Discuss about the Corporations and Securities Legislation Council.
The present report is developed for analysis and examination of the accounting and financial environment of a selected organization. This is done to evaluate the implications of the financial environment of an organization on the investment decisions of end-users. In this context, the report aims to presents an analysis of annual report of JB Hi-Fi Limited for evaluating its financial planning to support the decision-making process of end-users. The report for analyzing the financial position of the company has presented its brief summary describing its details such as industry sector, primary activities and its current performance. The details regarding the board of directors emphasizing on its composition, expertise and other information such as gender, age, education, career history and remuneration. In addition to this, it examines the financing decisions made by the company and its corporate governance policies. Also, it discusses the external audit function of the company in accordance with the ASX corporate governance. The measures taken by JB Hi-Fi for ensuring its business operations are in accordance with high level of ethical principles is also discussed in the report. Also, it evaluates the ownership stake of JB Hi-Fi and its financial statements through the help of ratio analysis.
The JB Hi-Fi Limited is involved in retailing of home consumer products in Australia and New Zealand. The company operates in highly competitive retail sector of Australia and has achieved a recognized position in the sector through retailing of consumer goods such as DVDs, CDs, electronics and home appliances, blue-ray disc, musical instruments and many others. In addition to this, the company is also involved in providing information technology and consulting services. The company owns about 60 home branded stores out of which four are in New Zealand and has more than 190 physical retail stores in Australia and New Zealand. The company is recently emphasizing on establishing approx 75 home stores in Australia and New Zealand and as such is largely investing in its supply chain activities and training programs for employees. This is done by the company to support its plan of business expansion and thus supporting its long-term growth and development plan (JB Hi-Fi, 2017).
The company has reported sales of about $3.95 billion in the year 2016 realizing an increase in sales of about 8.3% as compared to the previous year. In addition to this, the net profit after tax and earnings per share reported an increase of about 11.5% in the FY 2016 in comparison to the previous year. Also, the total divided also recorded a rise of about 10 per cent and gross profit of about 8.4 per cent. The company has achieved a competitive advantage in the highly competitive retails sector of Australia through reducing its operational costs by 15.2% in comparison to the proviso year. The balance sheet of the company has recorded a growth in strength with decrease in financial and operating leverage. Thus, it can be said that the company present financial condition is strong as reported from its recent annual report (JB Hi-Fi limited Annual Report, 2016).
The Board of directors of the company holds the major responsibility of promoting long-term value of shareholders. The board holds the composition for ensuring that its members provide a range of expertise, skills, diversity and knowledge for promoting the long-term growth of the company (JB Hi-Fi limited Annual Report, 2016). The varying members of the board and their details can be explained through the use of a table as follows:
|
Board Members Name |
Gender |
Designation |
Education |
Career History |
Remuneration |
|
Greg Richards |
Male |
Mr. Richard is presently working as Chairman Non-Executive Director of Board. He is also chairman of the remuneration committee of the company and of the audit and risk management committee. |
B.Ec (Hons) |
Mr. Richard before joining the company has worked in the banking industry. He possesses over 25 years of experience in the banking sector and also worked in Goldman Sachs JBWere for more than 19 years before joining the company. Mr. Richard ahs also worked in equity capital markets and is presently engaged in voluntary activities of serving various non-profit companies. |
$290,000 |
|
Richard Uechtritz |
Male |
Presently appointed as a non-executive director of the company |
– |
Mr. Uechtritz has over 20 years of experience in retail and is regarded to be the co-founder of photo chains of Rabbit Photo and Smiths Kodak Express. Also, he has remained a director of Kodak from where he resigned in the year 2010 before joining the board team of JB Hi-Fir in the year 2011. |
$130,000 |
|
Beth Laughton |
Female |
Presently working as non-executive director of the board of JB Hi-Fi |
B.Ec, FAICD, FCA |
Mrs. Laughton is a Chartered Accountant and has experience of over 25 years in corporate finance. She has also served as a board member of GPT Funds Management Limited and a non-executive director of the Sydney Ferries from the year 2004 to 2010. |
$166,093 |
|
Wai Tang |
Female |
Non-Executive Director |
BAppSC, MBA, GAICD |
Has carried out senior executive roles in Just Group and was also a general member of business development for Pacific brands. |
$115,201 |
|
Richard Murray |
Male |
Chief Executive Officer and Executive Director |
B.Comm, CA, GDipAppFin (Sec Inst), ASIA |
Chartered Accountant with over 20 years of experience in retail and finance sector. |
$2,750,596 |
|
Stephen Goddard |
Male |
Non-Executive Director |
MSc, BSc (Hons) |
Having 30 years of experience in retail and has carried out the role of senior executives in some of renowned retail companies in Australia |
– |
(Source: Jb Hi-Fi Limited , 2017)
The Board of JB Hi-Fi holds the responsibility of promoting shareholder growth and is directly accountable to the shareholders. As such, the board members have the responsibility of monitoring and controlling the operations of the company on the shareholders perspectives. The board develops and implements the corporate governance policies for the company in order to ensure that business operations are carried out in honest, open and ethical manner (Henderson et al., 2015). The Chief Executive Officer is accountable to the board and carries out the responsibility of managing, directing and promoting the profitability of the company. The Board composition consists of various executive and non-executive directors that are appointed through the use of most adequate search process. This is done to ensure that board members having different skills, capabilities, backgrounds and gender for promoting diversity and thus facilitating effective decision-making (Weygandt, Kieso and Kimmel, 2010). The board of the company has maintained that it promote diversity among its members in order to operate effectively. The board composition is reviewed regularly and currently have majority of non-executive directors on its board composition. The board composition currently consists of six directors, five non-executive directors including Chairman and a non-executive director. The board has maintained that its entire team member’s carries out their responsibility independently and acts in best interest of the company (JB Hi-Fi limited Annual Report, 2016).
