JB Hi-Fi Financial Statement Analysis - Research Paper Example

JB Hi-Fi Financial Statement Analysis Name Tutor Code Date Table of Contents Executive Summary 3 Introduction 4 Purpose 4 Scope 4 Methodology 4 Assumptions 5 Limitation 5 Company overview 6 Economic Framework 6 Financial Analysis 7 Activity Analysis 7 Profitability Analysis 8 Liquidity Analysis 11 Long Term Debt and Solvency 13 Du Pont Analysis 14 Cash Flow Analysis 15 Prospective Analysis 16 Sales and EBIT Forecast 16 Conclusion and Recommendation 17 References 17 Appendices 18 Executive Summary Financial statement analysis is what many investors look out for in making investment decisions. The financial analysis report surveys JB Нi-Fi Company Limited an Australian based company. The company specializes in the production of consumer electronics, entertainment, and technology. The report aims at evaluating the company’s performance based on its financial status and its position in the overall competitive market. The paper cover financial ratio analysis, cash flow analysis, Du Pont analysis and prospective analysis. In general, JB Hi-Fi performed best in 2015. The company’s efficiency has improved over the five year period. Liquidity and profitability also strengthened. Compared to Harvey Norman, JB Hi-Fi performed well on the activity rations and long-term-debt as well as solvency. The Du Pont analysis shows that the company had a ROE of 0.43 in 2015. However, the company is expected to realise growth is sales and EBIT as the market conditions improve in 2016. To further enhance its performance it is vital for JB Hi-Fi to diversify its product portfolio that will bring in more revenue. Introduction Purpose Financial statement analysis is what many investors look out for in making investment decisions. Financial statement analysis works around a company’s financial data for the past periods to gauge its financial performance over the periods under consideration. This helps to inform on the company’s financial suitability and performance that can be evaluated against the competitors, sector or industry. This paper takes into account, the annual reports and financial statements of JB Hi-Fi to compute the main financial ratios and assess its performance from 2011 to 2015. Scope The analysis covers a period of five years, from 2011 to 2015. The first step is to make up the adjustments to the company’s financial reports, that is, the balance sheets, income statements, and cash flow statements. The adjusted statements are then used to compute the common size statements (vertical and horizontal) and calculate the financial ratios comprising the activity ratios, profitability ratios, liquidity ratios, and solvency ratios. The analysis also encompasses, DuPont analysis, cash flow analysis, and prospective analysis. Apart from the information from within the company, information from financial markets; prices of securities, price indices, and the overall state of the economy can also be considered. Methodology The financial reports for JB Нi-Fi Company are collected from the company website. They are then adjusted to exclude non-recurring items. The various financial ratios like activity, profitability, liquidity and solvency ratios are then calculated to assess the JB Нi-Fi Company financial performance. The financial performances of the JB Нi-Fi Company is then compared to the financial performance of the main rival, Harvey Norman Company. The analysis process is performed with forecasted financial performance to supplement the financial ratios to enable potential investors to assess the future direction of JB Нi-Fi Company. Assumptions When determining the assets values, there are no distinct deviations in the values of the company assets at the start and at the end of each year. Limitation Financial statement analysis is essential in evaluating; performance of employees, the effectiveness of business systems, as well as the company’s credit worthiness. However, the paper may be limited by the quality of the fundamental financial statements that define the worth of the ratios derived from them. Besides, ratios give a narrow outlook of the ‘relative’ performance and position. Also comparing two businesses is challenging since they cannot be identical and the grander their dissimilarities, the greater the limitations