JB Hi Fi has swept aside the recent rash of retail collapses to post a record 23.6 per cent jump in half year sales to $2.6 billion and reaffirmed synergy benefits of up to $20 million a year from its acquisition of The Good Guys.
Underlying earnings before interest and tax surged by 30.9 per cent to $180.8 million and its net profit for the half grew by 31.7 per cent to $125.4 million or $110.4 million on a statutory basis.
The sales result beat consensus estimates of about $2.5 billion and group chief executive Richard Murray announced a 14.3 per cent increase in the interim dividend to 72¢ per share.
Same store sales in Australia increased by 8.7 per cent in the half, driven by sales of communication products, audio, cameras, computers and home appliances.
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Gross profit for the half increased by 13.2 per cent to $496.5 million and the group's gross margin, a key measure of profitability was up 30 basis points to 22.2 per cent. The result includes the first glimpse of The Good Guys business after JB Hi Fi completed its $870 million acquisition of the chain in November.
December sales for the month were up by a more modest 0.7 per cent on the previous corresponding period to $236.1 million, which like for like sales went backwards by 0.7 per cent in this key trading month.
JB Hi Fi said December earnings fo $14.3 million were "pleasing" and it claimed the trading for the group was impacted by the transition from a joint venture structure to a wholly-corporate model, a change that was undertaken by previous owners the Muir family ahead of the deal along with "overall market declines."
Analysts have raised concerns this fundamental shift in the structure of The Good Guys may drag on earnings in the medium term but Mr Murray said trading from December had continued to improve and he said this was expected to continue into the second half.
Sales and earnings from the date of completion of The Good Guys acquisition in November to June 30 are expected to be in line with the previous corresponding period.
"As indicated at the time of the acquisition was announced, given the proximity to the critical Christmas trading period for both JB Hi-Fi and The Good Guys there would be limited integration in 2016," Mr Murray said.
"As we move into 2017 we are taking a deliberate and considered approach to how we integrate and leverage the scale of the group.
"Our work to date has validated the rationale regarding the power of the combination and the strategic merits of the acquisition."
JB Hi Fi still expects synergy benefits of between $15 to $20 million a year, following a three year integration period.
"We remain highly confident in our ability to realise these benefits," Mr Murray said.
JB Hi-Fi said the interim result was pleasing given the strength of the previous corresponding period but it acknowledged the result also owed something to the collapse and shut down of rival Dick Smith in the second half of 2016.
Mr Murray warned this benefit was likely to wane in the coming months as the business cycles through the decline of Dick Smith and its eventual shut down.
JB Hi-Fi expects to achieve total sales of $5.58 billion, including a $1.25 billion contribution from The Good Guys and group underlying net profit after tax of between $200 million and $206 million, up as much as 35.4 per cent on the previous corresponding period.
"We are pleased with the group's results for the half," Mr Murray said.
"Having successfully completed our acquisition of The Good Guys, the group is well positioned to build on its solid momentum into the second half.
More to come
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