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

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1 JB Hi-Fi Limited Half Year Results Presentation 31 December February 2014

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

3 1. P ER F O R M A NCE HIGHLIGHTS 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

4 1. P ER F O R M A NCE - S UM M ARY HY13 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 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

5 2. P R OFI T A N D LOS S STAT E ME N T AUST NZ (NZD) CONSOLIDATED $m HY13 Growth HY13 Growth HY13 Growth Sales 1, , % % 1, , % Gross Profit % % % Gross Margin 21.76% 21.86% +10 bps 17.09% 17.58% +49 bps 21.52% 21.63% +11 bps EBITDA % % % Depreciation & Amortisation % % % EBIT % % % EBIT Margin 7.05% 7.11% +5 bps 2.21% 2.28% +8 bps 6.81% 6.85% +4 bps NPAT % Headline Statistics: Earnings per share (basic ) % Cost of doing business % 13.86% +4 bps 13.87% 14.26% +38 bps 13.82% 13.88% +6 bps Stores stores stores 1 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, 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. 5 As at 30 June

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

7 3. TRADING PERFORMANCE... Gross Margin Consolidated gross margin was 21.6%, an 11 bps increase on the pcp. In Australia, the gross margin increased by 10 bps on the pcp to 21.9%. Gross Margin HY13 Australia 21.8% 21.9% New Zealand 17.1% 17.6% 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 7

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

9 3. TRADING PERFORMANCE... Earnings Consolidated EBIT was up 7.5% to $132.9m and margin was up 4 bps on the pcp at 6.8%. In Australia, EBIT was up 7.3% to $130.5m and margin was up 5 bps on the pcp at 7.1%. EBIT MARGIN HY13 Australia 7.1% 7.1% New Zealand 2.2% 2.3% Total 6.8% 6.8% 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 (HY13: nil). EPS (cps) HY13

10 4. STORE UPDATE Six new stores opened in Six new stores opened in (five JB HI-FI and one JB HI-FI HOME): NSW: Roselands, Castle Towers, Homebush (HOME) VIC: Melton, Craigieburn TAS: Rosny Park 182 stores Seven JB HI-FI stores in Australia were converted to JB HI-FI HOME in. The final Clive Anthonys store was closed in NZ AUST Target of 214 stores 10 Acquired July 2000 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Total Stores

5. HOME HOME Growth Driver! The home appliance category is a circa $4.6 billion market!

2, with the longer term sales opportunity still to be fully quantified.

16 as at 31 December 2013. In 2 we anticipate converting a further six existing stores.

11 5. HOME 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, 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 In 2 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. O ut of st o r e Online We continue to leverage the benefits of a strong online presence combined with our bricks and mortar locations.

23 million per week 1. The new HOME categories present a good sales growth opportunity. Digital Entertainment anywhere, anytime!

Allows us to stay engaged with our customers after the physical purchase has been made.

12 6. O ut of st o r e Online We continue to leverage the benefits of a strong online presence combined with our bricks and mortar locations. In, 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 Rolling 52 weeks to 31 December 2013.

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

14 7. C A SH F LOW AND B AL ANCE SHEET... Inventory Inventory (HY13 to ) Inventory levels are in line with internal expectations; For personal use only 600 Inventory turnover in was consistent with the pcp at 5.9x (pcp: 5.9x) and like for like inventory turnover was 6.3x (pcp: 6.0x); and The underlying increase of $38.8m represents approximately 5.3 days sales. 550 $m (2.8) (3.3) $38.8m HY13 Closing Stock Closed Stores & Other New Stores Existing Stores Impact of JB HOME Private Label Closing Stock 14

15 8. DI V I D E N DS Dividends The interim dividend is 55.0 cents per share fully franked, up 10.0% or 5.0 cents per share from the pcp. Maintenance of our current circa 60% payout ratio enables the Company to continue to grow through its investment in both its store rollout program, including an expansion of the JB HI-FI HOME footprint, and its Digital and Online strategies Final Interim FY10 FY11 FY12 FY13 15 Dividends (cps)