The directors of the company regularly discuss the issues facing the company for developing an effective resolution. The Board also seeks suggestions from the directors for resolving nay situation of conflict of interest in the company. The board members continually meet in order to discuss the issues faced by the company and the board papers are presented to the directors for reviewing. The board members have varying expertise as discussed in the above section and therefore are regarded to be component for effective resolution of problems faced by the company. The board members on the basis of their expertise can bested to be highly competent for promoting the sustainable growth of the company. The board members have developed various committees for monitoring and controlling the business operations (Horngren et al., 2012). The board committee includes audit and risk committee, remuneration and nomination committee. The audit and risk committee holds the responsibility of providing assistance to the board on the matters of financial management, financial disclosures, overseeing business performance and reviewing of company policies regarding risk assessment and management (Stickney et al., 2009). The remuneration committee provides suggestions to the Board regarding the remuneration structure of the key management personnel. On the other hand, the nomination committee holds the responsibility of developing formal procedures for selection of the board members and directors (JB Hi-Fi limited Annual Report, 2016).
As analyzed form the director’s review in the annual report of the company for the FY2016, the company is currently focusing on opening new home stores in both Australia and New Zealand. This is aimed by the company for supporting its plan of business expansion in order to improve its profitability position in highly competitive retail market of Australia. The home appliance market in Australia is currently regarded to have a value of about $4.6 billion that is greater in comparison to many other retail categories. Thus, the investment decisions made by JB Hi-Fi in home sector can be regarded to be appropriate as it will help in promoting the long-term growth of the company. The company is presently emphasizing largely on innovation and technology for supporting the growth of its home appliances sector. This will prove to be useful for the company for meeting its significant opportunity of growth in home appliance sector in future (JB Hi-Fi limited Annual Report, 2016).
|
ASX CGC Principle |
Recommendations |
|
Delegation of adequate role to board and management |
The companies should effectively develop the board functions and management |
|
Effective Board Composition |
Maintaining the independency of Directors |
|
Promoting ethical decision-making |
Developing code of conduct |
|
Financial reporting Integrity |
Companies should develop audit committee for achieving integrity in financial processes |
|
Timeliness |
Develop written policies for their continues disclosures |
|
Protecting Shareholder Rights |
Promoting effective communication policies between companies and shareholders through arranging meetings |
|
Managing Risk |
Developing Risk committee |
|
Fair Remuneration |
Developing Remuneration committee for fair remuneration to the employees |
(Source: ASX Corporate Governance Council, 2014 )
The auditing function of the company is carried out by Deloitte. The auditing firms as per the Corporations Act 2001 have declared that directors have maintained independency in carrying out their roles and responsibilities. The auditor report ha stated that the general purpose financial statement of the company is prepared in accordance with the AASB standards and Corporations Act 2001. The financial reports have thus provided a true and fair view of the accounting activities of the company (Australia, 2011). The auditors’ report ahs also declared that development of consolidated statements of the company as per the IFRS standards. The remuneration report of the company developed under the supervision of directors is also reviewed by auditors. The auditors have regarded that remuneration reports are developed as per the section 300A of the Corporations Act 2001. The Board has also maintained an effective internal control over the business operations through development of adequate business polices and procedures (Weil, Schipper and Francis, 2013). The auditor’s ahs also stated that auditing of the company is carried out by maintaining independency as per the requirements of the Corporations Act 2001 (JB Hi-Fi limited Annual Report, 2016). The overall remuneration received by the auditors for the FY 2016 is $ 421,016 that comprises of remuneration recued or airing and reviewing of group and subsidiary financial statements and also of its IT services that can be depicted as follows:
The company in order to ensure that business operations are carried out in honet and trspnect manner has adopted a Code of Conduct. The Code of Conduct is developed by the board members for promoting the adoption highest ethical standards in business operations (Palepu et al., 2007). The Code of Conduct provides guidance to the directors, executives and employees of the company about the acceptable behavior so that they carry out their responsibilities as per the ethical norms and policies. The key elements of the code of conduct of the company are respecting employee’s dignity, providing a safe and healthy workplace, recognizing the employee’s achievements, securing the confidential information of the customers, suppliers and employees and complying with the legal laws. The company has also provided specific guidelines to the employees for guiding them to implement the Code of Conduct in practices while carrying out their daily job activities (JB Hi-Fi limited Annual Report, 2016).
