JB Hi-Fi Aktie

Good morning, and welcome to the J.B. Hi-Fi Group 2026 Half Year Results Investor Conference Call. Today's call will commence with a short presentation from J.B. Hi-Fi's Group CEO, Nick Wells; and Group CFO, David Giansalvo. Following the presentation, we will open to questions from investors, and the call will conclude around 11:30 a.m. We will welcome representatives of the media to this call and as with previous calls, I remind you that we will only be taking questions from investors.

I will now introduce and hand over to J.B. Hi-Fi's Group CEO, Nick Wells.

Good morning, everyone. Thank you for joining us. And as always, thank you for your interest in the business. We will talk through the presentation and then allow some time for questions.

I will turn to Slide 4, titled Group Model. You'll all be familiar with this slide, so just a few comments. We have 3 great brands that are all very complementary, JB Hi-Fi, the Good Guys and our most recent addition, e&s. Each brand has its own purpose and a clear focus on particular categories and segments. JB is focused on technology and entertainment. Good Guys is a leader in home appliances, particularly with entry to mid-market products and really aims at the replacement customer, while e&s is dominant in premium home appliances and bathroom products with a strong focus on the renovation and construction markets.

All of our brands go to market across multiple channels with stores online, over the phone, chat and commercial channels. Our value proposition in each brand is simple, the best brands, a big range and low prices. We are absolutely known and trusted for value. And with our passionate and knowledgeable team members we consistently deliver exceptional customer service. All of this is supported by our competitive advantages, which I'll talk to on the next slide.

So turning to Slide 5 and our 4 key competitive managers. First, scale and diversification. We have strong and engaged supplier relationships, both globally and locally that recognize our scale. We have a large, engaged and diverse customer base, which gives us the ability to execute promotions and new product launches at scale and high-traffic websites, which provides significant marketing opportunities and reach. Our multi-brand approach provides us the ability to have diverse and differentiated offers with a wide range of categories and different go-to-market approaches.

Second, low-cost operating model. We are a constant focus on productivity and minimizing unnecessary expenditure. The efficiency that we get through this model allows us to maintain low prices and drive value for our customers. Our group functions enable the business to drive efficiencies and spread investments across a large cost base.

Third, multichannel. This is ultimately about giving customers absolute choice on how they wish to shop with us. Our stores provide easy access to customers to transact, but are also destinations for discovery and advice. Online is used for both research and convenience purchasing and phone, chat or video gives customers who are not in store the ability to access staff knowledge and advice along with price negotiability.

And lastly and importantly, people and culture. Our knowledgeable and passionate team members provide exceptional customer service. Our dynamic and flexible business model allows the business to pivot quickly and adapt to any changing market conditions, and we have an unrelenting focus on health and safety.

Turning to Slide 6. We are committed to having a positive impact on our people, communities and environment and generating long-term sustainable growth. For our people, we are focused on supporting them and ensuring a safe, inclusive and respectful workplace whilst always looking for ways to provide our team members with flexibility and opportunities to grow and develop. For our communities, we seek to make a positive impact in the communities in which our team members live and work and work with our supplier partners to protect and further human rights. And for the environment, we are committed to minimizing the impact that our operations may have on the natural environment and proactively reducing our waste and our emissions.

Turning to the half year '26 group performance and starting on Slide 8. We will talk to the results in more detail as we move through the presentation, but we are really pleased to report record sales and strong earnings for half year '26 as we built on the momentum of the previous year. Total sales were up 7.3% to $6.1 billion. EBIT was up 8.1% to $454 million. NPAT was up 7.1% to $305.8 million. EPS was up 7.1% to $2.797 per share, and we today declared an interim dividend of $2.10 per share, up $0.40 per share or 23.5%, representing 75% of NPAT.

We'll take Slide 9 as read and turn to the divisional performance, starting with JB Hi-Fi Australia on Slide 10. It was pleasing to see continued strong growth in sales and earnings in JB Hi-Fi Australia. I'll turn to Slide 11 and cover in greater detail. For JB Hi-Fi Australia, total sales increased by 6.3% to $4.12 billion, with comparable sales up 5%, driven by continued customer demand for technology and consumer electronics and strong promotional execution. Mobile phones continue to perform well, particularly Apple. Unit sales have been strong across the majority of brands, and we've also seen ASP growth at a handset level.

Small appliances, the momentum in this category remains really strong with coffee, robotic vacuum cleaners and kitchen appliances all performing well. Our newly expanded personal care categories have had strong results and new innovative products from brands like Ninja have really resonated with our customers. Games Hardware continues to benefit from the release in late FY '25 of the Nintendo Switch 2. In computers, it was pleasing to see growth with Apple performing well again, but also solid results from AI-enabled devices and gaming PCs. Within fitness, wearables continue to perform strongly, but we've also seen successful results from our newly expanded health and well-being categories.

Online sales increased by 11.2% to $759 million or 18.4% of total sales. Gross profit increased by 6.9% to $904.5 million with gross margin up 11 basis points to 21.95%, driven by improvements in key product categories. Cost of doing business was 11.81%, up 5 basis points and in absolute terms grew 6.8% with continued disciplined cost control and investment in new stores and strategic initiatives. Our EBIT increased by 7.7% to $340.9 million with EBIT margin up 11 basis points to 8.27%.

On to Slide 12 and JB Hi-Fi New Zealand performance. It was pleasing to see our performance improve in New Zealand and to record strong sales and earnings growth, having been investing in growing the business in that market over the past few years.

I'll turn to Slide 13 and cover it in greater detail. So JB Hi-Fi New Zealand, total sales increased by 32.6% to NZD 268.6 million with comparable sales up 20.2% as the business continues to resonate with customers and expand its reach. Like Australia, we have seen strong growth from mobile phones, computers and small appliances. And in audio, we've seen strong growth from headphones, sound bars and party speakers.

Online sales increased by 47.7% to NZD 47.8 million or 17.8% of total sales. Gross profit increased by 32.8% to NZD 45.8 million with gross margin up 2 basis points to 17.05%. Cost of doing business was 12.73%, down 110 basis points and in absolute terms grew 22% with continued investment in new stores and strategic initiatives. Operating leverage from strong sales growth and disciplined cost control resulted in EBIT of NZD 4.5 million, up 104.5% with EBIT margin up 59 basis points to 1.69%.

Now turning to The Good Guys on Slide 14. Again, it was pleasing to see strong sales and earnings growth. I'll turn to Slide 15 and cover in greater detail. In The Good Guys, total sales increased by 4.1% to $1.58 billion with comparable sales up 4%, driven by continued customer demand for home appliance products and supported by well-executed Black Friday and Boxing Day promotional periods, which drove the strong Q2 sales results.

Portable Appliances growth was led by coffee machines and like JB Hi-Fi, the new Ninja products. Floorcare continues to show strong growth, underpinned by growth in robotic vacuums. Cooking growth was driven by growth in in-built cooking and range hoods. Refrigeration saw growth in French door refrigeration with consumers shifting into larger capacity models as well as volume growth in wine cabinets. Laundry growth was led by the shift into larger volume washers and combo washers as well as heat pump dryers.

Online sales increased by 14% to $266.1 million or 16.8% of total sales. Gross profit increased by 5% to $368.8 million with gross margin up 20 basis points to 23.32% driven by improvements in key product categories. Cost of doing business was 13.58%, down 1 basis point and in absolute terms grew 4% with continued disciplined cost control. EBIT increased by 8% to $107.4 million with EBIT margin up 24 basis points to 6.79%.

Now turning to e&s on Slide 16. In half year '26, we've remained focused on integrating e&s into the broader group and investing in the systems, processes and capability to set the business up for future growth. I will turn to Slide 17 and cover in greater detail.

In e&s, total sales for the 6 months to 31 December '25 were $144.8 million. In half year ' 25, the group consolidated four months sales and as a result, on a statutory basis, total sales were up 56.8%. For comparative purposes, for the full 6 months, total sales were up 2.9% with comparable sales down 0.1%. Gross profit was $43.4 million, with gross margin at 29.96%, up 261 basis points, driven by sales mix. Cost of doing business was 25.26%, up 283 basis points, driven by investments in new stores and the commercial division. EBIT was $1.7 million, in line with our expectations as the business invests in strategic initiatives.

I will now hand over to Dave for the balance sheet and cash flow.

Thanks, Nick. On Slide 19, the balance sheet and starting with inventory. Inventory was $1.41 billion, up 6.7% or $88.4 million year-on-year and in line with sales growth. Inventory turnover was down 21 basis points to 6.93x. Payables, which would ordinarily move in line with inventory, were up 1.7% or $20 million year-on-year, cycling an elevated payables position last year. As a result, net working capital was negative $67 million, up $97.9 million year-on-year and has returned to more normal levels.

Slide 20 highlights on the cash flow statement. Operating cash flow and operating cash conversion, whilst down year-on-year due to the normalization of working capital, continue to be strong. CapEx was $46.9 million, up 20.7% or $8 million year-on-year with investment in the store portfolio, online and strategic initiatives. Dividends paid of $224.1 million, which includes the FY '25 final dividend and the FY '25 special dividend of $1.00 per share or $109.3 million. Net cash was $489.5 million. In line with prior years, net cash at 31 December is seasonally high.

On Slide 21, capital management. As announced in August 2025, from FY '26, the Board has increased the dividend payout ratio from 65% to a range of 70% to 80% of NPAT. As a result, the interim dividend is $2.10 per share, fully franked, up $0.40 per share or 23.5% and represents 75% of NPAT. The record date for the interim dividend is the 27th of February, with payment to be made on the 13th of March. The group continues to maintain a strong balance sheet, and the Board will continue to review the group's capital structure with a focus on maximizing returns to shareholders and maintaining balance sheet strength and flexibility.

