JB Hi-Fi Full Year Results for 2012

JB Hi-Fi Full Year Results for 2012

JB Hi Fi today reported its full year results. Revenue of $3.13b was 6% higher than FY11, but NPAT was down 4.6% to $104.6m. While this was the first decline in JB Hi-Fi NPAT since it listed in 2003, it was slightly better than the market had anticipated and, as I write, the share price is up over 6%.

As value investors, we are more concerned about the long-term than the intra-day outlook, and the question exercising our minds is: to what extent are the current headwinds cyclical vs. structural?

JB Hi-Fi believes that most of what is happening is cyclical, and there is some evidence that can be marshaled to support that view. However, it can also be said that retailers who previously competed locally must now compete with the best in the world. In this context, retailers that must pay Australian prices for rent, staff and utilities have some relatively big hurdles to clear.

Investors should also be aware of two interesting financial developments. Looking at the Profit & Loss statement you will see EPS has risen from 101.76 cents to 105.93 cents.

But the charts of EPS in the remuneration section reveal a very different picture. You see, the P&L includes an abnormal loss of $33 million associated with the Clive Anthony’s ‘restructure’. Take the abnormal loss out and the continuing operations made EPS of $1.247 in 2011 against this year’s $1.059. If it was ok to use $1.247 for the execs in working out their incentives, it should be ok for shareholders to use to compare this year’s P&L!

And for those investors enamoured with cash flows, don’t get too excited by the cash flow from operations jumping to more than $215 million from $105 million last year. You see, there’s been a $100 million blow out in payables. In other words JBH appears to have held off paying its suppliers a little longer.

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Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.

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