of ratio analysis as a base for comparison. Any ratios based upon balance sheet figures will not be representative of the whole period because the balance sheet is a snapshot of a moment in time. Besides, the financial analysis does not include some important aspects that contribute to the successful performance of a company including the company brand reputation, organisation culture, as well as employee skills and competence. Inflationary effects may well limit the analysis given that inflation effectively affects the values reported for different items in the financial reports. Also, comparing the performance of one company with another may be misleading because the financial policies, culture and practices between the two companies are different. Company overview JB Hi-Fi is a leading electronics retailer. It mainly operates in Australia and New Zealand, which constitute its two business segments. The company headquarters are in Melbourne, Australia. JB Нi-Fi Company employs close to 7300 people and operates over 194 outlets. The Company is listed on Australian Security Exchange (ASX) under the code JBH. JB Нi-Fi Company Limited operates under different units including JB Hi-Fi, Clive Anthony, JB Hi-Fi HOME, and the recently acquired JB Hi-Fi Solutions. The company is also a leading supplier of CDs, DVDs and Blue-rays. Other products include consumer electronics, games, mobile phones and accessories, GPS, Computers and Tablets, Consoles, and audio equipment and instrument. The company also operates an online store and discount superstores. Economic Framework JB Нi-Fi has an elaborate organisation structure which has boosted its performance in recent times. The consumer electronics market continues to grow as manufacturers keep developing new products year after year to keep up with the demand in the market. JB Hi-Fi has used decent strategies including its stimulus package to help improve its like-for-like sales. It has also developed strategies to help contain the customer bargaining power and competitors’ effect. This is evident in the company’s improved performance given a 6.4 per cent rise in the net profit to 2015. The company also registered growth in sales in the Same-stores by 2.9 per cent largely due to increased demand for mobile phones, computers as well as fitness products. The company has recently announced that it would introduce small appliances in its stores as the demand for the products increases. Financial Analysis Financial ratios form the key toolbox used to perform the financial statement analysis. The ratios are easy to understand and interpret to potential investors and other interested parties considering that the final statements of accounts are not easy to interpret. Financial ratios are represented in form of a mathematical relationship between one measure of financial data and another. The ratios are classified depending on how they are calculated, their importance and features. Therefore, lots of financial ratios can be computed from all information available in respect to the company. However, ratios are broadly categorized into activity ratios, profitability ratios, liquidity ratios, long-term debt and solvency and DuPont analysis. Activity Analysis The activity ratios measure how well the company employs its assets or investments. The ratios assess the gains produced by specific assets such as debtors or all of a company’s assets together. The total assets turnover evaluates the company’s revenue to the total assets. JB Hi-Fi total assets turnover was lowest in 2012 at 3.96 per cent highest in 2015 at 4.16. This indicates that JB Hi-Fi is more efficient in utilising its assets to spawn income from its operations. The company also reported an impressive receivables turnover of between 47.98 times in 2015 and 53.96 times in 2013. The payables period also varied between 31.86 days in 2015 and 48.94 days in 2013. JB Hi-Fi initiated elaborate measures to collect money from debtors in 2015 that saw an improved operating efficiency. However Harvey Norman reported a very low total asset turnover at 0.6 per cent in 2015. The company also had a very low receivables turnover of 2.28 times and a payables period of 214.58 days. Therefore JB Hi-Fi proved to be more efficient in utilising its assets and investments in 2015 compared to Harvey Norman. JB