The purpose of this report is to evaluate the findings of an analysis conducted on JB Hi-Fi (JBH). This evaluation will be assessed to present a recommendation to acquire shares to add to an investment portfolio. This report will assess JBH relative to profitability, asset efficiency, liquidity, capital structure a
BSBFIA402A REPORT ON FINANICIAL ACTIVITY DANIELO FRUSCIANTE
JB Hi-Fi (JBH) Company Profile
Industry: Specialty Retail, Other
Public Company: Share holders
A public ltd company sells theirs shares through the stock exchange.Companies can have a full quotation put on the stock exchange so their share prices appear on the dealers screens.The main advantage of selling shares on the stock exchange is that large amounts of capital can be raised very quickly. A disadvantage is that a business can be taken over if a large amount of shares are bought in a take over bid. It also cost alot to have shares quoted on the stock exchange.
JB Hi-Fi Limited (JBH) is a specialty discount retailer of branded home entertainment products. The Group's products fall in into consumer electronics, car sound systems, music, DVDs and white goods. JBH does not operate a warehouse; instead all stock is delivered directly to each retail outlet and largely stored on the shop floor. JBH uses its size and mix of high growth categories to increase its buying and advertising synergies. They are focused on growth, opening 39 stores in the past 2 years and a securing another 18 sites set to open in the 2009/2010 financial year. As of the 30th of June 2009, the company had 123 stores operating around Australia and New Zealand. (106 branded JB Hi-Fi)
JBH delivered another record result in 2009 with sales up 27.3%on the prior year, EBIT growth of 39% and NPAT growth of 45% at year-end. This was achieved through a combination of strong comparative store sales growth and a continued expansion of its product offering.
JB Hi-Fi presents itself as a company that is profitable, highly efficient in relation to operational performance, liquid relative to its business model and capable of company and shareholder growth.
2009 2008 2007 |Return on equity 41.19% 39.71% 35.71% |Return on assets 15.12% 13.36% 10.17% |Gross profit margin 21.63% 21.86% 22.11% |Profit margin 5.46% 4.63% 4.05%
JBH have a strong net income return relative to the percentage of shareholders invested equity, displaying a 13.3% growth over the assessed period. This optimistic growth pattern presents itself to be highly favorable to investors. JBH further add to their capacity to profit displaying a 32.74% increase in its ability to generate income from its asset investments. The fact that both the ROE and ROA display growth indicates positive operational performance. Gross profit margins are stable with only slight fluctuations over the assessed period indicating a confident business model and pricing structure. An increase of 25.82% of cash flow generated by each sales revenue dollar further confirms JBH’s capacity to be profitable.
Despite the positive profits and growth that JBH present over this assessed period, caution needs to be advised for future performance expectations. Analysts are predicting tough times may be ahead for retailers as the impact from the financial stimulus fades, and uncertainty surrounding the condition of the Australian economy. Analyst’s further voice concerns that as interest rates continue to rise...
References: (2008) JBH Annual Report
(2009) JBH Annual Report
(Austock Equities Research – December Quarter 2009)
Stocks to watch, May 10, 2010, http://www.watoday.com.au/business/markets/stocks-to-watch-20100510-um2x.html
Symons, D. (April 13, 2010) Fading fiscal stimulus could put JB out of tune. http://www.watoday.com.au/business/fading-fiscal-stimulus-could-put-jb-out-of-tune-20100412-s43g.html
Thomson, J (09 February 2010) The 10 strategy secrets of JB Hi-Fi, http://www.smartcompany.com.au/retail/20100209-the-10-strategy-secrets-of-jb-hi-fi-chief-richard-uechtritz-here-s-what-you-can-learn.html
Gitman, Juchau & Flanagan, Principles of Managerial Finance,5th edition, 2008, Australia
Birt, Chalmers, Beal, Brooks, Byrne & Oliver, Accounting Business Reporting for Decision Making 2nd edition, 2008, Australia.
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