I'll now hand back to Nick for the January trading update.

Thanks, Dave. So turning to Slide 23 and the group trading update. For the period 1 Jan '26 to 31 Jan 2026, total sales growth for JB Hi-Fi Australia was 4% with comparable sales growth of 2.4%. Total sales growth for JB Hi-Fi New Zealand was 26.4% with comparable sales growth of 16.7%. Total sales growth for The Good Guys was 2.7% with comparable sales growth also 2.7% and total sales growth for e&s was negative 4.6% with comparable sales growth of negative 7.9%.

Whilst we're pleased to see sales growth continue in January in JB and The Good Guys, particularly cycling strong sales in the prior year, we remain cautious given the uncertainty in the retail market and continued competitive activity.

Now turning to Slide 25 and our group focus areas. We remain focused on 4 key areas and starting with retail execution in the top right-hand corner. In a competitive retail environment, our strong retail execution remains essential. We will continue to actively demonstrate improve value to our customers. We'll keep our operating model simple and efficient, focusing on the metrics that matter, driving operational improvements and reinvesting those efficiencies into customer-facing roles while continuing to enhance customer engagement and evolve our in-store experience.

Second is multichannel. We'll continue to strengthen our multichannel capability, leveraging our significant online traffic and expanding our marketplace offer. Our membership programs will remain a focus, delivering personalization at scale. At the same time, we'll ensure consistent customer experiences across all touch points and stay connected with shoppers however their shopping journeys evolve.

Third, brand reach. We'll continue to expand our store network across the group. In FY '26, we will open 3 JB Hi-Fi New Zealand stores, 1 new e&s store and 4 new JB Hi-Fi Australia stores. We have closed 1 JB Hi-Fi Australian store and completed 1 major store relocation in The Good Guys, and we'll complete one relocation in New Zealand. Our commercial businesses will continue to grow as we expand our customer base and strengthen our position across the market.

And finally, supply chain. Our investment in building and maintaining a fit-for-purpose supply chain network is ongoing. We will continue to focus on delivering best-in-class delivery options for our customers across all of our channels, optimizing inventory flow to ensure strong stock availability, particularly during peak trading periods and improving the flow of bulky products.

Over now to our investment checklist on Slide 27. You all know this well, so I won't go through it in detail. However, I will highlight a couple of points that continue to drive our success. We are the scale operator and leader in our market with 3 unique and relevant brands. We have a diverse and resilient product range from essential technology to replacement home appliances and continued product and category innovation. We have a flexible business model with a proven ability to adapt and grow and a very experienced management team.

Thank you, and we'll now open up to questions.

[Operator Instructions] Your first question comes from Shaun Cousins with UBS.

Nick and David, just curious around the drivers of the slowdown in the sales for January relative to what was a very strong sort of first half '26, and you saw that even a pullback on a 2-year stack basis. Has JB Australia and The Good Guys seen sales sort of in January suffer a little bit due to a bring forward of sales to November, not just say, from December to November, but also January to November as sort of Scali noted last week? Or was it competition or concerns around interest rates? Just any color on the drivers of January sales, much appreciated.

Yes. Look, January, it obviously has moderated slightly from the first half, but we're still pleased to see that growth. And I think when you look over the 2 years, the 2-year stack remains very solid. And it's -- the 2-year stack, I think is actually higher. It's a stronger 2-year stack than the Q1 stack. So what you're seeing, I think similar to what Scali saying with the promotional periods, January is not a promotional period, and we can see that customers are clearly looking for value and those promotional periods are outperforming like we saw in Q2. And I think that's a little bit of what you're seeing in January.

Okay. Perfect. Makes sense. My second question is just around CODB in JB Australia ex D&A, that's up some 6.8%. You've called out strategic initiatives. Can you sort of amplify some examples of that there? I'm just curious around how much of your CODB growth is actually sort of fixed or how much flex there is just in terms of how the company manages possibly slower like-for-like sales growth given that gross margins are generally at that 22% level. Just interested in any commentary around your CODB and how you handle that softer sales growth if that were to continue for the half?

Yes. Thanks, Shaun. Yes, so you're right, the CODB is growing slightly above sales there. It's about a 5 basis point increase in the CODB percentage. As you know, approximately 2/3 of that cost base is salary and wages, and we actively manage that in line with sales. So throughout that first half, we invested in additional hours on the shop floor, and that supported the customer experience, particularly during the key promotional periods. And we've had to do that whilst managing the fair work increase of 3.5% and 0.5% increase to superannuation.

So then to your question, if you find yourself in a softer sales environment, approximately 20% to 25% of that workforce are casuals and hours can be adjusted down if absolutely necessary. We try to do this without impacting the customer experience, and we do that by looking at ways where we can make perhaps the back of house more efficient or by analytically reviewing rostering to ensure that we take hours out of times in the day when there are less customers in the store. So we have that flex.

In terms of then where the cost increases come through, you can see in the [indiscernible] the other expenses that have increased more, and that's the strategic initiatives that we've called out in the past. And predominantly what comes through that line item is IT investment, so computer software investment, and that's what's driving the increase in JB.

And that computer software investment, does that annualize in the second half? Or was the first half, say, an annualization? Or should we just anticipate ongoing investments -- sorry, ongoing greater rates of computer sort of investments in the business?

We wouldn't expect it to grow that much. It will moderate slightly.

Your next question comes from Adrian Lemme with Citi.

I just want to focus on the gross margin. I think that was an area of positive surprise. Previously, there's been some drag from mix. And I know you've called out in your growth categories, things like mobiles and PCs still doing well, which I understand are below that kind of overall 22% margin. We've also seen TVs be soft, which I understand is a bit better margin. So is it small appliances, the growth you've seen there that's sort of driving this mix benefits, please?

Yes. It is -- wasn't -- mix wasn't a big headwind in JB in the first half. So yes, the -- and it is growth in some of those categories like small appliances that you mentioned is helping to offset a weaker first half in TVs and with growth in some of those lower-margin categories, that is definitely helping. But I would say what we've been pretty consistent in guiding to that 22% gross margin in JB in Australia. And I think it shows the strength of the execution of the teams in terms of how they're going to market, how they're leveraging that scale with suppliers, how our teams in store are actively qualifying customers and attaching and building high-quality baskets for customers. All of that goes into helping to maintain that 22% gross margin in JB Hi-Fi Australia.

And can I just ask a follow-up on small appliances. It obviously continues to be a strong performer. You've mentioned that you've expanded your range in personal care. Are you looking to allocate more space in small appliances more generally in JB Hi-Fi Australia and like could you potentially pull back on space allocation to large appliances, which maybe isn't performing as well?

We do space allocation on a store-by-store basis. You will definitely have seen in some of our more recent refurbishments that we are allocating more space to small appliances. And that's predominantly not coming from large appliances predominantly today. That's typically coming from as the software space in those stores is shrinking. So as movies and music is declining, that's typically where that extra space for small appliances and fitness and health and well-being categories is coming from.

Your next question comes from Michael Simotas with Jefferies.

Can you hear me?

Yes, we can hear you now, Michael.

Sorry. Just a question on the January trading update, if I can. I think there was an extra Saturday this year versus the same time last year in the month of January. Did that have a meaningful impact on any of the banners?

No, it doesn't. The weekends, the way our sales fall over the course of a week now, the weekends don't have a material impact on the sales.

Yes. Okay. That's great. And then just a follow-up to the earlier question on gross margin and in terms of how that relates to the promotional environment. It looked like a very promotional period, and you seem to go on full Boxing Day sale well out from Christmas. Can you talk a little bit about the balance between your own investment in promotions and price versus the support that you're getting from suppliers? And to what extent you can continue to deliver that increased competitiveness while maintaining gross margin?

Yes. I would say that nothing has changed through the half. It's still -- we're still actively looking to promote value and drive value with customers. We know we can see that customers are looking for that value, and we can see those promotional periods are really important. I would say our suppliers can see that as well. So they're as motivated at the moment in making sure they maximize those promotional periods. And you're seeing that across the industry. And that means the promotions are longer. That means they are starting earlier and even suppliers when they're going direct to consumer, they are starting earlier as well.

We haven't seen a significant change in the mix of suppliers of promotions that are funded between us and the suppliers. We still endeavor to get all our promotional activity funded by suppliers. And we're still seeing, like we said last time, that sort of normalization of discounting on the sales floor. We're probably seeing that back to normal levels as well. So it's back to that competitive on-floor discounting. It's promotional. Our teams are doing a really good job of managing that with our suppliers and making sure we get supported as best we can.

Your next question comes from Tom Kierath with Barrenjoey.

Just within the AV category, were margins actually down there? Like was there more promotional activity and discounting there? Or was it kind of fairly normal?

Pretty normal in the -- when you say AV probably TV category, pretty normal. Like it's very promotional at the moment, and it's probably -- you'll notice it's not one of the categories we called out as being in growth. So it's a more challenging category from a top line sales growth perspective. But no margins overall have held.

Yes. Cool, cool. And then secondly, just on e&s, like the last 12 months, I think it made $4 million like in calendar '25. You paid effectively kind of $60 million for it. So it's making like I know 6% return. I assume that's not where you want it to kind of be. But what is the kind of shape of that business look like? And when do you kind of get it to a double-digit, maybe 20% type return, which I assume you're kind of targeting for that business?

Yes. It's -- like I said in the presentation, it's a long-term play for us, e&s. It's -- for us, it's come from being a small family business to now being part of a bigger group with -- we've got plans to expand and roll that brand out. So we need to get the foundations right. We're going to get the basics right. We absolutely have had to put some investment into the cost base to do that, and that will probably continue for the next 12 or so months. But our view hasn't changed. We still maintain absolutely long-term really significant opportunity there.

