Business Report: Analysis of JB-Hi-Fi Limited (ACCY801, Finance)

This report provides a comprehensive analysis of JB-Hi-Fi Limited, a major retailer of consumer electronics. It begins with a company overview, followed by an examination of the board of directors, including their characteristics, experience, and remuneration. The report delves into key investment and financing decisions made by the company, corporate governance practices, and external audit functions. It assesses measures taken to ensure ethical judgments and identifies top investors. Ratio analysis is performed to evaluate JB-Hi-Fi's financial performance. The report concludes with recommendations and references, providing a detailed insight into the company's operations and financial health, based on its 2016 annual report.

Subject code and Subject Name: ACCY801: Accounting and Financial Management
Submission Type: Online
Assignment Title: Business Report-JB-Hi-FI Limited
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JB-Hifi Limited
Executive Summary
Any organization operates under an environment that is surrounded by various factors. Hence, the
investment decisions need to be undertaken in a proper manner. The key accounting policies also come
to the forefront and need to be tackled in a strong manner. In this report, JB-Hifi is selected for the
purpose of the study and various concepts are studied in the light of the company. Matters such as
investing decisions, corporate governance, board policies and ratios are computed to research on the
project. Further, the top investors are noted and an overall analysis of the company is done.
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JB-Hifi Limited
Contents
Introduction.................................................................................................................................................4
a. Company overview..............................................................................................................................5
b. Overview of Board of directors............................................................................................................5
c. Assessment of the Board characteristics.............................................................................................9
d. Important investment or financing decisions.....................................................................................10
e. Key Recommendations of the ASX Corporate Governance Principles..............................................10
f. External audit function......................................................................................................................11
g. Measures to ensure ethical judgments.............................................................................................12
h. Top Investors.....................................................................................................................................12
i. Ratio Analysis.....................................................................................................................................13
Conclusion.................................................................................................................................................15
References.................................................................................................................................................16
Appenndix.................................................................................................................................................18
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JB-Hifi Limited
Introduction
JB Hi-Fi Limited is a pioneer in the retail sector of the home consumer products. It is engaged in the
sale of electrical products that cater to the consumer that includes television, cameras, software, etc. it
has also a diversified business where it focuses on consultation and IT service. For the preparation of
this report, the annual report of 2016 is selected. The report revolves around JB-Hifi and its financial
report. The report initiates with the introduction of the company followed by the activities of the board.
Further, an in-depth analysis is made on the investment and the financial decision made by the
company. The corporate governance mechanism is studied in the light of JB-Hifi. Basically, the
report aims to provide a deep insight into the functioning of the company together with the operations.
Further, the report aims to provide a strong insight into the performance of the company through the
computation of the ratios.
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JB-Hifi Limited
a. Company overview
JB Hifi Ltd is primarily an Australian and New Zealand retailer of consumer items mainly
specialization in video games, CD’s, Blu-rays, electrical home appliances, hardware, etc. The group
also provides various consulting and technology services to its customers. For such purpose, it has
around sixty home branded stores that allow it to provide various kinds of services throughout New
Zealand and Australia. JB Hifi also provides various solutions like government, corporate, and
education sale of items and services, and replacement of insurance services as well. The company is
believed to be one of the fastest growing and successful companies in Australia that is listed on the
ASX and headquartered in Melbourne (JB-Hifi, 2016). Moreover, it also continues to stock various
premium quality products that assist it in redressing the requirements of consumers. Further, in relation
to financial performance in the year 2016, the company attained massive enhancement in the dividend,
sales, and profits that can be attributed to its low-cost operations throughout the year. In 2016, the
Group obtained sales of $3.95 billion that is approximately 8.3% extra in comparison to the last year.
Further, the net tax profit of the company also reported an increased figure of $152.2 million that is
11.5% more than the last year (JB-Hifi, 2016). Similarly, the total dividend also enhanced by ten cents
in the current year that is a positive indicator in terms of fulfillment of objectives. The low cost of
doing the business of the company (15.2%) is the major reason behind such developments in these
segments that allows it to be at a competitive advantage in comparison to other primary competitors.
Overall, the company has full capability to bring brands to life and establish engagement in several
categories. Besides, high range of loyalty and trust from its customers has assisted the company to
make additional developments in various segments (Porter & Norton, 2014).
b. Overview of Board of directors
Name Gender Age Education Remuneration
($)
Career history
Greg
Richards
Male Bachelor of
Economics
(Hons)
2,90,000 He was appointed
to the Board in
2007 and
thereafter, he
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JB-Hifi Limited
became
chairperson in
2012. He also
worked at
Goldman Sachs for
19 years. Presently,
he is the chairman
and member of the
Remuneration
Committee and is
also a non-
executive director
of Vitaco Holdings
Ltd.
Beth
Laughton
Female Bachelor of
Economics
1,66,093 She spent more
than a decade in
corporate finance
after qualifying as
a CA. For the
initial twelve years,
she concentrated
on entertainment,
telecommunication,
and information
technology. Beth
was also the
chairperson and
non-executive
director of Sydney
Farris, a non-
executive director
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JB-Hifi Limited
of Port Adelaide
Maritime
Corporation,
member and non-
executive director
of ASX Audit
Committee. She
became the
chairperson of JB
Hifi in June 2012
but was later
appointed to the
company’s
remuneration
committee (JB-
Hifi, 2016).
Gary Levin Male Bachelor of
Commerce
and LLB
1,56,000 He spent more than
thirty years in the
field of investment,
retail, and
renewable energy
fields. Presently, he
is on the Board of
Baby Bunting
Group Ltd. In JB
Hifi, Gary has been
a director since
2003 and is also a
member of Audit
and Risk
Management
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JB-Hifi Limited
Committee and
Remuneration
Committee (JB-
Hifi, 2016).