Hi-Fi enhanced it operations in 2015 to improve productivity and mitigate indirect spending. Besides, the Australian segment realised greater activity outcome as it accounts for over 90 per cent of the total assets. Ratio 2011 2012 2013 2014 2015 Total asset turnover 4.00 3.96 4.00 4.09 4.16 Inventory turnover 6.24 5.94 6.11 6.21 6.09 Days sales outstanding 7.51 6.81 6.76 7.07 7.61 Receivables turnover 48.61 53.64 53.96 51.62 47.98 Trend Profitability Analysis Profitability ratios review earnings performance relative to the capital investment or revenue. They measure the capability of the company to create wealth and are an assessment of whether the business is doing a good job of making profit. The ratios are also used to gauge the management’s ability (Bazley & Hancock, 2010). Ratio 2011 2012 2013 2014 2015 Net margin 3.71 3.35 3.52 3.68 3.74 Operating margin 5.49 5.16 5.37 5.49 5.50 Gross margin 21.78 20.70 21.12 21.12 21.86 Return on assets 14.81 13.26 14.07 15.07 15.56 Return on equity 49.23 62.14 54.40 47.72 42.79 Return on capital employed 31.56 31.67 35.08 31.90 29.39 Trend The net margin measures the proportion of net earnings to sales. The margin shows the amount of each one dollar of sales that is left over after all costs (Beranek, 1963). JB Hi-Fi reported a net margin of between 3.35 per cent in 2012, which was the lowest, and 3.74 per cent in 2015, which was the highest. 2012 had the least net margin due to poor economic condition that led to reduced sales. 2015 was a good year for the company. The operating margin and gross margin were also poor in 2012 at 5.16 per cent and 20.7 per cent after which it improved constantly to 5.50 per cent and 21.86 per cent in 2015 respectively. In 2015, JB Hi-Fi reported the highest margins and returns over the five year period. The returns were boosted by cost control and improved customer service. The Australian segment performed better than the New Zealand segment. Over the five year period, the Australian segment has accounted for over 90 per cent of the company’s sales revenue. The return on assets also followed the same pattern being at 13.26 per cent in 2012 and 15.56 per cent in 2015. However, JB Hi-Fi reported the worst return on equity in 2015 at 42.79 per cent and the best return on equity in 2012 at 62.14 per cent. This shows that even though 2012 was not a good year for the company, shareholders earned more from their investments that year compared to the rest of the years. Besides, the company reported the worst return on capital employed in 2015 at 29.39 per cent and the best return on capital employed in 2014 at 31.9 per cent. The returns set up the association between the revenue and the assets, equity and capital employed respectively. It points out the percent proportion of return on capital employed in production furthermore; it can be used to give investors an idea about the overall profitability and effectiveness of the company. On the other hand, Harvey Norman reported a higher gross margin in 2015 compared to JB Hi-Fi. The company reported a gross margin of 56.3 per cent whereas JB Hi-Fi reported a gross margin of 21.86 per cent. The operating margin and net margin were also higher at 10.6 per cent and 10.39 per cent respectively. But the return on assets, return on equity and return on capital employed were lower at 6.25 per cent, 10.71 per cent and 8.9 per cent in that order. The returns were lower compared to JB Hi-Fi due to the higher proportion of assets, equity and capital employed that Harvey Norman has than JB Hi-Fi. Liquidity Analysis Financial managers and other users of financial statements use liquidity ratios to judge whether a company can meet up its short-term obligations. The ratios offer a fine way through which the users can assess whether a company is projected to keep on as a going concern (Anthony & Breitner, 2010). Ratio 2011 2012 2013 2014 2015 Current ratio 1.45 1.22 1.27 1.64 1.62 Quick ratio 0.25 0.22 0.30 0.32 0.34 Trend The current ratio measures short term liquidity. This is an indicator of whether the current assets can be able to pay off the short-term liabilities. The ratio measures the financial health of the company. JB Hi-Fi had a current ratio of above 1 over the five year period. However, this is not sufficient given that the recommended industry current ratio