It's talking to a different customer, The Good Guys. It's a more premium customer, absolutely more renovation and construction. Some of the investments we do make, they're going to have longer-term paybacks in terms of -- if you think in that business, we're putting -- like we said in the presentation, putting investments into new stores and commercial. We've got to right the sale, then there's long delivered lead times on the nature of those products. They're construction -- typically construction sales. So there can be 6 months, 12 months lead times on the sales between written and delivered, and it's going to take some time for that to come through. So we're really comfortable with the long-term outlook, and we're just going to require a bit of patience over the short to medium term as we get those foundations right.

Your next question comes from Sean Xu with CLSA.

You called out the strong performance in AI-enabled device and computing in the category. My question is, have you seen any impact from ongoing chip shortage resulting in higher ASP or supply constraint in the coming months? And perhaps what do you expect in consumer behavior to respond in this case, please?

Yes. We haven't seen it in the first half, but it is -- at the moment, we're definitely seeing suppliers starting to push price increases through in the PC category. The major driver of that now is cost increases for suppliers in memory and storage. And those price increases are likely to be on average around 20%. They haven't hit yet. They're likely to hit from March. We -- our expectation is we won't see ASP increases anywhere near that 20%. And it's like what we've talked about when we've seen price increases before in a category like appliances.

There will be PCs at price points that customers can still spend to the same price point they were previously going to spend. So if a customer wants to spend $99.99 on a computer, we'll absolutely have a computer that is at that price point, and that's a choice that customer makes to purchase the PC at that price point, and it may have slightly different specs to what it had 3 months ago or there potentially will be some customers who maybe are willing to spend a bit more to get a more premium PC like a gaming PC. So haven't -- it definitely hasn't had an impact in the first half. Price increases will come through in the second half. We'll make sure we maintain those price points.

And on top of that, there is still a pretty strong tailwind in terms of replacement cycle from those consumers who bought a PC during COVID, that's sort of 5 years ago now. So it's a natural replacement cycle on those PCs. And also there's a reasonable sized Windows 10 active user base who is now in the support and likely some of those users will move to Windows 11 over the next 12 months.

Okay. That's super helpful. Can I just do another quick follow-up on TV category, please? The industry feedback suggesting this category weakness has been in the past 12 months, in particularly around Chinese TV brands getting more market share, which had a pressure on ASP growth. Is that what you're still seeing? Any color on this category? And when do you expect the growth in this category again, please?

Yes, we have -- we've seen over the last 12 months to 2 years, yes, the Chinese brands have been performing quite strongly in the category. And look, I don't think that's the key driver of ASP. I think it is just generally, it's a category that has been a bit soft and everyone is trying to stimulate demand. And as a result, we're promoting heavily and promoting frequently with suppliers, and that's putting a bit of pressure on ASP. It's -- we would like to think that, that category starts to improve over the next 12 months. There's some new technology coming with RGB, which will hopefully be helpful. And yes, and at some point in the next 12 months, you'd like to think we start to cycle through some easier comps in that category, too.

Your next question comes from Ben Gilbert at Jarden.

Just wanted to follow up on the comment just around the expectation of price increases of sort of circa 20%. What sort of work has been done or thinking around sort of price elasticities? And I just want to unpack if you think ASP will be materially less than 20% is the expectation suppliers are going to fund that? Or are you expecting some gross margin compression to understand that?

No, we're not expecting gross margin impact. So those price increases will flow through to ticket price increases. What we are actively doing and what suppliers are actively doing is looking at range and the models within the range and actively trying to make sure they have product available at every price point.

So a simple example is if you previously -- and these aren't live examples, but if it was $9.99 again, and you said previously that had 512 gigabytes of RAM, maybe after the price increases, you'll have a device that has -- sorry, not a gram of storage. You'll have a device that has 256 gigabytes of storage at $9.99. But similarly, it might be 16 gig RAM instead of 24 giga RAM. So what you'll see is, yes, there will be PCs with different specs at different price points. And that is -- that will help to enable customers to still hit the price point that they want to hit. And then -- but like I said, but there will be a certain number of customers who are very focused on performance or very focused on certain specifications and then they may be willing to pay more for that higher-end PC.

That's helpful. And I know you guys supply a lot of work around modeling in terms of where the replacement cycle is at. Do you think we're seeing the kicker in terms of demand coming through at the moment across sort of small appliances, PCs, these sorts of areas from replacement cycle kicking in? Or have we still got a bit of way to go there?

I think when you look at the first half, we would say all of those categories have had unit growth in the first half. So it's hard for us to exactly pinpoint what it is, but it does feel like you're seeing some of that replacement coming through.

And just final one for me. Just in terms of margin mix in terms of looking forward, you obviously officially launched your media business now you've got your partner. You've also obviously got the marketplace, which is ramping and then there's obviously still a big focus around attachments, et cetera, with your loyalty piece. Just wondering where you are in terms of how material those 3 buckets could be looking forward from a contribution standpoint, particularly the media side? Is that a $20 million EBIT opportunity for you? Is it $5 million? Because some big numbers get thrown around from some of your competitors and people more broadly in retail.

Yes, I have seen a number of big numbers quoted by a number of retailers. I would say we have a very strong traditional retail media business today that we work with our supplier brand partners around, and that's anything from on-site to in-store, and we've got screens in store and we monetize those, and we're absolutely monetizing a lot of our digital assets. What you've seen in the recent announcement, it's more about an evolution of that retail media business. It's not -- we're not expecting these massive incremental improvement in spend from our trade partners. It's around new technology platforms, new assets, just continuing to support and to grow that business with our brands.

And then it's about also opening it up to what we would call near endeavor partners, so people that we not necessarily supply partners today, but people that we work with to give them an opportunity to access some of those assets as well. So it's -- those things all go into helping us maintain the gross margin. It's not about -- we're not expecting to see an uplift in gross margin as a result.

Marketplace should be accretive though in theory, isn't it because of it drops sort of pretty chunky.

Yes, the commission drops through...

EBIT margin, not necessarily gross margin.

Your next question comes from Bryan Raymond with JPMorgan.

The first one is, apologies, a bit of a short-term one. But just in the January period, I was wondering if there was any impact from any product launch delays, particularly in telco category that might have weighed on the January figure, which will wash out over the March quarter. Is there anything meaningful that we should be thinking about there?

It's not from a product launch perspective. There's nothing significantly different. There is a few stock shortages that had an impact in January, but overall, nothing from a product launch perspective.

Okay. And then just on the CapEx side, you've already talked to some of the investments you're putting through the CODB line, but I noticed CapEx up 21% year-on-year. You've also talked to supply chain investment a fair bit over time. And just interested as to how much that's playing a role in that CapEx step-up, if we should be expecting a similar lift in the second half and beyond? Just keen to understand that sort of CapEx profile, please.

Yes, Bryan, there's not a lot of CapEx in the supply chain in the first half. It's all timing. So we had more store-based CapEx completed in the first half this year. There was one additional new store in the half compared to the same half last year, and The Good Guys undertook a major relocation of the Geelong store. So that will normalize in the second half, and it will be moderately up across the full year.

Okay. And maybe just a follow-up, if I can, just on that is the supply chain piece, like how should we be thinking about that from a medium-term perspective? I don't expect guidance, but it's something you've spoken about for a little -- for a few results in a row now. Is that something that should eventually flow through to CapEx? Or are you looking at some sort of supply funding of that through terms? I'd just be interested in your thoughts more broadly around supply chain, please?

Yes, we're not expecting a significant increase in CapEx in supply chain in the short to medium term. At the moment, it's more around continuing to evolve that supply chain rather than any big bang investment in the short to medium term. We're doing a significant amount of work, and we've made some good improvement in the first half, like we implemented a new transport management system, which is giving us a good foundation for how we deliver our products. We tested some centralized online fulfillment in the first half in New South Wales in a dark store. And we'll just continue to test and learn over the short to medium term. There's not -- I say not expecting a significant uplift in CapEx in that period.

Your next question comes from Josephine Forde with BofA.

My question is on The Good Guys sales growth. The 2-year stack is pretty outstanding. Can you just talk through how you've executed this? What's driving such strong demand in home appliances? And then have you been doing anything differently in your summer promotional period? Because it still looks like you're gaining some market share in The Good Guys.

Yes. What's really pleasing in The Good Guys is we're doing really well in those core destination categories for The Good Guys, and that's that large, bulky appliances and small appliances. And I think what you're seeing there is -- and we talked about is in an environment where customers are looking for value, The Good Guys brand is absolutely positioned for value. And as a result, I think we take share in those value categories in a period like this. Absolutely. The Good Guys, credit to the team. They're executing very strongly and particularly in that Q2 to cycle some really big numbers in Q2 the year before and deliver 5% sales growth again this year, a real credit to execution in The Good Guys.

Okay. Yes. And then maybe just on -- I know you don't give guidance for the second half, but are there any categories that you're sort of expecting should drive sales for JB Australia? Is it just continued momentum in phones and small appliances again? Or are there new product launches or promotions that you're planning for the second half, please?

It will be -- look, it will be a continuation of the categories we've seen in the first half. We still think we've got significant opportunities in the mobile phone category. Like I said earlier, with the computer category with the replacement cycle in computers. And then in small appliances, we have seen innovation. We're also excited about categories like in the health and fitness categories. We've seen product launches in the first half in those categories that have been quite successful, like in wearables and for example, in rings and other wearables, we've seen strong growth and strong demand for those products we introduced those in the first half.

