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Date : 21/02/2022

JB Hi-Fi

ASX :

JBH

Market Cap : $6.16 Billion

Dividend Per Share : $2.7

Dividend Yield : 5.02 %

Hold

52 Week Range : $43.12 - $54.64

Share Price : $53.73

JBH continues to dominate the market. The high cashflows has resulted in dividends + buycback.

Company Analysis

This morning, JB Hi-Fi delivered a fantastic 1H22 result, and the markets responded positively. All of JBH’s brands delivered a strong result, and all business areas, including stores, supply chain and online, demonstrated resilience despite the ongoing disruption. JB Hi-Fi has continued to invest in online and supply chains, including upgrades to its websites and distribution centres and expanded delivery options. Total online sales across the Group grew by 62.6% to $1.1 billion, representing 22.7% of total sales. Excluding sales when stores were temporarily closed in HY22, online sales represented 14.0% of total sales.

For some time now, JBH’s online and supply chain operations have scaled and maintained a high level of customer service and on-time delivery, demonstrating the strength of the Group’s diversified fulfilment model during a period of significantly increased volume.

Here are the highlights from the half-year result:

  • Total sales down 1.6% to $4.86 billion, but up 21.7% over a two-year period;
  • Online sales up 62.6% to $1.1 billion;
  • EBIT down 9.1% to $420.5 million, but up 59.9% over a two-year period;
  • Net profit after tax (NPAT) down 9.4% to $287.9 million, but up 68.8% over a two-year period;
  • EPS down 9.4% to 250.6 cps, but up 68.8% over a two-year period;
  • Interim dividend of $1.63 per share;
  • The Board today announced a capital return of up to $250 million to shareholders by way of an off-market buy-back;
  • Up to $437 million to be returned to shareholders through the interim dividend and the off-market buy-back.

JB Hi-Fi Australia & NZ

Total sales declined by 1.9% to $3.29 billion, with comparable sales down 2.5%. Over a two-year period, total sales were up 20.9%, with comparable sales up 20.8%.

Sales momentum was strong through the half, with continued heightened customer demand for consumer electronics and home appliance products. The key growth categories were Small Appliances, Smart Home, Games Hardware, Accessories and Visual. Online sales grew 59.9% to $823.9 million or 25.0% of total sales.

Gross profit declined by 2.9% to $716.3 million, with gross margins down 21 bps to 21.8%. The cost of doing business (“CODB”) was 10.8%, up 71 bps on the pcp. The business’ low CODB remains a competitive advantage and is maintained by focusing on productivity, minimising unnecessary expenditure and leveraging scale.

EBIT declined 11.3% to $292.4 million. Still, EBIT was up 39.7% over a two-year period, and EBIT margin up 120 bps as elevated sales growth, gross margin management, and disciplined cost control resulted in strong earnings growth.

In New Zealand, total sales were down 4.5% to NZD138.4 million, with comparable sales down 4.5%. Over a two-year period, total sales were up 4.2%, with comparable sales up 4.2%.

The key growth categories were Games Hardware, Visual and Smart Home. Online sales in New Zealand grew 81.5% to NZD29.6 million, or 21.4% of total sales. EBIT was up 6.0% to NZD7.3 million.

The Good Guys

Total sales declined by 0.8% to $1.44 billion, with comparable sales down 1.3%. Over a two-year period, total sales were up 25.4%, with comparable sales up 24.7%.

Sales momentum was strong through the half. The key growth categories were Portable Appliances, Floorcare, Laundry, Dishwashers and Cooking. 

Online sales were up 69.8% to $251.3 million or 17.5% of total sales.

Gross profit was $324.9 million with gross margin up 19 bps to 22.6%, driven by big improvements in key categories. CODB was 11.4%, up 45 bps, as store wages remained well controlled throughout the half. EBIT declined 4.3% to $121.1 million, but over a two-year period, EBIT was up 131.8%, and EBIT margin up 386 bps as elevated sales growth, gross margin improvements and disciplined cost control resulted in strong earnings growth.

Dividends + Share Buyback

JBH reduced their interim dividend from $1.80 to $1.63 a share. FY21 dividends and earnings were sky-high as the pandemic’s restrictions and cashed-up Aussies spent big – resulting in retail profits going through the roof. Market leaders such as JBH could take full advantage of the situation.

However, as things normalised and travel was back on the agenda, retail sales were expected to shrink. While several retailers in Australia have felt the pain of momentum going down considerably, JBH has done tremendously well to see sales down just 1.6% – demonstrating just how strong their business is and their dominance over their competitors.

The interim dividend of $1.63 shares still represents 65% of NPAT.

In addition to the dividends, JBH announced a capital return of up to $250m to shareholders. The incredible performance during the pandemic has resulted in JBH accumulating heightened cashflows. This excess capital is now being distributed to shareholders – beginning on the 7th of March to the 8th of April.

Provided you are an Eligible Shareholder; you can offer to sell some or all of your Shares to JB Hi-Fi at a discount to the Market Price that is within the Tender Discount Range (8% to 14%).

After returning capital to shareholders via the Buy-Back, JBH will maintain a conservative gearing position with the financial flexibility to pursue growth opportunities.

A year ago, JBH returned $207 million to shareholders through an interim dividend. With the buy-back and interim dividend this time around, JBH is returning a combined $437 million to shareholders.

Our detailed earlier report can be accessed by clicking here.

Recommendation

JBH is a stellar source of dividends and long-term shareholder value generation. Their market dominance sees them in a commanding position across all their businesses and regions. The first half of the year has been great, and in addition to the high dividends, we now have share buy-backs. 2022 is also off to a great start. While JBH did not provide guidance, January has already yielded growth in sales across JB Hi-FI in Australia and the Good Guys segments.

We recommend investors “Hold” positions and top-up current holdings ideally on a pull-back. For now, it’s a rich source of dividends, and eligible investors can benefit significantly from the buy-backs.

 

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