Financial and Accounting Analysis of JB Hi-Fi Limited's Annual Report

This report provides a comprehensive analysis of JB Hi-Fi Limited's financial performance, drawing insights from its annual report. The analysis includes a summary of the company's activities, market position, and financial performance, highlighting key metrics such as sales, profit, and earnings per share. It delves into the composition and characteristics of the board of directors, evaluating their expertise and contributions to the company's governance. Furthermore, the report examines the investment and financing decisions made by JB Hi-Fi, particularly focusing on its expansion strategy and investments in the home appliances sector. It also provides a detailed overview of the company's adherence to ASX Corporate Governance Council recommendations, the role of the audit firm Deloitte, and an analysis of the company's financial statements using ratio analysis. The report concludes with an assessment of JB Hi-Fi's financial health and strategic direction, offering valuable insights for end-users and investors.

ACCY801 Business Report-Trimester 3, 2017
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Contents
Introduction......................................................................................................................................3
Analysis and Discussion of Annual Report of JB Hi-Fi Limited....................................................3
a. Brief Summary of Company....................................................................................................3
b. Board of Directors Details.......................................................................................................4
c. Assessment on the characteristics of the Board.....................................................................10
d. Investment or financing decisions made by JB-Hi-FI Ltd.....................................................11
e. Key Recommendations of the ASX CGC IN Table Format..................................................12
f. Audit Firm of JB Hi-Fi Limited..............................................................................................13
h. Top five investors of JB-Hi-FI and their Ownership Stake...................................................14
i. Analyzing the financial statements of JB-Hi-FI Limited........................................................15
Conclusion.....................................................................................................................................18
References......................................................................................................................................20
Appendix........................................................................................................................................22
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Introduction
The present report is developed for analysis and examination of the accounting and
financial environment of a selected organization. This is done to evaluate the implications of the
financial environment of an organization on the investment decisions of end-users. In this
context, the report aims to presents an analysis of annual report of JB Hi-Fi Limited for
evaluating its financial planning to support the decision-making process of end-users. The report
for analyzing the financial position of the company has presented its brief summary describing
its details such as industry sector, primary activities and its current performance. The details
regarding the board of directors emphasizing on its composition, expertise and other information
such as gender, age, education, career history and remuneration. In addition to this, it examines
the financing decisions made by the company and its corporate governance policies. Also, it
discusses the external audit function of the company in accordance with the ASX corporate
governance. The measures taken by JB Hi-Fi for ensuring its business operations are in
accordance with high level of ethical principles is also discussed in the report. Also, it evaluates
the ownership stake of JB Hi-Fi and its financial statements through the help of ratio analysis.
Analysis and Discussion of Annual Report of JB Hi-Fi Limited
a. Brief Summary of Company
The JB Hi-Fi Limited is involved in retailing of home consumer products in Australia and
New Zealand. The company operates in highly competitive retail sector of Australia and has
achieved a recognized position in the sector through retailing of consumer goods such as DVDs,
CDs, electronics and home appliances, blue-ray disc, musical instruments and many others. In
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addition to this, the company is also involved in providing information technology and
consulting services. The company owns about 60 home branded stores out of which four are in
New Zealand and has more than 190 physical retail stores in Australia and New Zealand. The
company is recently emphasizing on establishing approx 75 home stores in Australia and New
Zealand and as such is largely investing in its supply chain activities and training programs for
employees. This is done by the company to support its plan of business expansion and thus
supporting its long-term growth and development plan (JB Hi-Fi, 2017).
The company has reported sales of about $3.95 billion in the year 2016 realizing an
increase in sales of about 8.3% as compared to the previous year. In addition to this, the net
profit after tax and earnings per share reported an increase of about 11.5% in the FY 2016 in
comparison to the previous year. Also, the total divided also recorded a rise of about 10 per cent
and gross profit of about 8.4 per cent. The company has achieved a competitive advantage in the
highly competitive retails sector of Australia through reducing its operational costs by 15.2% in
comparison to the proviso year. The balance sheet of the company has recorded a growth in
strength with decrease in financial and operating leverage. Thus, it can be said that the company
present financial condition is strong as reported from its recent annual report (JB Hi-Fi limited
Annual Report, 2016).
b. Board of Directors Details
The Board of directors of the company holds the major responsibility of promoting long-
term value of shareholders. The board holds the composition for ensuring that its members
provide a range of expertise, skills, diversity and knowledge for promoting the long-term growth
of the company (JB Hi-Fi limited Annual Report, 2016). The varying members of the board and
their details can be explained through the use of a table as follows:
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Board
Members
Name
Gender Designation Education Career
History
Remuneration
Greg
Richards
Male Mr. Richard is
presently working
as Chairman Non-
Executive
Director of Board.
He is also
chairman of the
remuneration
committee of the
company and of
the audit and risk
management
committee.
B.Ec (Hons) Mr. Richard
before
joining the
company has
worked in
the banking
industry. He
possesses
over 25 years
of experience
in the
banking
sector and
also worked
in Goldman
Sachs
JBWere for
more than 19
years before
joining the
$290,000
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company.
Mr. Richard
ahs also
worked in
equity capital
markets and
is presently
engaged in
voluntary
activities of
serving
various non-
profit
companies.
