JB Hi-Fi (JBH) seems to be on the verge of yet another surge in sales and earnings, judging by yesterday’s 2015-16 results. The company lifted full-year profit 11.5% to $152.2 million for the year to June.
Sales rose 8.3% to $3.95 billion, exceeding guidance of $3.9 billion, on like for like sales growth of a solid 5.4%, with buoyant sales of audio visual equipment and mobile phones offseting weaker demand for fitness products, music and games.
The June quarter saw much stronger than expected growth. The company used one off promotions in May and June, including generous discounts on computers, to grow sales in the 4th quarter, even though it was compared to the 8% growth from the same quarter a year ago which was dominated by the one off small business tax incentives in the budget.
The company and analysts saw the demise of Dick Smith at the start of this year has helped JB Hi-Fi’s second half performance, and that’s why it looks like to be on the verge of another sales and profit surge.
Just on the 2015-16 performance, sales will top $4 billion for the first time and net earnings will end up close to $175 million.
But that is before what could be an even bigger boost – a bid for the rival The Good Guys’ chain, should its owners, the Muir family, not proceed with an initial public offering. JB Hi-Fi received ACCC approval last week.
The Australian Competition and Consumer Commission concluded that JB Hi-Fi and The Good Guys focus on different product categories and customers, so an acquisition would not significantly reduce competition.
That could cost close to $1 billion, according to some analysts because of the value to JB Hi-Fi of The Good Guys different product range.
A takeover of The Good Guys would boost JB Hi-Fi’s sales from $3.9 billion to almost $6 billion, add $110 million to earnings before interest, tax, depreciation and amortisation – before synergies estimated to be worth as much as $40 million – and lift store numbers by 100 stores to 294.
JB Hi-Fi shares had risen 40% to a record $27.38 set last week, fuelled by expectations it will buy The Good Guys, and on the benefits from Dick Smith’s collapse.
Yesterday the shares bounded to new highs,closing at $29.39, up 7.3% on the day and a new all time closing high. The shares hit an intra day record high of $29.50.
Added to this positive news yesterday was a sharp, 6 cents a share boost to final dividend to 37 cents, making the full year payout $1 a share.
And on top of that the company told the market it is launching a share buyback after lifting The retailer said it will spend about $11.8 million on the on-market buyback and could spend more on further capital management initiatives. But that will depend on what it decides to do about The Good Guys.
