Result Reporting – JBH, AZJ, WAM and ANN

JB Hi-Fi Limited (ASX: JBH)

Softness in guidance: Down 8% on February 12, 2018, JBH released its first half results for FY 2018 wherein the total sales surged up 41% and first-half statutory net profit surged 37.4% to $151.7 million. Total sales in Australia grew by 10.8% and reached to $2.48 billion as compared to the same period in the last year, with a 7.8% growth in comparable sales. Gross profit also increased by 9.8% and amounted to $545.3 million. If we talk about Software sales, these were down by 6.5% and on comparable basis the sales were down by 9.3% due to an acceleration in the decline in the Movies category but it was partially offset by the growth in the Games Software category. Online sales in Australia for HY18 also grew by 40.6% on pcp and recorded to 119.3 million. Its strong sales growth, combined with operating cost leverage drove strong EBIT growth. EBIT was up by 10.9% on pcp and amounted to $183.7 million while EBIT margin was up 1 bps at 7.4%. Seven new stores were opened in HY 18. Group inventory levels were in line with expectations and the inventory turnover in HY 18 was at 6.2x. The interim dividend was 86 cents per share (cps) fully franked and was up by 14 cps which represented 65% of NPAT and the payment will be made in March 2018. Total Sales growth for The Good Guys was -3.5% and the comparable sales growth was -4.7%.  In 2HY18, the Group will focus on sales and on its market share; and as a result, the company anticipates that its total Group sales and NPAT will be approximately circa $8.65 billion and in the range of $235 million to $240 million, respectively. However, this guidance looks below the consensus. Looking at the trading scenario and recent industry-wide shortfalls in view of market expectations, we give an “Expensive” recommendation at the current price of $25.86
 

Sales Performance (Source: Company Reports)
 

Aurizon Holdings Limited (ASX: AZJ)

2018 Guidance remains unchanged: Group released its first half year results for 2018. The Underlying EBIT was down by 5% due to the impact of one-off related to UT4 true ups while statutory NPAT was up by 52% and amounted to $282 million as compared to the same period in the prior year. The interim dividend was 14.0 cps which will be paid on continuing NPAT; and rose 3% on pcp basis. It also completed its buy back of $226 million out of $300 million. Transformation benefits of $42 million were offset by redundancy cost ($15m), wages and consumables escalation ($11m) and net incremental costs of $8m. Capex for FY 2018 also reduced to $500 million which is lower than what was forecasted earlier. Aurizon Network’s $525m bank debt facility was repriced in November 2017 and its maturity has been extended to FY2023. Its strategy to refinance in advance of debt maturities remained same. AZJ’s outlook for 2018 remained unchanged and the underlying EBIT remained between $900-960m from its continuing operations and the operating ratio also remained between 69.5% and 71.5%. Its 1HFY18 gearing target was 40% and the dividend pay-out maintained at 100% of its underlying NPAT. It is also disposing its Acacia Ridge Terminal and Intermodal Queensland for a consideration of $225 million and out of which $40 million of deposits were received. While the performance has been decent, the stock looks “Expensive” at the current market price of $4.69
 

Underlying EBIT Trend (Source: Company Reports)
 

WAM Capital Limited (ASX: WAM)

WAM continues to gain momentum: Up 2.1% on February 12, 2018, WAM Capital Limited announced a record operating profit before tax of $119.4 million for the half of the year to 31 December 2017 which is an increase of 49.8% on the prior corresponding period (2016: $79.7 million); and an increase of 48.0% in operating profit after tax was recorded that reached to $87.4 million (2016: $59.1 million). In the past six months, WAM Capital’s pre-tax NTA after adjusting for dividends increased by 9.1% that benefited all its shareholders. The Board declared a fully franked interim dividend of 7.75 cents which is a 3.3% increase on the prior corresponding period. Total return on shareholders for the period 31 December 2017 was 3.6% and it was primarily driven by WAM Capital’s investment portfolio performance but was offset by the reduction in the share premium to NTA during the period. As on 31 December 2017, the share premium to NTA was 20.6% (June 2017: 24.8%). It also appointed Catriona Burns CFA as its Lead Portfolio Manager and ceased to be a substantial holder of Melbourne IT Limited since 24 January 2018. The share price dipped by 2.87% in the past one month, while we maintain a “Hold” recommendation on the stock at the current price of $2.42
 

NTA Performance (Source: Company Reports)
 

Ansell Limited (ASX: ANN)

Raised EPS guidance: Ansell’s half year FY18 organic revenue growth and EBIT were up by 4.5% and 3%, respectively, as compared to the same period in the prior year. Industrial Growth Brands was also up and included HyFlex. Though macro- economic volatility remained a challenge with Emerging Markets, but Ansell’s core product, position and distribution strategies continued to drive its underlying penetration and growth. Its focus remained on strengthening its organic growth rate and enhancing differentiation. Its Buyback programme acquired 4.2 million of shares at VMAP at A$21.96. Return on Capital Employed was 12.1% for its first half of 2018 which is expected to improve to 14-15% by FY2020. Its Transformation Programme delivered cash benefits of more than $30 million and the P&L Cash Cost estimate remained unchanged at $40-$50 million which will be incurred over FY18-FY20. Under the current buy-back program, 4,464,23 shares were bought back at a total cost of US$76.4 million. Its revised FY18 EPS for continuing business is expected in the range of 96-106 cents as compared to its original guidance which was in the range of 91-101 cents. However, higher material costs do raise some concern. Despite the decent result, the stock fell 3.4% on February 12, 2018 which may be partly owing to profit booking as it looks fairly valued. We give an “Expensive” recommendation at the current price of $23.86


Growth Drivers (Source: Company Reports)

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