should be above 2 to 1. But in large the company would be able to clear its current obligations with the use of its current assets. On the contrary, the quick ratio ranges between 0.22 times in 2012 and 0.34 times in 2015. This is also considered low measured up against a commended industry average of 1 to 1. In 2015, JB Hi-Fi reported a higher current ratio of 1.62 times compared to 1.31 times report by Harvey Norman. But Harvey Norman reported a higher quick ratio of 1.06 times. This indicates that inventory constitutes a large part of JB Hi-Fi’s current assets. Long Term Debt and Solvency As much as a company’s current operational performance is vital, it should be able to meet up its long-term debt obligations and remain solvent. The ratios hare are also used to evaluate the company’s financing structure against its investments (Steven, 2012). Ratio 2011 2012 2013 2014 2015 Debt/Equity 1.53 0.81 0.51 0.61 0.41 Financial leverage 5.04 4.40 3.47 2.92 2.61 Interest cover ratio 26.3 11.87 17.55 21.65 33.99 Trend The debt/equity ratio measures the relative proportion of shareholder’s equity and debt that is used to finance a company’s operations. JB Hi-Fi has realised a gradual reduction in debt/equity ratio from 1.53 per cent in 2011 to 0.41 per cent in 2015. In 2015, Harvey Norman had a debt/equity ratio of 0.11 per cent. This shows that the company has a very small component of debt to shareholder’s equity compared to JB Hi-Fi. Financial leverage evaluates the existence of fixed payment bearing securities, such as loans or bonds, in the company’s capital structure. Financial leverage is a pointer to the extent to which a company has borrowed from external parties, and is therefore important in assessing business risk. JB Hi-Fi reported the highest financial leverage in 2011 at 5.04 per cent. In 2015 JB Hi-Fi reported the lowest financial leverage at 2.61 per cent. The company borrowed more in 2011 but has gradually reduced its debt component. The company has progressively reduced the operating costs thus enabling it to reduce unnecessary spending. In 2015 Harvey Norman had a financial leverage of 1.72 per cent. The company is more conservative compared to JB Hi-Fi which had a financial leverage of 2.61 per cent in the same year. The interest coverage ratio is an assessment of how able-bodied a company is to honour its interest-payment compulsion. JB Hi-Fi had its interest coverage ratio of between 11.86 times in 2012 and 33.99 times in 2015. The ratio is quite high reflecting a good sign to lenders as the company has a substantial margin of safety. However, Harvey Norman had an interest cover of 12.5 times in 2015 which is quite low compared to 33.99 for JB Hi-Fi in the same year. Therefore, JB Hi-Fi is much more likely to attract debt. Du Pont Analysis The DuPont ratio can be used as a compass in this process by directing the analyst toward significant areas of strength and weakness evident in the financial statements. A five-stage du Pont analysis is used to decompose the net income margin to indicate the effect of interest and tax on the company’s return on equity. The five-stage du Pont analysis involves the ROE that is decomposed into the tax burden, interest burden, operating margin, and asset turnover and equity multiplier. Return on equity= [profit margin/ (Net income/sales)] x [total asset turnover/ (net sales/average total assets)] x [financial leverage/ (total assets/ total equity)] ROE = tax burden * interest burden * operating margin * asset turnover * equity multiplier ROE = 0.69 * 0.97 * 0.06 * 4.08 * 2.61; ROE = 0.43 The ROE is very low at 0.43 per cent. JB Hi-Fi’s current operation are able to generate more sales but the returns are countered by high expenses that eat into the profit margins. Cash Flow Analysis Cash Flow Analysis Free Cash Flow/Sales % 2.19 5.4 3.66 0.16 3.76 Free Cash Flow/Net Income 0.59 1.61 1.04 0.04 1.01 Free Cash Flow Per Share 0.6 0.58 0.74 0.88 1.85 The free cash flow to sales indicated the cash earned by the company out of the sales revenue. The lowest amount earned was at 0.16 per cent in 2014. In 2015, JB Hi-Fi earned the highest cash out of the sales revenue in 2015, which was an impressive proportion. The free cash flow to net income was also low in 2014 at 0.04 but it improved considerably to 1.01 in 2015. However, the free