So it's definitely about a continuation of the categories that we called out in the first half. And there will be -- there is some good product launches coming, and we will see cycling the same timing as last year broadly. So they're cycling the second half last year releases, but they will come through in half 2 as well.

Your next question comes from Craig Woolford with MST Marquee.

First question, just around the Aussie dollar. You talked about what might happen in the PC or computer category. How -- I know you don't have direct exposure to currency, but most of the products are ultimately manufactured offshore and currencies will impact your suppliers. But how do you expect the Australian dollar or price inflation path ahead given what we've seen in the Aussie dollar over the last couple of months?

Yes, it's a good call out. I probably should highlight it. Look, no one is -- the OEMs aren't talking about price reductions just yet, but I do think there is a potential for the foreign exchange to assist with offsetting some of those cost increases in PCs as an example. I think potentially, what you see and it depends on the OEM sort of suppliers hedging strategy, but I think potentially, on new product launches, we might see some benefit of that FX helping to offset what would otherwise be cost increases.

And how does it transfer at a -- would you tend to find a transfer at a dollar rate or as in a dollar outcome or you hold your percentage margin, like if you've got less lower prices in some of your categories that are not impacted by the memory chip issue, just is that a headwind for JB Hi-Fi? Or is it...

Yes. Look, I don't necessarily think we're going to see straight price reductions. I think it will help to offset inflationary impacts of cost increases in products. But ordinarily, we would say our model has always been hold the gross margin. And if there is price decreases, then we'll -- it's a good thing for driving value and driving top line sales growth.

Got it. And with your one other line item, if I add together lease amortization and lease interest costs, that increased by 8.5% year-on-year. There's a little bit of store movement, but it still does look like a high per store increase in lease costs. Can you just give some background on that? And should we expect a similar dynamic in the second half?

Yes. So interest on lease expenses is up and predominantly in The Good Guys, which you can see. It's a combination of 2 things. The first is the phasing of the lease renewals. So there's been more lease renewals come through with The Good Guys. That's just timing that ebbs and flows. And the expense will always be higher at the start of a lease period. So when you get more renewals, you'll get a higher interest on lease liability.

And the second is the increased discount rate that comes through on renewals because the cash rate is a lot higher now than 3 to 5 years ago when the last -- when the lease was last renewed or signed. So it will push more interest on lease liabilities. So that explains the interest on lease liabilities. When you aggregate them up, lease costs are generally running in line with sales. So reasonably well managed to the extent that you see more, it's just a function of new stores.

But isn't it more of a fixed rate increase? Like I said, if I add together the 2 items, I get 8.5% growth year-on-year, which is above sales, but is it -- should we expect it to be sales linked? So if we've got a sales slowdown in the second half that, that lease cost growth will slow? Or is it more fixed than that?

They're more fixed.

Your next question comes from Ajay Mariswamy with Macquarie.

Just a question around The Good Guys. Given it's more of a replacement market type business, how could we expect some of the changes we're seeing in interest rates or potential consumer expectations on that? Would we expect that to be a more insulated type business relative to a JB Hi-Fi or even e&s?

I think it's -- look, I think the replacement nature of the business does absolutely provide some protection for The Good Guys. So that is helpful for The Good Guys. Relative to JB, I would say that in JB, what we've seen, and we've said this over the last few years is that tech is becoming less discretionary as well. People are prioritizing their spend on their mobile phone and above other things. So I think there's an element of sort of less discretionary nature of the JB spend too. e&s is definitely more premium and more construction and renovation linked. So yes, it's probably out of the 3 businesses. That's the business that is more correlated to impact of interest rates and impact of the housing cycle.

Got it. And then just in terms of the competitive dynamics that you're seeing in the outlook statement, you commented on competition still remaining pretty strong. Is that more from the incumbents at the moment? Or are we seeing the likes of an Amazon, for example, starting to get a foothold in the market?

No. Look, it's more from the incumbents. So Amazon are absolutely there and competing hard, but it's more traditional multichannel retailers.

Your next question comes from Mac Ross with Morgan Stanley.

So there's been a few questions already on like AI PCs and memory relating to PCs. But it sounds like you don't view memory inflation as a headwind at all to impacting volumes. Is that correct?

No. Look, we're obviously cautious of the price increases that are coming through. We're just saying that we are working very closely with our supply partners to make sure we have devices available for customers at all price points to make sure we minimize any impact or minimize to the best we can, any impact on volume. And the offset is that there will be -- and like I said, there will be a cohort of customers who will be potentially willing to spend a little bit more as well. So we're cautious on it, but we're actively planning for it. We've got good visibility on supply, and we're comfortable with supply, and we're comfortable between us and our supply partners, we'll have a good strategy in place to work on how we present that to our customers.

And you said the first sort of port of call would be to hold category GP margins, but you would invest in price if required to do so?

Our goal is always to hold gross margins and to work with our suppliers to maintain that.

Great. Next question, maybe just on Amazon. Touched on multichannel. I was just curious if you've noticed a step-up in their price competitiveness in key categories. And also, is this an area that you guys need to invest more in, in terms of e-commerce and delivery offering?

In terms of competitiveness, though, we haven't seen any significant change in Amazon competitiveness. They are a really strong competitor today. They've been a strong competitor for a period of time now, and we are very focused on making sure we compete actively with Amazon and the more traditional incumbent competitors effectively. So comfortable around competition. We'll continue to manage it.

And from a delivery perspective, look, Amazon do a really good job in delivery, but we think we have very good delivery options for our customers as well. So we remain absolutely focused on delivering that best-in-class delivery options and whether that's from our bulky goods through to our expedited sort of immediate delivery options with Uber. We think we've got a really powerful suite of delivery options that compete well with a lot of those pure-play competitors.

Your next question comes from Adrian Lemme with Citi.

One more quick one. Just noted inventory up 7% year-on-year. We've seen sales slow a bit in January and maybe gets tougher from here with the rate outlook. Are you guys confident that you can manage the inventory without hurting gross margin from here, please?

Yes. I think, Adrian, as you've seen, we'll continue to manage inventory in line with sales growth. And you've seen that inventory come in more in New Zealand, obviously, to support the strong comp and new store growth we're generating in New Zealand. And there's a little bit more in JB Australia in some of the categories of brands that are also driving growth. As you look forward, as I said, we'll continue to manage that in line with sales growth, and we're very comfortable with the level and quality of inventory in the business as it stands.

Your next question comes from Bryan Raymond with JPMorgan.

Just further on the memory pricing dynamic. The mobile phone handset category, I understand it's probably a bit less exposed potentially from a price increase perspective, but as I understand, a bigger part of your sales mix. So just trying to understand if the similar dynamics hold there and upcoming iPhone release and other releases, should we expect ASP inflation there as well of a similar magnitude? Or -- and do you expect the customer to respond in a similar way as in PC?

Yes. Look, I think it's an open question at the moment. I think that a couple of those dynamics that I called out earlier are absolutely applicable here as well. So the cost of memory and storage you'd expect would have an impact. What you typically see in the mobile phone category is the suppliers will hold increases for the next product launch. And if you think about iPhone, that's typically not until September. So we've got a fair amount of time before that will come through.

And then as I called out earlier, the other element which will impact is whether the foreign exchange will help to offset some of those memory impacts in that mobile phone category. Separate to that, is the customer more willing to pay more in that category? Potentially. I think some of the customers in those mobile phone categories are very brand loyal, and there's a number of customers who will want the latest and greatest device. And so maybe it's a little bit less elastic on price.

Your next question comes from Emily Porter with Morgans.

All right. And otherwise, that does conclude our question-and-answer session. I will just hand back for any closing remarks.

Well, once again, thanks, everyone, for joining and for your interest in our business. We will no doubt see a number of you on the road over the course of the week. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.

Good morning, everyone, and welcome to the JB Hi-Fi 2025 Annual General Meeting. My name is Stephen Goddard. I'm Chair of the JB Hi-Fi Group, and I'm your Chair for today's meeting. We have a quorum, and I'm pleased to declare the meeting open. Can everyone hear me there? Do you want just a bit more volume? How does that sound? Do you want my name again? Stephen.

As in recent years, we are holding a hybrid AGM, and I'm delighted to be able to extend a warm welcome to our shareholders, proxies and guests who are attending either in person or through our online meeting platform. Our meeting is being held on the lands of the Wurundjeri people of the Kulin Nation, and I wish to acknowledge them as the traditional custodians. I would also like to pay my respects to their elders, past and present.

I would like to introduce my fellow directors: Beth Laughton, Christy Boyce, Sheila Lines, Mark Powell, Geoff Roberts, Melanie Wilson; Richard Uechtritz; and our Executive Director, Nick Wells.

Our Company Secretary, Doug Smith, is also in attendance, as is Suzana Vlahovic of Deloitte Touche Tomatsu. Obviously, as some attendees are attending online, there's a risk of technical difficulties. If this happens, it will be at my discretion whether we continue the meeting or postpone or adjourn.

And look, to that point, you may have seen in the news this morning, we are aware of some global problems with Microsoft's Azure software. We understand that there may be -- this may intermittently be affecting Computershare's online system, although it does appear to be up at the moment. Look, noting that there is a quorum of shareholders in the room, and we've had 73% of available votes have already been cast, we will continue with the meeting, and we apologize for any inconvenience that has occurred.

The agenda for today's meeting is as follows: procedural issues, summary of items of business and voting opens, Chair's address, group CEO's address, further information on each item of business, including hearing from the directors standing for election and reelection and disclosure of proxy votes already received on each item, questions, voting closes and close of meeting. The notice of meeting dated 12 September 2025 has been made available to all shareholders, and I'll take it as read.

