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investors.jbhifi.com.au
ANNUAL REPORT
2022
CORPORATE INFORMATION
ABN 80 093 220 136
PRINCIPAL REGISTERED OFFICE IN AUSTRALIA
COMPANY SECRETARY
Doug Smith
Podium Level
60 City Road, Southbank VIC 3006
Phone: +61 3 8530 7333
SHARE REGISTRY
Computershare Investor Services Pty Limited
Yarra Falls, 452 Johnston Street, Abbotsford, Victoria, 3067, Australia
Phone: 1300 302 417 (Australia)
Phone: +61 3 9415 4136
Financial Summary
FINANCIAL PERFORMANCE
2018
2019
2020
2021
2022
Growth
Sales
EBIT
NPAT
$6.85b
$7.10b
$7.92b
$8.92b
$9.23b
$350.6m
$372.8m
$483.3m
$743.1m
$794.6m
$233.2m
$249.8m
$302.3m
$506.1m
$544.9m
Earnings per share
203.1cps
217.4cps
263.1cps
440.8cps
479.5cps
3.5%
6.9%
7.7%
8.8%
Total dividend - fully franked
132cps
142cps
189cps
287cps
316cps
10.1%
Sales $9.23b
EBIT $794.6m
$9.23b
$8.92b
$794.6m
$743.1m
$7.92b
$6.85b
$7.10b
$483.3m
$372.8m
$350.6m
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
NPAT $544.9m
$544.9m
$506.1m
Earnings per share
479.5cps
479.5cps
440.8cps
$302.3m
$249.8m
$233.2m
263.1cps
217.4cps
203.1cps
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
JB Hi-Fi Limited ABN 80 093 220 136
Chairman’s and Group Chief Executive Officer’s Report
Dear fellow shareholder,
FY22 has been a strong year for JB Hi-Fi Limited and its
subsidiaries (the “Group”). We were pleased to report record
•
Making a positive impact in the communities in which our
team members live and work and working with our supply
partners to protect and further human rights; and
sales and earnings for the year ended 30 June 2022. These
•
Minimising the impact that our operations may have on the
results reinforce the enormous trust our customers have in
natural environment and pro-actively reducing our waste,
our brands and the strength of our multichannel offer, which
energy consumption and emissions.
continues to provide customers with choice on how to shop.
The Group is pleased with the progress made across these key
We would like to recognise and thank our team members across
areas of focus, which in FY22 included:
Australia and New Zealand who worked tirelessly to deliver this
record result and who remain focused on the customer and
continue to adapt and respond to meet their needs.
•
Solar power generation installed in 14 stores as the Group
works towards net-zero direct (scope 1 and 2) carbon
emissions by 2030;
Group Overview
•
Continued to action a set of Diversity and Inclusion
The Group comprises two leading retail brands: JB Hi-Fi,
with a focus on Technology and Consumer Electronics; and
The Good Guys, with a focus on Home Appliances and
Consumer Electronics.
initiatives, to improve diversity in leadership and inclusion,
including the launch of a revised Parental Leave Policy
which supports all primary carers regardless of gender
and doubles the amount of paid parental leave from
6 to 12 weeks;
The value proposition for each brand centres around ranging the
best brands at low prices supported by exceptional customer
service across our 319 store network, our online and phone
•
Workplace giving donations totalling $3.7 million in
FY22 and $31.7 million since inception;
channels, and through our commercial business.
•
Continued focus on safety including mental health and
The dual branded retail approach is underpinned by four key
wellbeing training programs;
competitive advantages, being:
•
Updated and distributed our revised Group Ethical Sourcing
•
•
scale;
a low cost operating model, evidenced by the Group’s
low cost of doing business (“CODB”);
• multichannel capability; and
•
people and culture.
It continues to be an integral part of the Group’s strategy to
innovate and diversify in new products, online, supply chain,
merchandising formats, advertising and property locations in
Policy, including a new requirement for social compliance
auditing; and
•
Improvements in sustainable packaging across our own
brand products in line with 2025 National Packaging
Targets.
The FY22 Sustainability Report can be found on the Group’s
investor website (https://investors.jbhifi.com.au/).
Management alignment with Shareholders
a controlled and responsible manner. This approach provides
The relationship between the Board and management is strong
opportunities to increase revenue, margin and productivity.
and remains engaging and constructive.
Generating sustainable long-term growth
The Board firmly believes that equity participation for
management, through the Group’s share ownership-based
The Group’s FY22 Sustainability Report outlines our commitment
remuneration schemes, creates strong alignment with
to having a positive impact on our people, our communities and
shareholders and is a critical tool in attracting new management,
our environment.
The Group is committed to:
•
Supporting our people and ensuring a safe, inclusive and
respectful workplace, whilst always looking for ways to
provide them with flexibility and opportunities to grow and
develop;
retaining existing management and rewarding performance.
Further information about the Group’s remuneration schemes is
included in the Remuneration Report.
1
CHAIRMAN’S AND GROUP CHIEF EXECUTIVE OFFICER’S REPORT (continued)
FY22 Trading Performance
The Good Guys
FY22 was another very successful year for the Group with:
Total sales increased by 2.7% to $2.79 billion, with comparable
•
•
Total sales up 3.5% to $9.23 billion;
Earnings before interest and tax (EBIT) up 6.9% to
$794.6 million;
• Net profit after tax (NPAT) up 7.7% to $544.9 million;
sales up 2.2%. Sales momentum was strong through the
year, particularly in the second half with sales up 6.7%, driven
by continued heightened customer demand for consumer
electronics and home appliance products. The key growth
categories were Laundry, Portable Appliances, Floorcare,
Dishwashers and Visual. Online sales were up 53.7% to
Earnings per share up 8.8% to 479.5 cents per share; and
$397.0 million or 14.2% of total sales.
•
•
The total dividend for FY22 up 10.1% to 316 cents
per share.
A summary of the performance of each of the Group’s
businesses is set out below.
JB Hi-Fi Australia
Gross profit increased by 6.8% to $649.9 million with gross
margin up 89 bps to 23.3%, driven by strong improvements
in key categories, particularly in the second half. CODB was
11.8%, up 12 bps as store wages remained well controlled
throughout the year.
EBIT was up 12.5% to $241.4 million with EBIT margin up
Total sales increased by 4.0% to $6.20 billion, with
75 bps to 8.7%. Second half FY22 EBIT was up 36.5%, driven
comparable sales up 3.4%. Sales momentum was strong
by elevated sales growth and improvement in gross margins.
through the year, particularly in the second half with sales up
11.7%, driven by continued heightened customer demand
for consumer electronics and home appliance products. The
key growth categories were Communications, Visual, Small
Appliances, Smart Home and Accessories. Online sales grew
52.3% to $1.19 billion or 19.2% of total sales.
Gross profit increased by 4.7% to $1.39 billion with gross
margin up 15 bps to 22.4%, driven by strong improvements
in key categories, particularly in the second half. CODB was
11.4%, up 21 bps on the pcp. The business’ low CODB
remains a competitive advantage and is maintained through
a continued focus on productivity, minimising unnecessary
expenditure and leveraging scale.
EBIT was up 4.2% to $544.9 million with EBIT margin up
1 bp to 8.8%. Second half FY22 EBIT was up 30.7%, driven
by elevated sales growth and improvement in gross margins.
JB Hi-Fi New Zealand
Total sales were up 0.3% to NZD262.4 million, with
comparable sales up 0.3%. Second half sales were up 6.3%.
The key growth categories were Visual, Games Hardware and
Smart Home. Online sales in New Zealand grew 56.7% to
NZD43.3 million, or 16.5% of total sales.
Gross profit decreased by 2.1% to NZD45.7 million with gross
margin down 43 bps to 17.4%. CODB was 12.8%, down
36 bps, and in absolute terms declined by 2.5% as store
wages remained well controlled.
EBIT was up 51.7% to NZD8.8 million. Underlying EBIT,
excluding the impact of impairments in the current and prior
year, was NZD4.7 million, down NZD1.3 million.
Executive Appointment – JB Hi-Fi New Zealand
The Group recently completed a strategic review of the
JB Hi-Fi New Zealand business and believes there is a
significant opportunity to grow and expand the business.
To lead the repositioning and growth of the New Zealand
business, the Group has appointed Tim Edwards as Managing
Director of JB Hi-Fi New Zealand. Tim previously worked
at the Warehouse Group for more than a decade, including
seven years as CEO of Noel Leeming, and brings deep local
experience and long-standing relationships, combined with a
passion for retail.
Over the next three years, the Group will be investing in
improving the JB Hi-Fi New Zealand customer offer, refreshing
the store network, opening new stores and upgrading its online
platform.
We are delighted to welcome Tim to the JB Hi-Fi Group. He
is a proven retail executive with an outstanding track record,
particularly in the New Zealand consumer electronics and
technology market. We look forward to growing our
New Zealand business under his leadership.
Group Balance Sheet, Capital Management and Dividends
The Group’s balance sheet continues to be strong with low
financial and operating leverage and closing net cash of
$66.2 million at 30 June 2022.
In FY22, the Board declared a final dividend of 153 cents per
share (cps) fully franked, up 46 cps or 43.0%, bringing the
total dividend for FY22 to 316 cps, up 29 cps or 10.1%, and
representing 65% of NPAT.
2
On 11 April 2022, The Group completed a $250 million
Off-Market Share Buy-Back comprising a $232.4 million
fully franked dividend (92.9%) and $17.6 million capital
component (7.1%).
Through the total dividend for FY22 and the FY22 Off-Market
Share Buy-Back, the Group will have returned $604 million
to shareholders.
$604m to be returned to Shareholders
TOTAL DIVIDEND
BUY-BACK
604
250
152
163
217
330
354
FY19
FY22
FY20
FY18
Announced Shareholder Distributions ($m)
FY21
The Board will continue to regularly review the Group’s capital
structure with a focus on maximising returns to shareholders
and maintaining balance sheet strength and flexibility.
Outlook
We are pleased with the start to FY23, with continued sales
momentum and strong sales growth rates over a three-year
period.
As we enter an uncertain retail environment and household
budgets come under increasing pressure, customers will gravitate
to trusted value-driven retailers. Our ongoing strategy of providing
customers with the best value and outstanding service every day,
will ensure our brands continue to deliver for our customers and
remain a destination of choice into the future.
We look forward to another successful year in FY23.
Stephen Goddard
Terry Smart
Chairman
Group Chief Executive Officer
23 August 2022
3
Annual Report
for the financial year ended 30 June 2022
Governance statement
Directors' report
Operating and financial review
Remuneration report
Auditor's independence declaration
Independent auditor’s report
Directors' declaration
Statement of profit or loss
Statement of profit or loss and other comprehensive income
Balance sheet
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Additional securities exchange information
Page
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53
54
58
59
60
61
62
63
64
94
4
JB Hi-Fi Limited ABN 80 093 220 136
GOVERNANCE STATEMENT
JB Hi-Fi Limited (“the Company” or “JB Hi-Fi”) recognises the importance of governance matters and the Board continually reviews
and monitors developments in corporate governance which are relevant to the Group (being the consolidated entity consisting of
the Company and the entities it controls). The Company’s Governance Statement is set out below. The Company also recognises
the importance of environmental and social matters to its shareholders, suppliers and customers and has released its 2022
Sustainability Report to the ASX at the same time as this Report.
CORPORATE GOVERNANCE STATEMENT
The directors and management of the Group are committed to ensuring that the Group’s business is conducted ethically and in
accordance with high standards of corporate governance.
The Board believes that:
•
the Group’s policies and practices comply in all material respects with the 4th edition of the ASX Corporate Governance
Council Principles and Recommendations (the “ASX Recommendations”); and
•
during the 2022 financial year, the Company has been compliant with the spirit of the principles contained in the ASX
Recommendations.
This Corporate Governance Statement has been approved by the Board and is effective as at 15 August 2022.
THE BOARD
Role
The primary role of the Board is to protect and enhance long-term sustainable shareholder value. The Board is accountable to
shareholders for the performance of the Company and it directs and monitors the business and affairs of the Group on behalf of
shareholders.
The Board’s responsibilities include: overseeing the business and affairs of the Group and demonstrating leadership of the Group;
defining the Group’s purpose and approving the Group’s statement of values and code of conduct so as to underpin the desired
culture within the Group and overseeing management’s implementation of these values; setting (in consultation with management)
the strategic and financial objectives of the Group and overseeing management’s implementation of these objectives; approving
the appointment and replacement of senior executives including the Group CEO; monitoring the performance of management
and, where required, challenging management and holding it to account; approving the adoption of the Group’s major corporate
governance policies; ensuring that the Group has in place an appropriate risk management framework (for both financial and
non-financial risk); overseeing the reliability and integrity of the Group’s accounting, financial reporting and financial management
and disclosure practices and systems; overseeing the Group’s process for making disclosure to the market; approving the Group’s
remuneration framework and satisfying itself that the Group’s remuneration policies are aligned with the Group’s values, strategic
objectives and risk appetite; and the establishment of a formal and transparent procedure for the selection, appointment and
review of directors.
The Group Chief Executive Officer, who is accountable to the Board, is responsible for managing, directing and promoting the
profitable operation and development of the Group.
A copy of the Board Charter can be found on the Company’s investor website at https://investors.jbhifi.com.au via the “Investors”
and “Corporate Governance” sections.
Composition of the Board / Selection and appointment of directors
Details of each of the Directors are set out on pages 15 and 16 of this Report.
The Board seeks to ensure that the combination of its members provides an appropriate range of experience, skills, diversity,
knowledge and perspective to enable it to carry out its obligations and responsibilities.
The Board believes that having a range of different skills, backgrounds, experience and gender ensures a diversity of viewpoints
which facilitate effective governance and decision making.
5
GOVERNANCE STATEMENT (continued)
The Company believes that skills and experience in the areas listed in the matrix below are desirable for the Board to perform its
role effectively. The Board considers that its current composition possesses an effective blend of these skills and experience which
enables it and its Committees to effectively govern the business, operate effectively and add value in the context of the Company’s
strategy.
Skill/Experience
Description
No. of Directors
Executive/Management
Holds or held an executive leadership position in a publicly listed
Experience
company or large professional services firm.
Retail
Holds or held an executive leadership position in a publicly listed or
large private retail company or has been an NED of a publicly listed or
large private retail company for at least 3 years.
8/8
7/8
Financial Acumen
Professional accounting qualifications, experience as the CEO, CFO
8/8
or Chair of the Audit Committee of a publicly listed company or large
private company.
Property
Holds or held an executive leadership position with specific, or ultimate,
6/8
responsibility for property in a large retailer or is/was a non-executive
director in a publicly listed or large private property company.
Online/Digital
Holds or held an executive leadership position in a digital or technology
6/8
company or having ultimate responsibility for, or specific focus on,
online/digital in a publicly listed company or large private retail company.
Other Listed Board
Is, or has been, a director of one or more other publicly listed
Experience/Governance
companies for at least one year (other than JB Hi-Fi Limited).
Risk Management
Membership of the risk management committees of at least two
6/8
7/8
publicly listed companies, or executive experience anticipating and
identifying risks and monitoring the effectiveness of both financial and
non-financial risk management frameworks and controls.
People & Culture
Experience as a Chair, NED, CEO or Senior HR executive in a publicly
8/8
listed or large private company or professional services firm in
overseeing workplace culture, people management, development and
succession planning, setting remuneration frameworks and promoting
diversity & inclusion.
Strategy/Mergers &
Experience in a publicly listed company, large private company or
8/8
Acquisitions/Capital
large professional services firm in understanding and defining strategic
Management
objectives, assessing business plans, mergers & acquisitions/capital
management.
Sustainability, Corporate
Understanding and experience in social responsibility and sustainability
8/8
Social Responsibility and
initiatives, management of workplace health & safety, community
Community Engagement
relations/workplace giving.
The Company maintains a majority of non-executive directors on its Board. The Board currently comprises eight directors, being
six non-executive directors, including the Chairman, and two executive directors, being the Group Chief Executive Officer and the
Group Chief Financial Officer. The Company has written agreements with each director setting out the terms of their appointment.
Apart from the Group Chief Executive Officer, directors are subject to shareholder re-election by rotation at least every three
years. The Company provides shareholders with all material information in its possession relevant to the election or re-election of a
director.
6
A copy of the Company’s Board Composition & Succession Policy, which includes the procedure for the selection and
appointment of directors, can be found on the Company’s investor website at https://investors.jbhifi.com.au via the “Investors” and
“Corporate Governance” sections. The Board will undertake appropriate checks before appointing any person, or putting forward
to shareholders a candidate for election, as a director, including checks to ensure that the candidate has sufficient capacity to
perform the role.
Details of the directors as at the date of this Report, including further information about their experience, expertise and term of
office, are set out in the Directors’ Report.
Independence
The Company considers that each of its directors (including the Chairman) is independent with the exception of Terry Smart
(Group Chief Executive Officer) and Nick Wells (Group Chief Financial Officer).
The Board regards directors as independent directors if they: do not have a material relationship with the Company other than
solely as a result of being a director; are independent of management; and do not have any business or other relationship that
could compromise the independent exercise of their judgement and their ability to act in the best interests of the Company. The
independence of each director is considered on a case-by-case basis.
Richard Uechtritz was Chief Executive Officer of the Company between July 2000 and May 2010 and a consultant to the Company
from May 2010 to November 2013. Given the passage of time, the Board is of the opinion that Richard is an independent
director, and that neither these previous roles, nor his relationship with current management, compromises his ability to exercise
independent, unfettered judgement or act in the best interests of the Company.
Beth Laughton is a non-executive director and chair of the audit, compliance & risk management committee of GPT Funds
Management Limited (“GPTFM”), the responsible entity for the GPT Wholesale Shopping Centre Fund. Mark Powell is a
non-executive director and chair of the ESG committee of Kiwi Property Group Limited. The Board notes that both the GPT
Wholesale Shopping Centre Fund and Kiwi Property Group Limited have ownership interests in shopping centres in which
the Group currently leases stores. The Board is of the opinion that Beth and Mark are independent directors on the basis
that individual leasing arrangements within the Group, GPTFM and Kiwi Property Group Limited are generally determined at a
managerial level rather than Board level.
In addition, the Company’s internal protocols provide that Beth and Mark would be excluded from any discussion and decision
making where any conflict of interest arises between their roles as a director of the Company and of GPTFM/Kiwi Property Group
Limited.
Geoff Roberts was previously a partner at Deloitte until 2015. During the period that Geoff was a partner, Deloitte were the
appointed auditors of the Group, however at no stage during the term of his partnership was Geoff involved in the provision of
audit or other services to the Group. The Board is therefore of the opinion that Geoff is an independent director.
Conflict of interest
Directors must keep the Board advised, on an ongoing basis, of any interests that could potentially conflict with those of the
Company. Directors are required to promptly disclose to the Board interests in contracts, other directorships or offices held,
possible related party transactions and any other material personal interests in a matter relating to the Company’s affairs. If a
material conflict of interest arises, the director concerned does not receive the relevant Board papers, is not present at the meeting
whilst the item is considered and takes no part in decision making.
Board meetings
The Board meets regularly, dependent on business requirements. Prior to any meeting, the directors receive all necessary Board
papers. As well as holding regular Board meetings, the Board also meets to comprehensively review business plans and the
strategy of the Group.
Access to information and independent advice
Each director has the right of access to all relevant Company information and to the Group’s executives. Subject to prior
consultation with the Chairman, each director may seek independent professional advice at the Company’s expense.
7
GOVERNANCE STATEMENT (continued)
Professional development of directors
The Company recognises the need for its directors to develop and maintain the skills and knowledge needed to perform their
roles as directors effectively. The Company periodically reviews the need for directors to undertake professional development to
maintain the skills and knowledge necessary to perform their roles. This includes, where necessary, management (including the
Group Chief Financial Officer and the Company Secretary & General Counsel) and external advisors providing the directors with
briefings and advice on developments in both the law and current practice in areas relevant to the Company and their role as
directors (including, for example, corporate governance, accounting and remuneration). Individual directors also take advantage of
professional development opportunities provided by third parties such as the Australian Institute of Company Directors and major
accounting and legal firms.
The Company also has an induction program for new directors.
BOARD COMMITTEES
Details of the Committees established by the Board are set out below.
Audit and Risk Management Committee
The Board has an Audit and Risk Management Committee.
The Audit and Risk Management Committee is charged primarily with assisting the Board in its:
•
oversight of the reliability, adequacy and integrity of the Group’s financial management, financial reporting and disclosure, its
related non-financial reporting and disclosure practices, and its financial reporting framework;
•
•
oversight of the independence, performance, appointment and removal of the external auditor;
review of the Group’s policies on risk oversight and management, and in discharging its responsibility to satisfy itself that
a sound system of risk management and internal control has been implemented to manage the material risks affecting the
Group’s businesses, including environmental, social, governance, health & safety and cyber-security risks and compliance with
all applicable laws; and
•
review of the Group’s plans, actions and reporting in relation to sustainability.
A copy of the Audit and Risk Management Committee Charter can be found on the Company’s investor website at
https://investors.jbhifi.com.au via the “Investors” and “Corporate Governance” sections.
During the 2022 financial year, the Audit and Risk Management Committee comprised the following non-executive directors, all of
whom were independent and have relevant financial, commercial and risk management experience, including an independent chair
who is not the Chair of the Board:
•
Beth Laughton: Chair of Committee;
• Mark Powell;
• Melanie Wilson; and
• Geoff Roberts.
Details of the background and experience of each of these non-executive directors are included in the Directors’ Report.
The Audit and Risk Management Committee meets regularly. Details of the meetings held and members’ attendance during
the 2022 financial year are listed in the Directors’ Report. Directors who are not members of the Audit and Risk Management
Committee may attend any Audit and Risk Management Committee meeting.
Remuneration and Nominations Committee
The Board has a Remuneration and Nominations Committee.
The Remuneration and Nominations Committee is charged primarily with:
•
reviewing and making recommendations to the Board regarding the framework, structure and quantum of remuneration of
executive officers and non-executive directors; and
8
•
reviewing and making recommendations to the Board regarding Board succession planning, the appointment and
re-appointment of non-executive directors, the induction and continuing professional development of non-executive directors,
the process for evaluating the performance of the board, its committees and directors, and the succession of the Group CEO
and other senior executives.
A copy of the Remuneration and Nominations Committee Charter can be found on the Company’s investor website at
https://investors.jbhifi.com.au via the “Investors” and “Corporate Governance” sections.
During the 2022 financial year, the Remuneration and Nominations Committee comprised the following directors, each of whom
are considered by the Company to be independent:
•
•
Stephen Goddard: Chair of Committee;
Beth Laughton; and
• Mark Powell.
The Remuneration and Nominations Committee meets as required. Details of the meetings held and members’ attendance during
the 2022 financial year are listed in the Directors’ Report. Directors who are not members of the Remuneration and Nominations
Committee may attend a Committee meeting at the invitation of the Chairman when considered appropriate.
COMPANY SECRETARY
The Company Secretary is accountable directly to the Board, through the Chair, on all matters to do with the proper functioning of
the Board.
CODE OF CONDUCT
The Group acknowledges the need for directors, executives and employees to observe the highest ethical standards of corporate
behaviour. The Group has adopted a Code of Conduct to provide directors, executives and employees with guidance on what the
Group deems to be acceptable behaviour. The Group will ensure that the Board and/or Audit and Risk Management Committee is
informed of any material incidents in breach of this Code. No such incidents have been reported in FY2022.
A copy of the Code of Conduct can be found on the Company’s investor website at https://investors.jbhifi.com.au via the
“Investors” and “Corporate Governance” sections.
WHISTLEBLOWER POLICY AND ANTI-BRIBERY, CORRUPTION & FRAUD POLICY
The Group has a Whistleblower Policy and an Anti-Bribery, Corruption & Fraud Policy. The Group will ensure that the Board
and/or Audit and Risk Management Committee is informed of any material incidents reported under or in breach of these policies.
No such incidents have been reported in FY2022.
Copies of these policies are available on the Company’s investor website at https://investors.jbhifi.com.au via the “Investors” and
“Corporate Governance” sections.
DIVERSITY
The Group recognises the importance of diversity and values the competitive advantage that is gained from a diverse range of
skills, backgrounds, experience and gender at all levels of the organisation. The Group has a Diversity Policy which is available on
the Company’s investor website at https://investors.jbhifi.com.au via the “Investors” and “Corporate Governance” sections.
The Group has a Group Diversity Strategy for both the JB Hi-Fi and The Good Guys businesses. This strategy is focussed on
identifying and growing internal talent, underpinned by common and meaningful competency-based criteria. The Group Diversity
Strategy and associated program of work is fundamental to enabling diversity by supporting women’s progression to leadership
roles, and is further supported by work to identify and remove potential barriers to this progression.
Details of the Group’s diversity initiatives, measurable objectives and performance are set out in the Group’s Sustainability Report
which can be found on the Company’s investor website at http://investors.jbhifi.com.au in the “Corporate Social Responsibility”
section.
9
GOVERNANCE STATEMENT (continued)
SAFETY
The Group is committed to providing a healthy and safe work environment for all its team members, contractors, customers and
visitors. Details of the Group’s health and safety policies and performance are set out in the Group’s Sustainability Report which
can be found on the Company’s investor website at http://investors.jbhifi.com.au in the “Corporate Social Responsibility” section.
SHAREHOLDINGS OF DIRECTORS AND EMPLOYEES
Directors’ current shareholdings are detailed in the Directors’ Report and are updated by notification to the ASX as required. The
Board has approved and adopted a Securities Trading Policy setting out the rules and procedures applying to directors, officers
and employees dealing in securities.
All Key Management Personnel (being all Non-Executive Directors and the Executive KMP listed on page 35), are subject to the
Company’s Minimum Shareholding Policies which require:
• Non-Executive Directors to hold the equivalent of 1.0 times base Board fees in shares;
•
•
the Group CEO to hold the equivalent of 1.5 times fixed pay in shares; and
other Executive KMP to hold the equivalent of 1.0 times fixed pay in shares.
This level of shareholding is required to be built over 5 years from the introduction of the policy in FY2019 (or appointment, if later).
Subject to certain specific and limited exceptions, directors and key employees may only trade in the Company’s shares, and
any other securities of the Company, during designated Trading Windows. These four-week Trading Windows follow the release
of the Company’s Final Results (August/September), Interim Results (February/March) and the Annual General Meeting (October/
November). Directors and Group executives are required to obtain the Chairman’s consent in advance of any such trading and any
transaction conducted by directors in shares of the Company is notified to the ASX.
A copy of the Securities Trading Policy can be found on the Company’s investor website at https://investors.jbhifi.com.au via the
“Investors” and “Corporate Governance” sections.
INTEGRITY OF REPORTING
The Company has controls designed to ensure the integrity of its financial reporting and that the Company complies with all
regulatory requirements relevant to this reporting.
In accordance with the Corporations Act and the ASX Recommendations, the Group Chief Executive Officer and Group Chief
Financial Officer have stated in writing to the Board that, in their opinion:
(a)
the financial records of the Group (consisting of the Company and the entities it controlled during the financial year) for the
financial year ended 30 June 2022 have been properly maintained in accordance with section 286 of the Corporations Act;
(b)
the financial statements for the financial year and the notes required by the accounting standards give a true and fair view of
the consolidated entity’s financial position and performance, and comply with the accounting standards;
(c)
the statements in (a) and (b) above are founded on a sound system of risk management and internal control which is
operating effectively; and
(d) subsequent to 30 June 2022, no changes or other matters have arisen that would have a material effect on the operation of
the risk management and internal control systems of the Group.
The Company’s full year financial statements and remuneration report are subject to an annual audit by an independent,
professional auditor who also reviews the Company’s half-yearly financial statements. The Audit and Risk Management
Committee oversees this process on behalf of the Board. Deloitte has been the Company’s external auditor since 2002. The audit
engagement partner is rotated every five years.
Information on procedures for the selection and appointment of the external auditor and for the rotation of external audit
engagement partners can be found in the Charter of the Audit and Risk Management Committee on the Company’s investor
website at https://investors.jbhifi.com.au via the “Investors” and “Corporate Governance” sections.
