[PPT] - JB JB Hi Hi-Fi Fi Limited ed Half Year Results Presentation 31 PowerPoint Presentation

SLIDE 1

JB JB Hi Hi-Fi Fi Limited ed

Half Year Results Presentation 31 December 2015

8 February 2016

SLIDE 2

1. HY16 Highlights 2. Profit and Loss Statement 3. Trading Performance 4. In Store 5. Out of Store 6. Cash Flow and Balance Sheet 7. Capital Management 8. Trading Outlook

Richard Murray Nick Wells CEO CFO

AGENDA

SLIDE 3

1. H Y 16 HIGHLIGHTS
Total sales up 7.7% to $2.12 billion
Comparable sales up 5.2%
Gross profit up 7.6%
NPAT up 7.5% to $95.2 million
EPS up 7.5% to 96.1 cps
Interim dividend up 4 cps to 63 cps

3

SLIDE 4

$m

HY15 HY16

Growth

HY15 HY16

Growth

HY15 HY16

Sales 1,862.1 2,000.9 7.5% 113.0 127.3 12.7% 1,965.1 2,116.8 7.7% p Gross Profit 408.7 438.6 7.3% 20.4 23.0 12.9% 427.3 459.6 7.6% p Gross Margin 21.95% 21.92% (3 bps) 18.03% 18.07% +4 bps 21.74% 21.71% (3 bps) q CODB 263.3 283.9 7.8% 16.7 19.5 16.7% 278.5 301.6 8.3% p EBITDA 145.4 154.7 6.4% 3.7 3.5 (4.2%) 148.7 157.9 6.2% p Depreciation & Amortisation 17.7 18.4 4.0% 1.2 1.5 26.8% 18.8 19.8 5.3% p EBIT 127.7 136.4 6.8% 2.5 2.0 (19.6%) 130.0 138.2 6.3% p EBIT Margin 6.86% 6.82% (4 bps) 2.17% 1.55% (62 bps) 6.61% 6.53% (9 bps) q Net Interest 2.9 1.7 (39.7%) q Profit before Tax 127.1 136.4 7.4% p Tax Expense 38.5 41.2 7.0% NPAT 88.5 95.2 7.5% p Headline Statistics: Dividends per share (¢) 59.0 63.0 +4 cps p Earnings per share (basic ¢) 89.4 96.1 +7.5% p Cost of doing business1 14.14% 14.19% +5 bps 14.78% 15.31% +53 bps 14.17% 14.25% +8 bps p Stores 173 179 +6 stores 14 15 +1 store 187 194 +7 stores p

AUST NZ (NZD) CONSOLIDATED

Growth

2. PROFIT AND LOSS STAT E MENT

1 Refer to Appendix II(c) for reconciliation of consolidated CODB. 2 As at 30 June 2015.

4

2 2 2 1

SLIDE 5

74.6% 76.5% 79.2% 81.9% 84.0% 25.4% 23.5% 20.8% 18.1% 16.0% HY12 HY13 HY14 HY15 HY16 Hardware & Services Software

Sales

Total consolidated sales grew by 7.7% to $2.12b, with

comparable sales up 5.2%.

Sales in November and December 2015 were strong, with a

well executed promotional plan supported by good inventory depth.

Australia

Total sales grew by 7.5% to $2.0b, with comparable sales up

5.2%.

Hardware and Services1 sales in HY16 were up 10.2%, with

comparable sales up 7.9% driven by the Telco, Fitness, Accessories, Computers and Home Appliance categories.

Software sales in HY16 were negative 4.6% and on a

comparable basis were negative 6.6%.

New Zealand

Total sales were up 12.7% to NZ$127.3m, with comparable

sales up 5.2%.

Sales growth has been driven by two new stores opened in

the past 12 months and elevated market wide demand for third party prepaid content cards. Excluding the sales impact

f these cards (NZ$8.4m), total growth in New Zealand was

5.3%, with comparable sales negative 1.8%.

3. T R ADING PERFOR M ANCE

Sales Category Splits by Value2

1 Hardware & Services is defined as all sales excluding the Music, Movies and Games Software categories. 2 Consolidated.

1

5

Australia 4.7% 3.4% 9.5% 6.5% 7.5% 5.2% New Zealand (NZD) 18.4% 10.9% 8.9% 1.5% 12.7% 5.2% Total 5.3% 3.7% 9.5% 6.3% 7.7% 5.2% Sales Growth Q1 FY16 Q2 FY16 HY16 Total Comps. Total Comps. Total Comps.