I'll start by briefly setting out how the meeting will work. All shareholders and proxies attending the meeting, whether in person or online, have the ability to ask questions and submit votes. Noting that questions may be submitted at different times by online participants and participants in person, we will answer questions on all items of business later in the meeting. For those attending the meeting online who wish to submit a written question, you may do so at any time during the meeting via the Q&A icon on your screen, type the question in the text and then press the send button. I will then address your question at the relevant time. If you are attending in person or attending online but wish to ask a question verbally, please wait until that time to ask your question.

Voting today will be conducted by way of a poll on all items of business, and Computershare will act as the independent returning officer. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. For those attending the meeting online and who are eligible to vote, when the poll opens, a voting icon will be available on your screen. Selecting this icon will bring up a list of resolutions and present you with voting options.

To cast your vote, simply select one of those options. There is no need to hit submit as the vote is automatically recorded. Please ensure you cast a vote for all resolutions. You will receive a vote confirmation notification on your screen. To change or cancel your vote, click the link, click here to change your vote at any time until the poll is closed. Votes may be changed up until the time that I declare voting is closed.

For shareholders, proxies and corporate representatives attending in person, you vote by completing the yellow voting card that was provided to you upon admission. White cards are for visitors who cannot vote or ask questions today. Shareholders with a green card are not entitled to vote on the items of business. You can vote at any time after voting opens, and I will warn you before I close voting at the end of the meeting. Results of voting will be released to the ASX after the meeting.

If you have any difficulties voting or submitting questions, please consult the online meeting guide, which can be accessed within the online platform or on the JB Hi-Fi Investors website if you're attending online or raise your hand if you're attending in person.

The items of business for the meeting are set out in the notice of meeting and are as follows: number one, to receive and consider the financial and other reports for the financial year ending 30 June 2025; number two, to vote on the reelection and election of directors; number three, to adopt the remuneration report; and number four, to approve the allocation of restricted shares to the Executive Director. I will provide more detail on each of those items later in the meeting.

I now declare voting open on all items of business. The voting tab will soon appear. Please submit your votes at any time, and I'll give you a warning before we close voting.

We now move to my Chair's address. The financial year ended 30 June 2025 was another strong year for JB Hi-Fi and its subsidiaries as we built on the momentum of the previous year with the group staying focused on its core proposition of driving great value and delivering consistently high levels of customer service to resonate with our customers.

We are thankful to our over 16,000 team members across Australia and New Zealand, whose support and commitment ensure the ongoing success of the business. Our motivated, passionate, knowledgeable and highly trained staff continue to be our most important asset.

As previously announced, Group Chief Executive, Terry Smart, retired from the group on the 3rd of October 2025 and has been succeeded by Nick Wells. We would like to recognize and thank Terry for his significant contribution to the group made over many years since joining in 2000. Since his reappointment as Group CEO in 2021, the group has seen significant growth in sales and profit and its share price rise to record levels. We wish him all the best for the future. Thank you.

The Board was delighted in having a candidate of the caliber of Nick within our ranks, and we look forward to him applying his considerable talents to the role and putting his own stamp on the group while continuing with the current strategy.

We would also like to recognize and thank Beth Laughton, who will retire from the Board today. Beth has made a significant contribution to the group's success over the past 14 years, particularly in her role as Chair of the Audit and Risk Committee. Thank you, Beth. Geoff Roberts will take over from Beth as Chair of the group's Audit and Risk Management Committee.

We're also delighted to welcome Sheila Lines to the Board following her appointment as a Non-Executive Director on 15 August 2025. Sheila has also joined the group's Audit and Risk Management Committee. Sheila brings both retail experience, financial acumen and her skills will complement those of our existing directors, and the Board is very much looking forward to working with her.

Turning to the group's operating model. Our group comprises 3 iconic retail brands, JB Hi-Fi with a focus on technology and consumer electronics; The Good Guys with a focus on home appliances and consumer electronics; and e&s with a focus on premium home appliances and bathroom products. The value proposition for each brand centers around ranging the best brands at low prices, supported by exceptional customer service across our store network, our online and over the phone channels and through our commercial business.

The multi-branded retail approach continues to be underpinned by 4 key competitive advantages being scale and diversification, a low-cost operating model, multichannel capability and people and culture.

An integral part of the group's ongoing strategy is to encourage innovation and diversification in our product range, merchandise formats, advertising, supply chain, property locations and our online offer in a controlled and responsible manner to ensure we remain current and relevant to our customers. We have a culture of embracing change, which is seen as a natural part of the business, and this approach provides opportunities to increase revenue, margin and productivity.

The group's FY '25 sustainability report, which can be found on the group's investor website, outlines our commitment to having a positive impact on our people, our community and our environment. As set out in the report, we are committed to supporting our people and ensuring a safe, inclusive and respective workplace while always looking for ways to provide our team members with flexibility and opportunities to grow and develop, making a positive impact in our communities in which our team members live and work and working with our supply partners to protect and further human rights and minimizing the impact that our operations may have on the natural environment and proactively reducing our waste and emissions.

In closing, the Board remains focused on building long-term shareholder value. Since JB Hi-Fi listed in October 2003, the share price compound annual growth rate is 21.1% compared to 4.7% on the ASX Index -- 200 Index over this period to 28 October 2025. The earnings per share compound annual growth rate is 17.9%, and the ordinary dividend per share fully franked compound annual growth rate is 18.9%.

More recently, over the last 5 years, the JB Hi-Fi share price compound annual growth rate is 17.9% at 28 October 2025 compared to 8.3% on the AS 200 Index. The earnings per share compound annual growth rate is 10%. The ordinary dividend per share fully franked compound annual growth rate is 7.8%, and the group has returned an additional $196.8 million in special dividends to shareholders.

I would like to take this opportunity to thank my fellow directors, the executive team and our store warehouse and support teams for their unwavering commitment to the ongoing prosperity of your company and its shareholders.

I now invite Nick to address the meeting on the group's operations.

Thank you, Stephen, and good morning, ladies and gentlemen. First, I would like to acknowledge the confidence that Stephen and the Board have shown in me in appointing me Group CEO. And I'd also like to acknowledge Terry. I'm fortunate to have worked with him for many years and thank him for his outstanding leadership. I'm excited to take on the group CEO role, having been part of this great business for more than 16 years and believe that in JB Hi-Fi, The Good Guys and e&s, we have 3 of Australia's most loved, respected and successful retail brands, overseen by an incredibly experienced and talented team, some are here today. Our businesses are in great shape and are well positioned to maximize the opportunities ahead of them.

Retailing is a dynamic and exciting industry, and JB Hi-Fi, The Good Guys and e&s are market leaders in their respective sectors. As we've said before, the core of our proposition has always been and will always remain our unwavering focus on our customers who continue to turn to us for their technology and home appliance needs and our over 16,000 team members who across Australia and New Zealand continue to respond and adapt to meet these needs.

As Stephen highlighted, we are committed to having a positive impact on our people, our community and our environment. In our FY '25 sustainability report, we outlined the progress made in our key areas of focus, which included 40% of the group's energy now coming from renewable sources and a 32% decrease in Scope 1 and 2 emissions from our FY '20 baseline year as we continue to work towards net zero direct Scope 1 and 2 emissions by 2030.

Continued investment in our teams with 1,333 leaders completing a leadership development course and 129 managers completing the women in leadership training program.

Recycling 9,632 tonnes of e-waste collected through recycling kiosks in JB Hi-Fi and The Good Guys stores and scrap metal from appliances collected from customers' homes.

Launch of a waste diversion target as we work towards achieving 80% waste diversion by 2030. And workplace giving donations totaling $4.6 million in FY '25 and $44 million since inception.

We are pleased with the progress we are making on our sustainability plan and commitments and importantly, are receiving an overwhelmingly positive response from our team members.

Now turning to our FY '25 results. FY '25 was another strong year for the group with total sales up 10% to $10.55 billion. EBIT up 7.3% to $694.1 million, NPAT up 5.4% to $462.4 million and earnings per share up 5.4% to $4.23 per share.

On an underlying basis, excluding the one-off $13.7 million expense in FY '25 relating to the resolution of the ACCC proceedings against the -- good Guys, EBIT was up 9.4% to $707.8 million. NPAT was up 8.5% to $476.1 million, and EPS was up 8.5% to $4.355 per share.

The total dividend for FY '25 was $2.75 per share, up 5.4% and representing 65% of NPAT. In addition to the total ordinary dividend, the group declared and paid a special dividend of $1.00 per share fully franked or $109.3 million and announced an increase of the dividend payout ratio from 65% to a range of 70% to 80% of NPAT from FY '26.

The group's balance sheet continued to be strong with low financial and operating leverage and closing net cash of $284.1 million at 30 June 2025.

Now turning to FY '26. The group will remain focused on the following key areas: number one, retail execution. In a competitive retail environment, our strong retail execution remains essential. We will continue to actively demonstrate and improve value to our customers, especially during key sales events such as Black Friday and Boxing Day. We will keep our operating model simple and efficient, focusing on the metrics that matter, driving operational improvements and reinvesting those efficiencies into customer-facing roles while enhancing customer engagement and evolving our in-store experience.

Number two is multichannel. We'll continue to strengthen our multichannel capability by leveraging our significant online traffic and expanding our marketplace offer. Our membership programs will remain a focus, delivering personalization at scale and enhancing our sales channels. At the same time, we'll ensure consistent customer experiences across all touch points and stay connected with shoppers however their shopping journeys evolve.