10
The Company also has a process in place to verify the integrity of any periodic corporate report that it releases to the market that
is not audited or reviewed by the independent auditor. Such reports are written by the relevant members of the Company’s senior
management team and are then independently reviewed by appropriate executives to ensure the information is accurate and
stated assumptions or opinions are reasonable. Data is verified by reference to a reliable source of information and information
is checked to ensure that it is consistent with any audited reports where relevant. A ‘third line’ check is then completed by an
independent internal review team. Finally, the reports are reviewed in detail by the Company’s Audit and Risk Management
Committee and then by the full Board which must formally authorise the release of any such report to the market.
CONTINUOUS DISCLOSURE
The Company seeks to provide relevant and timely information to its shareholders and is committed to fulfilling its continuous
disclosure obligations.
The Board has approved a Continuous Disclosure Policy to ensure that the procedures for identifying and disclosing material price
sensitive information in accordance with the Corporations Act and ASX Listing Rules are clearly articulated. This policy sets out
the obligations of employees in respect of such information. The Group Chief Executive Officer, in consultation with the Chairman
where appropriate, is responsible for communication with the ASX.
A copy of the Continuous Disclosure Policy can be found on the Company’s investor website at https://investors.jbhifi.com.au via
the “Investors” and “Corporate Governance” sections.
The Company ensures that the Board receives copies of all material market announcements before, or promptly after, they have
been made.
The Company releases a copy of any substantive investor or analyst presentation to the ASX ahead of the presentation.
SHAREHOLDER COMMUNICATIONS
The Company communicates to shareholders, potential investors and other interested parties in the following ways:
(a) by making information available on its website for investors at https://investors.jbhifi.com.au, including:
•
•
•
•
•
•
•
•
•
•
an overview of its business;
information about the Company’s directors and senior executives;
the Company’s Constitution;
the Company’s Board and Committee Charters;
the Company’s core corporate governance policies;
the Company’s Code of Conduct;
a calendar of key corporate events;
a summary of the Company’s dividend policy and its dividend payment history;
details of how investors can contact the Company and its share registry; and
the information set out in paragraphs (b) and (c) below.
(b)
in its disclosures to the ASX (including, amongst other things, its Annual Report, financial results, trading updates,
Sustainability Report and investor presentations);
(c) at its Annual General Meeting and the associated Notice of AGM;
(d)
through its engagement program with institutional investors and analysts, including post-results briefings;
(e)
through its engagement with the Australian Shareholders Association;
(f)
through its engagement with proxy advisers and the Australian Council of Superannuation Investors;
(g) where appropriate, by responding to questions submitted via its investor website; and
(h)
through its engagement with the financial media.
11
GOVERNANCE STATEMENT (continued)
Shareholders can elect to receive communications from, and send communications to, the Company’s share registry electronically.
The registry also gives shareholders the opportunity to manage their account details and holdings electronically. Shareholders are
also able to send communications to the Company and receive responses to these communications electronically.
The Company has an investor relations program which involves regular meetings with significant current and potential investors,
and with analysts and the financial media.
The Company holds an Annual General Meeting to which all shareholders are invited. In 2021, the Annual General Meeting was
held “virtually” to take account of restrictions arising from the Covid-19 pandemic. All resolutions at Annual General Meetings are
decided by a poll rather than a show of hands. Shareholders who are unable to attend are able to appoint a proxy to attend and
vote or, alternatively, can vote electronically in advance of the Meeting. The Company ensures that the external auditor attends its
Annual General Meetings and is available to answer shareholder questions about the conduct of the audit and the preparation and
content of the auditor’s report.
In 2022, the Company will hold a “hybrid” Annual General Meeting, allowing shareholders to attend either in person or online.
Further detail is set out in the Company’s Shareholder Communication Policy which can be found on the Company’s investor
website at https://investors.jbhifi.com.au via the “Investors” and “Corporate Governance” sections.
RISK IDENTIFICATION AND MANAGEMENT
The Group’s policy is to consider the balance of risk and reward, as far as practicable, in order to optimise the returns gained from
its business activities, and to meet the expectations of its shareholders, other key stakeholders and the broader community.
The Board has delegated to the Audit and Risk Management Committee responsibility for overseeing the implementation of
policies and procedures aimed at ensuring that the Group conducts its operations in a manner that adequately manages risk
to protect its people, the environment and the Group’s assets and reputation. The Group has an effective risk management
framework in line with ISO31000 which enables management to identify and manage risk appropriately. The Committee regularly
reviews and revises this framework and the Board reviews the framework at least annually to satisfy itself that it continues to be
sound and that the Group is operating with due regard to the risk appetite set by the Board. The risk management framework was
last reviewed by the Board in November 2021.
Risk identification and management is also a key focus of the executive and management teams.
The Group does not have a formal internal audit function. Instead, risk identification and management is managed on a day-to-
day basis by a dedicated risk management and business assurance team. The risk management and business assurance team
evaluate and look to continually improve the effectiveness of the Group’s governance, risk management and internal control
processes.
A copy of the Group’s Risk Management Policy can be found on the Company’s investor website at https://investors.jbhifi.com.au
via the “Investors” and “Corporate Governance” sections.
SUSTAINABILITY AND ENVIRONMENTAL AND SOCIAL RISKS
The Group recognises the material environmental and social risks that are relevant to its activities and takes action to manage
those risks. A Group Sustainability Plan has been established to provide a foundational framework to integrate sustainability and
the management of these risks into the operations and strategic priorities of the businesses. Governance and oversight of the
approach and progress is provided by the Audit and Risk Management Committee. Further detail about these environmental and
social risks is set out in the Operating and Financial Review.
The Company has released its 2022 Sustainability Report to the ASX and this Report can be found on the Company’s investor
website at http://investors.jbhifi.com.au in the “Corporate Social Responsibility” section. This Report provides disclosure around
the material sustainability-related issues for the Group’s businesses and how the Group plans to prioritise and manage these going
forward.
12
OUR PURPOSE & VALUES
The Group’s purpose is to connect customers with the products and services that make life better.
The Group aims to do this through its two iconic and trusted retail brands, JB Hi-Fi (a leading retailer of technology and consumer
electronics) and The Good Guys (a leading retailer of home appliances and consumer electronics).
Set out below are the Values which the Group and all of its team members are guided by in their activities.
Passion – We love what we do. We:
•
•
•
are passionate about our people, our customers and our products
show enthusiasm and take pride in our work
strive to exceed our customers’ expectations and create amazing experiences
Respect and Empower – We value and respect everyone. We:
•
•
•
empower, support and trust our people
treat everyone fairly and without discrimination
act with humility, listen openly, and value others’ opinions
Integrity – We act honestly and do the right thing. We:
•
•
•
accept responsibility for our actions
act lawfully, ethically and responsibly
call out things that aren’t right
Innovative – We embrace change and adapt quickly. We:
•
•
•
never stand still and constantly evolve
are entrepreneurial and look for opportunities
are not afraid to fail and we learn from our mistakes
Driven – We are focused and deliberate. We:
•
are results oriented and deliver on the things we commit to
• make decisions based on facts and experience
•
focus on productivity and efficiency
Social Conscience – We care about our people, our community and our environment. We:
•
•
•
give back to the communities where we live and work
ensure our business is safe, inclusive and welcoming for everyone
strive to minimise our impact on the environment
Authentic – We are diverse and embrace individuality. We:
•
•
•
are informal and don’t take ourselves too seriously
are energetic and enthusiastic
have fun, enjoy ourselves and celebrate success
13
GOVERNANCE STATEMENT (continued)
BOARD AND EXECUTIVE PERFORMANCE
JB Hi-Fi monitors and evaluates the performance of its Board, Board Committees, individual directors and executives in order to
fairly review and continuously improve Board and management effectiveness.
In June/July of each year, each director completes a written board review and assessment document, and subsequent one-on-
one interviews then take place between the Chair and each director which cover:
•
•
•
•
review of Board performance as a whole;
review of the individual director’s performance;
the director’s ongoing capacity to continue to perform their role with the Company; and
review of the Chair’s performance.
The Chair reports back to the Board on the discussions and the Board considers any issues as necessary.
Directors may also discuss the Chair’s performance with the Chair of the Company’s Audit and Risk Management Committee, who
will report back to the Board if necessary.
The Chair provides informal feedback to directors throughout the year as necessary.
Each Board Committee reviews its performance and reports the results of the review to the Board. Where necessary,
recommendations will be made to the Board for improving the effectiveness of the relevant Committee.
Review of the Group CEO’s performance is evaluated by the Chair, with ultimate oversight by the Board. This involves an
assessment against both financial and non-financial performance measures. All other Group executives are evaluated by the
Group CEO including: (i) assessment against both financial and non-financial performance measures; and (ii) a one-on-one meeting
between the Group CEO and executive to discuss the executive’s performance. The Group CEO provides a summary of the
evaluation of each executive to the Board and the Remuneration and Nominations Committee.
Evaluation of the performance of the Board, Board Committees, individual directors and Group executives has been conducted in
respect of the 2022 financial year.
DIRECTORS’ FEES AND EXECUTIVE REMUNERATION
Directors’ fees
The details of remuneration paid to each non-executive director during the financial year and the principles behind the setting of
such remuneration are included in the Remuneration Report.
Executive KMP remuneration
The amount of remuneration, both monetary and non-monetary, for the executives who had authority and responsibility for
planning, directing and controlling the activities of the Group during the financial year, and the principles behind the setting of such
remuneration, are included in the Remuneration Report.
14
DIRECTORS’ REPORT
The directors of JB Hi-Fi Limited (the “Company”) submit herewith the annual financial report of the consolidated entity consisting
of the Company and the entities it controlled (the “Group”) for the financial year ended 30 June 2022. In order to comply with the
provisions of the Corporations Act 2001, the Directors report as follows:
The names and particulars of the directors of the Company during or since the end of the financial year are:
Name
Mr Stephen Goddard
Non-Executive Director
MSc. BSc (Hons)
Ms Beth Laughton
Non-Executive Director
B.Ec, FAICD, FCA
Mr Mark Powell
Non-Executive Director
BSc (Hons), MSc, MBA (Distinction),
BApp. Theol, MA (Hons)
Particulars
Stephen was appointed to the Board in August 2016 and became Chairman on 1 July 2020.
Stephen is also Chair of the Company’s Remuneration and Nominations Committee and was a
member of the Audit and Risk Management Committee until 30 June 2020. Stephen has more
than 30 years’ retail experience having held senior executive positions with some of Australia’s
best known retailers. These include Finance Director and Operations Director for David Jones,
founding Managing Director of Officeworks, and various senior management roles with Myer.
Stephen is currently a non-executive director and Chair of the Audit and Risk Management
Committees of GWA Group Limited, Accent Group Limited and Nick Scali Limited.
Beth was appointed to the Board in May 2011, became Chair of the Audit and Risk
Management Committee in June 2012, and is also a member of the Company’s Remuneration
and Nominations Committee. After qualifying as a Chartered Accountant, Beth spent over
25 years in corporate finance, providing mergers and acquisition advice and arranging equity
funding for companies in a range of industries including specialty retail. For 12 years her
primary focus was on information technology, telecommunications and entertainment. She
is also a member of the board of GPT Funds Management Limited and Chair of its Audit,
Compliance & Risk Management Committee, and a non-executive director of Shopping
Centres Australasia Property Group and Chair of its Audit, Risk Management and Compliance
Committee. Beth was previously a member of the Defence SA Advisory Board, a
non-executive director of Port Adelaide Maritime Corporation, a non-executive director and
chair of the Audit Committee of both Sydney Ferries and CRC Care Pty Ltd, and a
non-executive director of the ASX listed Australand Property Group companies.
Mark was appointed to the Board in March 2017 and is a member of the Audit and Risk
Management Committee and the Remuneration and Nominations Committee. Following initial
training and experience in underground coal mining, Mark has gained over 30 years’ executive
experience in retail, logistics and wholesale distribution in the UK, Spain, North America, Australia
and New Zealand. This includes being UK Logistics Operations Director for Tesco Plc, running
Wal-Mart Canada’s logistics operations and CEO of the Warehouse Stationery retail chain in NZ.
Mark also spent five years as Group CEO for The Warehouse Group, a NZX listed retail group
which includes Noel Leeming, NZ’s largest technology and appliances retailer. He was also an
advisor to the board of The Good Guys for 18 months prior to its acquisition by JB Hi-Fi. Mark is
currently a non-executive director and Chair of the ESG Committee of NZX listed Kiwi Property
Group Limited, and a non-executive director of Bapcor Limited and Chair of its Nominations,
Remuneration and ESG Committee. In 2021 he also joined the Board of 7- Eleven Australia,
the 700+ convenience store chain, serving on both the Strategy and Audit, Compliance & Risk
Committees.
Mr Geoff Roberts
Geoff was appointed to the Board in January 2021. He has over 35 years’ finance experience,
Non-Executive Director
including as Group Chief Financial Officer of Seek Limited from 2015 – 2021. Geoff is a
Exec. MBA, B.Comm, FCA, FAICD
Committee (Board) member and Chair of the Finance and Audit Committee of the Melbourne
Cricket Club, is a Non-Executive Director of Djerriwarrh Investments Limited, and was formerly
a director and Chair of the Audit Committee of AMP Limited. Geoff was previously Group CFO
of AXA Asia Pacific Holdings Limited and a partner at Deloitte (Managing Partner, Victoria
from 2011 until 2015). During the period that Geoff was a partner, Deloitte were the appointed
auditors of the Group, however at no stage during the term of his partnership was Geoff
involved in the provision of audit or other services to the Group.
Mr Richard Uechtritz
Non-Executive Director
Richard has over 30 years’ experience in retailing. He was co-founder of Australia’s two
leading photo chains, Rabbit Photo and Smiths Kodak Express, and was a director of Kodak
(Australasia) Pty Ltd. Richard led the management buy-in of JB Hi-Fi in July 2000 and was
CEO and Managing Director until his resignation from these positions in May 2010. Richard
re-joined the Board in April 2011 as a non-executive director. He is also a non-executive
director of Seven Group Holdings Limited.
15
DIRECTORS’ REPORT (continued)
Ms Melanie Wilson
Non-Executive Director
MBA, B.Comm (Hons), GAICD
Mr Terry Smart
Group Chief Executive Officer
and Executive Director
Mr Nick Wells
Group Chief Financial Officer
and Executive Director
B.Comm, CA
Melanie was appointed to the Board in June 2020 and is a member of the Audit and Risk
Management Committee. Melanie gained extensive experience in senior management roles
across global retail brands, including Woolworths (Head of Online, Big W and Manager,
Strategy Group), Limited Brands (Victoria’s Secret and Bath & Bodyworks, New York), and
Diva/Lovisa. Her retail experience includes online/e-commerce, store operations, merchandise
systems, marketing, brand development and logistics/fulfilment. Melanie has also held roles
with Bain & Company (Boston) and Goldman Sachs (Hong Kong/Sydney) and completed an
MBA at Harvard Business School. Melanie is currently a non-executive director and Chair of
Baby Bunting Group Ltd and a member of its Remuneration & Nominations and Audit & Risk
Committees. She is also a non-executive director of EML Payments Ltd and Property Guru
Group (Singapore). Melanie was previously a non-executive director of Shaver Shop Group
Limited and a non-executive director and Chair of the Audit & Risk Committee of iSelect
Limited.
Terry was appointed Group CEO and joined the Board in August 2021. He was previously
CEO of JB Hi-Fi from May 2010 to June 2014, following ten years as Chief Operating Officer,
and oversaw significant expansion and growth during this time. Terry returned to the JB Hi-Fi
Group in April 2017 as Managing Director of The Good Guys and led the repositioning and
significant improvement in performance of The Good Guys business.
Nick was appointed Chief Financial Officer of the Group in 2014 and joined the Board in
August 2021. Nick oversees the finance, property, risk, sustainability and M&A functions and,
during his time as CFO, has implemented significant strategic initiatives, including leading the
acquisition of The Good Guys in 2016. Prior to joining JB Hi-Fi in 2009, Nick was a Manager
at Deloitte where he provided audit and assurance services to a broad range of companies,
including a number of Australian retail businesses.
Mr Richard Murray
Richard was Chief Executive Officer of the Group from July 2014 until the end of August 2021.
Former Group Chief Executive
He joined JB Hi-Fi as CFO in 2003 and took the business through the IPO process. Prior to
Officer and Executive Director
this Richard worked with Deloitte for 10 years.
B.Comm, Grad.Dip. Applied
Finance & Investment, FCA
Each of the aforementioned directors held office for the whole financial year and since the end of the financial year, other than
Terry Smart, Nick Wells and Richard Murray as set out above.
Board changes
As announced on 27 August 2021, Richard Murray left the Company at the end of August 2021 and Terry Smart (previously
Managing Director of The Good Guys business) succeeded Richard as Group CEO. Both Terry and Group CFO, Nick Wells,
were appointed to the Board as Executive Directors upon Richard’s departure. Both Terry and Nick are considered to be
non-independent directors. In accordance with the Company’s Constitution, Nick is subject to shareholder re-election by rotation
at least every three years but Terry, as the Group CEO, is not.
Company Secretary
Particulars
Mr Doug Smith
BA (Hons). Admitted to legal
practice in Victoria & in England
& Wales
Doug was appointed Company Secretary in June 2012. Doug joined JB Hi-Fi as General
Counsel in September 2010 and has over 25 years’ legal and company secretarial experience
in-house and in private practice.
16
Directorships of other listed companies
Directorships of other listed companies held by directors in the 3 years immediately before the end of the financial year, and since
the end of the financial year, are as follows:
Name
Company
Stephen Goddard
GWA Group Limited
Accent Group Limited
Nick Scali Limited
Period of Directorship
Since October 2016
Since November 2017
Since March 2018
Beth Laughton
Shopping Centres Australasia Property Group
Since December 2018
Mark Powell
Kiwi Property Group Limited (NZX)
Bapcor Limited
Since October 2017
Since September 2020
Geoff Roberts
Djerriwarrh Investments Limited
Since July 2022
Richard Uechtritz
Seven Group Holdings Limited
Since June 2010
Melanie Wilson
Baby Bunting Group Ltd
EML Payments Ltd
Shaver Shop Group Limited
iSelect Limited
Since February 2016
Since February 2018
June 2016 – May 2020
March 2016 – October 2021
Principal activity
The Group’s principal activity in the course of the financial year was the retailing of home consumer products. The Group offers
a wide range of leading brands with particular focus on consumer electronics, software (including music, games and movies),
whitegoods and appliances. There have been no significant changes in the nature of the principal activity of the Group during the
financial year.
Operating and Financial Review
The Operating and Financial Review, which forms part of this Directors’ Report, is presented separately on pages 20 to 32.
Changes in state of affairs
During the financial year there was no significant change in the state of affairs of the Group.
Subsequent events
There have been no matters or circumstances occurring subsequent to the end of the financial year that have significantly affected,
or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future
financial years.
Future developments
Information regarding likely developments in the operations of the Group in future financial years is set out in the Operating and
Financial Review and elsewhere in the Annual Report.
Environmental regulations
The Group’s operations are not subject to any particular and significant environmental regulation. The Group’s Sustainability Report
provides disclosure around the material sustainability-related issues for the Group’s businesses. The Group has not incurred any
significant liabilities under any environmental legislation during the financial year.
Dividends and Off-Market Share Buy-Back
In respect of the financial year ended 30 June 2021, as detailed in the Directors’ Report for that financial year, an interim dividend
of 180.0 cents per share and a final dividend of 107.0 cents per share, both franked to 100% at the 30% corporate income tax
rate, were paid to the holders of fully paid ordinary shares on 12 March 2021 and 10 September 2021 respectively.
17
DIRECTORS’ REPORT (continued)
In respect of the financial year ended 30 June 2022, an interim dividend of 163.0 cents per share was paid to the holders of fully
paid ordinary shares on 11 March 2022 and the directors have declared the payment of a final dividend of 153.0 cents per share
to be paid to the holders of fully paid ordinary shares on 9 September 2022. Both dividends are franked to 100% at the
30% corporate income tax rate. The total dividend for the financial year of 316.0 cents per share represents a payout ratio of
approximately 65% of net profit after tax of $544.9 million.
On 11 April 2022, the Company successfully completed a $250.0 million off-market share buy-back which resulted in the purchase
of 5.5 million of the Company’s shares, being 4.8% of the shares on issue. The buy- back was comprised of a $232.4 million
(92.9%) fully franked dividend and a $17.6 million (7.1%) capital component.
Indemnification of officers and auditors
The Company indemnifies current and former directors and officers for any loss arising from any claim by reason of any wrongful
act committed by them in their capacity as a director or officer (subject to certain exclusions as required by law). During the
financial year, the Company has paid premiums in respect of contracts insuring the directors and officers against any liability of
this nature. In accordance with normal commercial practices, under the terms of the insurance contracts the nature of the liabilities
insured against, and the amount of the premiums paid, are confidential. The Company has not otherwise, during or since the end
of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company
or of any related body corporate against a liability incurred as such by an officer or auditor.
Directors’ meetings
The following table sets out the number of directors’ meetings (including meetings of Committees of directors) held during the
2022 financial year and the number of meetings attended by the members of the Board or the relevant Committee. During the
financial year, 17 Board meetings, 4 Remuneration and Nominations Committee meetings and 7 Audit and Risk Management
Committee meetings were held.
Board of Directors
Remuneration and Nominations
Committee
Audit and Risk Management
Committee
Held
Attended
Held
Attended
Held
Attended
17
17
17
17
17
17
12
12
5
17
17
17
17
17
16
12
12
5
4
4
4
–
–
–
–
–
–
4
4
4
–
–
–
–
–
–
–
7
7
7
–
7
–
–
–
–
7
7
7
–
7
–
–
–
Directors
S. Goddard
B. Laughton
M. Powell
G. Roberts
R. Uechtritz
M. Wilson
T. Smart (aptd 27/8/21)
N. Wells (aptd 27/8/21)
R. Murray (retd 27/8/21)
Directors’ shareholdings
The following table sets out each director’s relevant interest in shares, debentures, and rights or options in shares or debentures of
the Company, or a related body corporate, as at the date of this Report.
Directors
S. Goddard
B. Laughton
M. Powell
G. Roberts
R. Uechtritz
M. Wilson
T. Smart (aptd 27/8/21)
N. Wells (aptd 27/8/21)
Fully paid ordinary shares
Executive share options
Direct number
Indirect number
Total
Direct number
Indirect number
Total
4,500
5,804
4,000
–
4,816
–
–
–
–
–
–
3,000
–
1,500
107,152
51,742
4,500
5,804
4,000
3,000
4,816
1,500
107,152
51,742
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
18
Remuneration Report
The Remuneration Report, which forms part of this Directors’ Report, is presented separately on pages 33 to 52.
Proceedings on behalf of the Company
The directors are not aware of any persons applying for leave under s.237 of the Corporations Act 2001 to bring, or intervene in,
proceedings on behalf of the Company.
Non-audit services
Given the size and complexity of the Group, it can be in the interests of the Group to engage the services of its auditor to assist
in a range of related projects. The directors are aware of the issues relating to auditor independence and have in place policies
and procedures to address actual, potential and perceived conflicts in relation to the provision of non-audit related services by the
Company’s auditor.
Details of the non-audit services undertaken by, and amounts paid to, the auditor of the Group are detailed in Note 28 to the
financial statements.
The directors are satisfied that the provision of non-audit services during the year by the auditor is compatible with, and do not
compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons:
•
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the
auditor; and
•
none of the services undermine the general principles relating to auditor independence as set out in the Code of Conduct
APES 110 Code of Ethics for Professional Accountants issued by the Australian Professional & Ethical Standards Board,
including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company,
acting as advocate for the Company or jointly sharing economic risks and rewards.
Auditor’s independence declaration
The auditor’s independence declaration is included on page 53 of the Annual Report.
Rounding off of amounts
The Company is a company of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 dated 24 March 2016, and in accordance with that Corporations Instrument, amounts in the Directors’ Report and financial
report are rounded off to the nearest hundred thousand dollars, unless otherwise indicated.
Signed in accordance with a resolution of the directors made pursuant to s.298(2) of the Corporations Act 2001.
On behalf of the directors
Stephen Goddard
Chairman
15 August 2022
Terry Smart
Group Chief Executive Officer
19
OPERATING AND FINANCIAL REVIEW
OVERVIEW OF OPERATIONS
The Group includes two iconic retail brands:
•
JB Hi-Fi – a leading retailer of technology and consumer electronics with a strong position with a young tech-savvy
demographic; and
•
The Good Guys – a leading retailer of home appliances and consumer electronics with a strong position with home-making
families.
Both businesses aim to sell the best brands, providing a big range, at low prices with exceptional customer service provided by
passionate, knowledgeable team members.
The Group holds significant market-share in many of its product categories and sells the following products:
•
consumer electronics and technology products including televisions, audio equipment, computers, fitness, health and
wellbeing products, smart home products and cameras;
telecommunications products and services;
home appliances including whitegoods, cooking products, heating & cooling products, small appliances and kitchen
•
•
accessories; and
•
software (music, movies and games).
The Group also provides information technology and consulting services.
The Group has multichannel sales capability with sales primarily from its branded retail store networks (199 JB Hi- Fi/JB Hi-Fi
Home stores in Australia, 14 JB Hi-Fi stores in New Zealand and 106 The Good Guys stores in Australia as at 30 June 2022),
online operations (JB Hi-Fi and The Good Guys websites) and over the phone. Sales are also generated from the Group’s
commercial and education businesses.
The Group Model is underpinned by 4 unique competitive advantages:
Scale:
•
•
•
•
•
•
#1 player in Australian Consumer Electronics and Home Appliance market
local and global relevance to suppliers
strong and engaged supplier relationships both locally and globally
large, engaged and diversified customer base across the two brands provides suppliers with the ability to execute promotions
and new product launches at scale
young customer base drives ongoing brand importance to suppliers to maximise sales of new technology and innovation
high volume website traffic provides significant marketing opportunities and reach
• Group function enables business to drive efficiencies across large cost base
Low Cost Operating Model:
•
•
•
constant focus on productivity and minimising unnecessary expenditure
highly productive floor space with high sales per square metre
efficiency of model allows the Group to:
•
•
respond to market price activity and maintain focus on market share; and
compete effectively with traditional competitors and new market entrants
Multichannel Capability:
•
•
focus on providing the customer with an integrated and frictionless shopping experience regardless of their chosen sales channel
customer choice on how to shop with us:
in-store – high quality store locations that provide convenience and easy access
online – high brand awareness and optimised digital experience drives high traffic through websites
over the phone – convenient and personalised sales experience giving customers the ability to negotiate a deal
•
•
•
20
•
•
•
fast fulfilment, via in-store shopping, click-and-collect, or delivery from the store network or Home Delivery Centres
aftersales support via any channel provides confidence when buying
national Commercial business supporting corporate, government and education customers
People & Culture:
•
•
•
•
•
•
knowledgeable and passionate teams who put customers first and provide exceptional customer service
strong, overarching culture that also reflects the individual brand personalities
dynamic and flexible environment allows the business to pivot quickly and adapt to any changing market conditions
highly engaged teams who have a connection with the business
diverse and inclusive workforce
unrelenting focus on health and safety
GROUP FINANCIAL PERFORMANCE FY2022 – HIGHLIGHTS
Total Sales ($m)
Earnings before interest and tax ($m)
Net profit after tax ($m)
Earnings per share (basic ¢)
Dividend per share (¢)
FY2022
9,232.0
794.6
544.9
479.5
316.0
FY2021
8,916.1
743.1
506.1
440.8
287.0
Growth
315.9
51.5
38.8
+39 cps
+29 cps
+3.5%
+6.9%
+7.7%
+8.8%
+10.1%
Total sales grew by 3.5% to $9.23 billion, with strong sales momentum through the year. In the second half of FY2022 total sales
were up 9.9% as Covid-19 restrictions eased and customers returned to shopping in-store, whilst continuing to shop online.
Online sales were up by 52.8% to $1.63 billion, representing 17.6% of total sales (FY2021: 11.9%). In the second half of FY2022,
online sales represented 11.9% of total sales.
