Financial and Non-Financial Analysis of JB Hi-Fi Company

The purpose of this report is present the interpretation of the financial and non-financial performance of JB Hi-Fi Company which is one of the leading businesses of Australia operating in the retailing industry. The analysis of the report has presented that the company’s revenue and sales and increasing due to its continuous focus on improving customer service and improving in-store experience of the customers.

Running head: FINANCIAL ANALYSIS
Financial Analysis
October 6
2019

FINANCIAL ANALYSIS 1
Executive Summary
The purpose of this report is present the interpretation of the financial and non-financial
performance of JB Hi-Fi Company which is one of the leading businesses of Australia
operating in the retailing industry. The analysis of the report has presented that the
company’s revenue and sales and increasing due to its continuous focus on improving
customer service and improving in-store experience of the customers. Besides this, the
company is focused on adopting different strategies that can help in managing challenges in
the coming future.

FINANCIAL ANALYSIS 2
Table of Contents
Executive Summary...................................................................................................................1
Introduction................................................................................................................................3
Interpretation..........................................................................................................................3
Management Structure.......................................................................................................8
Organizational Structure....................................................................................................8
Non-wage benefits.............................................................................................................8
Conclusion..................................................................................................................................9
References................................................................................................................................10
Appendix..................................................................................................................................11

FINANCIAL ANALYSIS 3
Introduction
The aim of this paper is to present the financial and non-financial interpretation of JB Hi Fi
Company with the analysis of its recent annual report in order to identify the trends and
changes in its performance and how it manages issues or challenges. In addition to this, this
interpretation is being done to support the external and internal stakeholders in taking their
investment decisions in the company.
Interpretation
The Group that include The Good Guys and JB Hi-Fi business are involved in the selling of
the following products: Telecommunication services, Software and musical instrument,
consumer electronics, whitegoods, small appliances, computers, cameras, etc. The group is
also involved in offering consulting services as well as information technology (IBIS World,
2019). With these services company has successfully gained a significance share in the
market. The sales of the group are majorly gained by its branded retail store chain (105 Good
Guys store in Australia and 196 JB Hi-Fi in Australia) and online operations (JB Hi-Fi
websites). In addition to this, the sales of the group are also generated through the education
and commercial business that is The Good Guys Commercial and JB Hi-Fi Solutions (JB Hi-
Fi, 2019c).
Net profit margin – It is considered as the revenue percentage left after all the expenses. From
the analysis of the annual report of JB Hi-Fi, the net profit margin is increasing which reflects
that has a strong profitability position in the market (Refer Appendix).
Gross profit margin –This ratio helps analysts how good the company is at making product or
offering a service in comparison to its rivals. The analysis of the JB Hi-Fi reveals that the

FINANCIAL ANALYSIS 4
gross profit margin is increasing and company is able to provide services properly in
comparison to its competitors (Refer Appendix).
Liquidity Ratio
Liquidity position of the company has slightly improved in 2019 as compared to 2018 as the
current as well as liquid ratios have increased in 2019. However, in both the years the
liquidity position of JB Hi Fi is not well as the company has not enough investment in the
current assets as compared to current liabilities. Hence, the company must invest more in
current assets which could be converted into cash at the time of paying off the liabilities
which will fall overdue in next coming year (Refer Appendix).
Solvency Ratio
Under this head, the proportion of debt is higher in comparison to the equity in both the years
under consideration. Besides this, the company’s solvency position has declined in 2019 as
compared to 2018 because of lower debt proportion (Refer Appendix).
Interest coverage ratio depicts that business has the capability to meet its interest payments
(Refer Appendix).
As discussed above, the financial results of the company has been improved because
company is increasing in the strategic initiatives and focusing on improving customer
services. Besides this, the retailing industry of Australia has showed a relatively passive
performance in the year 2018. The retail businesses have experienced a competitive pressure
and due to which number of brands taken exit from the market. This condition has been
raised in the market due to changing consumer behaviour and demand and their shift towards
online shopping (Euromonitor International, 2019).