Third, brand reach. We will continue to expand our store network across the group. In FY '26, we will open 3 new JB Hi-Fi New Zealand stores, 1 new e&s store and 5 new JB Hi-Fi Australia stores. We'll also close 1 JB Hi-Fi Australia store and complete 2 major store relocations in The Good Guys. Our commercial businesses will continue to grow as we expand our customer base and strengthen our position across the market.

And lastly, supply chain. Our investment in building and maintaining a fit-for-purpose supply chain network is ongoing. We will continue to focus on delivering best-in-class delivery options for our customers across all of our channels, optimizing inventory flow to ensure strong stock availability, particularly during peak trading periods and improving the flow of bulky products.

Now turning to recent trading. The group has today provided a sales update for the period 1 July 2025 to 30 September 2025, Q1 FY '26.

Total sales growth for JB Hi-Fi Australia was 6% with comparable sales growth of 5% Total sales growth for JB Hi-Fi New Zealand was 39.3% with comparable sales growth of 24.3%. Total sales growth for The Good Guys was 2.5% with comparable sales growth of 2.4%. And total sales growth for e&s was 4.1% with comparable sales growth of 0.7%.

Our Q1 FY '26 sales are in line with the group's expectations as we enter the important Q2 trading period.

In closing, we remain committed to offering great value and exceptional customer service to maximize our brand sales opportunities. As always, our team's unwavering focus on our customer, combined with our ability to adapt and innovate will ensure our brands remain the destination for shoppers into the future.

I look forward to another exciting and successful year in FY '26. Thank you.

Thanks, Nick. Turning back to the items of business. Item 1 relates to the receipt and consideration of the financial and other reports for the financial year ended 30 June 2025. The company's annual report, which includes the financial report, directors' report and auditor's report as well as the company's corporate governance statement has been made available to shareholders. No formal resolution will be put to the meeting on this item, and I'll take the reports as read. Shareholders and proxies may ask questions in relation to the reports later in the meeting.

Item 2 on the agenda relates to the reelection of Mark Powell and me as directors and the election of Sheila Lines as a director. As I am one of the directors standing, I will hand the chair over to my colleague, Beth Laughton, at this point.

Good morning, everyone. Can you hear me? Thank you. Thank you, Stephen. Item 2(a) relates to the reelection of Stephen Goddard. Stephen was appointed to the Board in August 2016 and became Chair of the Board on the 1st of July 2020. Stephen is also the Chair of the company's Remuneration and Nominations Committee and was a member of the Audit and Risk Management Committee until the 30th of June 2020.

Stephen has more than 30 years' retail experience, having held senior executive positions with some of Australia's best-known retailers. These include as Finance Director and Operations Director of David Jones, Founding Managing Director of Officeworks and various senior management roles with Myer. Stephen has previously -- was previously a non-executive director and Chair of the Audit and Risk Management Committees of Accent Group, Nick Scali Limited and GWA Limited. The Board considers Stephen to be an independent director. I will now ask Stephen to say a few words.

Thanks, Beth. I've worked in many different areas in a number of retail businesses over 30 years, which has given me a good sense of the competitive environment in which we operate and what a retail business needs to do well to be successful. As Beth said, I was on the Board of David Jones for nearly 10 years as Finance Director and along with my other public company Board experience, I feel this equips me well for my role as Chair of the company.

I have great respect for the business and its achievements over a long period and the high quality of its management team led by Nick; Dave, our CFO; Doug, our Company Secretary; Cameron Trainer, the Head of JB, who's in the back row and many, many others. So I look forward to supporting the company as it grows and prospers.

Thank you, Stephen. Shareholders and proxies may ask questions in relation to this item later in the meeting and can vote at any time before voting closes. The proxy votes received in advance of the meeting on this resolution should be shown on the screen. There we are. I'll now hand the Chair back to Stephen.

Thanks, Beth. Item 2b relates to the reelection of Mark Powell. Mark was appointed to the Board in March 2017, having been an adviser to the Board of The Good Guys for 18 months prior to its acquisition by the company. He is currently a member of the Remuneration and Nominations Committee and was a member of the Audit and Risk Management Committee from 2017 to 2023.

Mark has over 30 years executive experience in retail, logistics and wholesale distribution in the U.K., Spain, North America, Australia and New Zealand. This includes being U.K. Logistics Operations Director for Tesco plc, running Walmart's Canada's logistics operations and as CEO of the Warehouse Stationery retail chain in New Zealand. Mark also spent 5 years as Group CEO for the Warehouse Group, a New Zealand listed retail group, which includes technology and appliances retailer, Noel Leeming. Mark is currently a non-executive director and Lead Independent Director of Bapcor Limited, a non-executive director of My Food Bag Group Limited and Chair of its Nomination and Remuneration Committee and a non-executive director of Stihl Pty Limited. Mark was previously a non-executive director of Kiwi Property Group and Chair of its ESG Committee and a non-executive director and member of the Strategy and Audit, Compliance and Risk Committees of 7-Eleven Australia.

The Board considers Mark to be an independent director, and I'll hand over to Mark to say a few words.

Thank you, Stephen. And yes, it's a privilege to be here today. Stephen summarized a lot of my executive career there, which I think enables me to bring that to this role. As a retail CEO across multiple retail sectors, general merchandise, apparel, technology, office products and outdoor sports equipment. It gives me a wide range of retail experience. And I've been able and privileged to see the inside of some of the world's best retailers such as Tesco and Walmart. And with that, I also have a deep supply chain logistics background as well.

I've been a non-executive director now for 10 years. I first came on this Board, I wouldn't have considered myself experienced. I do consider myself an experienced director now. I've been able to serve on the Board of property companies that retail property own retail property. I've been able to serve on the Board of other retailers such as 7-Eleven and on pure-play online businesses as well.

And also on some challenging businesses, both in the not-for-profit space as well. And sometimes it's in those challenging ones you learn the most. So I would now consider myself an experienced director, which I wouldn't, as I said, I wouldn't have done in 2017 when I first came on this Board.

So it's a privilege to put myself forward, and it will be a privilege to serve on this Board again, which is an outstanding Board but also an outstanding executive team. And I don't mean to embarrass Nick, who picks up the mantle, but also Terry, Richard, you before him and the team under them, we've got -- as you said, we've got Cam here today.

Having seen the inside of some of the world's best retailers, these guys are up there with the best, if not better than them. And so it's a privilege to be able to support them as they move forward.

Thanks, Mark. Shareholders and proxies may ask questions in relation to this item later in the meeting and can vote at any time before I declare voting closed.

The proxy vote received in advance of the meeting on this resolution are as follows: Item 2(c) relates to the election of Sheila Lines. Sheila was appointed to the Board with effect from 15 August 2025 and also joined the company's Audit and Risk Management Committee at that time. Sheila is a chartered accountant with over 28 years' experience as a CFO, CEO and Director across multiple industries, including retail, media, telecoms and technology with over 20 years of these being in public companies in Australia and overseas.

Sheila's experience includes roles as CFO and Company Secretary of Nick Scali Limited as CFO of oOh!media Limited, Cabcharge Australia and Bpay and also as Chief Executive Officer of Bermuda-based KeyTech Limited. Sheila is a member of Chartered Accountants Australia and New Zealand and holds a Bachelor of Laws with honors from the University College in London.

Prior to her appointment, the company conducted appropriate checks into Sheila's background and experience, and those checks revealed no information of concern. The Board considers Sheila to be an independent director, and I'll now hand over to her to say a few words.

Thank you, Stephen. I'm excited to join JB with its iconic brands, impressive management team and strong organizational culture. As Stephen outlined, I bring to the role a professional qualification as a chartered accountant and nearly 3 decades of executive experience across a wide range of industries and most recently in retail.

I'm looking forward to working with the team at JB Hi-Fi to continue to grow stakeholder value, and I confirm that I have the time to commit to the affairs of the business as a director. Thank you.

Thanks, Sheila. Shareholders and proxies may ask questions in relation to this item later in the meeting and can vote at any time before I declare voting closed. The proxy votes received in advance of the meeting on this resolution are as follows. Item 3 relates to the adoption of the remuneration report, which is contained within the company's annual report. Further information, including information regarding voting on this resolution and the 2 strikes rule is set out in the notice of meeting.

Please note that a vote on this resolution is advisory only and does not bind the directors or the company. Again, I will take the report as read. Shareholders and proxies may ask questions in relation to the report later in the meeting can vote at any time before I declare voting closed. The proxy votes received in advance of the meeting on this resolution are as follows: Item 4 relates to the allocation of restricted shares to the Executive Director, Nick Wells. Further information, including the terms of the allocation and the associated KPIs is set out in the explanatory notes in the notice of meeting. I'll take that information as read.

Shareholders and proxies may ask questions in relation to this item later in the meeting and can vote at any time before I declare voting closed. The proxy votes received in advance of the meeting on Item 4 are as follows.

We'll now take questions from shareholders. Questions submitted online in writing will be read out by our Company Secretary. To ask a question verbally online, please follow the instructions shown below the broadcast window on the online platform. Our Company Secretary will say your name and then direct you to ask your question. If you have questions from the floor, please raise your hand and wait for the microphone to arrive before stating your name or organization and asking your questions. Questions will be answered by the relevant director or executive or by Suzana Vlahovic from our auditors. While time constraints may prevent us from answering the questions, we'll do our best to address all the concerns that you have and questions during the meeting. After the questions, I'll close voting.

So let's go to questions from the floor, I think, first. Chris.

Good morning, Mr. Chairman, Board, ladies and gentlemen. My name -- I'll introduce my name is Chris Lob. I'm representing the Australian Shareholders' Association this morning. Thank you for the opportunity to come along. Just in terms of that, I'm representing 109 shareholders with over 120,000 shares. I know some of our members are in the room this morning.