Earnings before interest and tax (“EBIT”) grew 6.9% to $794.6 million, with second half FY2022 EBIT up 33.4% driven by elevated
sales growth and improvement in gross margins. Net profit after tax grew by 7.7% to $544.9 million and earnings per share were
up 8.8% to 479.5 cps. Dividends per share are up 29.0 cps or 10.1% to 316.0 cps, with the final dividend of 153.0 cps up
46.0 cps or 43.0%.
The strength of the Group’s model was highlighted by the Group’s ability to continue to grow sales and EBIT despite the ongoing
disruption to all areas of the business, including stores, online and supply chain.
Through the total dividend for FY2022 and the FY2022 off-market share buy-back, the Group will have returned $604 million to
shareholders.
As announced to the ASX in April 2021 and noted in the 2021 Annual Report, Richard Murray left the Group on 27 August 2021
and Terry Smart succeeded him as Group CEO. Both Terry and Nick Wells, Group CFO, joined the Board as Executive Directors
upon Richard’s departure. Biag Capasso was appointed as Managing Director of The Good Guys, taking over from Terry, and
Tania Garonzi joined the Group as Merchandise Director of The Good Guys. In early July 2022, Tim Edwards was appointed as
Managing Director of the JB Hi-Fi New Zealand business.
COVID-19
In FY2022, the Group’s operations remained affected by the Covid-19 pandemic and resulting government actions.
The businesses remained committed to supporting government and community efforts to limit the spread of the virus. The Group’s
highest priority continued to be the health and wellbeing of its team members, customers, business partners and the wider
community, whilst responding to its customers’ changing needs and maintaining financial stability.
In accordance with government restrictions, some stores were closed at various times during the first half of the financial year, but
continued to fulfil online and click-and-collect orders where possible. Whilst the Group’s stores were open throughout the second
half of the financial year, the Group faced staffing challenges as significant numbers of team members were absent as a result
of Covid-19 and due to isolation requirements. Despite these challenges, performance across the JB Hi-Fi and The Good Guys
businesses remained strong.
21
OPERATING AND FINANCIAL REVIEW (continued)
DIVISIONAL PERFORMANCE
JB Hi-Fi Australia
Total Sales ($m)
Gross Profit ($m)
Gross Margin (%)
Cost of Doing Business (%)
EBITDA ($m)
EBITDA Margin (%)
EBIT ($m)
EBIT Margin (%)
FY2022
6,196.5
1,387.7
22.40%
11.40%
681.4
11.00%
544.9
8.79%
FY2021
5,956.8
1,325.2
22.25%
11.19%
658.5
11.06%
523.0
8.78%
Growth
+4.0%
+4.7%
+15 bps
+21 bps
+3.5%
(6 bps)
+4.2%
+1 bps
Total sales were up 4.0% to $6.20 billion (FY2021: $5.96 billion) with comparable sales growth up 3.4%. Sales momentum was
strong through the year, particularly in the second half with sales up 11.7%, driven by continued heightened customer demand for
consumer electronics and home appliance products.
Hardware and services sales (all sales excluding the Music, Movies and Games Software categories) were up 5.0% for the financial
year, with comparable sales up 4.3%, driven by the Communications, Visual, Small Appliances, Smart Home and Accessories
categories. Software sales were down 11.9%, and on a comparable basis were down 12.4%, as a result of a decline in the
Movies, Music and Games Software categories. By value, software sales represented 4.7% of total sales (FY2021: 5.5%).
Online sales grew 52.3% (FY2021: 93.0%) to $1.19 billion or 19.2% of total sales (FY2021: 13.1%). In the second half of FY2022,
with all stores open, online sales represented 12.5% of total sales.
The Commercial business recorded solid sales growth as the Group continued to improve the customer offer.
Gross profit increased by 4.7% to $1.39 billion, with gross margin increasing by 15 bps to 22.4%, driven by strong improvements
in key categories, particularly in the second half of the financial year. Cost of Doing Business (“CODB”) was up 21 bps to 11.4%
for the year and in absolute terms CODB grew 6.0%, with disciplined cost control throughout the year. Depreciation grew by 0.8%
with an increase in depreciation on right-of-use assets partially offset by a decline in depreciation on fixed assets. EBIT was up
4.2% to $544.9 million, with EBIT margin up 1 bp to 8.8%. In the second half of FY2022, EBIT was up 30.7%, driven by elevated
sales growth and improvement in gross margins.
JB Hi-Fi New Zealand(i)
Total Sales (NZ$m)
Gross Profit (NZ$m)
Gross Margin (%)
Cost of Doing Business (%)
EBITDA (NZ$m)
EBITDA Margin (%)
EBIT (NZ$m)
EBIT Margin (%)
Underlying EBIT (NZ$m)(ii)
Underlying EBIT Margin (%)
FY2022
262.4
45.7
17.40%
12.75%
12.2
4.64%
8.8
3.37%
4.7
1.77%
FY2021
261.6
46.6
17.83%
13.12%
12.3
4.70%
Growth
+0.3%
(2.1%)
(43 bps)
(36 bps)
(0.9%)
(6 bps)
5.8
+51.7%
2.23%
+114 bps
6.0
2.28%
(21.5%)
(51 bps)
(i) Amounts disclosed for JB Hi-Fi New Zealand are in local currency to remove the impacts of foreign currency translation on trading performance.
The Australian dollar performance is presented in Note 2 of the financial statements.
(ii) Underlying EBIT represents EBIT adjusted for the add back of non-cash impairment losses associated with right-of-use assets and fixed assets
of NZ$3.3 million (FY2021: NZ$6.5 million), minus depreciation of NZ$7.5 million (FY2021: NZ$6.3 million) that would have been recognised if
right-of-use assets and fixed assets had not been impaired.
22
Total sales were up 0.3% to NZ$262.4 million, with comparable sales also up 0.3% and sales in the second half of the financial
year up 6.3%. Hardware and Services sales (all sales excluding the Music, Movies and Games Software categories) were down
0.1%, with comparable sales also down 0.1%. The key growth categories in FY2022 were Visual, Games Hardware and Smart
Home. Software sales were up 5.9% with comparable sales also up 5.9%. Software sales were 7.4% of total sales
(FY2021: 7.1%). Online sales grew 56.7% to NZ$43.3 million or 16.5% of total sales (FY2021: 10.6%). In the second half of
FY2022, with all stores open, online sales represented 11.0% of total sales.
Gross margin was down 43 bps on FY2021 to 17.4%. CODB was down 36 bps on FY2021 to 12.8%, and in absolute terms
declined by 2.5% as store wages remained well controlled. EBITDA was NZ$12.2 million, down 0.9%. Underlying EBIT, excluding
the impact of impairments in the current and prior year, was NZ$4.7 million, down NZ$1.3 million on FY2021.
The Good Guys
Total Sales ($m)
Gross Profit ($m)
Gross Margin (%)
Cost of Doing Business (%)
EBITDA ($m)
EBITDA Margin (%)
EBIT ($m)
EBIT Margin (%)
FY2022
2,789.4
649.9
23.30%
11.79%
321.1
11.51%
241.4
8.65%
FY2021
2,715.7
608.6
22.41%
11.67%
291.7
10.74%
214.7
7.90%
Growth
+2.7%
+6.8%
+89 bps
+12 bps
+10.1%
+77 bps
+12.5%
+75 bps
Total sales grew by 2.7% to $2.79 billion (FY2021: $2.72 billion) with comparable sales growth of 2.2%. Sales momentum
was strong through the year, particularly in the second half with sales up 6.7%, driven by the continued heightened customer
demand for consumer electronics and home appliance products. The key growth categories for FY2022 were Laundry, Portable
Appliances, Floorcare, Dishwashers and Visual.
Online sales for FY2022 were up 53.7% to $397.0 million or 14.2% of total sales (FY2021: 9.5%). In the second half of FY2022,
with all stores open, online sales represented 10.8% of total sales.
Gross profit for FY2022 was up 6.8% to $649.9 million, with gross margin up 89 bps to 23.3% (FY2021: 22.4%) driven by strong
improvements in key categories, particularly in the second half of the year. CODB for FY2022 was up 12 bps to 11.8% and in
absolute terms grew 3.8% on FY2021 as store wages remained well controlled throughout the year. Depreciation grew by 3.3%
with an increase in both depreciation on right-of-use assets and fixed assets.
EBIT was up by 12.5% to $241.4 million with EBIT margin up 75 bps to 8.7%. In the second half of FY2022, EBIT was up 36.5%,
driven by elevated sales growth and improvement in gross margins.
23
OPERATING AND FINANCIAL REVIEW (continued)
GROUP BALANCE SHEET, CAPITAL MANAGEMENT AND DIVIDENDS
On 11 April 2022, the Company successfully completed a $250.0 million off-market share buy-back which resulted in the purchase
of 5.5 million of the Company’s shares, being 4.8% of the shares on issue. The buy- back was comprised of a $232.4 million
(92.9%) fully franked dividend and a $17.6 million (7.1%) capital component.
The Group’s total net assets at the end of the financial year were $1,280.3 million, which was $28.1 million lower than at the end
of FY2021.
During the year, in order to facilitate the $250.0 million off-market share buy-back in April 2022, the Group’s term debt facility
was increased from $138.0 million to $200.0 million, while the trade finance facility remained at $200.0 million. The Group’s bank
overdraft facilities also remained unchanged at $29.0 million.
The Group now has $429.0 million total facilities as follows, with $369.0 million undrawn as at 30 June 2022:
•
•
•
$200.0 million trade finance facility renewable annually;
$20.0 million and NZ$10.0 million overdraft facilities renewable annually (total AU$29.0 million); and
$200.0 million term debt facility with an expiry date of February 2025.
The financial covenants included in the Group’s financing facilities are leverage and fixed charges cover ratios. The Group has
complied with each of its financial covenants throughout the period.
At the end of the financial year the Group had total interest bearing liabilities of $59.4 million and cash on hand of $125.6 million,
resulting in net cash of $66.2 million, compared to net cash of $263.2 million in the prior year.
The total dividend for the 2022 financial year of 316.0 cents per share represents a payout ratio of approximately 65% of net profit
after tax. The final dividend for the 2022 financial year of 153.0 cents per share fully franked will be paid on 9 September 2022 with
a record date of 26 August 2022.
Through the total dividend for FY2022 and the FY2022 off-market share buy-back, the Group will have returned $604 million
to shareholders. The Board will continue to regularly review the Group’s capital structure with a focus on maximising returns to
shareholders and maintaining balance sheet strength and flexibility.
INVESTMENTS FOR FUTURE PERFORMANCE
Investments of $57.6 million were made during the financial year in capital expenditure projects, a decrease of $0.1 million from
$57.7 million during the previous financial year. Capital expenditure was in line with FY2021 as the Group continued to invest in
the store portfolio, online offerings and strategic initiatives. The Group’s investing activities are anticipated to contribute towards
earnings growth in FY2023 and beyond.
WORKING CAPITAL
Total inventory on hand increased from the previous financial year by $196.5 million or 20.9% to $1,135.3 million, as inventory
availability continued to improve from the low FY2021 and FY2020 closing inventory positions resulting from Covid-19 related
supply shortages. Inventory turnover was down 137 bps to 6.9 times from 8.3 times in FY2021, but up 63 bps on FY2019
(FY2019: 6.3 times). Compared to FY2019, inventory was up 28.0% compared to sales growth of 30.1% over the same period.
Payables, which would ordinarily grow in line with inventory, were up 7.9% or $53.0 million in FY2022 compared to FY2021 as
supply improved and inventory was purchased earlier to replenish inventory levels. As a result, at 30 June 2022 net working capital
has returned to historical levels.
Financial and operating leverage remains low as evidenced by solid fixed charges cover1 of 4.8 times (FY2021: 4.6 times) and
interest cover1 of 602.1 times (FY2021: 228.4 times). The Company’s gearing ratio was low at 0.1 (FY2021: 0.0) as there were
only $60.0 million of borrowings at 30 June 2022 (FY2021: nil).
Operating cash flows and operating cash conversion were impacted by the increases in working capital required to replenish
inventory levels from the low FY2021 and FY2020 closing positions, but remain strong over the last three years. The Group had
net cash of $66.2 million at 30 June 2022.
1 Calculated prior to the impact of AASB 16
24
STORES
The Group’s sales are primarily from its branded retail store networks, located both in stand-alone destination sites and shopping
centre locations.
The store locations as at 30 June 2022 are set out below.
1
2
5
11
14
23
JB Hi-Fi Australia
JB Hi-Fi New Zealand
The Good Guys
23
39
30
61
28 55
3
5
2
3
Total JB Hi-Fi Stores – 213
Total The Good Guys Stores – 106
14
In Australia, two new JB Hi-Fi stores and one new The Good Guys store were opened in FY2022. No stores were opened or
closed in New Zealand in FY2022.
25
OPERATING AND FINANCIAL REVIEW (continued)
BUSINESS STRATEGIES AND PROSPECTS
The following factors are considered important in understanding the strategy of the Group and the main opportunities and threats
that may have a significant effect on its results and its prospects for future years. These factors are listed regardless of whether
they were significant in FY2022.
Business risks
There are a number of factors, both specific to the Group and of a general nature, which may threaten both the future operating
and financial performance of the Group, and the outcome of an investment in the Group. There can be no guarantee that the
Group will achieve its stated objectives or that forward looking statements will be realised. The operating and financial performance
of the Group is influenced by a variety of general economic and business conditions, including levels of consumer spending,
inflation, interest and exchange rates, access to debt and capital markets, government fiscal, monetary and regulatory policies and,
at the present time, the ongoing effect on the economy of the Covid-19 pandemic. A prolonged deterioration in general economic
conditions, including an increase in interest rates or a decrease in consumer and business demand, may have an adverse impact
on the Group’s business or financial condition.
The specific material business risks faced by the Group, and how the Group manages these risks, are set out below.
•
Competition – the markets in which the Group operates remain highly competitive and any increased competition from new
and existing competitors may lead to price deflation and a decline in sales and profitability. As the #1 player in a fragmented
Australian market, the Group’s scale allows it to maintain focus on market share and absorb margin pressure during periods of
heightened market price activity and consolidation. The Group also believes that its competitive advantages and the plans for
growth set out below will allow it to maintain its market leading position.
•
A loss or erosion of reputation – both the JB Hi-Fi business and The Good Guys business enjoy a high level of loyalty and
trust with customers. The JB Hi-Fi business has been consistently ranked among Australia’s most reputable companies in the
Corporate Reputation Index released by the Reputation Institute and AMR. Between them, the JB Hi-Fi business and The Good
Guys business have won the Roy Morgan Customer Satisfaction Award for Furniture/Electrical store of the year six times since
2013, including the JB Hi-Fi business winning in 2020 and 2021. Additionally, The Good Guys Business won the Canstar Blue
Most Satisfied Customers Electronic Retailers Award every year from 2011 to 2020. Any decline in this high level of loyalty and
trust could compromise the market leading positions of the JB Hi-Fi business and The Good Guys business and adversely affect
the Group’s operating and financial performance. This could occur as a result of a wide range of factors or events, including:
•
a loss or erosion of the reputation of the JB Hi-Fi and The Good Guys businesses for price leadership. The Group
constantly reviews and updates its pricing strategy and takes a pro-active approach to responding to the competitive
environment including careful monitoring of its competitors’ pricing and strategic and tactical marketing campaigns to
maintain its price position;
•
a loss or erosion of the reputation of the JB Hi-Fi and The Good Guys businesses for high levels of customer service,
and/or the in-store experience provided by the businesses does not meet customer expectations. The Group seeks
to mitigate this risk through the use of customer service and engagement analytics, senior management monitoring of
customer complaints, targeted capex investment, optimising floor layouts and category space allocation, the trialling of
new store formats, and an ongoing program of work to improve in-store experience and evolve its service model;
•
the online experience provided by the Group’s businesses does not meet customer expectations. The Group has
demonstrated its ability to capture online sales during the Covid-19 pandemic and continues to invest in its digital and
online capability;
•
a major information security breach of the Group’s IT systems. Information security breaches remain a key area of focus
for organisations globally to mitigate the risk of financial and/or reputational damage. The Group seeks to mitigate this
risk through investment in IT security measures, including incident response planning and testing. Noting the constant
evolution of the nature and sophistication of external threats, management conduct regular reviews of, and continuous
improvement over, the Group’s network security and information security controls (including a continuous program of
system updates, patching and vulnerability assessments to ensure core systems are kept secure on an on-going basis),
and monitors the external environment for new and emerging risks;
•
a major workplace health and safety incident or customer injury. The Group seeks to mitigate this risk through having
appropriate occupational health and safety procedures and staff training in place for all of its sites. Particular areas of
focus in recent years include mental health and wellbeing of the Group’s team members, how to deal with disgruntled or
aggressive customers, safety within the Group’s home delivery centres, Covid-safe working environments and hazard,
incident and injury management. Further detail is set out in the Group’s Sustainability Report;
26
•
a significant breach of regulatory or legislative requirements. The Group seeks to mitigate this risk through appropriate
staff training on key regulatory and legislative requirements relevant to its business, as well as making legal and regulatory
compliance a key focus of the management team; or
•
the Group failing to meet its sustainability or corporate social responsibility objectives, or not operating in accordance
with community and stakeholder expectations in these areas and the potential for adverse media coverage should this
occur. The Group seeks to mitigate this via its sustainability and corporate social responsibility initiatives under its Group
Sustainability Framework, details of which can be found in the Group’s annual Sustainability Reports. Management
monitor progress against the Group’s sustainability plan and engage with suppliers, investors and across industry forums
to ensure that changes in stakeholder expectations are understood. In addition, the Group actively monitors both social
and traditional media on an ongoing basis and, where appropriate, responds to issues raised, as well as taking any steps
necessary to promptly address valid concerns or underlying issues.
•
Consumer discretionary spending and changes in consumer demands – the Group is exposed to both the upside and
downside of consumer spending cycles and changes in consumer demands. A reduction in consumer spending and demand
(for example, due to an increase in inflation) may lead to a decline in the Group’s sales and profitability. The Group maintains its
relevance using its strong market position supported by its low price proposition. Many of the products sold by the Group are
now considered less “discretionary” than in the past, with products such as mobile phones and computers now being seen as
“essential” by many consumers. The Group’s stores, which are both in convenient and high traffic locations, seek to maximise
both destination and impulse sales, reflected in the Group’s high sales per square metre of floor space. The Group also closely
monitors changes in the economic environment, consumer demand and new products, and is able to respond quickly to
such changes. During the Covid-19 pandemic, the Group’s diverse store portfolio (including its online stores) meant that the
Group was able to continue to respond to changes in consumer behaviour as foot traffic shifted away from CBD stores, Tier 1
shopping centres and airports, to homemaker and free-standing stores and online shopping.
•
Online competition taking sales from the Group’s stores – the Group seeks to provide customers with a quality online offer,
while leveraging the benefits of its physical stores. The Group continues to invest and innovate both in-store and online in
order to give customers the choice as to how to transact with the JB Hi-Fi and The Good Guys businesses, and is focusing on
continuing to integrate the in-store and online experience. The Group’s market leadership and scale gives it global relevance
with suppliers and drives significant buying power which enables the Group to compete successfully with online players, as
does its low cost of doing business. The Group also believes that the existence of its store networks will continue to provide
confidence in after-sales service and support to its online customers, whilst also enabling fast online fulfilment via delivery from
stores and click-and-collect.
•
Digitisation of physical software leading to a fall in traditional software sales beyond expectations – the JB Hi-Fi business will
maintain a software presence in store while the category is still providing solid returns, whilst adjusting inventory, range and
in-store space allocated to the category as appropriate.
•
Ineffective inventory management – a failure to maintain sufficient inventory (or holding excessive inventory) may adversely
affect the Group’s operating and financial performance. The Group mitigates this risk through regular monitoring of inventory
quality and stock levels.
•
Shortage of inventory due to supply chain disruption – a shortage of inventory due to global or local supply chain disruption
may adversely affect the Group’s operating and financial performance. The Group’s scale and strong relationships with a large
number of different suppliers mean that it is in a strong position to obtain inventory even when supply chains are disrupted, as
demonstrated by the Group’s strong performance over recent years despite disruption to supply chains caused by Covid-19.
•
Failure to maintain key supplier relationships – the Group has strong partnerships with all major suppliers, with its dual brand
retail approach providing ranging and merchandising optionality and facilitating the execution of strategic initiatives at scale.
The Group’s store locations and high traffic websites provide suppliers with high visibility for their products. The Group has
significant supplier management processes to mitigate the risk of failing to maintain key supplier relationships and, whilst at any
one time certain products and suppliers are more important than others, the large and diverse range of products stocked by
the businesses means that reliance on any one supplier or product is less than for some smaller competitors. In addition, the
JB Hi-Fi and The Good Guys businesses have proven records of expansion into new product categories and introducing new
brands, rather than solely remaining reliant on those products and brands which were successful in previous years.
•
Supply chain capability does not support the Group’s growth objectives – the Group continues to develop and improve its
supply chain through initiatives such as the rationalisation of the previously third party operated warehouse network into
Group operated Home Delivery Centres, the improvement of inventory planning and ordering processes, and the expansion of
delivery options.
27
OPERATING AND FINANCIAL REVIEW (continued)
•
The “JB Hi-Fi Business”, “JB Hi-Fi Education”, and “The Good Guys Commercial” businesses do not deliver the expected
growth outcomes for the Group – the Group continues to invest in these businesses to support their continued growth and
expand their product and service offerings.
•
Growth from expansion of the Group’s product and services offerings do not deliver the expected growth outcomes for the
Group – the Group continues to invest and innovate in these areas to support continued growth.
•
Failure to achieve the expected improved results for the JB Hi-Fi New Zealand business may have an adverse impact on
the Group’s operating and financial performance – the Group is encouraged by the improved performance of the JB Hi-Fi
New Zealand business and will invest in the business for future growth.
•
Increasing cost of doing business – certain costs of doing business are outside of the Group’s control. For example, the Group’s
cost of doing business is impacted by the annual Fair Work Award wage reviews and rising energy costs. However, the increasing
scale of the Group’s operations continues to deliver cost reductions and the Group remains focused on controlling costs.
•
Leasing arrangements – the ability to identify suitable sites and negotiate suitable leasing terms for new and existing stores
and warehouses is key to the Group’s ongoing growth and profitability. The Group believes that it will continue to be able to do
this as it has done successfully to date, and management continually assess the Group’s strategy on locations and formats to
optimise the store and warehouse network in light of changes in the market.
•
Loss of, or inability to attract and retain, key staff – the Group’s ability to attract and retain talented staff is critical to its
operating and financial performance. In recognition of this, succession planning and executive/senior management team
composition is a key focus for the Board and Group executive team. The Group continues to focus on providing a safe,
inclusive and welcoming environment for all of its employees and on developing and improving its programs and strategies
relating to diversity & inclusion, and the prevention of harassment, discrimination or bullying and development of its team
members. Further detail is set out in the Group’s Sustainability Report.
•
IT systems – the Group’s increasing reliance on IT systems means that outages, disruptions and security breaches could have
a detrimental impact on its operating and financial performance, and any failure to maintain and upgrade its IT systems over
time has the potential to inhibit the achievement of the Group’s business initiatives. To mitigate these risks, the Group has
disaster recovery processes (including off-site IT back-up infrastructure) and invests in IT security measures. The Group also
continues to invest and develop its IT resources and capabilities to support the Group’s strategic objectives.
•
Sustained disruption to operations resulting from external factors – external factors outside of the Group’s control, such as
pandemic, war or extreme weather events could materially impact the Group’s businesses. The Group mitigates these risks
by contingency planning as far as practicable, and its flexible model allows management to quickly take appropriate action to
react to any such risks as they arise. This includes, for example, the Group changing its marketing and stock buying patterns,
developing contactless click-and-collect and home deliveries, and redeploying team members and stock to stores and
categories with heightened demand, in response to the Covid-19 pandemic.
•
Changes in regulatory environment – changes in the regulatory environment in which the Group operates may increase
compliance costs, and even (in extreme cases) affect the ability of the Group to sell certain types of products and services or
conduct certain activities. Whilst such changes are outside the control of the Group, the Group monitors proposed changes
in the regulatory environment so that it can assess the impact of such changes and develop appropriate response strategies
where possible.
•
Finance – a breach of the Group’s debt covenants or inability to access financing facilities would adversely affect the Group’s
operating and financial performance. The Group has significant headroom in both its debt facilities and covenants. Additionally,
cash flow forecasts and debt capacity are closely monitored by management. Details of the Group’s financing facilities are set
out on page 24.
•
Fraud and corruption – the Group has no history of material fraud or corruption and seeks to minimise the risk of loss arising
from fraud and corruption through appropriate policies, procedures and controls. Risk identification and management is
managed on a day-to-day basis by a dedicated risk management and business assurance team which evaluates, and looks to
continually improve, the effectiveness of the Group’s governance, risk management and internal control processes.
•
Litigation/breach of legal or regulatory requirements – legal proceedings and claims may arise from time to time in the
ordinary course of the Group’s businesses and may result in high legal costs, adverse monetary judgements and/or damage
to the Group’s businesses which could have an adverse impact on the Group’s financial position and financial performance.
Additionally, a significant breach of regulatory requirements or laws could adversely impact the Group’s ability to carry on its
business. The Group seeks to mitigate this risk through appropriate staff training on key regulatory and legislative requirements
relevant to its business, as well as making legal and regulatory compliance a key focus of the management team.
28
Business Strategies
The Group believes that the following strategies/factors will continue to drive growth in sales and earnings:
•
•
continuing to prioritise the safety of team members and customers whilst adapting and responding to changing customer needs;
catering for our customers’ different shopping journeys via:
•
•
•
•
•
•
continuing to focus on in-store experience and engagement;
constant category and store layout evolution;
continued data driven evaluation of new store opportunities, including smaller “curated range” stores;
continued investment in e-commerce platforms to improve customer experience;
focus on improving customer conversion and online spend;
continuing to develop new and convenient ways for customers to interact with the brands such as over the phone sales
with price negotiation, live chat on the JB Hi-Fi Australia website, and JB TV creating new ways to engage and educate
customers;
•
continue to leverage brand awareness and improve the customer experience:
•
leveraging the Group’s website visitation and database, with a large and engaged contactable database of over 9 million
customers across the Group;
•
connecting customer data across all channels to create a consistent, predictable and more personalised experience,
and tailoring messaging and offers to customers based on known preferences, including the trial of the JB Hi-Fi Perks
membership program and continued evolution of The Good Guys Gold Service Extras program;
•
continued investment in a fit-for-purpose Group supply chain that supports our customers’ needs:
•
continuing the roll-out of the Group’s big and bulky Home Delivery Centres (“HDC”) that enable an improved customer
experience and greater stock efficiency, and reinforces the Group’s safety first approach;
•
launch of improved delivery options for customers, focusing on increased certainty, transparency and choice;
•
diverse product range, continued technological innovation, and the launch of new products and updated models which will
continue to drive new and replacement sales;
•
proactive management of its store portfolio with continued investment in, and optimisation of, the store network to maximise
profitability. The JB Hi-Fi business will continue to trial alternative store formats to increase market penetration and The Good
Guys will continue its store upgrade program, focusing on adjacencies, supporting growth categories, and showcasing the
home appliance categories. The Group will continue its disciplined approach to selecting new stores based on high foot traffic,
•
•
•
•
•
and the closure of underperforming or sub-scale existing stores;
enhancement of the Group’s partnerships with major suppliers to extend its capabilities;
investment in the JB Hi-Fi New Zealand business to support future growth:
•
recent appointment of Tim Edwards as Managing Director of JB Hi-Fi New Zealand, bringing deep local experience and
long standing relationships;
refresh of store network;
extend customer reach by opening more stores;
evolve multichannel offer including the re-platforming of the JB Hi-Fi NZ website;
work closely with our supply partners to improve the JB Hi-Fi NZ offer; and
continue focus on the learning and development of our team members to support growth;
•
•
•
•
•
design and implementation of expanded services offerings for the JB Hi-Fi Australia business;
expansion of the online product range and depth beyond that which is practical in store;
continued focus on productivity (as demonstrated by the Group’s high sales per square metre relative to its peers), minimising
unnecessary expenditure, and leveraging the scale of the Group;
29
OPERATING AND FINANCIAL REVIEW (continued)
•
setting the Group’s commercial business up for future growth:
•
repositioning from previous “JB Hi-Fi Solutions” branding to 3 new brands to align to key market segments:
“JB Hi-Fi Business”; “JB Hi-Fi Education”; and “The Good Guys Commercial”;
•
new e-commerce platform providing improved user experience from onboarding to order fulfilment and greater access to
•
•
small to medium business markets;
expansion of dedicated telecommunications business channel; and
delivering a better customer experience with tailored products and services for businesses, governments and education,
a multichannel experience for all businesses (small, medium and large) and greater integration (dual brands, range and
operating synergies);
•
focus on delivering value to the customer:
•
•
•
•
•
strong brand loyalty to continue to drive awareness and traffic to the brands;
through low price and discount heritage;
utilising our scale and supplier relationships to continue to create best in market offers and promotions;
using the breadth of our range, brands and price points to give customers the choice to trade up or trade down;
knowledgeable team members educating and engaging to create an entertaining and unique in-store experience;
•
leveraging the efficiency and resilience of the model:
•
multi-brand, direct from supplier inventory sourcing model allows for flexibility and ability to adjust ranging and order
volumes immediately;
low cost culture with a focus on minimising unnecessary expenditure;
diverse product categories, brands and store locations;
the importance of physical stores in the higher involvement product shopping journeys; and
strong online offer with multiple delivery options provides customers with convenience; and
•
•
•
•
•
continued mitigation of the business risks faced by the Group detailed on pages 26 to 28.
