an increasingly important sales generator for both in store and online sales. Our buying power and low cost of business ensured we remained competitive online. Focussed on ensuring that our unique brand personality is consistent across all mediums (i.e. in store, online, mobile and print media). Note: screen print taken from the JB Hi-Fi website on 29 July 2011 (prices current as at that date). 10

11 5. SHARE BUY-BACK AND CLIVE ANTHONYS RESTRUCTURE Share Buy-back In May 2011 we completed a $173.3m 3m off-market share buy-back which resulted in the purchase of 10.8 million shares, representing approximately 9.9% of the shares on issue. The buy-back will improve our earnings per share and return on equity. The buy-back was funded through an increase in our term debt facilities to $250m, which were extended out to March We forecast our FY12 interest expense to be in the range $13m to $15m. Our key internal measures of Fixed Charges and Gearing remain strong and continue to be comfortably within internal targets. We are confident,,post the buy-back, that our balance sheet remains strong with the flexibility to fund future growth opportunities. Clive Anthonys Restructure In March 2011 we announced a restructure of our Clive Anthonys business including a one-off charge of $33.4m ($24.7m post tax) which is being treated as a significant item in our financial statements. We are pleased with the progress of our restructuring plans. Four stores in Queensland have been converted to JB Hi-Fi stores. Two stores have been closed with the cost of exit in line with our expectations. 11

12 6. OUTLOOK Stores Trading Outlook We anticipate opening 16 new JB Hi-Fi stores in FY12 (Aust: 16, NZ: 0). Maintain our target of 214 JB Hi-Fi branded stores (164 Tier 1 and 50 Tier 2 format) in Australia and New Zealand. This includes the four Clive Anthonys stores that were recently converted to JB Hi-Fi stores. The recently opened Tier 2 stores continue to perform in line with internal expectations. FY12 YTD Trading Update: Total sales growth for the JB Hi-Fi branded stores in July was 6.4%; and Comparable store sales growth for the JB Hi-Fi branded stores in July was negative 3.3%. While we anticipate the market to remain challenging, our diversified product portfolio, particularly the categories of computers, telco and accessories, from which we expect strong growth, will assist JB in delivering another year of solid sales and earnings in FY12. Assuming trading conditions are comparable with FY11, we expect sales in FY12 to be circa $3.2b, an 8% increase on the prior year. Category Outlook All categories expected to remain very competitive. Constant technology innovation will drive continued industry growth. Computers Expansion of tablet category and the introduction of a new notebook subcategory, Ultrabook. Telecommunications Continued strong growth in the Smart Phone category with iphone 5 expected to be released in the first half of FY12. Games Continued share growth in PS3 and Xbox software and hardware. Launch in FY12 of Sony s new handheld gaming device, PlayStation Vita. Accessories New merchandising layouts will drive sales and assist with gross margin. 12

13 For personal use only 6. OUTLOOK Online Expect continued strong sales growth from online. Continued enhancement to the customer online experience including: Pickk up att store. Pi t This Thi will ill b be a new addition dditi tto our online li site it which provides customers greater convenience to browse and transact online then pick up direct from desired store. Introduction of a mobile friendly website to browse, explore and transact online. online This application also displays our latest promotions and What s New. New gift card module enables our customers to activate and manage their JB Hi-Fi Gift Cards online. Our buying power and low cost off doing business O ensures we can remain competitive online. We will continue to explore opportunities to expand our online offering offering. Online will continue to be an important sales generator for bricks and mortar. 13

14 6. OUTLOOK Digital New JB HI-FI NOW music service anticipated to launch in the second quarter of FY12. JB Hi-Fi to launch new music subscription streaming service. This new service will leverage off our strong music heritage. Natural extension to our current physical music sales. Will enable us to engage with customers however they choose to consume music. Intended staged roll-out over the next quarter with Mac and PC based web client, with a mobile solution to be added shortly after. Plan to have between 6 to 8 million tracks from 100,000 artists at launch which will continue to grow over time. Unlimited access and listening from Mac or PC. Service will continue to evolve with the later addition of a music download store. Post launch, the JB HI-FI NOW digital platform will continue to develop and provide us with opportunities to leverage our existing strong software supplier relationships. 14

15 7. CASH FLOW & BALANCE SHEET Cash Flow Statement AUDm FY10 FY11 EBITDA Change in Working Capital 1.2 (62.2) Net Interest t Paid (5.0) (3.8) Income Tax Paid (53.5) (52.2) Other Net Cash Flow from Operations Purchases of P&E (53.4) (43.9) Payments for intangible assets (2.4) - Net Cash Flow from Investing (55.8) (43.9) (ii) Free Cash Flow Borrowings / (Repayments) (20.0) 0) Share Buy-Back - (174.1) Proceeds from issue of Equity Dividends Paid (67.1) (88.4) Net Cash Flow from Financing (80.2) (90.9) Net Change in Cash Position 16.1 (24.8) Effect of exchange rates (0.1) 0.3 Cash at the end of Period Normalised (excludes Clive Anthonys one-off restructuring charge). (ii) Free Cash Flow = Net Cash Flow from Operations less payments for store related assets (excludes investments). 15