Richard
Uechtritz
Male Presently
appointed as a
non-executive
director of the
company
- Mr. Uechtritz
has over 20
years of
experience in
retail and is
regarded to
be the co-
founder of
photo chains
$130,000
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of Rabbit
Photo and
Smiths
Kodak
Express.
Also, he has
remained a
director of
Kodak from
where he
resigned in
the year 2010
before
joining the
board team
of JB Hi-Fir
in the year
2011.
Beth
Laughton
Female Presently working
as non-executive
director of the
board of JB Hi-Fi
B.Ec,
FAICD, FCA
Mrs.
Laughton is a
Chartered
Accountant
and has
$166,093
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experience of
over 25 years
in corporate
finance. She
has also
served as a
board
member of
GPT Funds
Management
Limited and
a non-
executive
director of
the Sydney
Ferries from
the year 2004
to 2010.
Wai Tang Female Non-Executive
Director
BAppSC,
MBA,
GAICD
Has carried
out senior
executive
roles in Just
Group and
$115,201
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was also a
general
member of
business
development
for Pacific
brands.
Richard
Murray
Male Chief Executive
Officer and
Executive
Director
B.Comm,
CA,
GDipAppFin
(Sec Inst),
ASIA
Chartered
Accountant
with over 20
years of
experience in
retail and
finance
sector.
$2,750,596
Stephen
Goddard
Male Non-Executive
Director
MSc, BSc
(Hons)
Having 30
years of
experience in
retail and has
carried out
the role of
senior
executives in
-
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some of
renowned
retail
companies in
Australia
(Source: Jb Hi-Fi Limited , 2017)
c. Assessment on the characteristics of the Board
The Board of JB Hi-Fi holds the responsibility of promoting shareholder growth and is
directly accountable to the shareholders. As such, the board members have the responsibility of
monitoring and controlling the operations of the company on the shareholders perspectives. The
board develops and implements the corporate governance policies for the company in order to
ensure that business operations are carried out in honest, open and ethical manner (Henderson et
al., 2015). The Chief Executive Officer is accountable to the board and carries out the
responsibility of managing, directing and promoting the profitability of the company. The Board
composition consists of various executive and non-executive directors that are appointed through
the use of most adequate search process. This is done to ensure that board members having
different skills, capabilities, backgrounds and gender for promoting diversity and thus facilitating
effective decision-making (Weygandt, Kieso and Kimmel, 2010). The board of the company has
maintained that it promote diversity among its members in order to operate effectively. The
board composition is reviewed regularly and currently have majority of non-executive directors
on its board composition. The board composition currently consists of six directors, five non-
executive directors including Chairman and a non-executive director. The board has maintained
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that its entire team member’s carries out their responsibility independently and acts in best
interest of the company (JB Hi-Fi limited Annual Report, 2016).
The directors of the company regularly discuss the issues facing the company for
developing an effective resolution. The Board also seeks suggestions from the directors for
resolving nay situation of conflict of interest in the company. The board members continually
meet in order to discuss the issues faced by the company and the board papers are presented to
the directors for reviewing. The board members have varying expertise as discussed in the above
section and therefore are regarded to be component for effective resolution of problems faced by
the company. The board members on the basis of their expertise can bested to be highly
competent for promoting the sustainable growth of the company. The board members have
developed various committees for monitoring and controlling the business operations (Horngren
et al., 2012). The board committee includes audit and risk committee, remuneration and
nomination committee. The audit and risk committee holds the responsibility of providing
assistance to the board on the matters of financial management, financial disclosures, overseeing
business performance and reviewing of company policies regarding risk assessment and
management (Stickney et al., 2009). The remuneration committee provides suggestions to the
Board regarding the remuneration structure of the key management personnel. On the other
hand, the nomination committee holds the responsibility of developing formal procedures for
selection of the board members and directors (JB Hi-Fi limited Annual Report, 2016).
d. Investment or financing decisions made by JB-Hi-FI Ltd
As analyzed form the director’s review in the annual report of the company for the
FY2016, the company is currently focusing on opening new home stores in both Australia and
New Zealand. This is aimed by the company for supporting its plan of business expansion in
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order to improve its profitability position in highly competitive retail market of Australia. The
home appliance market in Australia is currently regarded to have a value of about $4.6 billion
that is greater in comparison to many other retail categories. Thus, the investment decisions
made by JB Hi-Fi in home sector can be regarded to be appropriate as it will help in promoting
the long-term growth of the company. The company is presently emphasizing largely on
innovation and technology for supporting the growth of its home appliances sector. This will
prove to be useful for the company for meeting its significant opportunity of growth in home
appliance sector in future (JB Hi-Fi limited Annual Report, 2016).
e. Key Recommendations of the ASX CGC IN Table Format
ASX CGC Principle Recommendations
Delegation of adequate role to board and
management
The companies should effectively develop
the board functions and management
Effective Board Composition Maintaining the independency of Directors
Promoting ethical decision-making Developing code of conduct
Financial reporting Integrity Companies should develop audit committee
for achieving integrity in financial processes
Timeliness Develop written policies for their continues
disclosures
Protecting Shareholder Rights Promoting effective communication policies
between companies and shareholders through
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