Environmental & Social risks
There are a range of environmental and social risks that could negatively impact the Group:
•
•
if its activities adversely affect the natural environment or human society; and/or
if its activities are adversely affected by changes in the natural environment or human society.
In order to understand and prioritise these risks, the Group has undertaken a materiality assessment utilising a globally recognised
assessment framework. The most material environmental and social risks identified, and the actions to mitigate those risks are set
out below and additional information can be found in the Group’s 2022 Sustainability Report:
• Health and Safety – the Group promotes and reinforces a culture of safety throughout its operations by:
• maintaining a strong leadership focus and implementing a Group Strategy for safety;
•
employing a systematic approach to incident management and risk mitigation, supported by its Group Occupational
Health and Safety System;
•
implementing policies and practices to provide a safe, inclusive and welcoming environment for all of its customers and
employees, and by taking positive action to prevent harassment, discrimination or bullying; and
•
establishing key performance indicators and safety targets to monitor and improve performance.
Key health and safety initiatives implemented in FY2022 included:
provision of a comprehensive program of mental health & wellbeing training; and
enhancement of training on the management of aggressive customers and shoplifters, on the shopfloor and over
the phone.
•
•
30
•
Diversity and Inclusion – the Group recognises the importance of diversity and understands that by adapting to the differing needs
of its employees, it will build stronger teams and create value for its customers and shareholders. Initiatives implemented in FY2022
under the Group’s enhanced Diversity and Inclusion Strategy include: the setting of measurable goals to build a talent pipeline of
female team members; the launch of the “Speak Up” initiative to create an environment where team members can bring forward
any concerns relating to inclusion, respect, and safety in the workplace; embedding of the Group’s Flexible Work Policy; and
enhancements to the Group’s Parental Leave Policy, moving from a paid maternity leave program to a paid parental leave program
to support all primary carers regardless of gender, and doubling the period of paid leave from six weeks to 12 weeks.
•
Employee engagement, labour practices and communication – an engaged workforce is key to the success of the Group’s
businesses. The Group seeks to engage its employees through regular communication and surveys its employees periodically
to understand the level of employee engagement and to identify opportunities for improvement. In FY2022 the Group
completed two engagement surveys and one inclusion survey to obtain feedback from its team members.
•
Responsible business – the Group’s stakeholders expect the Group to act responsibly and ethically and to comply with all
relevant laws and regulations. The Group acts with integrity in conducting its businesses and has established a Statement
of Values and a Code of Conduct to help guide its behaviours, together with additional policies and procedures including a
Whistle-blower Policy, an Anti-Bribery, Corruption and Fraud Policy, and a Securities Trading Policy, which clearly outline the
standards of behaviour required and which provide avenues to report wrongdoing.
•
Ethical sourcing and human rights – the Group recognises the importance of sourcing responsibly, and the potential social and
environmental impacts that its purchasing decisions can have. The Group also recognises the risk of modern slavery and the
potential for human rights abuses in its supply chain. To mitigate these risks, the Group has an Ethical Sourcing Policy outlining
the minimum standards expected of its suppliers’ labour, safety, environmental and ethical practices. Supporting this policy is a
risk-based approach to supplier due diligence, which helps the Group assess compliance with the Policy. Initiatives undertaken
in FY2022 include: the submission of the Group’s second Modern Slavery Statement; continued membership of, and utilisation
of the resources of, the Responsible Business Alliance; ongoing engagement with suppliers, including providing detailed
feedback on ethical sourcing observations and areas for improvement; progression of the Group’s supplier due diligence
program through self-assessment questionnaires and independent social compliance audits for locations of higher risk; and
revision and enhancement of the Group’s Ethical Sourcing Policy including a requirement for social compliance auditing.
•
Packaging, Waste and Recycling – the products that the Group sells and related packaging can have an adverse impact on
the environment if not recycled or re-used. To mitigate this risk, the Group has operational processes and systems in place
to facilitate the recycling of cardboard, paper, hard and soft plastics and polystyrene waste. Processes are also in place to
facilitate the salvage and re-use of unwanted technology from both the Group’s own operations, and from product returns by
customers. Initiatives taken in FY2022 include: the completion of a review of operational waste management and recycling
capabilities across the Group; beginning the implementation of standardised waste and recycling systems and training across
the store networks; establishment of a Sustainable Packaging Working Group tasked with improving the sustainability of
our outbound delivery packaging and alignment with the 2025 National Packaging Targets; ongoing work with private label
suppliers to redesign packaging in line with the APCO Sustainable Packaging Guidelines; trialling customer-facing e-waste
collection points at selected stores; developing an Action Plan to ensure a full phase out of expanded polystyrene (EPS) for all
JB Hi-Fi private label products and continued engagement with trade partners on the development of EPS alternatives; and
a further decline in the Group’s plastic bag usage dropping a further 8% in FY2022 vs FY2021 (in addition to the initial 42.8%
reduction in FY2021 vs FY2020).
•
Energy and emissions – the majority of greenhouse gas (GHG) emissions resulting from the Group’s business operations come
from the electricity used to power its store and warehouse network. In addition, the Group consumes natural gas for heating
and fuel for company-owned cars as well as domestic and international business travel. In FY2021 the Group set a strategic
goal to achieve net-zero direct (scope 1 and 2) carbon emissions by 2030 (measured against the Group’s FY20 emissions
(66,776 t-CO20-e)). As it works towards this target, the Group’s activities in FY2022 included: completing the installation of
solar power generators on 15 stores with an additional 10 stores having received approval from landlords to proceed with
installation; fitting all remaining stores with LED lighting and ensuring LED lighting is now a standard inclusion in all new store
fit outs; undertaking a detailed carbon assessment of four JB Hi-Fi stores to identify further reduction initiatives; implementing
a new emissions reporting management system to enable more effective monitoring of our energy consumption and the
effectiveness of our emission reduction initiatives; developing an approach to improve the measurement of our material scope
3 emissions; and further engaging with suppliers on emissions reduction. The Group conducts an annual review of its key risks
and opportunities relating to climate change with each risk/opportunity being assigned to a member of the senior management
team to manage on an on-going basis, with progress reported to the Audit & Risk Management Committee twice a year.
These key risks and opportunities are set out in the 2022 Sustainability Report.
31
OPERATING AND FINANCIAL REVIEW (continued)
SALES UPDATE AND TRADING OUTLOOK – AS AT 15 AUGUST 2022
July 2022 sales update
The Group provides the following sales update for the period 1 July 2022 to 31 July 2022:
•
Total sales growth for JB Hi-Fi Australia was 9.7% (July 2021: -12.4%) with comparable sales growth of 9.2%
(July 2021: -12.6%);
•
Total sales growth for JB Hi-Fi New Zealand was -0.9% (July 2021: 8.1%) with comparable sales growth of -0.9%
(July 2021: 8.1%); and
•
Total sales growth for The Good Guys was 7.8% (July 2021: -6.4%) with comparable sales growth of 7.8%
(July 2021: -6.9%)
The Group is pleased with its start to FY2023, with continued sales momentum and strong sales growth rates over a
three-year period.
32
REMUNERATION REPORT (audited)
CONTENTS
•
•
Summary (page 33)
Executive KMP Remuneration (page 35)
• Non-Executive Director Remuneration (page 47)
•
Total Key Management Personnel Compensation (page 49)
• Other Information (page 49)
•
Share Ownership-Based Remuneration Schemes (page 50)
SUMMARY
Remuneration overview
The Board recognises that the performance of the Group depends on the quality and motivation of its people, including both the
Executive KMP (being those persons listed on page 35) and the 13,000+ employees of the Group across Australia and
New Zealand. The Company’s remuneration strategy seeks to appropriately reward, incentivise and retain key employees.
The Board aims to achieve this by setting competitive remuneration packages (“packages”) that include a mix of fixed remuneration
and incentives under the Company’s Variable Reward Plan (“VRP”).
Snapshot
FY2022 remuneration packages – Executive KMP
As previously reported, August 2021 saw the transition of several Executive KMP roles as follows:
•
•
•
Terry Smart (previously Managing Director – The Good Guys) took over as Group Chief Executive Officer from Richard Murray;
both Terry Smart and Nick Wells (Group Chief Financial Officer) joined the Board as Executive Directors; and
Biag Capasso (previously Merchandise Director – The Good Guys) became Managing Director – The Good Guys.
When setting remuneration packages for these Executive KMP upon their promotion or change in role, the Board considered the
remuneration levels with reference to external market benchmarks for their new roles, as well as Group performance and the skills
and experience required for, and the complexity and responsibilities of, the roles.
Further detail and explanation is set out on pages 36 and 37.
Another year of financial and strategic achievement
The 2022 financial year has been an outstanding year for the Group, with management having delivered record revenue (up 3.5%),
EBIT (up 6.9%) and EPS (up 8.8%). Sales momentum was strong through the year, with continued heightened consumer demand
for consumer electronics and home appliance products. Gross margin improvement, combined with disciplined cost control and
sales growth, drove strong EBIT and EPS growth.
These strong results build on the exceptional growth achieved in the previous two financial years, with three year compound
annual EPS growth from FY2019 to FY2022 of 30.2%, and EPS and EBIT having more than doubled over this period.
In addition to driving these exceptional financial outcomes, management has also executed on a number of key strategic initiatives
aimed at further developing and reinforcing the Group over the longer term. These include further enhancing and growing the
Group’s online channels, improving supply chain capability, successfully implementing sustainability initiatives and strengthening
succession plans through internal talent development.
Executive KMP FY2022 Incentive Achievement
This very strong performance has been reflected in vesting outcomes in respect of FY2022 VRP incentives, with Executive KMP
earning between 95% and 96% of rewards available for FY2022.
The VRP scorecard for FY2022 provided that 75% of available rewards were linked to financial measures, primarily Group EPS
growth, and 100% of available rewards for financial performance were earned by each Executive KMP. The remaining 25%
of available rewards were dependent upon the achievement of various strategic measures deemed relevant for the individual
executive, and between 79% and 83% of available rewards for this strategic component were earned by Executive KMP.
Further detail is set out on pages 37 to 41.
33
REMUNERATION REPORT (continued)
As with recent years, 25% of VRP rewards achieved in relation to FY2022 are paid in cash and the remaining 75% of the VRP
rewards achieved in relation to FY2022 are delivered in deferred shares. One third of these shares will be released from dealing
restrictions in each of August 2023, August 2024 and August 2025, such that the vast majority of VRP rewards will therefore
be subject to the share price performance and align Executive KMP with the experience of shareholders over the medium to
longer term.
Non-Executive Directors - FY2022 remuneration
Recognising the need to remain competitive in the market in order to continue to attract and retain talented directors, and
noting that there had been no increase in non-executive director fees since FY2018, the Board decided to increase fees for the
Chairman and other non-executive directors at the beginning of FY2022 by 6%. There were no changes to the fees for Committee
membership or chairing a Committee.
34
EXECUTIVE KMP REMUNERATION
Details of executive key management personnel
The following executive directors and Group executives (Executive KMP) are considered members of key management personnel
for reporting purposes. Each of them was engaged throughout and since the end of the financial year unless specified otherwise
below.
Richard Murray
Group Chief Executive Officer and Executive Director until 27 August 2021
Terry Smart
Group Chief Executive Officer and Executive Director since 27 August 2021 and
Managing Director – The Good Guys prior to this date
Nick Wells
Group Chief Financial Officer and, since 27 August 2021, Executive Director
Cameron Trainor Managing Director – JB Hi-Fi
Biag Capasso
Managing Director – The Good Guys since 27 August 2021
Executive KMP remuneration policy
The Board believes that remuneration for Executive KMP should be fair and reasonable, structured effectively to attract, motivate,
retain and reward valued executives, and designed to produce value for shareholders.
The financial performance of the Group over the past five years and the significant value created for shareholders over this period
is summarised in the table below.
FY2018(iii)
FY2019(iii)
FY2020
FY2021
FY2022
6,854.3
7,095.3
7,918.9
8,916.1
9,232.0
350.6
233.2
203.1
372.9
249.8
217.4
483.3
302.3
263.1
743.1
506.1
440.8
794.6
544.9
479.5
CAGR
Last
5 years(ii)
10%
22%
23%
23%
22.52
25.85
43.03
50.58
38.46
10%
Financial results:
Sales ($m)
EBIT ($m)
NPAT ($m)
Basic EPS (cents)
Shareholder returns:
Company share price at the end of
the reporting period ($)
Dividends paid to shareholders
during the financial year ($m)
Off-market share buy-back ($m)
–
–
–
–
151.6
157.4
172.3
310.2
310.2
250.0
21%
n/a
Shareholder value created –
rolling last 5 years ($m)(i)
1,836.5
1,969.3
3,380.1
4,015.7
2,330.5
10%
(i) Shareholder value created is measured as the increase in the enterprise value (the sum of market capitalisation and net debt),
plus cash dividends and share buy-backs paid during the financial year.
(ii) Percentage movement shown is the compound annual growth rate over the last 5 years.
(iii) FY2018 and FY2019 results are prior to the adoption of AASB 16 Leases.
35
REMUNERATION REPORT (continued)
The effectiveness of the Executive KMPs’ performance related remuneration in driving performance is reflected in the long term
growth of the share price of the Company. The following graph plots the JB Hi-Fi closing share price and the ASX 200 on a daily
basis over the past five years between 1 July 2017 and 1 August 2022. The JB Hi-Fi closing share price compound annual growth
rate between 1 July 2017 and 1 August 2022 is 12.4%, whilst the ASX 200 compound annual growth rate over the same period
is 4.0%.
e
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P
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$60.00
$55.00
$50.00
$45.00
$40.00
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$30.00
$25.00
$20.00
$15.00
$10.00
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JB Hi-Fi Share Price
ASX 200 (rebased against JBH share price)
Executive KMP remuneration packages – FY2022
The Remuneration and Nominations Committee annually reviews the remuneration packages of Executive KMP and makes
recommendations to the Board. Remuneration packages are reviewed with due regard to performance and data on remuneration
paid by comparable companies. Where appropriate, the Remuneration and Nominations Committee may receive expert
independent advice regarding remuneration levels required to attract, retain and compensate Executive KMP given the nature of
their work and responsibilities.
In setting the remuneration packages this year, noting that two of the four Executive KMP were promoted and the Group CFO
was invited to join the Board (as announced in April 2021, and taking effect in August 2021), the Board and the Remuneration
and Nominations Committee considered a number of factors, most notably the Executives’ new roles. Other factors considered
included Group performance, current market practice, external benchmarking, and the skills and experience required for, and
complexity and responsibilities of, the roles. The extent (if any) to which remuneration increases had been granted for FY2021
were also taken into account, particularly for Executive KMP continuing in their previous roles. The Company benchmarks its
Remuneration Packages for Executive KMP against the companies comprising the ASX 51 – 150 and the ASX 76 – 125 indices.
The Group’s policy in relation to executive remuneration is to target total remuneration levels (i.e. fixed pay plus the maximum
opportunity under the Variable Reward Plan) at a level between the 60th and 75th percentile of peers. This is because the
Board believes executive reward should approach top quartile outcomes if the challenging targets set under the incentive plans
are achieved.
36
The Remuneration and Nominations Committee also considered current market conventions with regard to the splits between
fixed remuneration and incentive elements. The package splits for FY2022 were as follows:
Executive
T. Smart
N. Wells
C. Trainor
B. Capasso
Fixed
33%
38%
37%
40%
Incentive
67%
62%
63%
60%
Total
100%
100%
100%
100%
The remuneration of Executive KMP is directly related to the performance of the Group through the linking of the incentives to
certain financial and strategic measures as detailed previously and below.
Further details on each of the key elements of Executive KMP remuneration for the 2022 financial year are set out below.
Fixed remuneration – FY2022
Fixed remuneration is paid by way of base salary, motor vehicle allowances and superannuation. No elements of fixed
remuneration are dependent on performance conditions.
Fixed remuneration for each Executive KMP was increased for FY2022 taking the factors referred to above into account and,
in particular, the new roles and responsibilities for 3 of the 4 Executive KMP.
This resulted in changes to fixed remuneration as follows.
•
As announced in April 2021, fixed remuneration of $1,700,000 for Terry Smart (becoming Group Chief Executive Officer).
When setting Terry’s remuneration package the Board took account of external benchmarking of comparable roles and noted
Terry’s previous experience as CEO of the Group from 2010 – 2014 and his proven track record as one of Australia’s best retail
executives. His total remuneration opportunity (with VRP at maximum) is around the 65th percentile of market peers, in-line
with the Company’s desired remuneration positioning.
•
Fixed remuneration increased by 16.4%, from $816,000 to $950,000 for Nick Wells to recognise his excellent performance
in the CFO role since 2014, as well as his increased responsibility for JB Hi-Fi’s long-term strategic success during a period
of leadership change in FY2022 and his appointment to the Board as an Executive Director. His new total remuneration
opportunity positioned him at approximately the 75th percentile of his peers. The Board believes that this recognises both
Nick’s performance and the importance the Board placed on retaining him during a period of leadership change.
•
Fixed remuneration increased by 2.3% from $1,050,600 to $1,075,000 for Cameron Trainor (continuing in his role as Managing
Director – JB Hi-Fi).
•
Fixed remuneration was set at $550,000 for Biag Capasso upon his promotion to Managing Director – The Good Guys.
In accordance with the Company’s normal practice, to recognise that this was his first year in an Executive KMP role, his fixed
remuneration was set lower than his predecessor (Terry Smart) and will be reviewed annually.
Variable Reward Plan (VRP) Incentive – FY2022
The Group operates a variable reward plan to incentivise, attract and retain valued executives. The VRP allows for flexibility in
setting performance targets year by year to take into account changing trading conditions which is particularly important in a fast
moving and volatile retail environment. It therefore provides a more motivating remuneration framework for Executive KMP, as well
as greater alignment with shareholders, than traditional structures. Following a review of the Executive KMP remuneration structure
for FY2022 and the performance of the Group, the Board remained of the view that the VRP was the most appropriate form of
incentive plan.
Under the VRP, performance is assessed at the end of each financial year against a scorecard of robust measures, and awards
under the VRP for Executive KMP are delivered:
•
•
25% in cash at the end of the one-year performance period; and
75% in restricted shares, to be released progressively in equal tranches over years 2, 3 and 4.
37
REMUNERATION REPORT (continued)
By granting the majority of the reward as shares that are restricted over the medium to longer term and are subject to long term
share price risk and clawback, the VRP provides for strong alignment with shareholders. This, combined with the minimum
shareholding guidelines as set out on page 46, encourages Executive KMP to think and act like shareholders and to make
decisions in the long term interests of the Group.
During the restricted period, dividends are paid on the restricted shares and the executive may exercise votes attaching to these
shares. The market value of a share used to calculate the number of restricted shares granted will be the volume weighted average
price of shares traded on the ASX in the 5 trading days immediately following the release of the Company’s financial results for the
year to which the award relates.
All rewards under the VRP are subject to clawback at the Board’s discretion in the event of fraud, dishonesty, material
misstatement, material breach or negligence by the executive and in certain other circumstances.
Subject to the Board exercising its discretion to the contrary, an executive will not be eligible to receive a VRP award in respect
of a particular performance period if, during that period, the executive ceases to be employed, or has given notice of his or her
resignation from employment or has been given notice of termination from employment. An executive who ceases to be employed
during the restriction period may, subject to the Board’s discretion:
•
•
forfeit the restricted shares if they are a “bad leaver” (termination for cause or resignation to work for a competitor); or
retain the restricted shares, subject to the restrictions, if they are a “good leaver” (retirement, redundancy, disablement,
mental/terminal illness or death).
Treatment of restricted shares where an executive leaves in other circumstances is at the Board’s discretion.
Further detail on the performance measures for each of the Executive KMP under the FY2022 VRP is set out below.
FY2022 VRP incentive scorecard – performance conditions and outcomes
Under the VRP, performance is assessed at the end of each financial year against a scorecard of robust measures. 75% of the
rewards under the plan for each executive are dependent on financial targets and the remaining 25% of the scorecard are based
on strategic measures approved by the Board and aligned with the Group’s long term corporate plans. The financial targets in the
scorecard are predominantly based on Group EPS, with some executives also having targets relating to aspects of the business
for which that executive is responsible or where particular focus is required.
In setting the FY2022 financial targets for the VRP in late FY2021, the Board noted the ongoing challenges presented by the
Covid-19 pandemic, including temporary store closures, product supply issues, elevated demand in FY2020 and FY2021, and
the potential volatility of the trading environment going forward. Taking these factors into account the Board determined that
the FY2022 financial targets for the VRP would be based on a 3 year compound annual growth rate (CAGR) from FY2019. This
approach differs from the Company’s historic approach where EPS targets were set at 0-10% growth from the prior year’s EPS
result. As a result of setting FY2022 targets using 3-year CAGR from FY2019, the Company set growth targets under the VRP of
between 12.4% and 16.0% compound EPS growth over this three year period.
The three year compound annual EPS growth from FY2019 to FY2022 was 30.2% (an increase from 217.4 cps to 479.4 cps in
three years), significantly exceeding the Company’s stretch target of 16.0% EPS CAGR, noting EPS has more than doubled in
three years. Brand EBIT growth targets for the JB Hi-Fi and TGG Managing Directors were also exceeded. As a result, 100% of
available rewards for the financial performance component were earned by each of the Executive KMP.
For strategic measures, between 79% and 83% of available rewards were earned.
A summary of FY2022 VRP achievement outcomes for each member of KMP, measured against the financial and strategic
measures, is set out in the table below with additional detail on pages 39 to 41.
38
Summary of VRP KPI Achievement
Achievement
Delivered In
Maximum
VRP Incentive
Opportunity
$
3,500,000
1,550,000
1,850,000
682,212
7,582,212
Financial
Measures
Strategic
Measures
100%
100%
100%
100%
100%
79%
83%
82%
80%
81%
Actual VRP
Incentive
Achieved
$
Cash(ii)
(25%)
$
Restricted
Shares(iii)
(75%)
$
3,316,252
829,063
2,487,189
1,485,092
371,273
1,113,819
1,765,592
441,398
1,324,194
648,100
162,025
486,075
7,215,036
1,803,759
5,411,277
Total
95%
96%
95%
95%
95%
T. Smart
N. Wells
C. Trainor
B. Capasso(i)
(i) B. Capasso became a KMP on 27 August 2021 following his appointment as Managing Director for The Good Guys. The amounts disclosed
for B. Capasso for FY2022 are in respect of his time as a KMP from 27 August 2021.
(ii) All incentives (including VRP cash) are paid in the financial year following the year in which they were earned, for example the FY2022 VRP
incentives earned are paid in August 2022 (the 2023 financial year).
(iii) The VRP Shares earned in FY2022 will be allocated in August 2022. The allocation of VRP shares to the Executive Directors, T. Smart and
N. Wells, will be subject to shareholder approval at the Company’s Annual General Meeting held in October 2022. If shareholder approval by
simple majority of those voting is not obtained, the Board will consider alternative remuneration arrangements for T. Smart and N. Wells which
are consistent with the Company’s remuneration principles and policy.
Detailed Assessment of VRP Scorecard Achievement
MEASURE
OUTCOME
FINANCIAL (75%)
GROUP
GROUP
MD
MD
CEO
CFO
JB HI-FI
TGG
Group EPS
30.2% 3 year EPS CAGR from FY2019. EPS for FY2022 was
Above
Above
Above
Above
479.5 cents per share compared to 217.4 cents per share in
Target
Target
Target
Target
FY2019.
JB Hi-Fi Australia
21.8% 3 year EBIT CAGR from FY2019. EBIT for FY2022 was
n/a
n/a
EBIT
$544.9m compared to $301.7m in FY2019.
Above
Target
n/a
TGG EBIT
49.1% 3 year EBIT CAGR from FY2019. EBIT for FY2022 was
n/a
n/a
n/a
$241.4m compared to $72.9m in FY2019.
Above
Target
Financial outcome
100% 100% 100% 100%
STRATEGIC (25%)
Group/Divisional
Strong results in OHS metrics as set out in the Sustainability
At
At
Above
At
OHS
Report (including 21% reduction in Lost Time Injury Frequency
Target
Target
Target
Target
Rate in the JB Hi-Fi store network and 6% reduction in Lost
Time Injury Frequency Rate in the Good Guys store network),
and rollout of key strategic OHS initiatives including:
•
provision of a comprehensive program of mental health
& wellbeing training;
•
enhancement of training on the management of aggressive
customers and shoplifters, on the shopfloor and over the
phone; and
•
review and revision of Covid-19 Management and
Response Plan.
For the MD JB Hi-Fi Australia and MD TGG, the individual is
only assessed against the OHS performance/initiatives for their
division.
39
REMUNERATION REPORT (continued)
MEASURE
OUTCOME
GROUP
GROUP
MD
MD
CEO
CFO
JB HI-FI
TGG
Diversity &
Improvement in diversity statistics (including increase in female
At
At
At
At
Inclusion
Senior Managers across the Group from 18% to 21%) and
Target
Target
Target
Target
implementation of strategic Diversity & Inclusion initiatives
including:
•
•
expansion of the Group’s Diversity and Inclusion Strategy;
measurable goals set to build a talent pipeline of female
team members;
•
launch of “Speak Up” initiative to create an environment
where team members can bring forward any concerns
relating to inclusion, respect, and safety in the workplace;
•
•
embedding of the Group’s Flexible Work Policy; and
enhancements to the Group’s Parental Leave Policy,
moving from paid maternity leave program to paid parental
leave program to support all primary carers regardless
of gender, and doubling the period of paid leave from six
weeks to 12 weeks.
Succession/Talent Several internal promotions to senior management positions
At
At
At
At
and implementation of strategic Succession/Talent initiatives
Target
Target
Target
Target
including:
•
•
development of succession framework;
ongoing embedding of the Group’s Competency
Framework across the businesses, designed to identify key
behavioural competencies specific to each role type within
the businesses and assist in identifying and growing diverse
talent in a structured and measurable way; and
•
store roles were reorganised within the JB Hi-Fi business
aimed at improving talent pipeline and diversity mix within
stores.
Group Strategic
Significant strategic initiatives implemented including:
At
At
n/a
n/a
Initiatives
•
developed turnaround/growth plan for the JB Hi-Fi NZ
Target
Target
business, including appointment of new Managing Director;
•
ongoing implementation of long term growth initiatives,
including new product lines, “multichannel”, and supply
chain initiatives;
•
•
successful Off-Market Share Buy-Back in April 2022; and
identification and evaluation of potential growth
opportunities.