As illustrated above, the major investors of the company are HSBC, JP Morgan, Citicorp, national Nominees and BNP. They hold the largest number of equity shares of the company and thus regarded to be major shareholders of JB Hi-Fi. In this context, it is essential for the company to carry out its business activities as per the interests of its shareholders for achieving long-term growth (Bazley, Hancock and Robinson, 2014). The Board of Directors in this context should ensure that company aims to maximize the shareholder returns through implementing sound business policies and activities (JB Hi-Fi limited Annual Report, 2016).
The analysis of the financial statements of any company helps to interpret its financial performance in that year and also allows making comparison. In this section financial statement of year 2016 of JB HI FI are analyzed using the ratio analyses technique in order to report on the financial performance of the company.
Liquidity analyses mean short term financial capability of the company to pay the short term or current liabilities. Current ratio and quick ratio is used to check the liquidity of the company.
This analysis provides the effectiveness of the company to use their resources to make the sales.
The leverage analysis shows how much debt capital is used by the company to finance the assets and process in the company.
This analysis provides capability of the company to earn the profits using the resources employed by the company.
The cash flow to sales ratio of the company is 4.68% that shows that company generates short of 5% cash of total sales from the operations (JB HI Fi Limited Annual Report, 2016).
The EPS of the JB HI Fi Company is 153.76 cents per share and it has increased as compared to previous year (Stickney, 2009).
Conclusion
Thus, it can be summarized from overall analysis of annual report of JB Hi-Fi that the company is currently having a good financial position. The company operates in retail sector of Australia but has attained a competitive advantage through minimizing its operational costs. The board of Directors composition has ensured that the company has maintained high level of expertise in its board diversity for effective decision-making. The company is recently planning to invest in its home sector growth as Australian home sector is presently in a state of ongoing growth. Thus, the financing decision of the company to invest in home sector is appropriate for promoting its sustainable growth. The company has also adopted sound corporate governance policies as per the ASX Corporate Governance Council guidelines and recommendations. This ensures that the company carries out is operations in ethical manner and thus securing interest of its major shareholders. The auditor report has also declared the financial reports of the company to be in effective compliance with AASB and Corporations Act. At last, the ratio analysis of the company has indicated its sound financial growth in the current and future period of time.
References
ASX Corporate Governance Council. 2014. [Online]. Available at: https://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-3rd-edn.pdf [Accessed on: 12 October 2017].
Australia. 2011. Australian Corporations & Securities Legislation 2011: Corporations Act 2001, ASIC Act 2001, related regulations. CCH Australia Limited.
Bazley, M., Hancock, P. and Robinson, P. 2014. Contemporary Accounting PDF. Cengage Learning Australia.
Henderson, S. et al. 2015. Issues in Financial Accounting. Pearson Higher Education AU.
Horngren, C. et al. 2012. Financial Accounting. Pearson Higher Education AU.
JB Hi-Fi limited. 2016. Annual Report.
JB Hi-Fi. 2017. [Online]. Available at: https://www.jbhifi.com.au/General/Corporate/Consumer-Matters/About-Us/ [Accessed on: 12 October 2017].
Palepu, K. et al. 2007. Business Analysis and Valuation: Text and Cases. Cengage Learning EMEA.
Palepu, K. et al. 2007. Business Analysis and Valuation: Text and Cases. Cengage Learning EMEA.
Stickney, C.P. et al. 2009. Financial Accounting: An Introduction to Concepts, Methods and Uses. Cengage Learning.
Stickney, C.P. et al. 2009. Financial Accounting: An Introduction to Concepts, Methods and Uses. Cengage Learning.
Weil, R., Schipper, K. and Francis, J. 2013. Financial Accounting: An Introduction to Concepts, Methods and Uses. Cengage Learning.
Weil, R., Schipper, K. and Francis, J. 2013. Financial Accounting: An Introduction to Concepts, Methods and Uses. Cengage Learning.
Weygandt, J., Kieso, D.E. and Kimmel, P.D. 2010. Financial Accounting: IFRS. John Wiley & Sons.
Weygandt, J., Kieso, D.E. and Kimmel, P.D. 2010. Financial Accounting: IFRS. John Wiley & Sons.
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