What a way to ruin an upbeat sales and earnings story.
JB Hi-Fi CEO, Richard Uechtritz revealed yesterday that he was stepping down mid year, a move that sent the share price south by more than 7% at one stage (or $1.45).
His announcement coincided with the company’s interim profit, up 29% to a net $76 million.
The company also revealed that it was more than doubling its fully franked dividend from 15c a share to 33c.
It also confirmed the full year profit forecast and a 20% rise in sales for the 12 months to June 30.
"This dividend is based on a full year payout ratio of 60%, up from our previous target of 50%," directors said in the statement to the ASX.
That news would have normally seen the shares chased by investors looking for yield, and then income.
The fall in the market after the news of the CEO’s proposed retirement cost the company around $156 million in lost value, double what it made on a net basis in the six months to December.
The shares were still down $1.03, or 5.1% at $19.07 at the close yesterday, a drop in value of more than $100 million.
JB Hi-Fi said the net profit of $76 million for the six months to December 31, 2009 was up from $59 million in the prior corresponding period.
Sales were up 23% to $1.554 billion, from $1.262 billion.
"Comparable store sales growth for the period was 9.9%," the company said in the statement sent to the ASX.
Comparable store sales growth was 10.2% in Australia and 5.8% in New Zealand.
The overall growth and the Australian growth was double that of larger rival, Harvey Norman, which issued its interim sales update last Friday.
The group currently has 134 stores (124 Australia, 10 NZ); of which 122 are JB Hi-Fi branded stores.
"The company is targeting 210 JB Hi-Fi branded stores and plan to open 13 to 15 stores per annum.
"With this rollout the company can look forward to at least 5 to 6 years of good sales and earnings growth.
"Sales in January have met internal expectations with comparable store sales at 7.2%.
"Whilst the retail outlook continues to be uncertain, the company is cautiously optimistic that it will have another strong year.
"JB confirms its previous guidance that sales will be circa $2.8 billion or a 20% increase on the prior financial year, and expects Net Profit after Tax to be in the range of $117 million to $120 million or a 24% to 27% increase on the prior year."
Mr Uechtritz said he was "extremely pleased" with the strong result, particularly the 6.5% comparable store sales growth in December.
"JB has proven to be very resilient throughout the economic downturn which led to low consumer confidence and spend," he said in a statement,
JB Hi-Fi chairman Patrick Elliott said Mr Uechtritz will step down in around July/August after 10 years at JB Hi-Fi.
“Richard has made an enormous contribution to the success of the Company since leading the management buy in back in July 2000," Mr Elliott said.
"During his tenure as CEO revenue has grown from $145 million to a forecast $2.8 billion in the current financial year, and JB Hi-Fi has been established as one of Australia’s most recognised retail brands.
“Investors who have held JB shares since the IPO in October 2003 to today will have received an annual rate of return of 48.0% compared to the ASX 200 returning 5.1% per annum over the same period.
"Richard is deservedly considered one of this country’s most effective chief executives.”
He will be replaced by current chief operating officer Terry Smart.
The company said that its gross margins in the half year remained relatively stable (down 26 bps: Aust down 19bps, NZ down 196 bps) despite competitor discounting and the strong performance of low margin categories.
The company said its cost of doing business was down 39 bps to 13.2% (HY09 13.6%). EBIT Margin increased 10 bps to 7.2% (HY08 7.1%).
Cashflow from Operations was strong at $168.4 million for the half year.