JB Hi-Fi Brand
Ongoing implementation of JB Hi-Fi Brand Strategy and long
n/a
n/a
Strategy
term growth initiatives for the JB Hi-Fi business including:
At
Target
n/a
•
•
roll out of JB Hi-Fi “purpose”;
continued enhancement of online channels and significant
growth (online sales up 52% and representing 19% of
sales); and
•
new store formats and category layouts tested and trialled.
40
MEASURE
OUTCOME
GROUP
GROUP
MD
MD
CEO
CFO
JB HI-FI
TGG
TGG Brand
Ongoing implementation of TGG Brand Strategy and long term
n/a
n/a
n/a
Strategy
growth initiatives for the Good Guys business, including:
At
Target
•
•
roll out of The Good Guys “purpose”;
continued enhancement of online channels and significant
growth (online sales up 53% and representing 14% of
sales); and
•
introduction of “price beat” guarantee and additional
customer loyalty initiatives.
Investor Relations Strong investor relations engagement in a challenging climate.
At
Above
n/a
n/a
For the CFO, led strong investor engagement on financial
performance and ESG issues.
Target
Target
Risk
Lead the Group’s Risk Management & Sustainability Teams,
n/a
Management/
including implementation of strategic Risk Management/
Sustainability
Sustainability initiatives including;
At
Target
n/a
n/a
•
•
continuing to lead the Group’s response to Covid-19;
implementation of initiatives to achieve “net zero” target
(Scope 1 and 2) by 2030, including identification and
implementation of energy reduction initiatives in store
network, e.g, installation of solar panels and LED lights at
certain stores;
•
revision and enhancement of the Group’s Ethical Sourcing
Policy, including the requirement for social compliance
auditing; and
•
implementation of waste management initiatives and
roll-out of the Group’s sustainable packaging strategy for
private label products.
Strategic outcome
79%
83%
82%
80%
FINAL OUTCOME (% of maximum)
95%
96%
95%
95%
41
REMUNERATION REPORT (continued)
Group CEO STI and VRP incentive achievement over the last 5 financial years
Executive KMP incentive achievement outcomes continue to align with the financial performance and strategic objectives of the
Group. The table below sets out the Group CEO’s incentive achievement over the last 5 years, with FY2019 – FY2022 under the
VRP and FY2018 under the Group’s previous STI incentive structure.
Group Financial Target
Incentive
Target
(Growth)
23% - 34%(ii)
0 - 10%
0 - 10%
0 - 10%
12.4% - 16.0%(vii)
Actual
Growth
30.8%
7.1%
23.6%(iii)
87.6%(v)
30.2%(vii)
Achievement
Non-Financial
Target
Achievement
Total
Achievement
71%
77%
91%(iv)
100%
100%
96%
74%
78%
88%
79%
77%
76%
87%
97%(vi)
95%
Financial Year(i)
2018
2019
2020
2021
2022
Notes
(i)
FY2018 STI target based on EBIT, FY2019 - FY2022 VRP targets based on EPS.
(ii) FY2018 target increased due to the acquisition of The Good Guys and JB Hi-Fi New Zealand goodwill impairment in the base in the prior year,
on an underlying basis this represented 0-10% growth target.
(iii) Based on statutory profit prior to the impact of AASB 16 Leases.
(iv) FY2020 achievement of Group Financial Target based on the Group’s (pre-Covid-19) guidance of $270 million rather than reported NPAT result
of $302.3m.
(v) FY2021 EPS growth from the Group’s FY2020 $270 million (pre-Covid-19) NPAT guidance.
(vi) Unadjusted achievement of 97%, adjusted achievement of 24.25% taking account FY2021 VRP restricted share rewards foregone following
R. Murray’s resignation and scheduled departure in early FY2022.
(vii) 3 year EPS CAGR from FY2019 to FY2022.
Executive KMP Remuneration FY2022 (Statutory Tables)
The compensation for each of the Executive KMP for FY2022 is set out below:
Post-
employ-
ment
benefits
Share based payments
Short-term employee benefits
Salary,
fees &
allowances
VRP Cash(ii)
Total
short-term
employee
benefits
$
$
$
$
$
Super-
annuation
Options(i)(ii)
Total share
based
payments
$
VRP(ii)(iii)
$
Total
$
1,672,500
829,063
916,425
371,273
1,047,500
441,398
432,067
162,025
255,288
–
2,501,563
1,287,698
1,488,898
594,092
255,288
27,500
31,979
1,377,767
1,409,746
3,938,809
27,319
9,625
1,119,876(vi)
1,129,501
2,444,518
27,500
15,319
1,248,915
1,264,234
2,780,632
22,740
42,094
206,936
249,030
865,862
4,327
31,514
–
31,514
291,129
4,323,780
1,803,759
6,127,539
109,386
130,531
3,953,494
4,084,025
10,320,950
2022
T. Smart
N. Wells
C. Trainor
B. Capasso(iv)
R. Murray(v)
(i)
In accordance with Accounting Standards, remuneration includes the amortisation of the fair value of options issued in prior years under the
Group share option plans that are expected to vest, less any write-back on options lapsed or expected to lapse as a result of actual or expected
performance against non-market hurdles (“Option Accounting Value”). The fair value of options is measured at grant date in accordance with the
relevant accounting standard and progressively allocated to profit and loss over the vesting period of the option.
(ii) Performance based (other than as set out in note (vi) below and the options granted to B. Capasso prior to becoming an Executive KMP).
(iii)
In accordance with Accounting Standards, remuneration includes the amortisation of the value of VRP that is paid in restricted shares. The value
of shares is progressively allocated to profit and loss over the restriction period of the share.
(iv) B. Capasso became a KMP on 27 August 2021 following his appointment as Managing Director for The Good Guys. The amounts disclosed for
B. Capasso for FY2022 are in respect of his time as a KMP from 27 August 2021.
(v) R. Murray left the Company on 27 August 2021. The amounts disclosed for R. Murray are for the period of his employment until 27 August 2021.
(vi)
In addition to the amortisation of his “standard” performance based FY2022 VRP amount of $986,543 shown below, the figure for N. Wells
includes amortisation of $133,333 relating to a one-off grant of restricted shares in 2019, to ensure the Group retained his services over the next
3 years. The grant value was equal to $800,000, being one year’s fixed remuneration at that time, with half of the shares restricted until August
2021 and half restricted until August 2022. The shares will be forfeited in the event that N. Wells resigns prior to the end of the restriction period,
but retained if employment is terminated for reasons other than for cause. In all other respects the restricted shares will be treated in the same way
as restricted shares granted under the Company’s Variable Reward Plan in August 2019. In accordance with Accounting Standards, the value of
shares is progressively amortised to profit and loss over the restriction period of the shares.
42
The FY2022 Maximum Potential accounting expense and Actual accounting expense recognised in accordance with Accounting
Standards for the performance-based elements of Executive KMP remuneration is set out below:
2022(iii)
T. Smart
N. Wells
C. Trainor
B. Capasso(iv)
2022(iii)
T. Smart
N. Wells
C. Trainor
B. Capasso(iv)
VRP Cash
VRP Shares(i)
Maximum Potential
Actual
Maximum Potential
Actual
% of total
potential
remuneration
$
% of total
actual
remuneration
$
% of total
potential
remuneration
$
% of total
actual
remuneration
$
875,000
387,500
462,500
170,553
22%
15%
16%
19%
829,063
371,273
441,398
162,025
21% 1,437,321
15% 1,181,072
16% 1,333,780
19%
218,532
36% 1,377,767
47%
986,543
46% 1,248,915
25%
206,936
1,895,553
18% 1,803,759
17% 4,170,705
40% 3,820,161
35%
40%
45%
24%
38%
Options(ii)
Maximum Potential
Actual
% of total
potential
remuneration
$
% of total
actual
remuneration
$
31,979
9,625
15,319
42,094
99,017
1%
0%
1%
5%
1%
31,979
9,625
15,319
42,094
99,017
1%
0%
1%
4%
1%
(i) The maximum potential and actual values represent the amortisation of the VRP restricted shares over the restriction period of the share in
accordance with Accounting Standards.
(ii) The maximum potential and actual values represent the amortisation of the fair value of the share options over the vesting period in accordance
with Accounting Standards. Some of the options granted to Executive KMP under the Company’s previous LTI structure vested in FY2022. For all
Executive KMP other than B. Capasso (who became an Executive KMP in August 2021), no options of this type remain on foot.
(iii) R. Murray left the company on 27 August 2021 and was not entitled to any VRP in relation to the FY2022 year. The accounting expense recorded
in FY2022 for the amortisation of share options issued to R. Murray in previous years was $31,514.
(iv) B. Capasso became a KMP on 27 August 2021 following his appointment as Managing Director for The Good Guys. The amounts disclosed for
B. Capasso for FY2022 are in respect of his time as a KMP from 27 August 2021.
43
REMUNERATION REPORT (continued)
Executive KMP Remuneration FY2021 (Statutory Table)
The compensation for each of the Executive KMP for FY2021 was as follows:
Short-term employee benefits
Post-
employ-
ment
benefits
Share based payments
Salary,
fees &
allowances
VRP Cash(ii)
Total
short-term
employee
benefits
Super-
annuation
Options(i)(ii)
VRP(ii)(iii)
Total share
based
payments
$
$
$
$
$
$
$
Total
$
1,475,000
851,175
2,326,175
24,519
292,459
1,615,879(iv)
1,908,338
4,259,032
1,025,600
439,335
1,464,935
24,519
143,238
1,061,417
1,204,655
2,694,109
1,064,095
442,723
1,506,818
25,000
264,275
479,616
743,891
2,275,709
781,000
332,867
1,113,867
24,519
89,894
1,135,910(v)
1,225,804
2,364,190
4,345,695
2,066,100
6,411,795
98,557
789,866
4,292,822
5,082,688
11,593,040
2021
R. Murray
C. Trainor
T. Smart
N. Wells
(i)
In accordance with Accounting Standards, remuneration includes the amortisation of the fair value of options issued in prior years under the
Group share option plans that are expected to vest, less any write-back on options lapsed or expected to lapse as a result of actual or expected
performance against non-market hurdles (“Option Accounting Value”). The fair value of options is measured at grant date in accordance with the
relevant accounting standard and progressively allocated to profit and loss over the vesting period of the option.
(ii) Performance based (other than as set out in note (v) below).
(iii)
In accordance with Accounting Standards, remuneration includes the amortisation of the value of VRP that is paid in restricted shares. The value
of shares is progressively allocated to profit and loss over the restriction period of the share.
(iv) The VRP expense recognised for R. Murray in FY2021 represents the amortisation of the remaining fair value of VRP restricted shares allocated
in prior years. In view of his resignation and departure from the Company in August 2021, R. Murray will not receive any part of his FY2021 VRP
which would otherwise have been paid in restricted shares.
(v)
In addition to the amortisation of his “standard” performance based FY2021 VRP amount of $802,577, the figure for N. Wells includes
amortisation of $333,334 relating to a one-off grant of restricted shares in 2019, to ensure the Group retained his services over the next 3 years.
The grant value was equal to $800,000, being one year’s fixed remuneration at that time, with half of the shares restricted until August 2021
and half restricted until August 2022. The shares will be forfeited in the event that N. Wells resigns prior to the end of the restriction period, but
retained if employment is terminated for reasons other than for cause. In all other respects the restricted shares will be treated in the same way
as restricted shares granted under the Company’s Variable Reward Plan in August 2019. In accordance with Accounting Standards, the value of
shares is progressively amortised to profit and loss over the restriction period of the shares.
Fully paid ordinary shares of JB Hi-Fi Limited held by Executive KMP
2022(ii)
T. Smart
N. Wells
C. Trainor
B. Capasso(iii)
Balance at
1 July 2021
No.
Granted as
compensation(i)
No.
Received on
exercise of options
No.
66,221
57,450
42,731
–
166,402
26,775
14,618
26,570
1,209
69,172
53,156
14,353
22,837
3,211
93,557
Net other
change
No.
(39,000)
(34,679)
–
3,313
(70,366)
Balance at
30 June 2022
No.
Balance held
nominally
No.
107,152
51,742
92,138
7,733
258,765
–
–
–
–
–
(i) Shares allocated under the Company’s Variable Reward Plan.
(ii) R. Murray left the Company on 27 August 2021 and, at this time he held 185,507 shares in the Company. At 1 July 2021 R. Murray held
138,802 shares in the Company and during the period 1 July 2021 to 27 August 2021 R. Murray exercised 46,705 options.
(iii) B. Capasso became a KMP on 27 August 2021 following his appointment as Managing Director for The Good Guys. Net change other for
B. Capasso represents the shares held by him in the Company when he became a KMP on 27 August 2021.
44
Share options of JB Hi-Fi Limited held by Executive KMP
Some of the options granted to Executive KMP under the Company’s previous LTI structure vested in FY2022 and Executive
KMP also exercised some options of this type in FY2022. Further details of the terms of these options are included under the
heading “Group Incentive Plans” on page 50. For all Executive KMP other than B. Capasso (who became an Executive KMP in
August 2021), no options of this type remain on foot.
2022(i)(ii)
T. Smart
N. Wells
C. Trainor
B. Capasso(iii)
Balance at
1 July 2021
No.
Granted as
compensation
No.
53,156
14,353
22,837
–
90,346
–
–
–
–
–
Exercised
No.
(53,156)
(14,353)
(22,837)
(3,211)
(93,557)
Net other
change
No.
Balance at
30 June 2022
No.
Balance vested at
30 June 2022
No.
Options vested
during year
No.
–
–
–
7,870
7,870
–
–
–
4,659
4,659
–
–
–
–
–
53,156
14,353
22,837
3,211
93,557
(i) R. Murray left the Company on 27 August 2021 and at this time he did not hold any share options in the Company. At 1 July 2021 R. Murray held
46,705 share options in the Company and during the period 1 July 2021 to 27 August 2021 R. Murray exercised 46,705 share options.
(ii) Some of the options granted to Executive KMP under the Company’s previous LTI structure vested in FY2022. For all Executive KMP other than
B. Capasso (who became an Executive KMP in August 2021), no options of this type remain on foot.
(iii) Net other change for B. Capasso represents the share options he held in the Company when he became a KMP on 27 August 2021.
Options exercised during the financial year
The following table summarises the value of options exercised during the financial year by the Executive KMP. All options exercised
by Executive KMP during FY2022 were zero exercise price options that were granted to Executive KMP under the Company’s
previous LTI structure. For all Executive KMP other than B. Capasso (who became an Executive KMP in August 2021), no options
of this type remain on foot.
T. Smart
N. Wells
C. Trainor
B. Capasso
R. Murray
Series
159
148
164
148
164
167
169
174
148
164
Options
exercised
and shares
received
No.
Exercise date
Exercise price
$
53,156
18/08/2021
53,156
3,735
23/08/2021
10,618
18/08/2021
14,353
6,026
23/08/2021
16,811
18/08/2021
22,837
1,154
18/08/2021
1,136
18/08/2021
921
18/08/2021
3,211
16,032
23/08/2021
30,673
18/08/2021
46,705
140,262
–
–
–
–
–
–
–
–
–
–
Value of options
exercised – at
the exercise
date(ii)
$
Performance
condition –
cumulative
EPS growth
per annum
Share price at
exercise date
$
Performance
condition –
achieved
$49.59
2,636,006
9%-15%
Yes
2,636,006
$48.09
$49.59
179,616
4%-8%
526,547
9%-15%
706,163
$48.09
$49.59
289,790
4%-8%
833,658
9%-15%
$49.59
$49.59
$49.59
1,123,448
57,227
56,334
45,672
159,233
n/a(i)
n/a(i)
n/a(i)
$48.09
770,979
4%-8%
$49.59
1,521,074
9%-15%
2,292,053
6,916,903
Yes
Yes
Yes
Yes
n/a(i)
n/a(i)
n/a(i)
Yes
Yes
(i) Options did not contain a performance condition as they were issued to B. Capasso prior to becoming a KMP.
(ii) The value of options exercised during the year is calculated based on the share price at the exercise date multiplied by the number of options
exercised.
45
REMUNERATION REPORT (continued)
Options granted during the financial year
There were no share options granted during FY2022 to Executive KMP (or the five most highly remunerated officers of the
Company). Instead, these employees participate in the VRP as set out on pages 37 and 38.
Options lapsed during the financial year
There were no options issued to the identified key management personnel that lapsed during the financial year.
Options granted, exercised and lapsed since the end of the financial year
Since the end of the financial year, no options have been granted to Executive KMP (or the five most highly remunerated officers of
the Company), and no options issued to Executive KMP (or the five most highly remunerated officers of the Company) have been
exercised or lapsed.
Key terms of Executive KMP employment agreements
The remuneration and other terms of employment for each of the Executive KMP are set out in individual Company employment
agreements. None of these executives are subject to a fixed term of employment.
Name
T. Smart
N. Wells
C. Trainor
B. Capasso
Notice Periods/Termination Payment/Non-compete
12 months’ notice (or payment in lieu)
12 months’ post termination non-compete and non-solicitation restriction
6 months’ notice (or payment in lieu)
6 months’ post termination non-compete and non-solicitation restriction
9 months’ notice (or payment in lieu) if terminated by the Company
6 months’ notice if notice is given by the executive
6 months’ post termination non-compete and non-solicitation restriction
6 months’ notice (or payment in lieu)
6 months’ post termination non-compete and non-solicitation restriction
Each Executive KMP may be terminated immediately for serious misconduct. In no instance would a payment in lieu of notice
exceed the termination payments limits set out in the Corporations Act 2001.
Each of the Executive KMP service contracts contains contractual entitlements for the Company to clawback incentive
remuneration in the event of fraud, dishonesty, or material misstatements in, or omissions from, the Company’s financial
statements or misstatements concerning the satisfaction of a performance condition.
Richard Murray (Group CEO) exit terms
As disclosed in detail in the 2021 Remuneration Report, the outgoing CEO, Richard Murray, was not eligible to participate in the
FY2022 VRP. Upon cessation of employment on 27 August 2021, he was permitted to continue holding restricted shares earned from
prior year VRP grants, subject to the applicable restriction periods and compliance with non-compete and non-solicitation provisions.
Minimum shareholding guidelines
Building Executive KMP shareholdings is a priority of the Board in the context of retention, and to ensure Executive KMP are
invested in the long term success of the Group and aligned with shareholder interests.
In conjunction with introducing the VRP, a minimum shareholding requirement for Executive KMP was introduced in FY2019, being:
•
•
1.5 times fixed pay for the Group CEO; and
1.0 times fixed pay for the other Executive KMP.
This level of shareholding is required to be built over 5 years from the introduction of the VRP (or appointment, if later).
Executive KMP FY2023 Incentives
The Company will retain the same structure for FY2023 executive KMP remuneration as was used in FY2022. The Group financial
component of the FY2023 VRP (EPS growth) will be set by reference to annual budgets, longer term corporate plans and current
market expectations, taking account of the effects of Covid-19 including elevated sales and profit in FY2020 – FY2022.
46
NON-EXECUTIVE DIRECTOR REMUNERATION
FY2022 Non-Executive Director Remuneration
The following persons acted as non-executive directors of the Company both during and since the end of the financial year and
are considered members of key management personnel for FY2022:
Stephen Goddard
Non-executive Director, Chair of the Board and of the Remuneration and Nominations Committee
Beth Laughton
Non-executive Director, Chair of the Audit and Risk Management Committee and Member of the
Remuneration and Nominations Committee
Mark Powell
Non-executive Director, Member of the Audit and Risk Management Committee and Member of the
Remuneration and Nominations Committee
Geoff Roberts
Non-executive Director and Member of the Audit and Risk Management Committee
Richard Uechtritz
Non-executive Director
Melanie Wilson
Non-executive Director and Member of the Audit and Risk Management Committee
The overriding objective of the JB Hi-Fi remuneration policies with regard to non-executive directors is to ensure the Company
is able to attract and retain non-executive directors with the skills and experience to enable the Board to discharge its oversight
and governance responsibilities in an effective and diligent manner. The Board also believes that remuneration for non-executive
directors should reflect the time commitment and responsibilities of the role.
The fees payable to non-executive directors for FY2022 are set out below. Recognising the need to remain competitive in the
market in order to continue to attract and retain talented directors, and noting that there had been no increase in non-executive
director fees since FY2018, the Board decided to increase fees for the Chairman and other non-executive directors for FY2022 by
6%. There were no changes to the fees for Committee membership or chairing a Committee. Aggregate non-executive director
remuneration for FY2022 was within the amount determined by the Company in its Annual General Meeting on 26 October 2017
being $1,500,000.
Role
Chair of the Board
Non-executive director
Additional Committee Fees
Fees
FY2022
$
Fees
FY2021
$
$318,000
$300,000
$142,000
$134,000
Remuneration and Nominations Committee Chair
$25,000
$25,000
Audit and Risk Management Committee Chair
$32,000
$32,000
Audit and Risk Management Committee member
$16,000
$16,000
Remuneration and Nominations Committee member
$14,000
$14,000
Superannuation contributions are made by the Company on behalf of non-executive directors in line with statutory requirements
and are included in the fees. It is the policy of the Company not to pay lump sum retirement benefits to non-executive directors.
It is the policy of the Company not to have any elements of non-executive director remuneration at risk. Specifically, non-executive
directors do not receive any bonus payments and are not entitled to participate in any Company share option plans or the VRP.
Accordingly, in FY2022, there were no share options granted to non-executive directors, and no options were exercised, vested
or lapsed.
In order to further align non-executive directors with shareholders of the Company, a minimum shareholding requirement for
non-executive directors was introduced in October 2018, being 1 times the base board fees for each non-executive director.
This level of shareholding is required to be built over 5 years from the introduction of the policy (or appointment, if later).
47
REMUNERATION REPORT (continued)
Non-Executive KMP Remuneration (Statutory Tables)
The compensation for each Non-Executive Director is set out below:
2022
S. Goddard
B. Laughton
M. Powell
G. Roberts
R. Uechtritz
M. Wilson
2021
S. Goddard
B. Laughton
M. Powell
G. Roberts
R. Uechtritz
M. Wilson
Short-term
employee benefits
Post-employment
benefits
Fees
$
Superannuation
$
319,432
170,904
156,360
143,640
129,096
143,640
1,063,072
23,568
17,090
15,636
14,364
12,910
14,364
97,932
Short-term
employee benefits
Post-employment
benefits
Fees
$
Superannuation
$
303,306
164,384
149,772
62,785
122,374
137,081
939,702
21,694
15,616
14,228
5,965
11,626
13,023
82,152
Total
$
343,000
187,994
171,996
158,004
142,006
158,004
1,161,004
Total
$
325,000
180,000
164,000
68,750
134,000
150,104
1,021,854
Fully paid ordinary shares of JB Hi-Fi Limited held by Non-Executive Directors
2022
S. Goddard
B. Laughton
M. Powell
G. Roberts
R. Uechtritz
M. Wilson
Balance at
1 July 2021
No.
Granted as
compensation
No.
Received on
exercise of options
No.
Net other
change
No.
Balance at
30 June 2022
No.
Balance held
nominally
No.
4,500
5,804
4,000
–
4,816
1,500
20,620
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,000
–
–
4,500
5,804
4,000
3,000
4,816
1,500
3,000
23,620
–
–
–
–
–
–
–
48
TOTAL KEY MANAGEMENT PERSONNEL COMPENSATION (Statutory Table)
Key management personnel for FY2022 include the non-executive directors and the Executive KMP listed on page 35.
The aggregate compensation of the key management personnel of the Group is set out below:
Short-term employee benefits
Salary, fees & allowances
VRP Cash
Post-employment benefits
Superannuation
Share based payments
Options expense
VRP expense
Total compensation of Key Management Personnel
OTHER INFORMATION
Consolidated
2022
$
2021
$
5,386,852
5,285,397
1,803,759
2,066,100
7,190,611
7,351,497
207,318
180,709
130,531
789,866
3,953,494
4,292,822
4,084,025
5,082,688
11,481,954
12,614,894
Board policy with regard to executives limiting their exposure to risk in relation to equity options
The Company’s Securities Trading Policy prohibits directors, executives, senior management and other specified employees from
altering the economic benefit or risk derived by them in relation to any unvested equity options that they hold. The Policy also
requires directors and Group executives to obtain prior written approval from the Chair of the Board before altering the economic
benefit or risk derived by them in relation to any shares or vested options in JB Hi-Fi held by them. Each year directors and
Executive KMP are required to sign a declaration that they are in compliance with all elements of the JB Hi-Fi Securities Trading
Policy. These declarations have been received in relation to the 2022 financial year from all directors and Executive KMP.
49
REMUNERATION REPORT (continued)
SHARE OWNERSHIP-BASED REMUNERATION SCHEMES
Group Incentive Plans
The Group has the following share ownership-based remuneration schemes for Executive KMP, other executives and
non-executive management (excluding non-executive directors).
Variable Reward Plan (as detailed on pages 37 and 38)
Participants are Executive KMP, other executives and selected senior management.
Employee Share Option Plan (as detailed below)
Under the Employee Share Option Plan, participants are granted options to acquire shares in JB Hi-Fi Limited. Participants
are executives and management. With effect from FY2019, Executive KMP no longer participate in this scheme and, instead,
participate in the Variable Reward Plan. Of current Executive KMP, only B. Capasso has options outstanding under the plan, being
options granted to him before he became an Executive KMP in August 2021.
Options under this Plan which are currently “on foot” or which vested, were exercised, or expired in FY2021 or FY2022 have the
following features.
•
•
•
Issue Price – no issue price is payable on the issue of an option;
Exercise Price – no exercise price is payable on the exercise of an option;
Performance Conditions – for options issued to Executive KMP and other executives, the majority of options are subject to
performance conditions based on EPS growth. Some of the options issued to certain senior managers are also subject to
performance hurdles. These performance hurdles require compound annual earnings per share growth of between
4% and 15% per annum. To the extent that a performance condition is not achieved in one year, the hurdle is compounded
and reassessed in each subsequent year, until the earlier of the condition being satisfied or the option expiring. However, no
retesting takes place in the year of expiry;
•
Service Conditions – the options issued to Executive KMP and other executives in FY2016 and FY2017 (inclusive) vest a third
each on the third, fourth and fifth anniversary of the grant date provided that the executive remains employed at that time. The
only exception to this was for options issued to Terry Smart in April 2017, which vested one half each on each of the third and
fourth anniversaries of the grant date, provided that he remained employed at that time. Options issued to Executive KMP and
other executives in FY2018 also vest one half each on each of the third and fourth anniversaries of the grant date, provided the
relevant executive remains employed at that time. Options issued to certain (non KMP) executives since FY2019 vest a third
each on the second, third and fourth anniversary of grant date provided that the non-executive manager remains employed
at that time. For all options issued to non-executive management, options vest a third each on the second, third and fourth
anniversary of grant date provided that the non-executive manager remains employed at that time;
•
•
Vesting – all conditions must be satisfied for an option to vest;
Expiry – options issued to non-executive management generally expire five years after they are issued. Options issued to
Executive KMP and other executives prior to 30 June 2017 generally expire six years after they are issued. Options issued
to Executive KMP and other executives between 1 July 2017 and 30 June 2018 expire five years after they are issued.
Options issued to certain (non KMP) executives since FY2019 also expire five years after they are issued. All unvested options
generally expire immediately upon termination of employment although, depending upon the terms of issue, the Board may
have discretion to allow the options to continue or waive vesting conditions in certain circumstances. Upon termination of
employment, vested options either expire upon termination, 30 days after termination or continue in force depending upon the
circumstances of the employee’s exit and the terms of issue;
•
Valuation – options are valued using the Black-Scholes option pricing model, which takes into account the exercise price, term
of the option, the expected exercise date based on prior years’ experience, the share price at grant date, the expected price
volatility of the underlying share, the expected dividend yield and the risk-free interest rate;
Entitlement to Shares – each option entitles the holder to one ordinary share in JB Hi-Fi Limited;
Share Issues – holders of options do not have the right, under the options, to dividends or to participate in any share issue or
interest issue of JB Hi-Fi Limited or of any other body corporate or registered scheme;
•
•
50
•
Change of Control – upon a change of control of the Company all vested and unvested options will automatically lapse unless
the Board determines otherwise; and
•
Other Conditions – other conditions apply including, amongst other things, treatment of the options in the event of a capital
reorganisation.