SLIDE 6

Gross Margin

Consolidated gross profit increased by 7.6% to $459.6m.
Consolidated gross margin was 21.7%, a 3 bps decrease
n the pcp.
In Australia, gross margin decreased by 3 bps on the pcp

to 21.9%, which was a solid result given the change in sales mix.

In New Zealand, gross margin increased 4 bps to 18.1%.

Gross Margin

3. T R ADING PERFOR M ANCE . . .

6 21.2% 21.5% 21.6% 21.7% 21.7% HY12 HY13 HY14 HY15 HY16

HY15 HY16 Growth HY15 HY16 Growth Australia $408.7m $438.6m 7.3% 21.95% 21.92% (3 bps) New Zealand (NZD) $20.4m $23.0m 12.9% 18.03% 18.07% +4 bps Total $427.3m $459.6m 7.6% 21.74% 21.71% (3 bps) GROSS PROFIT GROSS MARGIN

SLIDE 7

Cost of Doing Business (CODB)

Consolidated CODB was 14.3%, up 8 bps on the pcp.
In Australia, CODB increased by 5 bps to 14.2%. Operating costs remained well

controlled as we invested in our HOME store rollouts.

In New Zealand, CODB was up 53 bps to 15.3%.
We seek to maintain our low CODB through continued focus on productivity and

minimising indirect expenditure.

CODB

3. T R ADING PERFOR M ANCE . . .

7

HY15 HY16 Australia 14.14% 14.19% New Zealand 14.78% 15.31% Total 14.17% 14.25% CODB

13.6% 13.8% 13.9% 14.2% 14.2% HY12 HY13 HY14 HY15 HY16

SLIDE 8

3. T R ADING PERFOR M ANCE . . .

8

EBIT $m EPS (cps) Earnings

Consolidated EBIT was up 6.3% to $138.2m, driven by Australia with growth of 6.8%.

This was a solid result with sales and earnings momentum growing through the half year.

Consolidated EBIT margin was down 9 bps on the pcp at 6.5%, with Australia stable but

New Zealand down on the pcp.

Net interest expense was down 39.7% to $1.7m driven primarily by lower debt levels.
Effective tax rate was 30.2%, down from 30.3% in the pcp.
NPAT was up 7.5% to $95.2m and EPS was up 7.5% to 96.1 cps.

HY15 HY16 Australia 6.86% 6.82% New Zealand 2.17% 1.55% Total 6.61% 6.53% EBIT MARGIN

EBIT Margin %

6.8% 6.8% 6.8% 6.6% 6.5% HY12 HY13 HY14 HY15 HY16 80.7 83.0 90.5 89.4 96.1 HY12 HY13 HY14 HY15 HY16 120.7 123.7 132.9 130.0 138.2 HY12 HY13 HY14 HY15 HY16

SLIDE 9

10 15 21 26 32 48 66 77 93 109 131 144 155 164 169 173 179 214 12 12 14 10 13 13 13 13 14 15 Acquired July 2000 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 HY16 TARGET

Total Stores AUSTRALIA NEW ZEALAND

FY16

A total of eight new stores are expected to open in FY16,

five JB HI-FI HOME stores (Aust: 5, NZ: nil) and three JB HI-FI stores1 (Aust: 2, NZ: 1).

13 existing JB HI-FI stores are expected to be converted to

JB HI-FI HOME (Aust: 11, NZ: 2) in FY16. This includes four stores (Aust: 4, NZ: nil) which will be relocated as part

f their conversion to JB HI-FI HOME stores.

We continue to optimise the store portfolio

HY16

Seven new stores were opened in HY16, four new JB HI-FI HOME stores (Aust: 4, NZ: nil) and three new JB HI-FI

stores1 (Aust: 2, NZ: 1).

Nine existing JB HI-FI stores were converted to JB HI-FI HOME (Aust: 8, NZ: 1). This included two stores in Australia

which were relocated as part of their conversion to JB HI-FI HOME stores.

Small appliances were introduced to 22 existing JB HI-FI stores (Aust: 19, NZ: 3).

187 141 123 105 89 157 168

9

177 182

4. IN STOR E

HY16 194

1 Including Small Appliances.

SLIDE 10

8 22 43 56 ~75

FY13 FY14 FY15 HY16 TARGET

10

4. IN STOR E . . .

HOME Stores JB HI-FI HOME

During HY16 nine existing stores were converted to JB HI-FI

HOME and four new JB HI-FI HOME stores were opened. We had 56 HOME stores at the end of HY16, including four in New Zealand.