Wai Tang Female MBA,
BAppSC,
and GAICD
1,15,201 She became the
member of the
Audit and Risk
Management
Committee of the
company with
significant
experience in retail
industry. She also
served as the
general manager
for Pacific Brands
and co-founded
Happy Lab Retail
Confectionary
Concept (JB-Hifi,
2016). Moreover,
she also served as
non-executive
directors of various
other companies.
Richard
Uechtritz
Male 1,30,000 He is a co-founder
of photo chains like
Kodak Express and
Rabbit Photo. He
also became the
director Kodak.
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JB-Hifi Limited
Moreover, through
high experiences in
retailing, he
became the CEO
and managing
director of JB Hifi
in 2000.
Richard
Murray
Male Chartered
Accountant,
B.Com,
Grad. Dipl.
Finance and
Investment
2,750,596 He started as a
CEO with twenty
years experience in
finance and
retailing. He joined
JB Hifi as a CFO
but before, he
operated under
Deloitte for around
ten years (JB-Hifi,
2016). He is
currently the
chairman of
Australia Charities
Fund Employer
Leadership Group
James King Male B.Com,
FAICD
52,000 Appointed in May
2004 and retired in
October 2015. He
further served as a
chairman
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JB-Hifi Limited
c. Assessment of the Board characteristics
It is solely the responsibility of the board to provide pace to the shareholder values and take it to the expected
price (Deegan, 2011). It is very much obvious that the board holds the key to the performance of the company
which affects the share price and thus the board is totally answerable to the shareholders of the company.
Corporate governance of the company and stabilizing the company are the major tasks of the board (Brealey et.
al, 2011). It is the duty of the Chief Executive Officers of JB Hi-fi to pay attention to the profitability and
stability of the company in order to increase it and to be answerable to the board solely (JB-Hifi, 2016). In
order to fulfill its duty, the key factors that the company look for our experience, skills, diversity, knowledge,
and perspective. These can be attained by undertaking a mixed range of people with these qualities
(Christensen, 2011). These mixed qualities of skills, experience, and gender provide with the exchange of ideas
and advanced thoughts which would be very helpful in governance and decision-making (Spiceland et. al,
2011).
The below-mentioned point is some of the departments in which expertise and skill are needed by the company
to function well and to increase its profit ratio. As per the records put up by the board, it is seen that the
company has a well-proportioned mix of such people who excel in such areas and can lead the company to an
uprising (JB-Hifi, 2016). They can effectively [plan the company’s working and can make the committee’s
decision-making easy.
 Executive/effective experience
 Retail expertise and experience
 Operational management and experience
 Financial Expertise
 Property Expertise
 Mergers & Acquisitions expertise and experience
 Governance expertise and experience
 Other board experience
 Experience in setting executive remuneration
 Risk management expertise and experience
JB has a large percentage of non-executive directors in comparison to that of the executive directors. At present
JB have six directors in its board of which five are non-executive and the only executive one id the chief
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JB-Hifi Limited
executive director. It is a good move for the company to offer electoral or non-electoral data to the shareholders
of the company.
It is also paid attention that the company undergoes a series of exams and scanning procedures before
presenting a candidate for the elections.
d. Important investment or financing decisions
It can be observed from the annual report of the company that it has invested around $52.3 million in
the capital expenditure project that consists of the opening of new stores, conversion of its Home
stores, upgradation, and relocation of stores, and online projects. The Group believes that such
investment activities can assist it in enhancing the growth of earnings in the upcoming tenures.
Besides, the company also believes that online presence can generate a significant impact on its
development. Thus, it continues to make significant developments in its online sites that include
transformation and up-gradation of its sites in New Zealand. The company also intends to maximize its
investments in IT security measures over the years so that breach of such systems can be minimized to
a greater extent. In addition, the company is also focusing on 75 Home stores throughout New Zealand
and Australia, and for such purpose, it makes relevant investments in supply chain, training of staff,
investment in store wages, etc (JB-Hifi, 2016). This can assist in placing the company in a very good
position in the market and enhancing its developments throughout the countries.
e. Key Recommendations of the ASX Corporate Governance
Principles
Director remuneration must be ample to retain and attract high-quality directors
Every listed company must operate responsibly and ethically.
Every listed company must disclose their management roles and process of monitoring their
performance.
Every listed entity must make balanced and timely disclosure of all material items that can
influence decision-making.
Every listed company must have a board of an appropriate composition, size, and skills.
Every listed company must attempt to respect the shareholders’ rights by offering them adequate
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JB-Hifi Limited
facilities and details to assist them in exercising their rights.
f. External audit function
The presented auditing report has been made by keeping in attention the Corporate Act 2001 which deals with
the independence importance of the auditors. It is fully satisfying and legitimate and real that the data of the
Corporate Act 2001 which was provided to the company of JB Hi-fi is similar and fully matches with the one
which is written and depicted in this report of the company (JB-Hifi, 2016). All these instructions were given to
the board of directors at the time of enactment and also at the time of the representation of this report by the
company.
Auditor’s remuneration :
2015 2016
$ $
Audit and other services
Audit and review of group financial statements 333000 323500
Audit and review of subsidiary financial statements 29800 29000
IT services (I) 58216 511507
Total remuneration for audit and other services 421016 864007
(I) Customer Relationship Management Tool was the main plan of the company for which the Deloitte auditing
firm was associated with the company from 30 June 2015 to 30 June 2016.
It is to be mentioned that the auditing firm of the JB Hi-fi company if Deloitte Touche Tohmatsu (JB-Hifi,
2016).
g. Measures to ensure ethical judgments
In order to ensure that the business of the company has a high level of ethics and ethical judgments, it
has adopted a Code of Conduct that is offered to the employees, executives, and directors with
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