16 7. CASH FLOW & BALANCE SHEET Working Capital and Key Ratios AUDm FY10 FY11 Inventory Management. (Increase)/decrease in current assets Inventory (10.0) (73.4) Receivables (3.4) 5.1 Other current assets 1.1 (4.1) Increase/(decrease) in current liabilities Trade creditors Other current liabilities (2.1) (2.3) Net Movement in Working Capital 1.2 (62.2) Performance Indicators: Inventory Turnover 6.5x 6.2x Creditor Days ,(ii) Fixed Charge Ratio 3.9x 4.0x,(ii) Interest Cover 25.2x 31.3x Return on Equity 40.5% 75.9% Return on Invested Capital 56.3% 50.1% (ii) FY11 ratios have been normalised (excludes the Clive Anthonys one-off restructuring charge). On a statutory basis, the FY11 Fixed Charges ratio was 3.5x and FY11 Interest Cover was 25.9 times. - Inventory levels and mix are in line with internal expectations. The movement from the prior year was due primarily to: - $49.1m invested in FY11 new store inventory. - $7m of prepaid private label inventory. - $4.4m of inventory held for FY12 stores. - Like for like inventory turnover was 6.7 times (pcp: 6.9 times). - Inventory turnover was 6.2 times (pcp: 6.5 times). Receivables relate predominately to supplier rebates and the movement is due to timing. Creditor days were down marginally from the prior period which reflects changes in supplier mix and is in line with expectations. Fixed charges ratio at 4.0 times, coupled with high interest cover is a good indication of JB Hi-Fi s strong balance sheet and low financial and operational leverage. Return on Equity has improved predominantly due to the share buy-back. back Return on Invested Capital has declined due primarily to the movement in working capital. 16

17 7. CASH FLOW & BALANCE SHEET Balance Sheet AUDm FY10 FY11 Cash Receivables Inventories Other Total Current Assets Fixed Assets Brandname & Goodwill Other Total Non-Current Assets Total Assets Payables Borrowings Other Total Current Liabilities Borrowings Other Total Non-Current Liabilities Total Liabilities Net Assets Net Debt / (Net Cash)

18 8. DIVIDENDS Dividends The final dividend is 29.0 cents per share fully franked. Total dividends of 77.0 cents per share represents a 16.7% increase over the prior year. This represents a payout ratio of 60% of normalised FY11 earnings and further underlines the Board s confidence in our strong cash flow generation. (ii) Our strong balance sheet has enabled us to return $261.7m to shareholders h in the past 12 months. 77 cps +17% 29.0 Final Interim (ii) FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 Dividends (cps) Excludes Clive Anthonys one-off restructuring charge. Final FY10 dividend of 33 cps ($35.9m), interim FY11 dividend of 48 cps ($52.5m) and the buy-back ($173.3m). 18

19 9. STORE UPDATE 18 new JB Hi-Fi stores opened in FY11 18 JB Hi-Fi stores opened in FY11: VIC: Airport West, Bayside Frankston, Chadstone Warrigal Rd, Forrest Hill, Mildura, Sunshine NSW: Charlestown, Merrylands, Westfield Sydney NZ: Bayfair, Dunedin, Sylvia Park QLD: Cairns Stockland, Maroochydore WA: Booragoon, Bunbury, Mandurah FY stores SA: Munno Parra 5 of the FY11 stores are classified as Tier 2. 4 Clive Anthonys stores were converted to JB Hi-Fi stores. 2Cli Clive Anthonys stores were closed d(labrador, Fyshwick) NZ AUST Acquired July 2000 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 Total Stores 19

20 9. STORE UPDATE 16 new JB Hi-Fi stores to be opened in FY12 16 JB Hi-Fi stores to be opened in FY12 including: VIC: Greensborough #, Hoppers Crossing #, Traralgon, Thomastown, Springvale NSW: Caringbah #, Bankstown, Jamisontown, North Sydney QLD: Mackay, Garden City AUST: 5 undisclosed 6 of the FY12 stores are classified as Tier 2. 1 JB Hi-Fi store was closed in July 2011 (Keilor) FY12F 172 stores 13 NZ NZ AUST # open as at 8 th August Acquired July 2000 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12F Total Stores 20

21 10. INVESTMENT CHECKLIST Strong and unique retail model. Operates mainly in high growth home entertainment and technology sector. Low cost of doing business best of listed retailers. Many new store opportunities - JB Hi-Fi circa 214 (164 Tier 1 format and 50 Tier 2 format) in Australia and New Zealand (152 as at FY11). Good continued growth from existing categories, such as computers and telco. Online and digital strategies designed to leverage off existing strong brand heritage. Size and continued high growth gives us great buying power and advertising synergies. Low capital investment and high return on invested capital. Proactive capital management initiatives including share buyback and 60% dividend payout ratio. Strength and depth of board and management. 21