In FY16 we anticipate opening five new JB HI-FI HOME stores and

converting 13 existing stores to JB HI-FI HOME. We expect to have 61 HOME stores at the end of FY16.

Our target of ~75 HOME stores should be reached during FY17.
We are targeting $3m incremental sales in the first full year post

conversion, rising to circa $5m over the medium term as our rollout achieves scale.

Small Appliances

In HY16 small appliances were introduced to 22 existing JB HI-FI stores, with up to an additional 15 existing JB HI-

FI stores expected to range small appliances by the end of FY16.

In the long term we expect most stores to carry appliances, with the range (i.e. small appliances vs full HOME offer) tailored to suit each specific store.

SLIDE 11

5. Out of stor e

11

JB HI-FI Solutions

All departments enjoyed solid growth.
We remain on track to deliver on our longer term aspirational sales target of approximately $500m per annum,

through both organic growth and strategic acquisitions.

Online and Digital

We continue to leverage the benefits of a strong online presence combined with our bricks and mortar

locations.

Online sales for HY16 grew 28.9% on the pcp to $62.8m or 3.0% of total sales (HY15: 2.5%).
Unique visitors to JB HI-FI’s websites during the 12 months to 31 December 2015 averaged 1.3 million per

week, with a peak of 2.3 million around Christmas 2015.

Supply Chain

We continue to develop our low cost, fit-for-purpose supply chain and logistics solution, with facilities operating

in Melbourne, Sydney, Brisbane, Perth, Newcastle and Auckland.

In other states and regional centres where stand alone facilities are not currently economic, the HOME rollout

allows for expanded back-of-house storage areas.

SLIDE 12

Cash Flow Statement

12

Working Capital

6. C A SH FLOW AND BAL ANCE SHEET

1 Free Cash Flow = Net Cash Flow from Operations less Purchases of P&E (net). 2 Rolling 12 month EBITDA. Note that the Company held no debt as at 31 December 2015 (HY15: Nil). Refer to following page for further discussion.

AUDm EBITDA 148.7 157.9 Change in Working Capital 146.6 134.4 Net Interest Paid (2.7) (1.7) Income Tax Paid (29.0) (33.6) Other 1.8 2.6 Net Cash Flow from Operations 265.5 259.6 Purchases of P&E (net) (27.5) (28.6) Investments (2.4)

Net Cash Flow from Investing

(29.9) (28.6) Free Cash Flow1 238.0 231.0 Proceeds / (Repayment) of borrowings (180.0) (140.0) Proceeds from issue of equity 2.5 5.0 Share buy-back (5.0) (13.2) Dividends Paid (28.8) (30.9) Other

0.1

Net Cash Flow from Financing (211.3) (179.0) Net Change in Cash Position 24.3 52.0 Effect of exchange rates 0.3 0.3 Cash at the end of Period 68.1 101.4

HY15 HY16

AUDm

FY12

(Increase)/decrease in current assets Inventory (112.6) (140.4) Receivables (80.0) (64.3) Other current assets (0.3) (1.9) Increase/(decrease) in current liabilities Payables 337.2 337.5 Other current liabilities 2.3 3.5 Net Movement in Working Capital 146.6 134.4

Performance Indicators:

Inventory Turnover 5.9x 6.0x Creditor Days 56.3d 55.0d Fixed Charge Ratio2 3.3x 3.5x Interest Cover 41.4x 69.6x Gearing Ratio2 0.0 0.0 Return on Invested Capital 45.1% 45.4%

HY16 HY16 HY15 HY15

SLIDE 13

$572.6m ($27.7m) $31.2m $33.6m $11.7m $621.5m

HY15 Closing Inventory New Stores Existing Stores (AUS & NZ) Impact of Appliances Consignment Stock HY16 Closing Inventory $17.6m

6. C A SH FLOW AND BAL ANCE SHEET. . .

13

Balance Sheet Inventory Bridge – HY15 to HY16

Inventory levels are in line with Company expectations.

Inventory turnover in HY16 was up on the pcp at 6.0x (pcp: 5.9x).

Similar to prior half years, the 31 December payables and

net debt / (net cash) positions are heavily influenced by the timing of Christmas inventory purchasing. We will return to a net debt position in the second half of FY16.