cash flow per share was low in 2012 at 0.58 but then again in 2015 JB Hi-Fi earned a high free cash flow per share of 1.85. This shows an improved capability of the company to generate more cash in 2015 a pointer to the overall improvement in performance as the company as the company expands its store portfolio to include small appliances. Trend The net operating cash flow shows fluctuations with highest value in 2012 and a lowest value in 2014. The net cash flow from financing activities has remained relatively stable over the five-year period. The financing section of the cash flow shows fluctuation with the highest values recoded in 2012 while the lowest in 2014. The fluctuations are because of the changes in net sales and the net income that affects the dividends earned, the stock values. Prospective Analysis Sales and EBIT Forecast Year 2011 2012 2013 2014 2015 2016 2017 Sales 2.96B 3.13B 3.31B 3.48B 3.65B 3.85B 4.05B EBIT 223.86M 193.96M 212.46M 226.91M 241.07M 254.09M 267.81M The company sales have improved steadily over the five year period. The EBIT shows a slump in 2012 but since then the EBIT has been on an upward trajectory. In the 2016, the market structure is expected to further improve performance regarding sales. The EBIT is also projected to rise in 2016 to 2017. Conclusion and Recommendation In general, JB Hi-Fi performed well in 2015 compared to the other years. The company also beat its close competitor, Harvey Norman on activity ratios and efficiency. However, Harvey Norman reported higher gross margin and net margin therefore scoring better on profitability. To improve its performance, JB Hi-Fi should work to improve on the liquidity. It should also continue to streamline operations so as to keep reducing on operating costs, which can reduce its profitability and turnover. It is also vital for the company to diversify their production line in order to increase on their sales revenue. References Anthony, R.N. and Breitner, L.K. (2010). Essentials of Accounting: International, 10th Ed. Pearson. Arnold, G. (2005). Corporate Financial Management, 3d Ed. Harlow: Pearson Education Ltd. Bazley, M. and Hancock, P. (2010). Contemporary Accounting, 7th Ed. Cengage Learning. Deegan, C. 2009, Financial accounting theory, 3rd edn, McGraw-Hill, North Ryde. Jackling, B. Raar, J. and McDowall, T. 2010, Accounting: A Framework for Decision Making, 3rd edn, McGraw-Hill. Marshall, D.H. McCartney, J.P. vanRhyn, D. McManus, W.W. and Viele,D.F. 2009, Accounting: What the numbers mean, 2nd ed. (revised), McGraw-Hill. Ryan, R. 2006, Corporate Finance and Valuation, Thomson Learning, London. Steven, M.B. 2006, Financial Analysis: A Controller's Guide, 2nd edn, Wiley. Appendices Appendix 1 List of Adjustments Income Statement Impairment Cash Flow Statement Inventories increase/decrease Current receivables increase/decrease Other current assets increase/decrease Deferred tax assets increase/decrease Current payables increase/decrease Non-current provisions increase/decrease Current provisions increase/decrease Other current liabilities increase/decrease Other non-current liabilities increase/decrease Current tax liabilities increase/decrease Proceeds from sale of plant and equipment Appendix 2 Adjusted Accounts JB HI FI LTD (JBH) BALANCE SHEET Fiscal year ends in June. AUD in thousands except per share data. 2011-06 2012-06 2013-06 2014-06 2015-06 Assets Current assets Cash and cash equivalents 27,246 39,710 67,368 43,445 49,131 Trade and other receivables 58,253 59,378 64,246 70,745 81,480 Inventories 406,939 428,290 426,000 458,625 478,871 Other current assets 8,634 7,682 6,038 5,332 7,416 Total current assets 501,072 534,060 563,652 578,147 616,898 Non-current assets Other financial assets 3 3 3 3 3 Plant and equipment 169,590 182,048 181,098 181,564 176,208 Deferred tax assets 17,802 1,196 14,839 14,909 17,363 Intangible assets 78,672 78,842 83,712 85,218 84,541 Total non-current assets 266,067 277,089 279,652 281,694 278,115 Total assets 767,139 811,149 843,304 859,841 895,013 Liabilities Current liabilities Trade and other payables 301,602 400,803 387,020 302,979 325,604 Other financial liabilities 645 1,303 956 79 40,585 Current tax liabilities 12,064 4,374 14,932 8,184 4,566 Provisions 29,316 30,673 36,391 36,840 9,474 Other current liabilities 2,311 2,328 3,080 4,111 