22 Appendix I Store movements during FY11 Geographic breakdown # FY10 FY11 Opened Rebranded Closed Total Australia JB - Tier JB - Tier Clive Anthonys 11 - (4) (2) (2) 144 New Zealand JB - Tier JB - Tier TOTAL (2) JB Hi-Fi store type: Tier Tier Store format: Shopping centres Other (2) (2) NZ # as at 30 June

23 Appendix II a) EBIT reconciliation b) CODB reconciliation AUDm FY10 FY11 Profit for the year (App 4E) add back - income tax expense (App 4E) Profit before Tax add back - interest received (1.4) (2.2) - interest expense (App 4E) net interest expense Earnings before interest and tax (EBIT) add back Clive Anthonys one-off restructuring charge Earnings before interest and tax (EBIT) AUDm FY10 FY11 Other income (ex interest received) (0.3) (0.1) Sales and marketing expenses (App 4E) Occupancy expenses (App 4E) less depreciation & amortisation (17.2) (20.2) Administration expenses (App 4E) less depreciation & amortisation (6.1) (7.1) Other expenses (App 4E) Significant item (App 4E) Cost of Doing Business (CODB) less Clive Anthonys one-off restructuring charge Cost of Doing Business (CODB) Sales 2, ,959.3 CODB (% of sales) % 14.5% c) NZ Profit and Loss statement (AUD) NZ (AUD) $m FY10 FY11 Growth Sales % Gross Profit % Gross Margin 15.6% 17.3% +171 bps EBITDA (1.9) % Depreciation & Amortisation EBIT (3.5) (1.2) 65.4% EBIT Margin (2.6%) (0.8%) +177 bps Headline Statistics: Cost of doing business 17.0% 16.9% -11 bps Stores stores CODB % (STAT) 14.5% 15.6% d) NPAT reconciliation AUDm FY10 FY11 Profit for the year (App 4E) add back Clive Anthonys one-off restructuring charge less tax effect - (8.6) Normalised profit from the year FY11 has been normalised (excludes Clive Anthonys one-off restructuring charge). 23

24 Appendix III Profit and Loss Statement (5 years) AUDm FY07 FY08 FY09 FY10 FY11 (ii) FY11 Sales 1, , , , , ,959.3 Gross Profit Gross Margin 22.1% 21.9% 21.6% 21.8% 22.0% 22.0% EBITDA Depreciation & Amortisation EBIT EBIT Margin 5.1% 5.6% 6.1% 6.4% 5.5% 6.6% (iii) Net Profit After Tax Headline Statistics: Earnings per share (basic ) Cost of doing business 16.1% 15.4% 14.7% 14.5% 15.6% 14.5% Stores at period end (ii) (iii) Statutory (includes Clive Anthonys one-off restructuring charge). Normalised (excludes Clive Anthonys one-off restructuring charge). Net of OEI. 24

25 Appendix III Balance Sheet (5 years) AUDm FY07 FY08 FY09 FY10 FY11 Cash 23.7 (1.5) Receivables Inventories Other Total Current Assets Fixed Assets Brandname & Goodwill Other Total Non-Current Assets Total Assets Payables Borrowings Other Total Current Liabilities Borrowings Other Total Non-Current Liabilities Total Liabilities Net Assets Net of OEI. 25

26 Appendix III Cash Flow Statement (5 years) AUDm FY07 FY08 FY09 FY10 FY11 EBITDA Change in Working Capital 5.6 (44.8) (62.2) NtIt Net Interest tpid Paid (7.1) (8.9) (6.7) (5.0) (3.8) Income Tax Paid (15.2) (28.0) (41.3) (53.5) (52.2) Other Net Cashflow from Operations Purchases of P&E (34.4) 4) (51.3) (43.9) (53.4) (43.9) Investments (19.2) (8.2) Payments for intangible assets (2.4) - Net Cashflow from Investing (53.6) (59.5) (43.9) (55.8) (43.9) (ii) Free Cash Flow 29.7 (8.9) Borrowings / (Repayments) (35.3) (20.0) Proceeds from issue of Equity Share Buy-Back (174.1) Dividends Paid (9.4) (16.9) (33.2) (67.1) (88.4) Net Cashflow from Financing 8.6 (8.1) (64.3) (80.2) (90.9) Net Change in Cash Position 19.2 (25.2) (24.8) Effect of exchange rates - - (0.1) (0.1) 0.3 Cash at the end of Period 23.7 (1.5) Normalised (excludes Clive Anthonys one-off restructuring charge) (ii) Free Cash Flow = Net Cash Flow from Operations less payments for store related assets (excludes investments). 26