I had a couple of questions just to put to you. The first was in relation to New Zealand. Those sales figures that you've just released this morning, maybe Mark is in a better position to comment on those, but they are knockout figures. I'm not familiar. I don't know if they're coming off a low base, but that would be one question.

And the second would be in relation to your external audit arrangements. We noted through your annual report that your current auditor firm has been in the position since the floating, which goes back over 20 years now. It's a policy of the ASA that we believe that after a 10-year period, a competitive tender should be held. And I would just be interested in your comments, Mr. Chairman in relation to that.

Thanks, Chris. And look, we always respect and enjoy our dialogue with the Australian Shareholders' Association. It's good to meet you as the new representative. We had a meeting recently, and I just mentioned Mike Roy, who's sitting next to you, who's been the representative previously. So good to see you, Mike.

A couple of questions. Firstly, I'll get Nick to just talk a little bit about New Zealand. But in principle, we feel there's a significant opportunity. We've had to rebuild the business, and we've had to grow it and expand it. And I think the signs are very encouraging from what we've seen. But Nick, why don't you talk a little bit about New Zealand?

New Zealand, as Stephen said, we've been investing in New Zealand for the last few years. We have been underrepresented in that market, but we know the brand does resonate well there. So we've been rolling out stores. If you go back a number of years, we're at 14 stores. We're now at mid-20 stores. That is -- that's definitely helping with that total sales growth at 39%. But what's really pleasing for us is the comparable store sales growth. So we're opening new stores, but our existing stores are growing strongly.

And to call it too early because it's still -- we still got plenty of work to do in New Zealand, but I think we're starting to see that point where our investment is starting to resonate. Our offer is resonating with our customers. We're starting to get that recognition in the market, and that is coming through in our sales figures. We would say we're definitely outperforming the market. It's still -- it's not an easy market in New Zealand. So that is largely market share driven.

Thanks, Nick. And look, with audit firms, I mean, 2 schools of thought, I guess, one is that you should change audit firms. I mean the regulations within this country, I think, reflect our view, which is every 5 years, the partner must change. It's an independent partner who hasn't been involved in the business. In this case, Suzana has now been with us for 2 years, signing off our accounts. When a new partner joins, you get a completely fresh approach. You get a completely set of new set of eyes and you get an independent perspective on the business without the disruption of necessarily changing firms. We think that works well. We've got a good relationship with Deloitte.

It's pretty frank and open, to be honest. We think we get good value, could always be a little better, but that will put the fee discussion to one side. Suzana has got a good team working for us. So look, we haven't, and that's the reason, as I say, two schools of thought, but we respect your opinion on that, Chris. Sorry, second back row -- do you want to come to the microphone?

Good morning, Mr. Chairman and other executives there, ladies and gentlemen, John Joyce is my name. I'm a long-time shareholder of JB Hi-Fi. Thank you very much for all the cash flow and the growth that I had over that time.

In the press recently, we noticed that there's problems with some people with the situation in direct e-commerce with China and so on. And it's brought several apparel dealers undone it seems and so on. Is there any comment on whether that's affecting us in any way?

Sure. Thanks, John. It's good to see here as well. Look, we are a branded organization. We sell branded product largely. So I think what you're seeing is a lot of private label comparison competition in the market. We've always had a lot of competition in the electrical market from entrants such as Amazon and the like. So we will take any competition head on and do our best to fight for our customers and offer them the best possible value we can.

Good. So our growth is still continuing according to the statement there.

Well, we put out...

We're relaxed for going that matter.

We put out a trading update this morning. I'd might get Nick to just talk a little bit about that. We think the sales figures are pretty solid.

Yes, you can see the momentum there continuing through the quarter. Obviously, we're entering an important period now with the Q2 promotional period, but we're come in with some good momentum. We've got some really strong promotions planned. We're in a good stock position. We're optimistic about the next quarter.

Thank you, John.

Mr. Chairman, Greg Hoffman, proxy holder. I've got 2 questions. I'll just shoot for the first one, maybe for Nick, but I'll ask it through you. e&s, how is it going sort of roughly a bit more than 12 months on? Any new ideas emerged, strategic options that are emerging that weren't on the table last year? Just any comment around that business?

Happy to hand that straight to Nick.

Yes. It's going well. From our perspective, e&s is only a small business today, but we do have good growth ambitions for that business. The last 12 months, we've been really just focused on trying to get the foundations right and set that business up for future success. It is -- when you see that slide before, it is positioned in that premium home appliance and bathroom space. So it's very complementary to our existing brands.

We've just recently -- in terms of developments, we took a store in Hobart. So we've gone into Tasmania for the first time, and that's very early days, but showing promising signs. And we just -- we've got a bit more work to do on those systems and processes and people. And then once we get that right, we'll start to look to roll out that brand more broadly.

And this one for you, Mr. Chairman. Regarding mix incentive package, that was quite the no vote there through the proxies. Did you get any feedback? Where did those no votes come from? Was it one proxy adviser? What feedback did they give? Whatever you can share with us would be helpful.

Sure, happy to. So as you know, we have the VIP. We have this discussion every year. The VIP is a little different for us because we're a trading business. So we set the next year's target for the team as a challenging but achievable target, and they run from the 1st of July hard to get those results. And I think that's been really important in our capacity to get results continually year-on-year over time.

But it doesn't have a long-term assessment, but it works for retention because if the team gets their targets in 1 year, they get a cash bonus, but the 75% of shares are allocated across years 2, 3 and 4. So the team need to be with us over that period. So it actually provides incentives to perform quickly and urgently in that financial year, but also gives them a sense of what they need to do to retain those shares, which has actually been with our company. So we've had a really good lack of turnover, if you like, we've been able to retain our people.

Now having said that, it doesn't fit the mold of what all proxy advisers look for. One in particular, has said, look, we understand it's fit for purpose and has recommended a vote for the rem report, in fact, for a number of years now. But as an acknowledgment that it doesn't fit their mold, I said, please vote against the shares. So that's one proxy adviser. We've been at 75% now for, I think, several years. So it's sort of where we've landed.

And I think we're acknowledged that we're a little different where it's fit for purpose. We're unusual, but it works for us, and we appreciate the flexibility that shareholders have shown in supporting that vote at least more than 50%.

Yes. Okay. Can I just say that -- I mean with regard to that, you're saying you're taking -- you realize it's an exceptional choice to the status quo. I'm sure the proxy advisers aren't going to listen to me, but just for the Board from an appreciative shareholder. This company's performance and culture and corporate governance is exceptional. And so therefore, the proxy advisers, in my view, exceptional in a good way.

And so anything that this company is doing that's out of the ordinary and exceptional should perhaps be a case study for other companies rather than be criticized and drag you back to what is status quo. This is an exceptional company and exceptional companies do things differently than the status quo. So my wholehearted support and the results seem to be on the Board as far as anyone who's looked at this company since its inception.

Look, I really appreciate those comments. Thank you. Sometimes the Board feels we need to make decisions that are not easy but are in the best interest of the company and the shareholders, and you rely on us to do that into the future. And then when we meet with proxy advisers, when we meet with the ASA, we just explain what we do. And by and large, we get a pretty good hearing. But I take your comments and really appreciate them. Thanks very much. Other questions from the floor?

Chairman and Board, I've been a JB customer since it was a single shop in the centerway. My question is, where are you seeing the competitive risks coming forward over the next 12 to 18 months, given you're probably the market leader in the places you play? But when you're the market leader, somebody is going to be trying to hunt you town.

I always have. So thanks for being a shopper since 1974. Nick, do you want to talk to that?

It's no different to what we've talked about over the last year. We operate in a competitive category. We sell branded product that you can buy at multiple different retailers. And so just making sure that we stay very focused on our customer, making sure we stay very focused on providing value, having stock in store in range, exceptional customer service. that's what we just keep -- stay focused on doing, and that will help us compete in what is a competitive environment. I wouldn't say there's any sort of new or emerging risks that are different to what we've encountered previously.

Thanks, Nick. And look, all I'd add from the Board's perspective is that it is a people business. We need the best management team and the best team within our stores. And our role, we feel is to give the management team the capacity and the resources to get the job done to look after our people, and that's what we're trying to do. So thank you for your question and for shopping.

Daniel Cost, shareholder for a number of years. I'm a Jaded millennial with short attention span. I love technology. When I walk into a JB Hi-Fi store, my expectation is to maybe see some new piece of technology that wows or amazes me that I might think about after I go home and maybe think about buying -- coming back to purchase. It's been a few years since I've actually walked into a JB Hi-Fi store and seen something that genuinely amazed me and wasn't just something that I've seen for years on end.

So although your sales figures are really great, I worry that I might be the canary in the coal mine. So how would you appeal to someone like me who is like a very -- probably a very tough kind of demographic who might be looking for something new and exciting that I might have seen on tech YouTube or something, and I might be excited to see it in a store.

Okay. Daniel, thank you for your question. We're always refreshing our stores. We're relying on innovation from our suppliers. I'll get Nick to add a little bit to this. And of course, with what's going to happen with AI in the PC market and everywhere else, I think there's plenty of scope. But why don't you talk a bit more?

Yes. We're really optimistic on the product innovation cycle. Like to Stephen's point, AI PCs, and I appreciate it may not be for everyone at this point, but AI in devices, I think, is a really interesting dynamic that's going to come out over the next few years.

If you've been in stores recently, some products like wearable products that are coming, the Meta glasses, the Ray-Ban Meta Glasses, the Oakley Meta Glasses. We're selling the Oura Rings now, that monitor your health. There's a lot of new product that's just coming now that we think over the next few years, will continue to evolve and hopefully excite you in a JB Hi-Fi store.