On-market purchase of shares for purposes of Group incentive plans
During FY2022, 567,645 ordinary shares in the Company were purchased on-market at an average price of $49.64 per share
in order to satisfy the entitlements of executives and non-executive management to securities under the Group’s Variable
Reward Plan and Employee Share Option Plan. Accordingly, there was no dilution of existing shareholdings as a result of these
entitlements.
Shares under option
Details of interests under option at the date of this Report are set out below. 81,510 of the outstanding options are vested and
exercisable. All options entitle the holder to ordinary shares in JB Hi-Fi Limited.
Number
of shares
under
option
Grant date
(GD)
Share Price
at GD
$
Expiry date
Exercise
price
$
Weighted
average
expected
volatility(i)
Dividend
yield at
GD
Risk-free
interest
rate at GD
Option
series
167
769
29/08/2017
$23.56
28/08/2022
168-170
77,963
20/08/2018
$26.21
19/08/2023
173
2,532
3/12/2018
$23.40
2/12/2023
174-176
132,638
19/08/2019
$32.06
18/08/2024
177
178
179
42,686
17/08/2020
$49.60
16/08/2025
42,467
16/08/2020
$47.33
15/08/2025
41,975
14/08/2020
$47.33
13/08/2025
180-182
2,118
7/12/2020
$43.97
6/12/2025
183-185
142,097
17/08/2021
$50.51
16/08/2026
186-188
189-191
2,460
1,760
489,465
29/10/2021
$50.49
28/10/2026
3/11/2021
$50.30
2/11/2026
(i) The values shown are the weighted average for the relevant series listed.
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
28.2%
27.5%
27.3%
27.0%
36.2%
33.6%
31.8%
34.4%
34.3%
34.4%
34.4%
4.6%
5.0%
5.5%
4.5%
3.7%
3.7%
3.7%
4.1%
5.6%
5.5%
5.5%
2.2%
2.2%
2.2%
0.7%
0.4%
0.4%
0.4%
0.3%
0.6%
1.6%
1.3%
Weighted
average
fair value
at GD(i)
$
$20.70
$21.00
$18.69
$26.56
$46.35
$44.66
$43.03
$40.12
$41.91
$42.71
$42.65
51
REMUNERATION REPORT (continued)
The following tables include all share options granted under the Group share option plans that were exercised during the
current financial year and during the previous financial year. All shares are ordinary shares in JB Hi-Fi Limited and no amounts
remain unpaid.
2022
Option
Series
142
148
Grant date
2/05/2016
22/8/2016
159
18/04/2017
162
1/05/2017
Options
exercised
No.
Shares
received
No.
Amount paid
per share
$
880
41,083
53,156
2,317
880
41,083
53,156
2,317
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
164-167
29/08/2017
167,384
167,384
168-170
20/08/2018
172
3/12/2018
174-175
19/08/2019
177
17/08/2020
80,708
2,532
69,273
894
80,708
2,532
69,273
894
418,227
418,227
2021
Option
Series
Grant date
Options
exercised
No.
Shares
received
No.
Amount paid
per share
$
130
14/08/2015
42,874
42,874
136
141
5/11/2015
2/05/2016
5,480
880
5,480
880
145-147
22/08/2016
78,528
78,528
154
19/10/2016
157
2/11/2016
158
18/04/2017
161
1/05/2017
492
492
53,156
2,317
492
492
53,156
2,317
163-167
29/08/2017
170,363
170,363
168-169
20/08/2018
81,563
171
3/12/2018
174
19/08/2019
2,531
921
81,563
2,531
921
439,597
439,597
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Share price at
exercise date(i)
$
$49.59
$47.35 to $48.09
$49.59
$49.59
$44.90 to $53.66
$44.90 to $55.85
$53.66
$44.90 to $55.85
$47.89 to $55.85
Share price at
exercise date(i)
$
$48.07 to $50.24
$48.81
$48.07
$45.46 to $52.40
$47.91
$48.81
$51.46
$48.07
$44.62 to $52.40
$45.39 to $52.40
$51.59
$52.18
(i) Where a range of prices are shown, options within the series were exercised on various dates throughout the period. The share prices shown are
the maximum and minimum share prices on the exercise dates for the relevant series.
52
AUDITOR’S INDEPENDENCE DECLARATION
Deloitte Touche Tohmatsu
ABN 74 490 121 060
477 Collins Street
Melbourne, VIC, 3000
Australia
Phone: +61 3 9671 7000
www.deloitte.com.au
Board of Directors
JB Hi-Fi Limited
Podium Level, 60 City Road
Southbank VIC 3006
15 August 2022
Dear Board Members
Auditor’s Independence Declaration – JB Hi-Fi Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence
to the directors of JB Hi-Fi Limited.
As lead audit partner for the audit of the financial statements of JB Hi-Fi Limited for the year ended 30 June 2022, I declare that to
the best of my knowledge and belief, there have been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Travis Simkin
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
53
INDEPENDENT AUDITOR’S REPORT
Deloitte Touche Tohmatsu
ABN 74 490 121 060
477 Collins Street
Melbourne, VIC, 3000
Australia
Phone: +61 3 9671 7000
www.deloitte.com.au
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF JB HI-FI LIMITED
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of JB Hi-Fi Limited (the “Company”) and its subsidiaries (the “Group”) which comprises the
consolidated balance sheet as at 30 June 2022, the consolidated statement of profit or loss, the consolidated statement of profit
or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash
flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the
directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
• Giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its financial performance for the
year then ended; and
•
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further
described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the
Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements
of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including
Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other
ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the
Company, would be in the same terms if given to the directors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report
for the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
54
Key Audit Matter
How the scope of our audit responded to the
Key Audit Matter
Inventory existence and valuation
Our audit procedures included the following:
Refer to Note 8 Inventories
•
Understanding the Group’s processes and controls for
As at 30 June 2022, the carrying value of the Group’s
inventories was $1,135 million, representing 36% of the
inventory costing, stocktakes and the measurement of
inventory provisions.
Group’s total assets.
•
Evaluating the existence of inventory by:
Inventories are primarily held at 319 retail stores and 5 home
•
Attending stocktakes at a sample of store and
delivery centres in Australia and New Zealand.
warehouse locations to observe the stocktake
As detailed in Note 8 of the financial report, inventories are
process and the condition of inventory.
measured at the lower of cost and net realisable value on
•
Testing the recording of stocktake results to the
a weighted average basis. The cost of inventory represents
general ledger and testing inventory movements
its purchase price, net of associated rebates and discounts.
from count date to year end.
Net realisable value represents the estimated selling price of
inventories less estimated selling costs.
Provisions are recognised against the cost of inventory for
items where the net realisable value is estimated to be lower
than cost.
There is judgement inherent in:
•
identifying obsolete, discontinued and slow moving
•
Assessing the valuation of inventory by:
•
Assessing the application of inventory costing
methodologies for compliance with Australian
Accounting Standards, including the recalculation
of weighted average cost, on a sample basis,
with reference to supplier invoices and associated
supplier terms.
inventory, taking into consideration the nature and
•
Testing the accuracy and completeness of the report
condition of the inventory and historical inventory turnover
used by the Group to identify obsolete, discontinued
compared to inventory on hand.
and slow moving inventory.
•
the estimation of net realisable value, taking into account
•
Examining and challenging the Group’s estimate of
recent sales history, expected future mark downs and
net realisable value with reference to recent sales
estimated selling costs.
history, expected future mark downs and estimated
selling costs as well as the Group’s allowance for
shrinkage, with reference to historical loss rates.
•
Evaluating the adequacy of the disclosures included in
Note 8 to the financial statements.
Lease accounting
Our audit procedures included the following:
Refer to Note 16 of Right of use assets and lease liabilities
•
Understanding management’s processes and key controls
The Group holds right of use assets of $461.6 million
related to the accounting for leases.
and lease liabilities of $545.0 million. These balances are
•
Testing on a sample basis, movements in the right of use
significant in the context of the Group’s balance sheet as at
assets and lease liabilities and recalculating the interest
30 June 2022.
and depreciation recognised in profit or loss.
In applying AASB 16 Leases, the Group is required to make a
•
Evaluating the judgements applied by management,
number of judgments and estimates as disclosed in Note 16,
including the probability of exercising renewal options.
including:
•
In conjunction with our treasury specialists, assessing the
•
Measuring the lease term (including judgements
incremental borrowing rates adopted by management, by
associated with lease renewal options and the accounting
preparing an independent expectation of the incremental
for leases in hold over).
borrowing rates.
•
Determining an appropriate incremental borrowing rate to
•
Evaluating the adequacy of the disclosures included in
be applied in the measurement of right of use assets and
Note 16 to the financial statements.
lease liabilities upon initial recognition of a lease and for
certain lease modifications.
55
INDEPENDENT AUDITOR’S REPORT (continued)
Other Information
The directors are responsible for the other information.
The other information comprises:
•
the Governance Statement, Directors’ Report, Operating and Financial Review and additional securities exchange information,
which we obtained prior to the date of this auditor’s report, and are included in the Group’s Preliminary Final Report.
•
the Chairman’s and Group Chief Executive Officer’s Report, which will be included in the Group’s annual report, which is
expected to be made available to us after the date of this auditor’s report.
The other information does not include the financial report or the Remuneration Report and our auditor’s report thereon. Our
opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of
this other information we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial
report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain
professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for
our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
•
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.
•
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on
the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
56
•
Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the
financial report represents the underlying transactions and events in a manner that achieves fair presentation.
•
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the
Group’s audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the
financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 33 to 52 of the Directors’ Report for the year ended 30 June 2022.
In our opinion, the Remuneration Report of JB Hi-Fi Limited, for the year ended 30 June 2022, complies with section 300A of the
Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with
section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our
audit conducted in accordance with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
Travis Simkin
Partner
Chartered Accountants
Melbourne, 15 August 2022
57
DIRECTORS’ DECLARATION
The directors declare that:
(a) in the directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable;
(b) the attached financial statements are in compliance with International Financial Reporting Standards, as stated in note 1 to the
financial statements;
(c) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001,
including compliance with accounting standards and giving a true and fair view of the financial position and performance of the
consolidated entity; and
(d) the directors have been given the declarations required by s.295A of the Corporations Act 2001.
At the date of this declaration, the Company is within the class of companies affected by ASIC Corporations (Wholly-owned
Companies) Instrument 2016/785. The nature of the deed of cross guarantee is such that each company which is party to the deed
guarantees to each creditor payment in full of any debt in accordance with the deed of cross guarantee.
In the directors’ opinion, there are reasonable grounds to believe that the Company and the companies to which the ASIC Class
Order applies, as detailed in note 22 to the financial statements will, as a group, be able to meet any obligations or liabilities to
which they are, or may become, subject by virtue of the deed of cross guarantee.
Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.
On behalf of the Directors
Stephen Goddard
Chairman
15 August 2022
Terry Smart
Group Chief Executive Officer
58
STATEMENT OF PROFIT OR LOSS
for the financial year ended 30 June 2022
Revenue
Cost of sales
Gross profit
Other income
Sales and marketing expenses
Occupancy expenses
Administration expenses
Other expenses
Finance costs
Profit before tax
Income tax expense
Profit for the year attributable to Owners of the Company
Earnings per share
Basic (cents per share)
Diluted (cents per share)
Notes
5
Consolidated
2022
$m
2021
$m
9,232.0
8,916.1
(7,151.6)
(6,938.9)
2,080.4
1,977.2
3.0
(881.1)
(302.8)
(41.8)
(62.3)
(20.1)
775.3
(230.4)
544.9
2.9
(845.8)
(293.6)
(41.3)
(54.7)
(24.7)
720.0
(213.9)
506.1
Cents
Cents
479.46
477.45
440.75
437.83
6
7
3
3
The above statement of profit or loss should be read in conjunction with the accompanying notes.
59
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
for the financial year ended 30 June 2022
Profit for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations
Other comprehensive income for the year (net of tax)
Total comprehensive income for the year attributable to Owners of the Company
Consolidated
2022
$m
544.9
(0.5)
(0.5)
544.4
2021
$m
506.1
–
–
506.1
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
60
BALANCE SHEET
as at 30 June 2022
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Plant and equipment
Deferred tax assets
Intangible assets
Right-of-use assets
Other non-current assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Deferred revenue
Provisions
Lease liabilities
Current tax liabilities
Total current liabilities
Non-current liabilities
Borrowings
Deferred revenue
Provisions
Lease liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained earnings
Total equity
Consolidated
2022
$m
2021
$m
Notes
17
9
8
10
11
7
12
16
10
13
14
15
16
18
14
15
16
19
20
125.6
132.6
1,135.3
31.2
263.2
102.8
938.8
35.7
1,424.7
1,340.5
169.0
30.6
169.0
30.3
1,031.4
1,031.4
461.6
44.1
1,736.7
3,161.4
536.3
39.0
1,806.0
3,146.5
721.6
253.5
109.4
167.0
54.8
668.6
212.9
105.5
167.3
92.2
1,306.3
1,246.5
59.4
94.7
42.7
378.0
574.8
1,881.1
1,280.3
346.8
22.8
910.7
—
85.0
42.6
464.0
591.6
1,838.1
1,308.4
393.0
83.8
831.6
1,280.3
1,308.4
The above balance sheet should be read in conjunction with the accompanying notes.
61
Contributed
equity
$m
403.2
Equity-
settled
benefits
reserve
$m
67.5
Foreign
currency
translation
reserve
$m
Hedging
reserves
$m
Common
control
reserve
$m
4.6
0.8
(6.1)
STATEMENT OF CHANGES IN EQUITY
for the financial year ended 30 June 2022
Consolidated
Notes
Balance at 1 July 2020
Profit for the year
Total comprehensive
income for the year
4
19
Dividends paid
Acquisition of shares by
employee share trust
Share-based payments -
expense
Share-based payments -
income tax
–
–
–
(10.2)
–
–
–
–
–
–
13.5
3.5
84.5
Balance at 30 June 2021
393.0
Balance at 1 July 2021
393.0
84.5
Profit for the year
Exchange difference
on translation of foreign
operations
Total comprehensive
income for the year
–
–
–
Off-market share buy-back 19
(17.6)
19
4
19
Off-market share buy-back
costs (net of tax)
Dividends paid
Acquisition of shares by
employee share trust
Transfer of vested equity
settled benefits(i)
Share-based payments -
expense
Share-based payments -
income tax
(0.4)
–
(28.2)
–
–
–
Balance at 30 June 2022
346.8
–
–
–
–
–
–
–
(76.8)
12.8
3.5
24.0
Retained
earnings
$m
635.7
506.1
Total
equity
$m
1,105.7
506.1
506.1
506.1
(310.2)
(310.2)
–
–
–
(10.2)
13.5
3.5
–
–
–
–
–
–
(6.1)
831.6
1,308.4
(6.1)
–
–
–
–
–
–
–
–
–
–
831.6
544.9
1,308.4
544.9
–
(0.5)
544.9
544.4
(232.4)
(250.0)
–
(0.4)
(310.2)
(310.2)
–
(28.2)
76.8
–
–
–
12.8
3.5
–
–
–
–
–
–
4.6
4.6
–
(0.5)
(0.5)
–
–
–
–
–
–
–
–
–
–
–
–
–
0.8
0.8
–
–
–
–
–
–
–
–
–
–
4.1
0.8
(6.1)
910.7
1,280.3
(i) Upon vesting of equity-settled benefits, the expense recognised in the equity-settled benefits reserve is transferred to retained earnings.
Refer to note 27 for further details on share based payments.
The above statement of changes in equity should be read in conjunction with the accompanying notes.
62
STATEMENT OF CASH FLOWS
for the financial year ended 30 June 2022
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest and other finance costs paid on borrowings
Interest on lease liabilities
Income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Payments for plant and equipment
Proceeds from sale of plant and equipment
Net cash (outflow) from investing activities
Cash flows from financing activities
Off-market share buy-back
Off-market share buy-back costs
Payments for shares acquired by the employee share trust
Proceeds from borrowings
Payments for debt issue costs
Dividends paid to owners of the Company
Payment of lease liabilities
Net cash (outflow) from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
Consolidated
2022
$m
2021
$m
Notes
10,194.5
(9,283.5)
9,819.2
(9,078.8)
16
17
11
19
19
19
18
18
4
16
0.8
(1.3)
(18.7)
(264.4)
627.4
(57.6)
0.2
(57.4)
(250.0)
(0.6)
(28.2)
60.0
(0.6)
(310.2)
(177.6)
(707.2)
(137.2)
263.2
(0.4)
125.6
1.6
(3.3)
(21.3)
(158.7)
558.7
(57.7)
–
(57.7)
–
–
(10.2)
–
–
(310.2)
(168.9)
(489.3)
11.7
251.5
–
263.2
The above statement of cash flows should be read in conjunction with the accompanying notes.
63
NOTES TO THE FINANCIAL STATEMENTS
for the financial year ended 30 June 2022
Contents of the notes to the consolidated financial statements
Page
1
About this report ................................................................................................................................................................65
Group Performance .....................................................................................................................................................................66
2
3
4
5
6
7
Segment information ..........................................................................................................................................................66
Earnings per share .............................................................................................................................................................67
Dividends ...........................................................................................................................................................................67
Revenue ............................................................................................................................................................................68
Expenses ...........................................................................................................................................................................69
Taxation .............................................................................................................................................................................70
Operating Assets and Liabilities ................................................................................................................................................72
8
9
10
11
12
13
14
15
16
Inventories .........................................................................................................................................................................72
Trade and other receivables ...............................................................................................................................................72
Other assets ......................................................................................................................................................................73
Plant and equipment ..........................................................................................................................................................73
Intangible assets ................................................................................................................................................................74
Trade and other payables ...................................................................................................................................................75
Deferred revenue ...............................................................................................................................................................76
Provisions ..........................................................................................................................................................................76
Right-of-use assets and lease liabilities ..............................................................................................................................77
Capital Structure and Risk Management ..................................................................................................................................80
17
18
19
20
21
Notes to the cash flow statement .......................................................................................................................................80
Borrowings ........................................................................................................................................................................80
Contributed equity .............................................................................................................................................................81
Reserves............................................................................................................................................................................83
Financial risk management .................................................................................................................................................83
Group Structure ...........................................................................................................................................................................86
22
23
24
25
Subsidiaries .......................................................................................................................................................................86
Deed of cross guarantee ....................................................................................................................................................87
Parent entity ......................................................................................................................................................................89
Related party transactions .................................................................................................................................................89
Other Disclosures ........................................................................................................................................................................90
26
27
28
29
30
Key management personnel disclosures ............................................................................................................................90
Share-based payments ......................................................................................................................................................90
Remuneration of auditors ...................................................................................................................................................91
Summary of other significant accounting policies ...............................................................................................................92
Events occurring after the reporting period .........................................................................................................................93
64
1 ABOUT THIS REPORT
These are the consolidated financial statements of JB Hi-Fi Limited (Company or parent entity) and its controlled entities.
JB Hi-Fi Limited and its controlled entities together are referred to in this financial report as the Group. For the purposes of preparing
the consolidated financial statements the Company is a for-profit entity.
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001.
(i) Compliance with IFRS
The consolidated financial statements of JB Hi-Fi Limited comply with International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board (IASB).
(ii) Historical cost convention
These financial statements have been prepared under the historical cost convention.
(iii) Corporation information
JB Hi-Fi Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of
business is Podium Level, 60 City Road, Southbank, Victoria.
The financial statements were authorised for issue by the directors on 15 August 2022.
(b) Rounding off of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, dated
24 March 2016, and in accordance with that Corporations Instrument, amounts in the financial report are rounded off to the nearest
hundred thousand dollars, unless otherwise stated.
(c) Sections
The notes in these financial statements have been organised into the following sections to help users find and understand the
information they need to know:
(i) Group Performance: focuses on the results and performance of the Group;
(ii) Operating Assets and Liabilities: provides information on the assets and liabilities used to generate the Group’s
performance;
(iii) Capital Structure and Risk Management: outlines how the Group manages its capital and various financial risks;
(iv) Group Structure: explains aspects of the group structure and how any changes have affected the financial position and
performance of the Group; and
(v) Other Disclosures: provides information on items which require disclosure to comply with Australian Accounting Standards
and other regulatory pronouncements.
(d) Critical accounting estimates and assumptions
Estimates and judgements used in the preparation of these financial statements are continually evaluated and are based on
historical experience and other factors, including expectations of future events that may have a financial impact on the Group and
that are believed to be reasonable under the circumstances.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are included in the following notes:
Areas of judgement and estimate
Inventory net realisable value
Impairment of goodwill and other intangible assets
Right-of-use assets and lease liabilities
Note
8
12
16
65
GROUP PERFORMANCE
2 SEGMENT INFORMATION
(a) Description of segments
Management has determined the operating segments based on the reports reviewed by the Group Chief Executive Officer that are
used to make strategic and operating decisions.
The Group Chief Executive Officer considers the business primarily from a brand and geographic perspective. On this basis,
management has identified three reportable segments, JB Hi-Fi Australia (JB Aust), JB Hi-Fi New Zealand (JB NZ) and The Good
Guys (TGG). The Group Chief Executive Officer monitors the performance of these three segments separately. The Group does not
operate any other brand or in any other geographic segment.
(b) Segment information provided to the Group Chief Executive Officer
The segment information provided to the Group Chief Executive Officer for the reportable segments for the year ended
30 June 2022 is as follows:
2022
Revenue from external customers
EBITDA
Depreciation and impairment
EBIT
Interest on leases
Interest revenue
Other finance costs
Profit before income tax
Other segment information
Segment Assets
Segment Liabilities
2021
Revenue from external customers
EBITDA
Depreciation and impairment
EBIT
Interest on leases
Interest revenue
Other finance costs
Profit before income tax
Other segment information
Segment Assets
Segment Liabilities
TGG
$m
Elimininations
$m
JB Aust
$m
6,196.5
681.4
(136.5)
544.9
(10.9)
JB NZ(i)
$m
246.1
11.4
(3.1)
8.3
(0.4)
2,789.4
321.1
(79.7)
241.4
(7.4)
534.0
7.9
234.0
1,574.4
1,526.8
JB Aust
$m
5,956.8
658.5
(135.5)
523.0
(12.3)
51.2
33.4
1,879.3
664.4
(343.5)
(343.5)
TGG
$m
Elimininations
$m
JB NZ(i)
$m
243.6
11.4
(6.0)
5.4
(0.4)
2,715.7
291.7
(77.0)
214.7
(8.6)
510.7
5.0
206.1
1,634.5
1,389.5
46.3
34.9
1,678.7
626.7
(213.0)
(213.0)
–
–
–
–
–
–
–
–
–
–
–
–
Total
$m
9,232.0
1,013.9
(219.3)
794.6
(18.7)
0.8
(1.4)
775.3
3,161.4
1,881.1
Total
$m
8,916.1
961.6
(218.5)
743.1
(21.3)
1.6
(3.4)
720.0
3,146.5
1,838.1
(i) The JB Hi-Fi New Zealand 2022 financial result includes non-cash impairment losses associated with right-of-use and fixed assets of $3.1 million
(2021: $6.0 million) and reduced depreciation due to the assets being impaired of $7.0 million (2021: $5.9 million). The net impact on the JB Hi-Fi
New Zealand 2022 financial result from the impairments was a $3.9 million benefit (2021: $0.1 million reduction).
(i) EBIT and EBITDA
The Group Chief Executive Officer assesses the performance of the Group’s operating segments based on EBIT and EBITDA.
EBIT excludes the effects of interest revenue, finance costs (including interest on leases) and income tax. EBITDA further excludes
depreciation, amortisation and impairment charges.
66
NOTES TO THE FINANCIAL STATEMENTS (continued)for the financial year ended 30 June 2022 3 EARNINGS PER SHARE
Basic (cents per share)
Diluted (cents per share)
Consolidated
2022
Cents
2021
Cents
479.46
477.45
440.75
437.83
Consolidated
2022
$m
2021
$m
(a) Reconciliation of earnings used in calculating earnings per share
Basic earnings per share
Profit for the year attributable to owners of the Company
544.9
506.1
Diluted earnings per share
Profit for the year attributable to owners of the Company
544.9
506.1
(b) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating
basic earnings per share
Adjustments for calculation of diluted earnings per share:
Options
Consolidated
2022
Number
m
2021
Number
m
113.7
114.8
0.5
0.8
Weighted average number of ordinary and potential ordinary shares used as the
denominator in calculating diluted earnings per share
114.2
115.6
The weighted average number of shares during the 2022 financial year was impacted by the off-market share buyback completed in
April 2022, refer to note 4 for further details.
(c)
Information concerning the classification of securities
Options
Options granted under the Company’s share option plans are considered to be potential ordinary shares and have been included
in the determination of diluted earnings per share to the extent to which they are dilutive (477,604 options are considered dilutive
(2021: 776,443), zero are considered anti-dilutive (2021: zero)). The options have not been included in the determination of basic
earnings per share. Details relating to the options are set out in note 27.
4 DIVIDENDS
Recognised amounts
Final Dividend - previous financial year
Interim Dividend - current financial year
Unrecognised amounts
2022
Cents
per share
107.00
163.00
270.00
$m
122.9
187.3
310.2
2021
Cents
per share
90.00
180.00
270.00
$m
103.4
206.8
310.2
Final Dividend - current financial year
153.00
167.3
107.00
122.9
In respect of the financial year ended 30 June 2022, the directors have recommended the payment of a final dividend of 153 cents
per share. The record date is 26 August 2022.
All dividends declared and subsequently paid by the Company are franked to 100% at the 30% corporate income tax rate.
67
4 DIVIDENDS (continued)
In addition to the interim and final dividends above, JB Hi-Fi Limited completed a $250.0 million off-market share buy-back in
April 2022, resulting in 5.5 million shares being bought back at $45.05 per share. The buy-back comprised a capital component
per share of $3.18 ($17.6 million in total) and a fully franked dividend component per share of $41.87 ($232.4 million in total).
Further details in relation to the buyback are contained in the company announcements made at the time of the buy-back.
Consolidated
2022
$m
2021
$m
(a) Franking account balance
Franking credits available for subsequent reporting periods based on a tax rate of 30.0%
(2021: 30.0%)
450.9
470.1
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for franking credits
that will arise from the payment of the amount of the provision for income tax. The 2022 financial year franking account balance was
also impacted by the $99.6 million franking credits distributed as part of the off-market share buyback completed in April 2022.
The impact on the franking account of the dividend recommended by the directors since year end, but not recognised as a liability
at year end, will be a reduction in the franking account of $71.7 million (2021: $52.7 million).
5 REVENUE
Sale of goods and services - Stores and other channels
Sale of goods and services - Online
Total Revenue
(a) Revenue recognition
Consolidated
2022
$m
2021
$m
7,606.8
1,625.2
9,232.0
7,852.2
1,063.9
8,916.1
The Group generates revenue from the sale of products and services, both as a principal and as an agent, to retail and commercial
customers. Revenue is recognised in accordance with the principles set out below, in an amount that reflects the consideration
expected to be received in exchange for those goods or services. Revenue excludes goods and services tax and is recognised net
of discounts and sales returns.
Where payment for the goods or services is received in advance, the amount is recognised as deferred revenue in the balance sheet
until the goods or services have been delivered to, or collected by, the customer.
Gift cards are considered a prepayment for goods or services to be delivered in the future. The Group recognises deferred revenue
in the balance sheet relating to the gift cards and recognises revenue when the customer redeems the gift card and the Group
fulfils the performance obligation related to the transaction. Revenue is also recognised where the likelihood of the gift card being
redeemed by the customer is deemed remote.
(i) Product revenue
The Group generates product revenue from the sale of consumer electronics and home appliances.
Product revenue is recognised on a “point in time” basis when control of the goods transfers to the customer. Control of the goods
transfers to the customer either at the point of sale or when the goods are delivered to, or collected by, the customer. Any fees
charged to the customer for delivery are recognised as revenue when the delivery has been completed.