2

1 Nine stores were opened in the 12 months to 31 December 2015. 2 Excludes impact of Appliances in existing stores.

AUDm Cash 68.1 101.4 49.1 Receivables 150.5 146.1 81.5 Inventories 572.6 621.5 478.9 Other 5.7 9.7 7.4 Total Current Assets 796.8 878.7 616.9 Fixed Assets 190.4 185.5 176.2 Intangibles & Goodwill 85.6 85.3 84.5 Other 17.1 20.7 17.4 Total Non-Current Assets 293.2 291.5 278.1 Total Assets 1,090.0 1,170.2 895.0 Payables 638.9 664.3 325.6 Other 63.1 68.6 54.7 Total Current Liabilities 702.0 732.8 380.3 Borrowings

139.5

Other 31.8 31.5 31.7 Total Non-Current Liabilities 31.8 31.5 171.2 Total Liabilities 733.8 764.3 551.5 Net Assets 356.2 405.9 343.5 Net Debt / (Net Cash) (68.1) (101.4) 90.3

HY15 HY16 FY15

1

SLIDE 14

7 . C APITAL M ANAGE MENT

14

Capital Management

JB HI-FI regularly reviews all aspects of its capital structure

with a focus on maximising returns to shareholders.

We have maintained our dividend payout ratio of 65%, with

the interim dividend at 63 cents per share (cps) fully franked, up 4 cps from the pcp. The record date for the interim dividend is 19 February 2016, with payment to be made on 4 March 2016.

During HY16 we completed an on-market buy-back of 0.7m
rdinary shares (at a cost of $13.2m), to offset the dilutionary

impact of shares expected to be issued to employees under the Company’s share option plans in FY16.

Interim dividend up 4 cps

49 50 55 59 63 16 22 29 31 FY12 FY13 FY14 FY15 HY16 Dividends (cps)

Final Interim

SLIDE 15

Trading Outlook

January 2016 sales update:
Total consolidated sales growth was +10.2% (January 2015: +8.9%); and
Consolidated comparable sales growth was +6.5% (January 2015: +7.0%).

The sales result in January 2016 was pleasing given the strength in the pcp, with back to school technology purchases in both our retail and Solutions businesses driving sales.

FY16 Guidance:
The market is expected to remain competitive as retailers cycle a strong second half in
FY15. Of particular significance was the small business tax incentive which drove sales in

May and June 2015.

We note recent changes to the consumer electronic and home appliance retail industry. In

the near term it is unclear how these events will impact the industry; however we will continue to focus on delivering great value to our customers and ensure that we remain the preferred destination for consumer electronics, home appliances and entertainment.

In FY16 the Company expects total sales to be circa $3.9b and NPAT to be in the range of

$143m to $147m.

8 . T R ADING OUTLOOK

15

SLIDE 16

2 as at 31 December 2015.

b) Geographic breakdown2 a) Store movements during HY16 15 2 52 37 51 2 9 21 5

NZ

Appendix I

16

1 Relocations. 1 1

Opened

Total Australia JB HI-FI 133 2 (8) 127 JB HI-FI HOME 40 4 8 52 173 6

179

New Zealand JB HI-FI 11 1 (1) 11 JB HI-FI HOME 3

1

4 14 1

15

TOTAL 187 7

194

Store type: JB HI-FI 144 3 (9) 138 JB HI-FI HOME 43 4 9 56 187 7

194

Store format: Shopping centres 103 5 2 110 Other 84 2 (2) 84 187 7

194

FY15 HY16

Converted

SLIDE 17

a) EBIT reconciliation

Appendix II

b) NZ Profit and Loss statement (AUD) c) CODB reconciliation 17

AUDm

HY15 HY16

Profit for the half-year (App 4D) 88.5 95.2 add back

income tax expense (App 4D)

38.5 41.2 Profit before Tax 127.1 136.4 add back

interest received

(0.2) (0.2)

interest expense (App 4D)

3.1 2.0

net interest expense

2.9 1.7 Earnings before interest and tax (EBIT) 130.0 138.2 AUDm

HY15 HY16

Sales 103.0 116.0 Gross Profit 18.6 21.0 Gross Margin 18.03% 18.07% EBITDA 3.3 3.2 Depreciation & Amortisation 1.1 1.4 EBIT 2.2 1.8 EBIT Margin 2.17% 1.55% AUDm

