Bell Potter

In this daily reporting season update, we provide first impressions on key takeouts from companies reporting today, including Bendigo and Adelaide Bank (BEN), JB Hi-Fi (JBH), Aurizon Holdings (AZJ) and Ansell (ANN), with links through to more detailed reports.

Bendigo and Adelaide Bank (BEN)

BDD charge $72m/12bp GLA (BP $80m/13bp GLA); and CET1 capital ratio 8.3% (BP 8.0%). Cash EPS 89cps (BP 89cps).

Outlook: Broadly in line with our expectations and consensus. As expected, NIM was up 6bp in 2H17 due to repricing and lower liquidity drag and Homesafe is still growing thanks to Sydney and Melbourne prices. Costs kept in check but other income was down in 2H17 across the board – still a flight to low fee products endemic of smaller banks. Positive “Jaws” for the full year but negative in 2H17 suggesting top line strain compounded by flat volume growth. More of business as usual and with Homesafe revaluations now out of cash NPAT, result is a lot cleaner. Dividends safe but fairly valued is our view.

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JB Hi-Fi (JBH)

JB Hi Fi standalone business: Total FY17 sales of JB Hi-Fi standalone business of $4.37b, vs guidance of ~$4.33b. JB Hi-Fi Australia total FY17 sales up 10.9% to $4.15b, with SSS growth +8.6% (cycling +5.5%).o Hardware and Services categories SSS +11.9% and software (12.0% of Aust. sales) SSS -10.7%. o SSS growth in New Zealand (NZ) was weak - 5.3% (excluding sales impact of third party prepaid content cards). Note though, NZ is a small contributor to JBH. Noncash impairment charge of $15.8m recorded against NZ business. The Good Guys: Total FY17 sales contribution (since acquired) of The Good Guys standalone business of $1.26b, in line with guidance of ~$1.25b.o Total sales was up +0.2%, with SSS down -1.3%. Margins: Group EBIT margin is down 15bps vs pcp due to mix from The Good Guys acquisition. JB Hi-Fi NZ business was also a drag with –NZ$2.7m in EBIT. EBIT margin performance in JB Hi-Fi Australia was strong, up 43bps. Gross margin in JB Hi Fi Australian business of 22.24% vs pcp of 22.08% - benefited primarily from sales mix; CODB/rev in JB Hi Fi Australian improved and was down 21bps to 14.96% vs 15.18% in pcp; Merger synergies update: JBH now expects to achieve the upper end of its $15-$20m synergy target. Synergies now expected to be fully realised in FY19 (one year ahead of original timeline). Any upside will be reinvested. FY18 Guidance: JBH expects total group sales to be ~$6.8b (with contribution from the JB Hi-Fi standalone business of ~$4.65b and the Good Guys of ~$2.15b).

Outlook: Result slightly ahead of guidance and BPe. JBH’s guidance allowed for a slowdown in LFL sales growth in 2H17 which did not materialise (and hence the slight beat).The strong result was driven by sales growth and margin expansion in the JB Hi Fi Australian business. The Good Guys met management’s FY17 target. We believe Terry Smart’s appointment is helping drive the earlier realisation of synergies that said, we thought upside to synergies would be more material. JBH noted any further upside will be reinvested back into the business. We believe this likely reflects the increasing competitive outlook for JBH.

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Aurizon Holdings (AZJ)

Above Rail highlights: Volumes: Coal 198.2mt – down 4% due to ~11mt cyclone impact in Qld (down 8%), Iron ore 22.7mt – down 4% due to lower customer production. Revenue: Coal Above Rail up 1%, Freight down 8% due to lower revenue quality and volumes, Iron Ore down 12%, with volumes down 4% and impact of rate relief. Underlying EBIT Down 8% to $402m due to impact of cyclone and deteriorating Freight performance. Below Rail (Network) highlights: Revenue: Increased 7% to $1.3bn despite impact of cyclone. EBIT: Down 3% to $490m with additional cyclone-related operating costs and increased depreciation. Transformation benefits: $129m generated in FY2017. On target for $380m FY2016 - FY2018 commitment. $300m buy-back announced.

Outlook: Management expects EBIT guidance range for FY18 is $900-960mn (excluding Intermodal), coal volume guidance is 215-225mt, and delivery of another ~$120mn transformation savings in FY18.

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Ansell (ANN)

Divisional performance: Industrial: EBIT down 10% to US$80m, EBIT margin down 143bps 12.2%; Single Use: EBIT down 2% to US$63m, EBIT margin down 163bps to 19.8%, Medical: EBIT down 10% to US$47m EBIT margin down 144 bps 11.8%, Sexual Wellness: EBIT up 29% to US$40m EBIT margin up 367 bps to 17.8%.

Outlook: ANN has guided to FY18 Basic EPS of ~97.5 US cps, or 91-101 US cps + 1-2 US cps from 3 mths contribution of Sexual Wellness. This excludes any additional benefit from the US$265m buyback program; vs. our FY18 estimate 89 US cps. ANN expects organic revenue growth to be 3-5%. The improvement in EPS is expected to be realized on 1) organic growth, 2) the benefits of the "transformation program”, and 3) the benefit of lower interest costs (4¢ benefit to EPS).

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