In most cases, the Group is the principal in product revenue transactions, recognising revenue on a gross basis. For certain
transactions, the Group acts as a sales agent and recognises commission, which represents the consideration received from the
customer net of amounts payable to third parties responsible for fulfilling the performance obligation for the customer. The Group
typically recognises commission arising from such transactions when the goods are delivered to the customer by the third party.
68
NOTES TO THE FINANCIAL STATEMENTS (continued)for the financial year ended 30 June 2022 5 REVENUE (continued)
(a) Revenue recognition (continued)
(ii) Services revenue
The Group generates revenue from installation, IT services, extended care and customer support services.
The Group recognises revenue for services, such as installation and IT services once the service is completed, as this is when the
customer has the ability to direct the use of and obtain benefits from the service.
For extended care and customer support services where the Group is the principal, revenue is recognised on an “over time basis”
from the date the service commences until the date the service is completed. Such contracts typically contain multiple performance
obligations with service terms ranging up to 7 years. The Group recognises revenue for these services on a usage basis, an input
method of measuring progress over the related contract term, which is generally time based.
For extended care and customer support services where the Group acts as an agent, the Group recognises commission, which
represents the consideration received from the customer net of amounts payable to third parties responsible for fulfilling the
performance obligation for the customer. The Group typically recognises commission arising from such transactions at the point of
sale to the customer, which is when the Group completes arranging the sale on behalf of the third party.
The Group generated 0.4% of its total revenue on an over time basis in the current year (2021: 0.5%).
6 EXPENSES
Profit before income tax includes the following specific expenses:
Finance costs
Interest and other finance costs on borrowings
Interest on leases
Other interest expense
Employee benefits expenses
Share-based payments - expense
Defined contribution superannuation expense
Other employee benefits
Depreciation and impairment
Depreciation - Plant and equipment
Impairment - Plant and equipment
Depreciation - Right-of-use assets
Impairment - Right-of-use assets
Consolidated
2022
$m
2021
$m
1.3
18.7
0.1
20.1
12.8
68.8
751.0
832.6
52.0
1.8
162.8
2.7
219.3
3.2
21.3
0.2
24.7
13.5
62.4
726.8
802.7
51.8
3.0
159.1
4.6
218.5
69
7
TAXATION
(a)
Income tax expense
Current tax
Deferred tax
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Profit from continuing operations before income tax expense
Tax at the Australian tax rate of 30.0% (2021: 30.0%)
Effect of expenses that are not deductible in determining taxable profit
Effect of different tax rates of subsidiaries operating in other jurisdictions
Effect of other deductibles in determining taxable profit
Unrecognised New Zealand tax losses and timing differences
Other
Tax expense
(c) Amounts recognised directly in equity
The following current and deferred amounts were charged directly to equity during the
period:
Current tax
Tax effect of employee share options in reserves
Deferred tax
Tax effect of share issue costs charged to issued capital
(d) Deferred tax
The balance comprises temporary differences attributable to:
Deferred tax assets
Provisions
Inventories
Deferred revenue
Lease liabilities
Other
Deferred tax liabilities
Brand names
Prepayments
Right-of-use asset
Net deferred tax assets/(liabilities)
Consolidated
2022
$m
2021
$m
230.7
(0.3)
230.4
775.3
232.6
4.1
(0.2)
(4.9)
(1.2)
–
222.0
(8.1)
213.9
720.0
216.0
4.4
(0.1)
(4.8)
(1.4)
(0.2)
230.4
213.9
3.5
0.2
3.5
–
40.3
10.3
40.4
159.9
21.9
272.8
(85.2)
(18.5)
(138.5)
(242.2)
30.6
39.1
11.4
37.4
184.7
20.9
293.5
(85.2)
(17.1)
(160.9)
(263.2)
30.3
All movements in the above temporary differences have been charged to income, with the exception of the share issue costs
charged to issued capital as noted above.
70
NOTES TO THE FINANCIAL STATEMENTS (continued)for the financial year ended 30 June 2022 7
TAXATION (continued)
(e) Recognition and measurement
Current tax
Current tax represents the amount expected to be paid to taxation authorities on taxable income for the period, using tax rates
enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years. Current tax
for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).
Deferred tax
Deferred tax is accounted for using the balance sheet liability method, providing for temporary differences between the carrying
amounts of assets and liabilities under financial reporting and taxation purposes. Deferred tax is measured at the rates that are
expected to apply in the period in which the liability is settled or asset realised, based on tax rates enacted or substantively enacted
at the reporting date.
Deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a
business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit or in
relation to the initial recognition of goodwill.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the
deductible temporary differences or unused tax losses and tax offsets can be utilised. Deferred tax assets are reduced to the extent
that it is no longer probable that the related tax benefit will be realised.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group
intends to settle its current tax assets and liabilities on a net basis.
Income tax is recognised in the statement of profit or loss except to the extent that it relates to items recognised directly in equity, in
which case, the tax is also recognised directly in equity.
(f) Tax consolidation legislation
The Company and its wholly owned Australian resident entities are part of a tax consolidated group and are therefore taxed as a
single entity. The head entity within the tax consolidated group is JB Hi-Fi Limited. The members of the tax consolidated group are
identified at note 22.
Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax
consolidated group are recognised in the separate financial statements of the members of the tax consolidated group using the
‘separate taxpayer within group’ approach by reference to the carrying amounts in the separate financial statements of each entity
and the tax values applying under tax consolidation. Current tax liabilities and assets and deferred tax assets arising from unused
tax losses and relevant tax credits of the members of the tax consolidated group are recognised by the Company (as head entity in
the tax consolidated group).
Where the tax contribution amount recognised by each member of the tax consolidated group for a particular period is different to
the aggregate of the current tax liability or asset and any deferred tax asset arising from unused tax losses and tax credits in respect
of that period, the difference is recognised as a contribution from (or distribution to) equity participants.
(g) Nature of tax funding and tax sharing agreements
Entities within the tax consolidated group have entered into a tax funding arrangement and a tax sharing agreement with the head
entity. Under the terms of the tax funding arrangement, JB Hi-Fi Limited and each of the entities in the tax consolidated group have
agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity.
Such amounts are reflected in amounts receivable from or payable to other entities in the tax consolidated group.
The tax sharing agreement entered into between members of the tax consolidated group provides for the determination of the
allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations or if an entity
should leave the tax consolidated group. The effect of the tax sharing agreement is that each member’s liability for tax payable by
the tax consolidated group is limited to the amount payable to the head entity under the tax funding agreement.
JB Hi-Fi calculates deferred taxes in relation to investments within the tax consolidated group using the ‘change in tax status’ view.
This view results in no deferred tax being recognised until such time as an entity leaves the tax consolidated group.
71
OPERATING ASSETS AND LIABILITIES
8
INVENTORIES
Finished goods
(a) Recognition and measurement
Consolidated
2022
$m
2021
$m
1,135.3
938.8
Inventories are valued at the lower of cost and net realisable value. Cost is calculated on a weighted average basis, comprising
the purchase price, less supplier rebates and discounts. Net realisable value is the estimated selling price in the ordinary course
of business, less estimated costs necessary to make the sale. Inventory provisions are recognised where the net realisable value
of inventory is estimated to be lower than its carrying value as well as to allow for estimated inventory losses associated with
shrinkage.
When determining the net realisable value of inventories (which is most applicable to obsolete, end of life and slow moving
inventory), the Group uses its judgement to determine the expected selling price and the estimated costs necessary to make the
sale. These assumptions are reviewed at least annually.
9
TRADE AND OTHER RECEIVABLES
Trade receivables
Allowance for expected credit losses
Other receivables
(a) Terms and conditions
Trade and other receivables
Consolidated
2022
$m
68.3
(1.8)
66.5
66.1
2021
$m
59.8
(2.1)
57.7
45.1
132.6
102.8
Trade receivables relate to amounts due from commercial customers. Other receivables primarily relate to supplier rebates that
are expected to be received by the Group and not settled on a net basis.
Trade and other receivables are recognised initially at fair value and are subsequently measured at amortised cost using
the effective interest method, less an allowance for expected credit losses. The average credit period for trade and other
receivables is 30 days. There are no material trade and other receivables past due.
In the current year, the Group revised its presentation approach for amounts due from suppliers (other receivables) where the
Group has a legally enforceable right to set-off and the intention to settle on a net basis. Refer to note 29(d) for further details.
Impairment of trade receivables
The Group assesses the expected credit losses associated with its trade and other receivables on a forward-looking basis.
The Group applies the simplified approach to measuring expected credit losses, which requires expected lifetime losses to
be recognised from initial recognition of the receivables. Credit insurance is carried for most amounts due from commercial
customers. Individual debts which are known to be uncollectable are written off when identified.
72
NOTES TO THE FINANCIAL STATEMENTS (continued)for the financial year ended 30 June 2022 10 OTHER ASSETS
Current
Prepayments
Other
Non-current
Prepayments
Consolidated
2022
$m
2021
$m
30.3
0.9
31.2
44.1
44.1
30.7
5.0
35.7
39.0
39.0
Prepayments includes prepaid premiums made in relation to extended warranty component of The Goods Guys Gold Service Extras
program and general prepaid expenses. Gold Services Extra is an extended care program operated by The Good Guys, which
encompasses a range of features including extended warranty. The prepaid premiums are amortised to profit or loss over time,
concurrent with the recognition of revenue from the extended warranty service.
11 PLANT AND EQUIPMENT
At 1 July 2020
Cost
Accumulated depreciation and impairment
Net book amount
Year ended 30 June 2021
Opening net book amount
Additions
Disposals
Depreciation charge
Impairment charge
Closing net book amount
At 30 June 2021
Cost
Accumulated depreciation and impairment
Net book amount
Year ended 30 June 2022
Opening net book amount
Additions
Disposals
Depreciation charge
Impairment charge
Closing net book amount
At 30 June 2022
Cost
Accumulated depreciation and impairment
Net book amount
(a) Recognition and measurement
Plant and
equipment
$m
Leasehold
improvements
$m
Total
$m
460.7
(348.9)
111.8
111.8
33.7
(6.0)
(31.2)
(2.6)
105.7
431.1
(325.4)
105.7
105.7
31.2
(3.3)
(27.8)
(1.1)
104.7
414.8
(310.1)
104.7
221.6
(161.1)
60.5
60.5
24.0
(0.2)
(20.6)
(0.4)
63.3
237.1
(173.8)
63.3
63.3
26.4
(0.5)
(24.2)
(0.7)
64.3
245.7
(181.4)
64.3
682.3
(510.0)
172.3
172.3
57.7
(6.2)
(51.8)
(3.0)
169.0
668.2
(499.2)
169.0
169.0
57.6
(3.8)
(52.0)
(1.8)
169.0
660.5
(491.5)
169.0
Plant and equipment and leasehold improvements are stated at cost less accumulated depreciation and impairment losses. Cost
includes expenditure that is directly attributable to the acquisition of the item.
Depreciation is provided on plant and equipment and leasehold improvements. Depreciation is calculated on a straight line basis
so as to write off the net cost of each asset over its expected useful life to its estimated residual value. The estimated useful lives,
residual values and depreciation method are reviewed at the end of each annual reporting period, with the effect of any changes
recognised on a prospective basis.
73
11 PLANT AND EQUIPMENT (continued)
(a) Recognition and measurement (continued)
The following estimated useful lives are used in the calculation of depreciation:
•
•
Leasehold improvements
1 to 15 years
Plant and equipment
1.5 to 15 years
Plant and equipment and leasehold improvements are tested for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of assets (cash-generating units).
An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the
continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of plant and equipment is determined as
the difference between the sales proceeds and the carrying amount of the asset, and is recognised in other expenses in the profit
or loss.
12
INTANGIBLE ASSETS
Year ended 30 June 2021
Opening net book amount
Closing net book amount
Year ended 30 June 2022
Opening net book amount
Closing net book amount
(a) Recognition and measurement
Goodwill
Goodwill
$m
747.0
747.0
747.0
747.0
Brand
names
$m
284.4
284.4
284.4
284.4
Total
$m
1,031.4
1,031.4
1,031.4
1,031.4
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of
the acquired subsidiary or business at the date of the acquisition.
Goodwill is not amortised. Instead, it is tested for impairment annually, or more frequently if events or changes in circumstances
indicate that it might be impaired. Any impairment is recognised as an expense and is not subsequently reversed. Goodwill is carried
at cost less accumulated impairment losses.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating
units) expected to benefit from the synergies of the related business combination. Cash-generating units to which goodwill has
been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the
recoverable amount of the cash-generating unit (higher of its value in use and fair value less costs of disposal) is less than the carrying
amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then
to the other assets of the unit pro-rata on the basis of the carrying amount of each asset.
Further details regarding the allocation of goodwill to cash generating units and the Group’s impairment testing results for the year
ended 30 June 2022, including an overview of key assumptions, is set out below.
Brand names
Brand names that are acquired as part of a business combination are recognised separately from goodwill. These assets are
measured at their fair value at the date of acquisition using the relief from royalty method. Brand names are subsequently carried at
cost less accumulated impairment losses.
Brand names have indefinite useful lives and therefore do not attract amortisation. As at 30 June 2022, management has concluded
that an indefinite useful life remains appropriate as the Group expect to continue using the brand names for the foreseeable future
and there are no legal, technical or commercial factors indicating that the brand names have a limited life.
74
NOTES TO THE FINANCIAL STATEMENTS (continued)for the financial year ended 30 June 2022
12
INTANGIBLE ASSETS (continued)
(a) Recognition and measurement (continued)
Brand names (continued)
For the purpose of impairment testing, brand names with indefinite useful lives are assessed for impairment annually, or more
frequently when there is an indication that a brand name may be impaired.
An impairment loss is recognised for the amount by which the assets carrying value exceeds its recoverable amount (higher of its
value in use and fair value less costs of disposal). None of the Group’s brand names have incurred an impairment in previous periods.
(b)
Impairment testing
The carrying amount of goodwill and brand names is allocated to the following cash-generating units or groups of CGUs (CGUs) for
impairment testing purposes:
Goodwill
The Good Guys
JB Hi-Fi Australia
Brand names
The Good Guys
JB Hi-Fi Australia
Consolidated
2022
$m
2021
$m
575.6
171.4
747.0
241.3
43.1
284.4
575.6
171.4
747.0
241.3
43.1
284.4
The recoverable amount of each CGU has been determined based on value in use calculations.
The key assumptions used in the value in use calculations include the 2023 financial budget, sales growth, gross margin, cost
of doing business (CODB) and the discount rate. These assumptions are based on past experience and the Company’s forecast
operating and financial performance for each CGU taking into account current market and economic conditions, risks, uncertainties
and opportunities for improvement for each CGU.
The value in use calculations use cash flow projections over a 5 year period, extrapolated into perpetuity using a long term growth
rate of 2.5% (2021: 2.5%), which is consistent with the mid-point of long-term inflation forecasts by recognised bodies.
The cash flows projections in Year 1 are based on financial budgets for the 2023 financial year, as reviewed by the Board.
The cash flow projections thereafter assume a steady growth rate of 2.5% (2021: 2.5%), consistent with historical experience.
A post-tax discount rate of 9.0% (2021: 9.0%) has been used for all CGUs.
The Group has conducted sensitivity analysis, taking into consideration the continued uncertainty associated with Covid-19 and
the current macro-economic conditions, which indicated that no reasonably possible change in key assumptions would result in
an impairment loss. Accordingly, the Group has concluded that no impairment is required based on current market and economic
conditions and expected future performance.
13 TRADE AND OTHER PAYABLES
Trade payables
Goods and services tax (GST) payable
Other creditors and accruals
Consolidated
2022
$m
660.6
38.6
22.4
721.6
2021
$m
607.3
39.8
21.5
668.6
Trade payables and other creditors and accruals represent liabilities for goods and services provided to the Group prior to the end of
financial year which are unpaid. Trade and other payables are stated at amortised cost. The amounts are unsecured and are usually
settled within 45 days of recognition.
The Group revised its presentation approach for amounts due from suppliers in the current year, which resulted in the reclassification
of certain comparative amounts from receivables to trade payables. Refer to note 29(d) for further details.
75
14 DEFERRED REVENUE
Current
Deferred revenue
Non-current
Deferred revenue
Consolidated
2022
$m
2021
$m
253.5
253.5
94.7
94.7
212.9
212.9
85.0
85.0
Deferred revenue relates to unfulfilled services to be performed under The Good Guys Gold Service Extras program,
unredeemed gift cards and customer deposits. Gold Services Extra is an extended care program operated by The Good Guys,
which encompasses a range of features including extended warranty. Refer to note 5(a) for the Group’s revenue recognition
accounting policy.
It is expected that 74% (2021: 74%) of Non-Current Deferred Revenue will be recognised in the next 3 financial years and the
remaining 26% (2021: 26%) recognised in the following 3 years.
15 PROVISIONS
Current
Employee benefits
Lease make good provision
Non-current
Employee benefits
Lease make good provision
Consolidated
2022
$m
2021
$m
107.9
1.5
109.4
9.2
33.5
42.7
104.0
1.5
105.5
9.4
33.2
42.6
(a) Recognition and measurement
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable
that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting
date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows
estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
(i) Employee benefits
Liabilities for wages and salaries, including non-monetary benefits, are recognised in respect of employees’ services up to the end
of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual
leave and unpaid bonuses are recognised in the provision for employee benefits. All other short-term employee benefit obligations
are presented as payables.
Contributions to defined contribution superannuation plans are expensed when employees have rendered services entitling them to
the contributions.
The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of
expected future payments to be made in respect of services provided by employees, up to the end of the reporting period.
Expected future payments are discounted using the Australian corporate bond discount rate curve as published by Milliman with
terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
76
NOTES TO THE FINANCIAL STATEMENTS (continued)for the financial year ended 30 June 2022 15 PROVISIONS (continued)
(a) Recognition and measurement (continued)
(i) Employee benefits (continued)
Management judgement is applied in determining the following key assumptions used in the calculation of long service leave at
balance date:
•
•
•
future increases in wages and salaries;
future on cost rates; and
experience of employee departures and period of service.
(ii) Lease make good provision
The lease make good provision includes the Group’s best estimate of the amount required to return the Group’s leased premises to
their original condition at the end of the lease term in accordance with the terms of the lease.
16 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
The Group leases various properties including retail stores, warehouses and offices and equipment in Australia and New Zealand.
Lease agreements are typically entered into for fixed periods ranging from 1 to 10 years, have varying terms and commonly include
extension options and annual increase clauses. Certain store leases contain variable lease payment terms that are linked to store sales.
Retail store leases can enter ‘hold-over’ from time to time, where the Group continues to occupy and use a property on a rolling
basis beyond the contractual lease term. This typically occurs when a lease renewal process extends beyond the expiry of the lease,
with both the Group and lessor having an economic incentive for the lease arrangement to continue in expectation of reaching an
agreement on renewal terms. Refer to note 16(e) for the Group’s key judgements in accounting for leases in hold-over.
The carrying value of right-of-use assets and lease liabilities is presented below:
Properties
$m
Equipment
$m
Total
$m
(a) Right-of-use assets
At 1 July 2020
Cost
Accumulated depreciation and impairment
Carrying value
Year ended 30 June 2021
Opening carrying value
Additions, modifications and other reassessments of leases
Depreciation
Impairment charge
Closing carrying value
At 30 June 2021
Cost
Accumulated depreciation and impairment
Closing carrying value
Year ended 30 June 2022
Opening carrying value
Additions, modifications and other reassessments of leases
Depreciation
Impairment charge
Closing carrying value
At 30 June 2022
Cost
Accumulated depreciation and impairment
Closing carrying value
810.6
(173.2)
637.4
637.4
53.3
(156.9)
(4.6)
529.2
869.0
(339.8)
529.2
529.2
89.3
(160.4)
(2.7)
455.4
957.4
(502.0)
455.4
6.4
(1.6)
4.8
4.8
4.5
(2.2)
–
7.1
10.9
(3.8)
7.1
7.1
1.5
(2.4)
–
6.2
12.4
(6.2)
6.2
817.0
(174.8)
642.2
642.2
57.8
(159.1)
(4.6)
536.3
879.9
(343.6)
536.3
536.3
90.8
(162.8)
(2.7)
461.6
969.8
(508.2)
461.6
77
16 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (continued)
Properties
$m
Equipment
$m
Total
$m
(b) Lease liabilities
Year ended 30 June 2021
Opening carrying value
New and modified leases
Payment of lease liabilities
Payment of interest on lease liabilities
Interest expense
Foreign exchange translation
Closing carrying value
At 30 June 2021
Current
Non-Current
Total
Year ended 30 June 2022
Opening carrying value
New and modified leases
Payment of lease liabilities
Payment of interest on lease liabilities
Interest expense
Foreign exchange translation
Closing carrying value
At 30 June 2022
Current
Non-Current
Total
(c) Amounts recognised in the Statement of Profit or Loss
Depreciation expense on right of use assets
Impairment expense on right of use assets
Interest expense on lease liabilities
Property lease expense(i)
736.7
54.2
(166.7)
(21.2)
21.2
(0.1)
624.1
165.1
459.0
624.1
624.1
90.0
(175.2)
(18.5)
18.5
(0.3)
538.6
164.6
374.0
538.6
4.9
4.5
(2.2)
(0.1)
0.1
–
7.2
2.2
5.0
7.2
7.2
1.6
(2.4)
(0.2)
0.2
–
6.4
2.4
4.0
6.4
741.6
58.7
(168.9)
(21.3)
21.3
(0.1)
631.3
167.3
464.0
631.3
631.3
91.6
(177.6)
(18.7)
18.7
(0.3)
545.0
167.0
378.0
545.0
2022
$m
2021
$m
162.8
2.7
18.7
9.4
159.1
4.6
21.3
6.2
(i)
The property lease expense includes short-term, low value and variable rent expenses.
(d) Recognition and Measurement
A right of use asset and corresponding lease liability are recognised at commencement of the lease.
Lease liabilities are initially measured at the present value of the lease payments, discounted at the rate implicit in the lease, or if that
cannot be readily determined, at the Groups incremental borrowing rate. The weighted average incremental borrowing rate used
during the year was 3.27% (2021: 3.25%) which was influenced by the timing of new and modified leases.
Each lease payment is allocated between the lease liability and finance costs. The finance cost is charged to profit or loss over the
period of the lease to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
78
NOTES TO THE FINANCIAL STATEMENTS (continued)for the financial year ended 30 June 2022 16 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (continued)
(d) Recognition and Measurement (continued)
Lease liabilities are subsequently measured at amortised cost using the effective interest rate method. Lease liabilities are
remeasured, with a corresponding adjustment to the right-of-use asset, when there is a change in future lease payments resulting
from a rent review, change in an index or rate such as inflation, or change in the Group’s assessment of whether it is reasonably
certain to exercise an extension option.
AASB 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease
components as a single arrangement. The Group has applied this practical expedient.
The right-of-use asset is initially measured at cost, comprising: the initial lease liability; any lease payments already made less any
lease incentives received; initial direct costs; and any make good costs. The right-of-use asset is subsequently depreciated on a
straight-line basis over the shorter of the lease term or the useful life of the underlying asset. The right-of-use asset is tested for
impairment if there are any indicators of impairment.
Leases of low value assets and short-term leases of 12 months or less are expensed to profit or loss on a straight line basis.
Low-value assets primarily comprise office equipment such as printers and photocopiers.
(e) Key judgements
Lease term
The lease term is determined at lease commencement or at the effective date of a lease modification. The lease term represents the
non-cancellable term, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised.
Extension options are a common feature within the Group’s property leases, providing the Group with operational flexibility should a
property perform below expectations, a relocation opportunity arises or the economic outlook adversely changes. Hence, at lease
commencement, extension options are not typically considered reasonably certain to be exercised, unless there is a clear economic
incentive for extension.
Extension options held are exercisable only by the Group and not by the lessors. The Group does not have any options to purchase
leased assets.
After lease commencement, the Group reassesses the lease term if there is a significant event or change in circumstances that is
within its control and affects its ability to exercise (or not exercise) an extension option.
In assessing whether the Group is reasonably certain to extend or renew a lease in hold-over, the Group considers all relevant
facts and circumstances that create an economic incentive for the Group to remain in the leased premises and whether a
right-of-use asset and lease liability should be recognised, or whether the lease should be accounted for as a short term lease.
When an economic incentive exists, the Group estimates the expected lease term, lease liability and related right of use asset based
on information available at the date the lease enters hold-over. When a new lease agreement is subsequently entered into, the
Group accounts for any change in terms in accordance with the principles that apply to lease modifications.
79
CAPITAL STRUCTURE AND RISK MANAGEMENT
17 NOTES TO THE CASH FLOW STATEMENT
For the purposes of the cash flow statement, cash and cash equivalents includes cash on hand and in banks, net of outstanding
bank overdrafts and trade finance facilities used.
(a) Reconciliation of cash and cash equivalents
Cash and cash equivalents at the end of the financial year as shown in the cash flow statement is reconciled as follows:
Consolidated
Cash
Bank overdrafts
Cash and cash equivalents
(b) Reconciliation of net cash inflow from operating activities to profit
Profit for the year
Depreciation and amortisation
Impairment charges
Share-based payments - expense
Share-based payments - income tax
Net loss on disposal of non-current assets
Change in operating assets and liabilities:
(Increase) decrease in inventories
(Increase) decrease in current receivables
(Increase) decrease in other current assets
(Increase) decrease in deferred tax assets
(Increase) decrease in other non-current assets
(Decrease) increase in current provisions
(Decrease) increase in current payables
(Decrease) increase in current deferred revenue
(Decrease) increase in non-current provisions
(Decrease) increase in non-current deferred revenue
(Decrease) increase in current tax liabilities
Net cash inflow from operating activities
18 BORROWINGS
Unsecured non-current
Bank loans
Reconciliation of liabilities arising from financing activities
Drawdown of borrowings
Debt issue costs paid
80
2022
$m
125.6
–
125.6
544.9
214.8
4.5
12.8
3.5
3.6
(197.7)
(29.3)
4.4
(0.3)
(5.1)
4.2
53.8
40.6
0.1
9.8
(37.2)
627.4
2021
$m
273.6
(10.4)
263.2
506.1
210.9
7.6
13.5
3.5
6.2
(199.3)
(21.5)
(1.0)
(8.1)
–
6.6
(46.5)
16.3
1.1
3.4
59.9
558.7
Consolidated
2022
$m
2021
$m
59.4
60.0
(0.6)
59.4
–
–
–
–
NOTES TO THE FINANCIAL STATEMENTS (continued)for the financial year ended 30 June 2022 18 BORROWINGS (continued)
During the year, in order to facilitate the $250.0 million off-market share buy-back in April 2022, the Group’s term debt facility
was increased from $138.0 million to $200.0 million, while the trade finance facility remained at $200.0 million. The Group’s bank
overdraft facilities were also unchanged at $20.0 million and NZ$10.0 million (total $29.0 million). The Group therefore has total
borrowing facilities of $429.0 million of which $369.0 million are unused at 30 June 2022 in addition to cash on hand of
$125.6 million. Refer to note 21(a) for further details on the Group’s financing facilities.
(a) Recognition and measurement
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at
amortised cost.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at
least 12 months after the reporting date, and intends to do so.
The Group monitors compliance with its financial covenants on a monthly basis and reports compliance on a semi-annual basis to
the banks. The Group has complied with all such requirements during the current and previous year.
19 CONTRIBUTED EQUITY
(a) Share capital
Ordinary shares - fully paid
Parent entity
Parent entity
2022
Shares
2021
Shares
2022
$m
2021
$m
109,333,981
114,883,372
346.8
393.0
Ordinary shares issued are classified as equity and are fully paid, have no par value and carry one vote per share and the right to
dividends. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the
proceeds.
If the entity reacquires its own equity instruments, for example, as the result of a share buy-back, those instruments are deducted
from equity and the associated shares are cancelled. No gain or loss is recognised in the profit or loss and the consideration paid,
including any directly attributable incremental costs (net of income taxes), is recognised directly in equity.
