Branded Network of Retail Sales Assignment

JB Hi-Fi
FIN600 TX YYYY
NAME: STUDENT ID:

Student name – ID FIN600 TX YYYY
Assignment – Company
Executive Summary
Aim of the task is to present the financial performance of ASX listed company JB HI-Fi
considering its profitability, liquidity, efficiency and gearing position. The entity generates
the sales majorly from the branded network of retail sales. In addition to that it also
generates revenue from commercial and educational solution services through JB Hi-FI
Solutions. Despite of the tough environment in retail sector, the entity managed to post
strong growth in profit, beating the market expectations along with its own forecasts. It will
focus on the company’s financial position for 2018 and will compare the same with the
performances of 2017. Apart from that the report will further focus on the company’s
competitive and political environment along with various external factors and how the
entity is making its strategies for being sustainable over the long term. Based on the
analysis, recommendations will be provided regarding JB Hi-Fi shall be considered for
investment.
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Student name – ID FIN600 TX YYYY
Assignment – Company
Contents
Page Number
1 Introduction - Background and Business 3
2 Company Analysis - Current Financial performance, economic outlook
3
3 Ratio Analysis
3.1 Profitability ratios 3
3.2 Efficiency ratios 4
3.3 Liquidity ratios 5
3.4 Gearing ratios 5
4 Recommendations and overall assessment 6
5 References/Bibliography 8
Appendices – attached Excel Spreadsheet
10
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Student name – ID FIN600 TX YYYY
Assignment – Company
1 Introduction
1.1 Background and Business
JB HI-Fi is the Australian retailer that is publicly listed and engaged in
retailing of products related to home consumers. Mainly the entity operates
through 2 segments – New Zealand and Australia. Business operation of the
entity involves selling of services and products related to consumer electronics
including audio equipments, televisions, software, cameras, computers,
whitegoods, and small appliances, cooking products, compact discs and Blu-ray
games and discs. It has more than 60 home branded stores under the name of
JB Hi-Fi that includes 4 in New Zealand. It further offers different solutions
including government, corporate and education sales of the services and
products as well as insurance replacements (Jbhifi.com.au, 2019).
2 Company Analysis
2.1 Financial statements, Current Financial performance,
economic outlook
The entity generates the sales majorly from the branded network of retail sales. In
addition to that it also generates revenue from commercial and educational solution
services through JB Hi-FI Solutions. Looking into the annual report of the entity it is
identified that the company presents its financial results through 5 statements including
statements of profit or loss, statements of profit or loss and other comprehensive income,
balance sheet, statement of changes in equity and statement of cash flows. All these
statements are prepared for the period ended 30th June each year and the entity complies
with Australian Accounting Standards along with the interpretation issued by AASB and
Corporations Act 2001 while preparing these statements. Analyzing the financial
statements of the entity for the year ended 2018; it can be found out that the company
was able to increase its sales from $5628 million to $6854.3 million over the years from
2017 to 2018 that led to increase in gross profit from $1230.5 million to $1470.2 million
over the same period (Altman et al., 2017). Further, the net profit amount increased from
$172.4 million to $233.2 million that is in percentage form it increased from 3.06% to
3.40% that is signifying the improved profitability position of the entity. Further liquidity
position of the entity has been enhanced as the current assets have been increased from
$1167.5 million to $1210.5 million and it was able to pay off the long term borrowing as
the same has been reduced from 885.4 million to 917.2 million. However, much difference
is not there in terms of closing cash balance of the entity as the same has been reduced to
$72 million in 2018 from $72.8 million (Klomp, 2014).
Despite of the tough environment in retail sector, the entity managed to post strong
growth in profit, beating the market expectations along with its own forecasts. Strong
performance of the entity was majorly driven by the strong sales of computers, mobile
phones, audio equipments, smart home devices, fitness trackers and video games. Strong
sales in these categories assisted the entity to offset the weaker demands for music,
movies that experienced double digit drop all over the network of Australian stores. Its
profit was stronger as compared to the expectation. Further, the like-for-like sales at The
Good Guys that was purchased by the entity during 2016was jumped by 1.5% as
compared to 0.7% drop in same period of last year; Further, the entity is incredibly well
managed and its sales as well as profitability continued surprising on upside. Instead of
uneasy market sentiment at present, the entity held up itself very well in its financial
performance aspect (Jbhifi.com.au, 2019).
3 Ratio Analysis
3