16 9. T R ADI NG O UT L O OK Trading Outlook 2 sales update: - total consolidated sales growth in January 2014 was +7.4%; and - consolidated comparable sales growth in January 2014 was +3.8%. Eight new stores are expected to open in FY14 1, bringing the total number of stores at the end of FY14 to A total of 13 existing stores are anticipated to be converted to JB HI-FI HOME in FY14 2, taking the total number at the end of FY14 to 22 stores. By entering the $4.6 billion home appliances market via JB HI-FI HOME, we see a significant opportunity to grow comparable sales over the medium term. The Company expects to see continued strong growth in its Commercial business. The Company expects sales in FY14 to increase by between 6% and 8% and NPAT to be in the range of $126.0m to $129.0m, an increase of 8.3% to 10.8% on the prior year. 1 In, six new stores opened (Aust: five JB HI-FI and one JB HI-FI HOME, NZ: Nil). Two new stores are expected to open in 2. Two smaller sub-scale JB HI-FI stores were closed in January In, seven JB HI-FI stores in Australia were converted to JB HI-FI HOME. A further six JB HI-FI stores in Australia are expected to be converted in 2. 16

17 1 0. G R OW TH OPP O RT UNI TI E S Growth Opportunities New stores Existing categories and market share Solid pipeline of properties (2 new stores expected to open in 2). Will continue our disciplined approach to selecting new stores based on high foot traffic locations. Target of 214 stores across Australia and New Zealand. Many categories still have above average growth opportunities. Convenient and easily accessible locations with high foot traffic generates impulse sales. Continued growth in market share, both in store and online. Leverage the strength of the brand. HOME Six existing stores to be converted to HOME stores in 2. Significant growth opportunity. Online HOME appliances website growth opportunity. Commercial Significant opportunities to grow this business over the next 2 to 3 years. Digital NOW Music presents a longer term sales growth opportunity as adoption of music subscription gains momentum. NOW ebooks add on opportunity to our substantial device sales. NOW Video Digital copy redemption site (UltraViolet) launched. Future digital video download/streaming and rental service for feature films and TV episodes. 17

A p p e n dix I Store movements during Geographic breakdown # FY13 Opened Rebrand Closed Total Australia JB HI-FI - Tier 1 135 4 (7) - 132 JB HI-FI - Tier 2 20 1 - - 21 JB HI-FI HOME 8 1 7-16 163 6 -

18 A p p e n dix I Store movements during Geographic breakdown # FY13 Opened Rebrand Closed Total Australia JB HI-FI - Tier (7) JB HI-FI - Tier JB HI-FI HOME Clive Anthonys (1) (1) 169 New Zealand JB HI-FI - Tier JB HI-FI - Tier TOTAL (1) 182 Store types: JB HI-FI - Tier (7) JB HI-FI - Tier JB HI-FI HOME Store format: Shopping centres Other (1) (1) NZ 18 # as at 31 December 2013

19 A p p e n dix I I a) EBIT reconciliation AUDm HY13 Profit for the half-year (App 4D) add back - income tax expense (App 4D) Profit before Tax add back - interest received (0.3) (0.2) - interest expense (App 4D) net interest expense Earnings before interest and tax (EBIT) b) NZ Profit and Loss statement (AUD) AUDm HY13 Sales Gross Profit Gross Margin 17.1% 17.6% EBITDA Depreciation & Amortisation EBIT EBIT Margin 2.2% 2.3% c) Other items Net interest expense was down $1.3m driven primarily by a lower interest rate environment. Effective tax rate was 29.9%, down from 30.7% in the pcp, driven primarily by the exercise of 1.3m employee share options during the period (HY13: nil). d) CODB reconciliation AUDm HY13 Other income (ex interest received) (0.1) (0.1) Sales and marketing expenses (App 4D) Occupancy expenses (App 4D) less depreciation & impairment (12.8) (13.7) Administration expenses (App 4D) less depreciation & amortisation (3.4) (3.7) Other expenses (App 4D) Cost of Doing Business (CODB) Sales 1, ,939.9 CODB (% of sales) 13.8% 13.9% 19

20 Appendix III AUDm Balance Sheet HY13 FY13 Cash Receivables Inventories Other Total Current Assets Fixed Assets Intangibles & Goodwill Other Total Non-Current Assets Total Assets , Payables Other Total Current Liabilities Borrowings Other Total Non-Current Liabilities Total Liabilities Net Assets Net Debt / (Net Cash)

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