(b) Movements in ordinary share capital
Date
Details
1 July 2020
Opening balance
Unallocated shares held by employee share trust
Balance excluding shares held by employee share trust
Shares acquired by employee share trust
Allocation of shares under share option, variable reward and deferred STI plans
Balance excluding shares held by employee share trust
Unallocated shares held by employee share trust
30 June 2021 Closing balance
1 July 2021
Opening balance
Unallocated shares held by employee share trust
Balance excluding shares held by employee share trust
Off-market share buy-back
Off-market share buy-back costs
Income tax relating to off-market share buy-back costs
Shares acquired by employee share trust
Allocation of shares under share option, variable reward and deferred STI plans
Balance excluding shares held by employee share trust
Unallocated shares held by employee share trust
30 June 2022 Closing balance
Number of
shares
114,883,372
(351,596)
114,531,776
(216,507)
566,438
114,881,707
1,665
114,883,372
114,883,372
(1,665)
114,881,707
(5,549,391)
–
–
(567,645)
561,983
109,326,654
7,327
109,333,981
$m
403.2
–
403.2
(10.2)
–
393.0
–
393.0
393.0
–
393.0
(17.6)
(0.6)
0.2
(28.2)
–
346.8
–
346.8
81
19 CONTRIBUTED EQUITY (continued)
(c) Share options
In accordance with the provisions of the Company’s share option plans, as at 30 June 2022, executives and non-executive
management have options over 497,981 ordinary shares (of which 10,177 were vested), in aggregate, with various expiry dates.
As at 30 June 2021, executives and non-executive management had options over 785,543 ordinary shares (of which 4,862 were
vested), in aggregate, with various expiry dates.
Share options granted under the Company’s share option plans carry no rights to dividends and no voting rights.
(d) Capital management
The Board reviews the capital structure on an ongoing basis. The Group’s objective is to maintain an optimal capital structure which
seeks to reduce the cost of capital and to ensure the Group has access to adequate capital to sustain the future development of
the business.
In conjunction with the ongoing reviews of the capital structure, the Group completed an off-market share buy-back of
$250.0 million in April 2022 which comprised a capital component of $17.6 million and dividend component of $232.4 million,
refer to note 4 for further details.
As part of its capital management program, the Group monitors the return on invested capital and the gearing ratio. The Group
defines return on invested capital as earnings before interest and tax (EBIT) divided by the sum of total equity plus net debt and
the gearing ratio as term debt excluding capitalised borrowing costs, divided by earnings before interest, taxation, depreciation,
amortisation and impairment (EBITDA).
The Board has adopted a policy of monitoring the dividend payout ratio and targeting a payout ratio of 65% of net profit after tax as
it seeks to strike a balance between shareholder returns and ensuring adequate capital is retained for the growth of the business so
as to maximise long term shareholder returns.
There were no changes in the Group’s approach to capital management during the year.
The Group’s return on invested capital and gearing ratios as at 30 June 2022 and 30 June 2021 were as follows:
Return on invested capital
Profit before tax
Net finance costs
EBIT
Borrowings
Cash and cash equivalents
Net cash
Total equity
Invested capital
Consolidated
2022
$m
2021
$m
775.3
19.3
794.6
59.4
(125.6)
(66.2)
1,280.3
1,214.1
720.0
23.1
743.1
–
(263.2)
(263.2)
1,308.4
1,045.2
Return on invested capital
65.4%
71.1%
Gearing ratio
Term debt
EBIT
Depreciation and impairment
EBITDA
Gearing ratio
82
60.0
–
794.6
219.3
1,013.9
743.1
218.5
961.6
0.06
0.00
NOTES TO THE FINANCIAL STATEMENTS (continued)for the financial year ended 30 June 2022 20 RESERVES
Equity-settled benefits
Common control reserve
Hedging reserves
Foreign currency translation reserve
(a) Nature and purpose of reserves
(i) Equity-settled benefits
Consolidated
2022
$m
24.0
(6.1)
0.8
4.1
22.8
2021
$m
84.5
(6.1)
0.8
4.6
83.8
The equity-settled benefits reserve arises on the grant of share options and restricted shares to executives and non-executive
management under the Company’s share option plans and variable reward plan. Further information about share based payments is
in note 27 to the financial statements.
(ii) Common control reserve
The common control reserve represents the excess of the purchase consideration over the balance of a non-controlling interest at
the date a change in ownership of a subsidiary occurs.
(iii) Hedging reserves
Hedging reserves include gains and losses recognised on the effective portion of foreign currency loans in previous periods
designated as net investment hedges. The gains and losses deferred due to the net investment hedge are recognised in the profit or
loss when the foreign operation is disposed.
(iv) Foreign currency translation
Exchange differences relating to the translation of the Group’s foreign controlled entities from their functional currencies into
Australian dollars are brought to account directly to the foreign currency translation reserve, as described in note 29(a).
21 FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks, including market risk (foreign currency and interest rate risk), liquidity
risk and credit risk.
The Group seeks to minimise the effects of these risks, by using various financial instruments, including derivative financial
instruments. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative
purposes. The use of financial derivatives is governed by the Group’s policies approved by the Board of directors, which provide
written principles on the use of financial derivatives.
The Group holds the following financial assets and liabilities at reporting date:
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Bank loans
Lease liabilities
Consolidated
2022
$m
125.6
132.6
258.2
721.6
59.4
545.0
1,326.0
2021
$m
263.2
102.8
366.0
668.6
–
631.3
1,299.9
83
21 FINANCIAL RISK MANAGEMENT (continued)
(a) Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Board of directors, who assess the Group’s short, medium and
long term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves,
banking facilities and reserve borrowing facilities and by continuously monitoring forecast and actual cash flows.
Financing arrangements
The Group had access to the following borrowing facilities at the end of the reporting period:
Unsecured bank overdraft facility:
amount used
amount unused
Unsecured trade finance facility:
amount used
amount unused
Unsecured indemnity guarantees:
amount used
amount unused
Unsecured bank loan facilities (term debt):
amount used
amount unused
Headroom in total borrowing facilities (excluding security indemnity guarantees)
Consolidated
2022
$m
–
29.0
29.0
–
200.0
200.0
3.0
3.3
6.3
60.0
140.0
200.0
369.0
2021
$m
10.4
18.9
29.3
–
200.0
200.0
3.5
2.8
6.3
–
138.0
138.0
356.9
84
NOTES TO THE FINANCIAL STATEMENTS (continued)for the financial year ended 30 June 2022 21 FINANCIAL RISK MANAGEMENT (continued)
(a) Liquidity risk (continued)
Maturities of financial liabilities
The following tables detail the Group’s remaining contractual maturity for its financial liabilities. The tables have been drawn up
based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay.
The table includes both principal and estimated interest cash flows.
The weighted average interest rate disclosed for lease liabilities represents the incremental borrowing rates over the lease term
at the time the leases were entered into or modified. The weighted average interest rate disclosed for bank loans represents the
interest rates that applied during the financial year to bank loans and does not represent the interest rates that may apply in
the future.
Cash flows for financial liabilities without fixed amount or timing are based on the conditions existing at the reporting date.
Less than
6 months 6 - 12 months
$m
$m
Between
1 and 2 years
$m
Between
2 and 5 years
$m
Over 5 years
$m
721.6
96.0
0.4
818.0
–
84.6
0.4
85.0
–
145.4
0.8
146.2
–
227.5
60.6
288.1
–
28.2
–
28.2
1,365.5
Less than
6 months 6 - 12 months
$m
$m
Between
1 and 2 years
$m
Between
2 and 5 years
$m
Over 5 years
$m
Total
$m
668.6
94.6
763.2
–
90.7
90.7
–
160.7
160.7
–
284.6
284.6
–
62.5
62.5
668.6
693.1
1,361.7
Total
$m
721.6
581.7
62.2
Weighted
average
effective
interest rate
%
–
3.27%
1.41%
Weighted
average
effective
interest rate
%
–
3.25%
2022
Financial liabilities
Trade and other payables
Lease liabilities
Bank loans
2021
Financial liabilities
Trade and other payables
Lease liabilities
(b) Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group.
The Group has endeavoured to minimise its credit risk by dealing with creditworthy counterparties. The Group’s exposure and the
credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst
approved counterparties.
The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having
similar characteristics.
The carrying amount of financial assets recorded in the financial statements, net of any allowance for impairment, represents the
Group’s maximum exposure to credit risk.
(c)
Interest rate risk
The Group is exposed to interest rate risk as it borrows funds at floating interest rates. The risk has historically been managed by
the Group by maintaining an appropriate mix between fixed and floating rate borrowings through the use of interest rate swap and
cap contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring optimal
hedging strategies are applied, by either positioning the balance sheet or protecting interest expense through different interest rate
cycles.
As at 30 June 2022, the Group has no interest rate swaps or cap contracts in place.
85
GROUP STRUCTURE
22 SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following principal subsidiaries in
accordance with the accounting policy described below:
Name of entity
Parent entity
JB Hi-Fi Limited ^
Subsidiaries
JB Hi-Fi Group Pty Ltd ^
Clive Anthonys Pty Ltd
JB Hi-Fi (A) Pty Ltd ^
Rocket Replacements Pty Ltd
JB Hi-Fi Education Solutions Pty Ltd ^
JB Hi-Fi Group (NZ) Limited
JB Hi-Fi NZ Limited
JB Hi-Fi (B) Pty Ltd ^
The Muir Electrical Company Pty Ltd ^
The Muir Electrical Service Co Pty Ltd ^
The Good Guys Discount Warehouses (Australia) Pty Ltd ^
Muir Group Employee Share Plan Pty Ltd ^
The Muir Finance Company Pty Ltd ^
M.E.W. (Australia) Pty Ltd ^
The Muir Electrical Company Pty Ltd as Trustee of the Muir Investment Unit Trust ^
The Good Guys Discount Warehouses (Australia) Pty Ltd as Trustee of the various store Trusts
Home Services Network Pty Ltd ^
Notes:
(i)
(ii)
JB Hi-Fi Limited is the head entity within the tax consolidated group.
All Australian entities are members of the tax consolidated group.
(iii) Entities identified with ‘^’ are party to a deed of cross guarantee.
Ownership interest
Country of
incorporation
2022
%
2021
%
Australia
-
-
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
(iv) The Company has a trust to administer the Company’s share options plans and variable reward plan. This trust is consolidated, as the substance
of the relationship is that the trust is controlled by the Company.
(a) Principles of consolidation
Subsidiaries
Subsidiaries are all entities which are controlled by the Company. Control is achieved when the Company:
•
•
•
has power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or
more of the three elements of control listed above. Subsidiaries are fully consolidated from the date on which control is transferred
to the Group. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised
gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Non-controlling interests in
the results and equity of subsidiaries are shown separately in the consolidated financial statements. Investments in subsidiaries are
accounted for at cost, less any impairment, in the separate financial statements of JB Hi-Fi Limited.
86
NOTES TO THE FINANCIAL STATEMENTS (continued)for the financial year ended 30 June 2022 23 DEED OF CROSS GUARANTEE
The subsidiaries identified with a ‘^’ in note 22 are parties to a deed of cross guarantee under which each Company guarantees to
each creditor payment in full of any debt in accordance with the deed of cross guarantee. By entering into the deed, the subsidiaries
who are party to the deed have been relieved from the requirement to prepare and lodge an audited financial report under ASIC
Corporations (Wholly-owned Companies) Instrument 2016/785.
The consolidated statement of profit or loss, statement of profit or loss and other comprehensive income and balance sheet of the
entities party to the deed of cross guarantee are provided as follows:
(a) Consolidated statement of profit or loss, statement of profit or loss and other
comprehensive income
Statement of profit or loss
Revenue
Cost of sales
Gross profit
Other income
Sales and marketing expenses
Occupancy expenses
Administration expenses
Finance costs
Other expenses
Profit before income tax
Income tax expense
Profit for the year
Statement of profit or loss and other comprehensive income
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss
Other comprehensive income for the year (net of tax)
Total comprehensive income for the year
2022
$m
2021
$m
6,330.9
6,086.7
(4,920.3)
(4,740.5)
1,410.6
1,346.2
327.6
(655.0)
(208.5)
(33.5)
(14.1)
(56.8)
770.3
(229.4)
540.9
354.2
(623.9)
(252.6)
(33.0)
(24.2)
(49.0)
717.7
(213.9)
503.8
540.9
503.8
–
540.9
–
503.8
87
2022
$m
2021
$m
111.6
113.0
793.2
30.3
253.5
84.7
643.1
35.2
1,048.1
1,016.5
114.8
461.6
103.0
77.9
911.8
337.5
123.6
536.3
102.8
77.9
911.8
377.4
2,006.6
3,054.7
2,129.8
3,146.3
714.5
162.0
162.0
53.9
108.1
661.8
142.0
162.1
92.2
104.9
1,200.5
1,163.0
94.7
370.8
31.5
59.4
556.4
1,756.9
1,297.8
358.0
21.8
918.0
85.0
453.5
31.5
–
570.0
1,733.0
1,413.3
405.5
79.7
928.1
1,297.8
1,413.3
23 DEED OF CROSS GUARANTEE (continued)
(b) Balance sheet
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Plant and equipment
Right-of-use assets
Deferred tax assets
Intangible assets
Investments in subsidiaries
Other non-current assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Deferred revenue
Lease liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Deferred revenue
Lease liabilities
Provisions
Borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
88
NOTES TO THE FINANCIAL STATEMENTS (continued)for the financial year ended 30 June 2022 24 PARENT ENTITY
Assets
Current assets
Non-current assets(i)
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Shareholders’ equity
Contributed equity
Reserves
Retained earnings
Profit for the year
Total comprehensive income
Parent Entity
2022
$m
2021
$m
0.1
564.7
564.8
60.0
0.2
60.2
-
346.8
24.0
133.8
504.6
551.1
551.1
0.1
623.5
623.6
97.4
0.2
97.6
-
393.0
84.5
48.5
526.0
318.2
318.2
(i)
Non-current assets are predominantly loans to subsidiaries that have no set repayment and are effectively at call to enable the Parent entity
to satisfy any liabilities required to be settled within the next 12 months.
25 RELATED PARTY TRANSACTIONS
(a) Parent entity and equity interests in related parties
The parent entity of the Group is JB Hi-Fi Limited, a listed public company, incorporated in Australia.
(b) Equity interests in related parties
Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 22.
(c) Key management personnel
Disclosures relating to key management personnel are set out in the Directors’ report.
(d) Transactions within the Group
During the reporting period and previous reporting periods, entities within the Group advanced amounts to, received and repaid
amounts from, and provided treasury, accounting, legal, taxation, and administrative services to other entities within the Group.
Entities within the Group also exchanged goods and services in sale and purchase transactions.
All transactions occurred on the basis of normal commercial terms and conditions. Balances and transactions between entities
within the Group have been eliminated on consolidation and are not disclosed in this note.
89
OTHER DISCLOSURES
26 KEY MANAGEMENT PERSONNEL DISCLOSURES
The aggregate compensation of the key management personnel of the Group is set out below:
Short-term employee benefits
Post-employment benefits
Share-based payments expense
Detailed remuneration disclosures are provided in the remuneration report on pages 33 to 52.
27 SHARE-BASED PAYMENTS
(a) Group share option plans
Consolidated
2022
$’000
-
7,191
207
4,084
2021
$’000
7,351
181
5,083
11,482
12,615
The Group has ownership-based remuneration schemes for executives and non-executive management (excluding non-executive
directors). In accordance with the provisions of these schemes, executives and non-executive managers within the Group are
granted options to purchase parcels of ordinary shares at zero exercise price.
Details of the features of outstanding share options are provided in the remuneration report on pages 50 to 51.
The following reconciles the outstanding share options granted under the Group’s share option plans at the beginning and end of
the financial year:
2022
Balance at
start of
the year
Number
Granted
during
the year
Number
Exercised/
lapsed
during
the year
Number
Balance
at end of
the year
Number
Vested and
exercisable
at end of
the year
Number
Outstanding Zero Exercise Price Options
785,543
156,818
(444,380)
497,981
10,177
Balance at
start of
the year
Number
Granted
during
the year
Number
Exercised/
lapsed
during
the year
Number
Balance
at end of
the year
Number
Vested and
exercisable
at end of
the year
Number
2021
Outstanding Zero Exercise Price Options
1,091,782
141,974
(448,213)
785,543
4,862
The weighted average remaining contractual life of share options outstanding at the end of the period was 1,032 days
(2021: 903 days).
Fair value of options granted
Equity settled share based payments with employees are measured at the fair value of the equity instrument at grant date.
The weighted average fair value of options granted during the year ended 30 June 2022 was $41.97 (2021: $44.61). The fair value
at grant date is determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the
option, the expected exercise date based on prior years’ experience, the share price at grant date, the expected price volatility of
the underlying share, the expected dividend yield and the risk-free interest rate.
The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations.
The expected price volatility for options granted during the year ended 30 June 2022 is based on the daily closing share price for
the number of years preceding the issue of the series, that matches the years to vesting as all of these options are expected to be
exercised as soon as they vest.
Detailed share option disclosures for all options series granted and exercised during the year are provided in the remuneration report
on pages 33 to 52.
90
NOTES TO THE FINANCIAL STATEMENTS (continued)for the financial year ended 30 June 2022 27 SHARE-BASED PAYMENTS (continued)
(a) Group share option plans (continued)
Share based payments expense
The fair value determined at the grant date of the equity-settled share based payments is expensed on a straight line basis over the
vesting period, based on the Group’s estimate of shares that will eventually vest, with a corresponding increase in the equity-settled
benefits reserve. Upon vesting of equity-settled benefits, the expense recognised in the equity-settled benefits reserve is transferred
to retained earnings.
At each reporting date the Group estimates the number of equity instruments expected to vest. The number of equity instruments
that are expected to vest is based on management’s assessment of the likelihood of the vesting conditions attached to the equity
instruments being satisfied. The key vesting conditions that are assessed are earnings per share targets and required service
periods. The impact of any revision in the number of equity instruments that are expected to vest is recognised as an adjustment to
the share based payments expense with the corresponding adjustment to the equity-settled benefits reserve in the reporting period
that the revision is made.
(b) Variable reward plan
In the 2019 financial year, the Group introduced a Variable Reward Plan (VRP) for Group Executives which replaces their previous
short term and long term incentives. Under the VRP, performance is assessed at the end of each financial year against a scorecard
of robust measures and awards under the VRP are generally delivered:
•
•
25% in cash at the end of the one-year performance period; and
75% in restricted shares, to be released progressively in equal tranches over years 2, 3 and 4.
There are also certain non-Group Executives who participate in the VRP in addition to their existing short term and long term incentives,
however the whole amount is delivered in restricted shares that are released progressively in equal tranches over years 2, 3 and 4.
Further details on the VRP are set out in the remuneration report on pages 37 to 38.
The component of the VRP that is paid in cash is treated as a bonus and is expensed to the profit and loss in the period the bonus is
earned. The component of the VRP that is delivered in shares is expensed on a straight line basis over the restriction period of each
tranche, with the expense recorded as part of the share based payments expense and a corresponding increase in the equity-settled
benefits reserve. Upon vesting of the equity-settled benefits, the expense recognised in the equity-settled benefits reserve is transferred
to retained earnings.
28 REMUNERATION OF AUDITORS
Audit or review of financial statements
Audit and review of group financial statements
Audit and review of subsidiary financial statements
Total audit or review of financial statements
Statutory assurance services required by legislation to be provided by the auditor
Other services
Tax compliance services
Accounting advisory services
Total other services
Total remuneration for audit and other services
The auditor of the Group is Deloitte Touche Tohmatsu.
Consolidated
2022
$’000
2021
$’000
695
35
730
9
226
10
245
975
704
34
738
9
–
–
9
747
During the current and prior financial years the Group also engaged Deloitte Touche Tohmatsu to assist with certain pre-acquisition
tax matters associated with The Good Guys. The fees associated with these services will be paid for by the previous owner and
there will be no cost to the Group, hence they have not been included in the summary above.
91
29 SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES
The remaining principal accounting policies adopted in the preparation of these financial statements that have not already been
disclosed are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
(a) Foreign currency translation
(i)
Functional and presentation currency
Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency’). The financial statements are presented in Australian
dollars, which is JB Hi-Fi Limited’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year
end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss, except
when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges, or are attributable to part of
the net investment in a foreign operation.
(iii) Group companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a
functional currency different from the presentation currency are translated into the presentation currency as follows:
•
•
assets and liabilities presented are translated at the closing rate at the date of that balance sheet;
income and expenses are translated at average exchange rates (unless this is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the
dates of the transactions); and
•
all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and
other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a
foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are
reclassified to profit or loss, as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign
operation and translated at the closing rate.
(b) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable
from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable
from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which
are recoverable from, or payable, to the taxation authority, are presented as operating cash flows.
(c) New accounting standards and interpretations
The Group has adopted all relevant new and amended Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board which are effective for annual reporting periods beginning on or after 1 July 2021. None of the new
standards or amendments to standards that are mandatory for the first time materially affected any of the amounts recognised in the
current period or any prior period.
92
NOTES TO THE FINANCIAL STATEMENTS (continued)for the financial year ended 30 June 2022 29 SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES (continued)
(c) New accounting standards and interpretations (continued)
The effects of the following Standards and Interpretations that are issued but not yet effective are not expected to
be material:
(i) AASB 2014-10 Amendments to Australian Accounting Standards: Sale or Contribution of Assets Between an Investor and its
Associate or Joint Venture, AASB 2015-10 Amendments to Australian Accounting Standards - Effective Date of Amendments
to AASB 10 and AASB 128, AASB 2017-5 Amendments to Australian Accounting Standards - Effective Date of Amendments
to AASB 10 and AASB 128 and Editorial Corrections (effective 1 January 2025)
(ii) AASB 17 Insurance Contracts and AASB 2020-5 Amendments to Australian Accounting Standards - Insurance Contracts
(effective 1 January 2023)
(iii) AASB 2020-1 Amendments to Australian Accounting Standards - Classification of Liabilities as Current or Non-Current and
AASB 2020-6 Amendments to Australian Accounting Standards - Classification of Liabilities as Current or Non-Current -
Deferral of Effective Date (effective 1 January 2023)
(iv) AASB 2020-3 Amendments to Australian Accounting Standards - Annual Improvements 2018-2020 and Other Amendments
(effective 1 January 2022)
(v) AASB 2021-2 Amendments to Australian Accounting Standards - Disclosure of Accounting Policies and Definition of
Accounting Estimates (effective 1 January 2023)
(vi) AASB 2021-5 Amendments to Australian Accounting Standards - Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (effective 1 January 2023)
(vii) AASB 2022-1 Amendments to Australian Accounting Standards - Initial Application of AASB 17 and AASB 9 - Comparative
Information (effective 1 January 2023)
(d) Reclassification of non-trade receivables
The Group is party to a number of arrangements with its suppliers, in the form of contracts and other written agreements, which set
out key trading terms, including the Group’s entitlements to rebates, discounts and promotional support.
Under accounting standards, amounts due from suppliers are required to be recognised within receivables, except in cases where
an entity has a legally enforceable right to set-off and the intention to settle on a net basis, in which case the entity should recognise
the net outstanding balance within trade payables.
Historically, the Group has recognised the entitlement to rebates receivable from suppliers as other receivables until a credit note is
received from the supplier. However, where the Group has a binding entitlement to these amounts and the Group has an intention
and established practice of net settlement with suppliers, the Group has concluded that presentation of amounts owed to suppliers
on a net basis more appropriately reflects the fair value of the transaction price with the supplier and the amounts and timing of
expected future cash flows, as well as the risks to which those cash flows are exposed.
As at 30 June 2022, the Group has presented amounts due from suppliers on this basis and reclassified its comparative
information for 30 June 2021 to align with this approach, resulting in the reclassification of amounts previously presented as other
receivables against trade payables. Amounts that are settled on a gross basis with suppliers or where the Group does not have a
binding entitlement continue to be recognised as other receivables. The other receivables reclassified against trade payables are set
out below.
Trade payables (historically reported)
Other receivables reclassified
Trade payables (net basis)
30 June 2022
$m
30 June 2021
$m
816.1
(155.5)
660.6
716.1
(108.8)
607.3
30 EVENTS OCCURRING AFTER THE REPORTING PERIOD
There have been no other matters or circumstances occurring subsequent to the end of the financial year, that have significantly
affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group
in future financial years.
93
ADDITIONAL SECURITIES EXCHANGE INFORMATION
The shareholder information set out below was applicable as at 8 August 2022.
A. Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
Holding
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Ordinary shares
Total Holders
Units
% Issued Capital
31,141
8,306,180
4,746
9,594,686
324
163
23
2,217,792
4,084,083
85,131,240
36,397
109,333,981
7.60
8.78
2.03
3.74
77.85
100.00
All shares above are fully paid ordinary shares. Each fully paid ordinary share carries one voting right.
There were 1,185 holders of less than a marketable parcel of ordinary shares.
B. Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Ordinary shares
Name
1. J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
2. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
3. CITICORP NOMINEES PTY LIMITED
4. NATIONAL NOMINEES LIMITED
5. BNP PARIBAS NOMS PTY LTD
Number held
29,584,753
28,882,397
10,704,665
2,912,028
2,884,998
6. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
2,773,477
7. BNP PARIBAS NOMINEES PTY LTD
8. AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
9. CITICORP NOMINEES PTY LIMITED
10. DJERRIWARRH INVESTMENTS LIMITED
11. BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
12. CPU SHARE PLANS PTY LIMITED
13. 3RD WAVE INVESTORS PTY LTD
14. MIRRABOOKA INVESTMENTS LIMITED
15. NETWEALTH INVESTMENTS LIMITED
16. BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM
17. BNP PARIBAS NOMS (NZ) LTD
18. SCCASP HOLDINGS PTY LTD
19. BNP PARIBAS NOMS PTY LTD
20. BNP PARIBAS NOMINEES PTY LTD
2,679,517
1,131,264
559,280
479,558
350,964
291,622
250,000
231,832
220,169
203,260
199,197
175,400
138,185
130,043
% of issued
shares
27.06
26.42
9.79
2.66
2.64
2.54
2.45
1.03
0.51
0.44
0.32
0.27
0.23
0.21
0.20
0.19
0.18
0.16
0.13
0.12
84,782,609
77.55
94
C. Substantial holders
Substantial holders in the Company are set out below:
Ordinary shares
AustralianSuper Pty Ltd
Blackrock
Magellan Financial Group
State Street Corporation
The Vanguard Group
Number
held
Voting Power
%
14,323,126
13.10
8,558,464
6,948,678
6,915,748
5,746,950
7.83
6.36
6.33
5.26
Number
on issue
Number
of holders
D. Unquoted equity securities
Employee share options issued under the Company’s share option plans
489,465
166
95
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96
CORPORATE INFORMATION
ABN 80 093 220 136
COMPANY SECRETARY
Doug Smith
PRINCIPAL REGISTERED OFFICE IN AUSTRALIA
Podium Level
60 City Road, Southbank VIC 3006
Phone: +61 3 8530 7333
SHARE REGISTRY
Computershare Investor Services Pty Limited
Yarra Falls, 452 Johnston Street, Abbotsford, Victoria, 3067, Australia
Phone: 1300 302 417 (Australia)
Phone: +61 3 9415 4136
Financial Summary
FINANCIAL PERFORMANCE
2018
2019
2020
2021
2022
Growth
Sales
EBIT
NPAT
$6.85b
$7.10b
$7.92b
$8.92b
$9.23b
$350.6m
$372.8m
$483.3m
$743.1m
$794.6m
$233.2m
$249.8m
$302.3m
$506.1m
$544.9m
Earnings per share
203.1cps
217.4cps
263.1cps
440.8cps
479.5cps
3.5%
6.9%
7.7%
8.8%
Total dividend - fully franked
132cps
142cps
189cps
287cps
316cps
10.1%
Sales $9.23b
EBIT $794.6m
$9.23b
$8.92b
$794.6m
$743.1m
$7.92b
$6.85b
$7.10b
$483.3m
$372.8m
$350.6m
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
NPAT $544.9m
Earnings per share
$544.9m
$506.1m
479.5cps
479.5cps
440.8cps
$302.3m
$249.8m
$233.2m
263.1cps
217.4cps
203.1cps
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
JB Hi-Fi Limited ABN 80 093 220 136
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investors.jbhifi.com.au
ANNUAL REPORT
2022