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JB Hi-Fi’s net profit rose a better than expected 11.5 per cent to $152.2 million in 2016, underpinned by robust demand for consumer electronics and market share gains in the wake of the collapse of Dick Smith.
The net profit result beat consensus forecasts around $146.6 million and exceeded JB Hi-Fi’s $143 million to $147 million guidance, which was updated in May.
Sales rose 8.3 per cent to $3.95 billion, exceeding guidance of $3.9 billion, as new stores augmented like for like sales growth of 5.4 per cent and buoyant sales of audio visual equipment and mobile phones offset slowing demand for fitness products.
Strong promotions in May and June, including generous discounts on computers, helped JB Hi-Fi grow sales in the fourth quarter even though it was cycling 8 per cent like for like sales growth spurred by small business tax incentives in June 2015.
JB Hi-Fi shares have risen 40 per cent to a record $27.38 this year, fuelled by expectations it will acquire appliances chain The Good Guys.
Last week JB Hi-Fi gained clearance from the competition regulator to pursue a bid should The Good Guys’ owners, the Muir family, not proceed with an initial public offering.
The Australian Competition and Consumer Commission concluded that JB Hi-Fi and The Good Guys focus on different product categories and customers, so an acquisition would not significantly reduce competition.
An acquisition of The Good Guys would boost JB Hi-Fi’s sales from $3.9 billion to almost $6 billion, add $110 million to earnings before interest, tax, depreciation and amortisation – before synergies estimated to be worth as much as $40 million – and lift its total store footprint by 100 stores to 294.
JB Hi-Fi increased its final dividend by 6¢ to 37¢ a share, payable September 9, taking the full year payout to $1.
Newcrest Mining shareholders will receive a dividend for the first time in 42 months, after the board of the gold miner decided it could afford to balance a payment with capital commitments and debt reduction.
The US7.5¢ dividend will be unfranked, and comes after Newcrest reported a $US332 million statutory profit.
That result was 12 per cent weaker than the previous year, but underlying profits of $US323 million was in line with analyst consensus measured by Bloomberg.
The company’s previous dividend was in February 2013, and shareholders have since been waiting for Newcrest to get its debt down far enough to resume dividends.
The miner’s gearing ratio reached 24 per cent on June 30, which meant it was below Newcrest’s debt reduction goal of 25 per cent.
Newcrest produced 2.43 million ounces of gold in the year to June 30, which was slightly higher than the previous year.
Copper production was lower than the previous year’s haul of 96,816 tonnes at 83,070 tonnes.
Newcrest produced its gold at an all-in sustaining cost of $US762 per ounce during the year, meaning its average margin per ounce was $US404.
Gold prices have been above $US1300 per ounce since June 24, and the lustrous metal was fetching $US1336.19 per ounce this morning.
Santos has taken a $US1.5 billion hit on the value of its GLNG gas export project in Queensland, which has been undermined by the collapse in crude oil prices.
The impairment charge, equating to about $US1.05 billion after tax, will be recognised in the half-year earnings report on Friday, Santos advised.
Chairman Peter Coates said the charge was “clearly disappointing but it is a consequence of the challenging environment which we now face.”
He said the impairment reflected “the reality of the current oil price environment“.
Chief executive Kevin Gallagher, who joined the oil and gas producer earlier this year, said low oil and gas prices were continuing to challenge Santos’s business as well as the entire oil and gas industry.
The charge is expected to plunge Santos into a heavy loss for the first half.
All of Australia’s $200 billion of new LNG projects are set to return far less for their owners than anticipated because of the drop in oil prices, given LNG long-term contract prices are directly indexed to crude oil.
NAB’s third-quarter profit fell 3 per cent to $1.6 billion as both funding costs and charges for soured loans increased, the bank said.
A trading update said NAB’s unaudited cash earnings in the most recent June quarter were 3 per cent lower than a year earlier, and also 3 per cent below the March quarter of this year.
Revenue was “broadly stable”, NAB said, as loan growth helped offset a “slightly lower” net interest margin, due to higher funding costs.
Net interest margins measure the difference between banks’ funding costs and what they charge for loans. They are being crunched across the industry, as banks find it hard to cut deposit rates as deeply as the cuts in lending rates.
Charges for bad and doubtful debts jumped 21 per cent to $228 million compared with the quarterly average for the six months to March 31.
The rise in bad debts was driven by higher provisions for loans to mining and agribusiness customers, it said, and because bad debts had been “unusually low” in the previous period.
The proportion of total loans that were more than 90 days past due lifted from 0.78 per cent to 0.81 per cent between the March and June quarter, NAB said.
Bad debts remain below their long-term average, but results last week from ANZ Bank, Commonwealth Bank and Westpac showed soured loans are rising across the industry.
The softer conditions are forcing banks to rein in costs, and NAB said expenses fell 1 per cent in the period.
Chief executive Andrew Thorburn said the higher funding costs in the quarter were one reason for its decision to pass on about half of this month’s cut in official interest rates to mortgage customers.
“While we saw higher funding costs during the quarter, asset quality remains strong and cost control was pleasing,” Mr Thorburn said.
“These higher funding costs contributed to our decision to not pass on all of the most recent RBA interest rate cut to home loan borrowers.”
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[email protected]: Reporting season ramps up
The ASX is set to open lower with the banks and the materials space both set to drag on the index today. The rest of the Asian markets also look set to open lower as well again today. Energy stocks may be the one bright spot today as WTI oil eyes up breaking through the US$45 level.
A raft of companies are reporting today, including the likes of NAB, Ansell, Newcrest Mining, Aurizon and JB Hi-Fi.
1. ASX: SPI Futures pointing to a 11 point decline at the open
2. Commodities: Industrial metals selloff after poor China data on Friday. Nickel sees worst two-day fall since May
3. Currencies: Aussie dollar drops 0.6% as commodities fall
4. Equities: Dow -0.2%, S&P 500 -0.1%, Nasdaq +0.1%, Stoxx 50 -0.1%, FTSE flat, CAC -0.1%, DAX -0.3%
5. Overseas data: US retail sales and PPI inflation disappointed. Up today, Japan 2nd Qtr economic growth; US Empire State manufacturing (August), NAHB homebuilder sentiment (August) and Treasury international capital flows (June)
6. Energy: Oil continues to rally after Saudi comments, +2.7%
7. Local data: NZ Performance of Services Index
8. Earnings season: NAB, Ansell, JB Hi-Fi and Newcrest Mining among those reporting.
The Friday session was filled with data disappointments from Chinese fixed asset investment (FAI) and industrial production (IP) and the US’s retail sales.
While China’s data releases did not have an immediate impact on Asian markets, they were wreaking havoc in Chinese commodity futures with particularly massive drops seen in nickel prices.
And it was these developments in Chinese commodities futures that continued to develop throughout the session, which saw the S&P 500 Materials sector lose 1.2% and the Aussie dollar lose 0.6%. China’s retail sales and IP missed estimates, but the worst performance was seen by FAI, which grew at 8.1% year-on-year well below expectations for 8.9%.
While flooding in Southern China during the period may have weighed on the data, the concern collapse in private sector FAI continued unabated with year-to-date year-on-year growth falling to 2.1% and in pure year-on-year terms it actually decline 1.2%.
Good morning and welcome to the Markets Live blog for Monday.
Your editors today are Jens Meyer and Patrick Commins.
This blog is not intended as investment advice.
BusinessDay with wires.