FINANCIAL ANALYSIS 5
In order to deal with the increasing competition and other challenges in the market the group
believes that the below specified strategies adopted by the company will support in driving
growth in earnings and sales:
 Selection of the store at new location, according to the high traffic at the place and
closing of underachieving existing stores
 Continuously focusing on the customer service and improving customer’s in-store
experience
 Increasing the range of online product
 Expanding JB Hi-Fi business in new countries
 Enhancing logistics and supply chain system (JB Hi-Fi, 2019c)
Furthermore, in order to gain continuous growth the company ensure that all the employees
must be enrolled in the smarter choice program on how to provide best advice to the customer
related to the energy efficiency of the products. This is being focused because the business
wants to provide best in-store experience to the customers.
The JB Hi-Fi’s non-financial analysis highlights that the key strength of the company is that
it focus on strengthening the supplier relationships in order get best quality products at
reasonable prices. Strong supplier relationship not just supports business in gaining quality
products but it offers long-term profits to the business. As maintaining long-term relationship
with the suppliers allow the free flow of innovative ideas and feedback. The new and
innovative ideas from the suppliers and customer help company in expanding business in new
segments which offer additional source of revenue.
The remuneration Policy 2019

FINANCIAL ANALYSIS 6
The remuneration committee consider present market agreements related to the splits
between incentive elements and fixed remunerations. The package ruptures for 2019 were as
follows:
Source [(JB Hi-Fi, 2019c)]
The financial performance of the Group is potted in the below table, at the same time
showing the alignment of the remuneration of the executive to the Group’s performance.

FINANCIAL ANALYSIS 7
Source [(JB Hi-Fi, 2019c)]
The graph represents the relationship between executive remuneration and EPS over 5 years.
Source [(JB Hi-Fi, 2019c)]
Change in the wages
As the retailing industry of Australia is increasingly becoming competitive and in order to
survive in the market, the players are cutting their production cost and salaries of the workers,
which represents that there is no must difference between the wages offered by JB Hi-Fi and
its rivals.

FINANCIAL ANALYSIS 8
Management Structure
The management structure of JB Hi-Fi is comprised of Richard Murray (CEO and Executive
director), Cameron Trainer (managing director - Group Merchandise), Nick Wells (Chief
Financial Officer), and Tim Carter (Commercial and supply chain director) (JB Hi-Fi,
2019b).
Organizational Structure
Source [(JB HI-Fi, 2019a)]
Non-wage benefits
The employees of the company not just get financial benefit of working in the JB Hi-Fi, in
fact company allow its workforce to get involve in meeting their social responsibilities. The
company has introduced its “Helping Hands” program which involves 6500 employees who
make weekly contributions to the registered charitable organization. In the year 2019, the
company is able to raise around $2.6 million.

FINANCIAL ANALYSIS 9
Conclusion
The above report has provided the brief financial and non-financial analysis of the JB Hi-Fi
Company which is one of the well-known retailing companies that deals in consumer
products. In the conclusion, it can be said that company is with time raising its net sales by
focusing on cost in line and customer service. However, the increasing competition in the
industry can impact its performance in the long-run for which the company has adopted some
strategies like increasing number of stores, improving customer service to avoid such
barriers.

FINANCIAL ANALYSIS 10
References
Euromonitor International (2019) Retailing in Australia [online]. Available from:
https://www.euromonitor.com/retailing-in-australia/report [Accessed 6 October 2019]
IBIS World (2019) JB Hi-Fi Limited - Premium Company Report Australia [online].
Available from: https://www.ibisworld.com.au/australian-company-research-reports/retail-
trade/jb-hi-fi-limited-company.html [Accessed 6 October 2019]
JB HI-Fi (2019a) The Official Board [online]. Available from:
https://www.theofficialboard.com/org-chart/jb-hi-fi [Accessed 6 October 2019]
JB Hi-Fi (2019b) The Executive Team [online]. Available from:
https://investors.jbhifi.com.au/the-executive-team/ [Accessed 6 October 2019]
JB Hi-Fi (2019c) Annual Report [online]. Available from: https://investors.jbhifi.com.au/wp-
content/uploads/2019/08/4E_FY19.pdf [Accessed 6 October 2019]

FINANCIAL ANALYSIS 11
Appendix
This below table is representing the performance analysis of JB Hi-Fi Australia
Particular 2018 (Amount in $m) 2019 (Amount in $m)
Profitability
Net Profit Margin 3.40% 3.52%
Gross Profit Margin 21.50% 22.52%
Return on equity 24.59% 23.92%
Liquidity
Current Ratio 1.32 1.38
Quick Ratio 0.35 0.42
Solvency
Debt to equity ratio 1.63 1.44
Interest Coverage Ratio 20.15 25.13
Source [(JB Hi-Fi, 2019c)]