HY15 HY16

Other income (ex interest received) (0.01) (0.004) Sales and marketing expenses (App 4D) 187.2 202.8 Occupancy expenses (App 4D) 78.4 84.9 less depreciation & amortisation (15.6) (17.1) Administration expenses (App 4D) 13.5 13.9 less depreciation & impairment (3.1) (2.6) Other expenses (App 4D) 18.2 19.9 . . Cost of Doing Business (CODB) 278.5 301.6 Sales 1,965.1 2,116.8 CODB (% of sales) 14.17% 14.25%

SLIDE 18

Appendix III

18 a) Profit and Loss

AUDm HY12 HY13 HY14 HY15 HY16 Sales 1,774.7 1,816.2 1,939.9 1,965.1 2,116.8 Gross Profit 377.0 390.9 419.6 427.3 459.6 Gross Margin 21.24% 21.52% 21.63% 21.74% 21.71% CODB 240.9 251.1 269.3 278.5 301.6 EBITDA 136.1 139.8 150.3 148.7 157.9 Depreciation & Amortisation 15.4 16.1 17.4 18.8 19.8 EBIT 120.7 123.7 132.9 130.0 138.2 EBIT Margin 6.80% 6.81% 6.85% 6.61% 6.53% Net Interest 6.9 5.2 3.9 2.9 1.7 Profit before Tax 113.8 118.5 129.0 127.1 136.4 Tax Expense 34.2 36.4 38.6 38.5 41.2 NPAT 79.6 82.1 90.3 88.5 95.2 Headline Statistics: Dividends per share (¢) 49.0 50.0 55.0 59.0 63.0 Earnings per share (basic ¢) 80.7 83.0 90.5 89.4 96.1 Cost of doing business 13.57% 13.82% 13.88% 14.17% 14.25%

SLIDE 19

Appendix III. . .

19 b) Cash Flow

AUDm HY12 HY13 HY14 HY15 HY16 EBITDA 136.1 139.8 150.3 148.7 157.9 Change in Working Capital 107.5 (9.2) (45.8) 146.6 134.4 Net Interest Paid (7.2) (4.9) (3.7) (2.7) (1.7) Income Tax Paid (23.9) (15.3) (25.9) (29.0) (33.6) Other 3.4 3.1 3.3 1.8 2.6 Net Cash Flow from Operations 215.9 113.5 78.3 265.5 259.6 Purchases of P&E (net) (29.8) (23.1) (20.7) (27.5) (28.6) Investments

(3.0)

(2.4)

Net Cash Flow from Investing

(29.8) (23.1) (23.7) (29.9) (28.6) Free Cash Flow 186.1 90.3 57.6 238.0 231.0 Borrowings / (Repayments) (129.3) (60.0) (75.1) (180.0) (140.0) Proceeds from issue of Equity 3.3

19.6

2.5 5.0 Share buy-back

(5.0)

(13.2) Dividends Paid (28.6) (15.8) (22.0) (28.8) (30.9) Other

0.1

Net Cash Flow from Financing (154.6) (75.8) (77.4) (211.3) (179.0) Net Change in Cash Position 31.5 14.5 (22.8) 24.3 52.0 Effect of exchange rates (0.1) 0.1 0.4 0.3 0.3 Cash at the end of Period 58.7 54.3 44.9 68.1 101.4

SLIDE 20

Appendix III. . .

20 c) Balance Sheet

AUDm HY12 HY13 HY14 HY15 HY16 Cash 58.7 54.3 44.9 68.1 101.4 Receivables 125.7 113.6 127.6 150.5 146.1 Inventories 415.7 529.8 588.1 572.6 621.5 Other 8.0 6.8 4.7 5.7 9.7 Total Current Assets 608.2 704.4 765.4 796.8 878.7 Fixed Assets 183.2 188.1 185.4 190.4 185.5 Intangibles & Goodwill 78.5 79.0 85.1 85.6 85.3 Other 18.4 17.4 17.0 17.1 20.7 Total Non-Current Assets 280.1 284.4 287.5 293.2 291.5 Total Assets 888.3 988.9 1,052.9 1,090.0 1,170.2 Payables 484.8 545.7 565.4 638.9 664.3 Other 55.2 62.4 70.9 63.1 68.6 Total Current Liabilities 540.1 608.1 636.3 702.0 732.8 Borrowings 103.5 90.0 49.5

Other

37.6 37.5 33.8 31.8 31.5 Total Non-Current Liabilities 141.1 127.5 83.3 31.8 31.5 Total Liabilities 681.1 735.6 719.6 733.8 764.3 Net Assets 207.2 253.2 333.3 356.2 405.9 Net Debt / (Net Cash) 44.8 35.7 4.5 (68.1) (101.4)