107 Total current liabilities 345,938 439,481 442,379 352,193 380,336 Non-current liabilities Borrowings 232,582 149,775 124,331 179,653 139,461 Provisions 14,466 13,792 9,416 8,699 6,073 Other non- current liabilities 1,548 22,797 23,350 24,638 25,644 Other financial liabilities 292 803 - 25 - Total non- current liabilities 268,888 187,167 157,097 213,015 171,198 Total liabilities 614,826 626,648 599,476 565,208 551,534 Net assets 152,313 184,501 243,828 294,633 343,479 Equity Contributed equity 58,206 61,692 62,774 58,383 56,521 Reserves 4,028 5,120 11,762 16,265 17,636 Retained earnings 90,079 117,689 168,809 219,985 269,322 Equity attributable to owners of the company 152,313 184,501 243,345 294,633 343,479 Non-controlling interests - - 483 - - Total equity 152,313 184,501 243,828 294,633 343,479 Fiscal year ends in June. AUD in thousands except per share data. 2011-06 2012-06 2013-06 2014-06 2015-06 Revenue 2,959,253 3,127,792 3,308,396 3,483,775 3,652,136 Cost of sales -2,307,224 -2,467,962 -2,596,194 -2,727,794 -2,853,883 Gross profit 652,029 659,830 712,202 755,981 798,253 Other income 2,351 613 574 520 631 Sales and marketing expenses -286,823 -309,465 -336,831 -355,694 -374,084 Occupancy expenses -114,800 -129,343 -140,249 -148,969 -160,216 Administration expenses -26,898 -26,715 927,239) -27,600 -27,711 Other expenses -27,658 -32,893 -30,249 -32,716 -35,414 Significant item -33,352 - - - Finance cost -6,268 -13,654 -10,156 -8,845 -5,927 Profit before tax 158,581 148,373 168,052 182,677 195,532 Income tax expense -48,886 -43,732 -51,420 -54,230 -59,021 Profit for the year 109,695 104,641 116,632 128,447 136,511 Adjustment 1302 1574 1119 Adjusted net profit 109,695 105,943 118,206 128,447 137,630  Cash flows from investing activities Payments for property, plant and equipment -45,063 -46,078 -35,307 -35,914 -42,466 Proceeds from sale of plant and equipment 1,144 1,257 1,203 674 496 Acquisition of non-controlling interests - - - -3,000 -2,400 Payments for acquisition of subsidiary, net of cash acquired - - -4,197 - - Net cash (outflow) inflow from investing activities -43,919 -44,821 -38,301 -38,240 -44,370 Cash flows from financing activities Proceeds/ (repayment) of borrowings 163,334 -84,174 -26,210 54,063 -40,113 Payments for debt issue costs -955 -13 -632 -64 -484 Proceeds from issues of equity securities 9,305 3,514 1,082 21,523 3,125 Dividends paid to members of the parent entity/owners of the company -88,411 -77,031 -65,263 -77,183 -87,174 Payments for shares bought back -173,333 - - -25,830 -4,970 Payments for share buy-back costs -801 -40 - -118 -24 Net cash (outflow) inflow from financing activities -90,861 -157,744 -91,023 -27,609 -129,640 Net increase (decrease) in cash and cash equivalents -24,835 12,442 27,086 -24,523 5,886 Cash and cash equivalents at the beginning of the financial year 51,735 27,246 39,710 67,368 43,445 Effects of exchange rate changes on cash and cash equivalents 346 22 572 600 -200 Cash and cash equivalents at end of year 27,246 39,710 67,368 43,445 49,131 Adjustment 45764 -77001 -998 125456 9868 New cash and cash equivalents at end of year 73,010 -37,291 66,370 168,901 58,999 HARVEY NORMAN (HVN) BALANCE SHEET Fiscal year ends in June. AUD in thousands except per share data. 2014-06 2015-06 Assets Current assets Cash and cash equivalents 144,957 185,840 Trade and other receivables 1,062,284 1,142,551 Other financial assets 21,596 26,148 Inventories 297,670 298,381 Other assets 23,010 23,072 Intangible assets 541 476 Total current assets 1,550,058 1,676,468 Non-current assets Trade and other receivables 64,526 71,815 Investments accounted for using equity method 24,912 21,425 Other financial assets 16,176 16,570 Property, plant and equipment 569,057 552,603 Investment properties 1,903,504 1,935,936 Intangible assets 77,898 83,727 Total non-current assets 2,656,073 2,682,076 Total assets 4,206,131 4,358,544 Liabilities Current liabilities Trade and other payables 740,681 813,474 Interest bearing loans and borrowings 469,872 408,438 Income tax payable 24,142 34,807 Provisions 25,494 23,490 Other liabilities 2,043 2,870 Total current liabilities 1,262,232 1,283,079 Non-current liabilities Interest bearing loans and borrowings 238,094 290,000 Provisions 10,293 12,249 Deferred income tax liabilities 188,980 198,728 Other liabilities 15,426 17,628 Total non- current liabilities 452,793 518,605 Total liabilities 1,715,025 1,801,684 Net assets Equity Contributed equity 259,610 380,328 Reserves 102,735 113,290 Retained profits 2,109,032 2,043,463 Parent entity interests 2,471,377 2,537,081 Non-controlling interests 19,729 19,779 Total equity 2,491,106 2,556,860 HARVEY NORMAN (HVN) INCOME STATEMENT Fiscal year ends in June. AUD in thousands except per share data. 2014-06 2015-06 Sales revenue 1,513,662 1,617,151 Cost of sales -1,064,892 -1,126,894 Gross profit 448,770 490,257 Revenue and other income items 1,033,624 1,101,286 Distribution expenses -15,114 -18,744 Marketing expenses -348,952 -370,124 Occupancy expenses -233,881 -229,081 Administrative expenses -427,604 -447,198 Other expenses from ordinary activities -136,846 -124,082 Finance cost -36,437 -32,872 Share of net profit of joint venture entities 17,501 8,658 Profit before tax 301,061 378,100 Income tax expense -88,823 -109,186 Profit for the year 212,238 268,914 Adjustment -22 -274 Adjusted profit for the year 212,216 268,640 HARVEY NORMAN (HVN) Statement of CASH FLOW Fiscal year ends in June. AUD in thousands except per share data. 2014-06 2015-06 Cash flows from operating activities Net receipts from franchises 871,251 830,844 Receipts from customers 1,590,489 1,707,259 Payments to suppliers and employees -1,994,315 -2,056,114 Distributions received from joint ventures 15,512 13,905 GST paid -39,087 -43,258 Interest received 8,874 8,657 Interest and other costs of finance paid -36,583 -33,059 Income taxes paid -78,626 -89,284 Discount received 1,420 1,498 Net cash inflow (outflow) from operating activities 338,935 340,448 Cash flows from investing activities Payments for property, plant and equipment and intangible assets -64,970 -55,012 Payments for purchase of investment properties -54,665 -15,828 Proceeds from sale of plant and equipment and properties held for resale 10,459 7,152 Payments for purchase of units in unit trusts -106 -395 Payments for purchase of equity accounted investments -2,608 -4 Proceeds from sale of listed securities 134 1,477 Payments or purchase of listed securities -4,048 Losses granted to other entities -1,361 -15,145 Net cash (outflow) inflow from investing activities -113,117 -81,803 Cash flows from financing activities Proceeds from Renounceable Rights Offer 120,718 Payments for purchase of shares in controlled entities -22,618 Repayments of Syndicated Facility and Syndicated Working Capital Facility -122,855 -52,000 Dividends paid -111,543 -333,664 Loans repaid from related parties 19,925 37,153 Proceeds from other borrowings 1,878 7,196 Net cash (outflow) inflow from financing activities -235,213 -220,597 Net increase (decrease) in cash and cash equivalents -9,395 38,048 Cash and cash equivalents at the beginning of the financial year 124,567 115,172 Cash and cash equivalents at end of year 115,172 153,220 Appendix 3 Common Size Statements Appendix 4 Ratio Calculations 2011-06 2012-06 2013-06 2014-06 2015-06 Profitability Gross Margin % 21.78 20.7 21.12 21.21 21.86 Operating Margin % 5.49 5.16 5.37 5.49 5.5 Net Margin % 3.71 3.35 3.52 3.68 3.74 Return on Assets % 14.81 13.26 14.07 15.07 15.56 Return on Equity % 49.23 62.14 54.4 47.72 42.79 Return on Capital Employed % 31.56 31.67 35.08 31.9 29.39 Liquidity Current Ratio 1.45 1.22 1.27 1.64 1.62 Quick Ratio 0.25 0.22 0.3 0.32 0.34 Activity Ratios Days Sales Outstanding 7.51 6.81 6.76 7.07 7.61 Payables Period 41.13 46.32 48.94 38.52 31.86 Cash Conversion Cycle 24.86 21.94 17.56 27.37 35.7 Receivables Turnover 48.61 53.64 53.96 51.62 47.98 Inventory Turnover 6.24 5.94 6.11 6.21 6.09 Asset Turnover 4 3.96 4 4.09 4.16 Long-Term Debt & Solvency Interest Coverage 26.3 11.87 17.55 21.65 33.99 Financial Leverage 5.04 4.4 3.47 2.92 2.61 Debt/Equity 1.53 0.81 0.51 0.61 0.41 Appendix 5 Peer Company Data 2015-06 Profitability Gross Margin % 56.3 Operating Margin % 10.6 Net Margin % 10.39 Return on Assets % 6.25 Return on Equity % 10.71 Return on Capital Employed % 8.9 Liquidity Current Ratio 1.31 Quick Ratio 1.06 Activity Ratios Days Sales Outstanding 159.94 Payables Period 214.58 Cash Conversion Cycle 41.89 Receivables Turnover 2.28 Inventory Turnover 3.78 Asset Turnover 0.6 Long-Term Debt & Solvency Interest Coverage 12.5 Financial Leverage 1.72 Debt/Equity 0.11 Read More