Okay. So let me think for a moment. So in the Hi-Fi space, if I look on like, say, Tech YouTube, the things that -- hi enthusiasts are excited about, it's not really things like sound bars. I already have a turn table. Sound bars are more for people who hate technology rather than like technology. I personally probably like to see brands like Miranda's and Nakamichi and things like that.

I won't comment on the AI Windows 11 PCs. It's interesting to note that the market share for Windows 11 has actually fallen since they dropped support for Windows 10. But I'd like to ask you what do you think might be some emerging trends which are not necessarily popular in stores yet, which you might be looking at going forward in the future years?

We take your point on audio, and we are looking at our audio range and whether we can trial some expanded ranging in some particular audio stores. But I would say that the benefit of the JB model is the breadth of the product that we sell. Not everything needs to be brand new in a particular year because we sell across so many different categories that there is always something that is new. And it may not be in audio this year, it may be in a different category, but there is always a new product.

In terms of the evolution, it's just -- it's again, what we talked about, like I think the wearable space, I think, is a really interesting space. If you look at what Meta is doing in that space in terms of what they think will evolve, how those glasses, for example. And whether you believe it or not, their ambition for those glasses taking over from what you would ordinarily do on a PC or on a mobile phone, I think over the coming years, that will be really interesting to see how that evolves.

Do you have any other things that you might be quietly looking at, which consumers might not necessarily be ready?

Always. We are always looking...

Thanks, Daniel. And our team visit regularly. So we heard from them yesterday that they've been visiting all the major players on the West Coast of America in the last couple of weeks. Any other questions from the floor?

Alex, a shareholder of JB Hi-Fi. Very much enjoy your products. JB Hi-Fi dominates the sectors that it plays in currently, obviously, Australia. There's really only a small amount of growth that you can get out of New Zealand being a smaller market. So really, where is the growth that's going to drive the share price in the future for this company.

Overseas, I'm not really sure. I mean you're looking at adjacencies with The Good Guys and the e&s. So where is the growth going to come that's really going to drive the share price for obviously the company and all the shareholders present?

Yes. Good question. Thank you for that. When you say where is the growth, I suspect you're talking about store growth because that's a traditional mechanism for retailers to grow. You start with a model. And frankly, JB Hi-Fi did that from its inception as a public company in 2003 for a number of years.

We've had limited store growth, although we've got several stores that we are -- have opened recently that have been successful. So there are gaps in the market for us to grow. But look, the opportunity for us is immense in terms of our product range and our categories in which we trade. So not that long ago, we were a record shop. We had changed.

And if you look at the ability for us to bring innovative product that Nick talked about into our business, we think we can get real productivity growth through our stores by having better product, by servicing better than our competition. And I think we've got enormous opportunities just within our current footprint.

Of course, New Zealand is an opportunity for us, and you've seen the growth we're getting there. e&s, Nick talked about. We've got lots of other things we're doing in commercial, so JB business and commercial is an avenue for growing into that SME market as well. And of course, behind closed doors, we're doing lots of thinking about what we might do. But you would expect us to do things that are sensible and related to our customer and our business. And if we do that, we feel we can offer really significant growth over the medium to longer term. Thank you. Maybe we should take one from the -- Sorry, please.

My name is Fred and mine is more a comment actually. I've been a customer of JB Hi-Fi from the time he started operating out of his backyard. And over the years, I've spent a lot of money there. So I thought on principle, I should own shares. Anyway to get back...

It's both, by the way.

I'm sorry.

We're happy if you do both.

Absolutely. Well, I felt I bought so much of it. I already own half the company. Anyway, my comment is to congratulate the Board on the service that you have in the environment that you've created, give us good service.

I had the occasion a few weeks ago to go to the DFO JB Hi-Fi. I wanted a particular product. And while it was on display, they didn't have any in stock. However, they didn't abandon me. They guided me across to The Good Guys. And sure enough, I got it there. And the reason I'm saying this is because there was a gentleman of Indian origin, and he gave me the most wonderful service you could ever get. And I came in with a wonderful product at a very good price. So I want to congratulate you guys on the environment you've created for good service.

We really appreciate those comments. Thank you. Anything from the floor? Maybe -- we've got some questions online, Doug?

Thanks, Stephen. Yes, a question from Stephen Mayne. Thank you to Beth Laughton for 14 years of service on the Board. It is always helpful for investors to have access to some exit perspectives from retiring independent directors. In her final contribution as a JB Hi-Fi Director. Could Beth please comment on what she regards as the best 3 decisions made during her time on the Board? And does she have any regrets?

How long do I have, Stephen?

You've got as long as you like, Beth.

Stephen, thank you for your question. I think that's a good question because, obviously, as I come to the end of my term, which is today, I have thought long and hard about the experience that I've had.

Firstly, just about -- a little bit about me, which might put this in perspective. I'm a 40-year chartered accountant. Even my husband says, you're just a chartered accountant. So that means I'm a bit boring, and I'm very serious. I have a bit of a sense of humor, but I take life quite seriously, and I'm quite conservative. So my experience on this Board has been to ask questions at the right time and to respond and consider the answers to those questions.

I should say I've had a 20-year experience also as a nonexecutive director. So I think my [indiscernible] signal is pretty good. This experience that I've had on this Board, I have had the most utmost respect for the management team, my fellow directors.

I think if you -- the 3 most significant things, I think, and one would be succession planning and the transition over that time between Terry Smart to Richard Murray, to buying The Good Guys and Terry Smart coming back to help us position The Good Guys to where it is now. So that's more than double the earnings, bringing Terry back in when Richard left as the CEO and then now having the opportunity to encourage and support Nick in his journey through the CFO role into the chief operating role and then as now our new CEO. And I have utmost confidence in his ability to continue to grow the business.

The acquisition strategy that we've had with, firstly, The Good Guys and the way the team focused on getting -- first off, securing that opportunity and then ensuring that we get The Good Guys in the best possible shape has been outstanding.

e&s is another example of the diligence and the approach that we've taken to make a determination around investing in a business with the major -- sorry, the shareholder. Rob is an exceptional person, and that business is going to provide all sorts of wonderful opportunities.

The other thing I would just want to comment on is the culture of the organization. A number of times I have heard various parts of the management team never, never, never say the market is tough. The economy is tough. We have nothing that we can do to respond. It has always been a whole list of opportunities to drive the business, to support the team, to empower the people on the floor and to grow that online sales business. So I've never heard we can't do anything. So that's an absolute positive. I have never seen or heard that anywhere else in my experience.

The other thing that is a constant is let's get back to basics, good quality retailing. And so I have learned so much about what good quality retailing looks like. So whenever things start to go a little bit around the edges, the theme is let's get back to basics that gets back to customer service, quality product in store, systems process and ongoing business improvement.

So summary, this has been an amazing experience for me. I've learned a huge amount, and I'm very, very comfortable that the business is in great shape for the future.

Thanks, Beth. Well spoken, I'll answer the second half of the question. The only regret is on our behalf that we'll miss Beth's sense of humor in the boardroom and everything else about it, too. Doug, other questions?

Thanks, Stephen. Another question from Stephen Mayne. What constraints are there on Terry Smart in terms of joining other listed retailers? His predecessor, Richard Murray, has been highly promiscuous, taking roles at Premier Investments, Metcash and now Sigma. Could Nick please detail his plans in terms of remaining in touch with the 3 previous JB Hi-Fi CEOs, all of whom have been highly successful and contributed enormously to our remarkable success. Please do everything you can to keep them all in attend.

Thanks, Stephen. That they're nice comments. Look, in terms of noncompete, we talked a little bit about our incentive plan, which has shares in years 2, 3 and 4. So that's a strong incentive for any person who leaves the organization to behave respectfully. We do have a noncompete. You saw that with Richard Murray, he left us and people said, he's going to pinch any of the team and none joined Richard because of those circumstances. So I don't see any issues going forward.

We wish Terry all the best. Terry is beyond reproach. She's a very fine executive and a very fine person. So clearly, we'll keep in touch with him and look forward to whatever happens in the future with him.

Thanks, Stephen. Another question from Stephen Mayne. Whilst it is great you're offering a hybrid AGM with both online voting and questions, you are still deficient in 4 areas in terms of AGM best practice. The annual report was released too late on the same day as the notice of meeting. It should be out in August with the full year results.

You're not following the agenda, instead dealing with questions in one job lot. This takes away focus from key individual items. You also failed to disclose the proxy position to the ASX along with the formal addresses to allow for a more fully informed AGM debate. Have there been any protest votes?

Finally, will you get with the disclosure program? And release headcount voting data in the poll results like with the scheme of arrangement to make public retail shareholder sentiment and stimulate higher levels of retail voting, which has crashed to below 3% since the move away from paper. If the likes of Suncorp, Myer Stockland and Tabcorp can do all these things, why can't JB Hi-Fi?

Thanks, Stephen. In terms of the annual report, when we release our results in the middle of August, so that's some time ago, you get just about everything. The only thing I think that's added to the formal yellow document you see the Chairman's letter, the CEO's letter and some shareholder information at the end. So I'm not sure that's material. We'll take on board questions on timing on that, but I don't think that's material.

In terms of questions, it's just impractical to have questions throughout this session. We allow plenty of time. You can ask about everything. I don't think it's helpful to say you can only ask about the rem report. And then for online people who missed that come back and then we say, you can't ask about the rem report because that was a little earlier in the meeting. So it's just not practical for a hybrid meeting.

In terms of proxies, we're just following what's required by the ASX. So we released them during the meeting. And shareholders, the same thing. We don't release shareholder voting by numbers because that's not required. We're a simple company. We follow what the ASX tells us to do, and we believe we have our governance pretty well in place. Doug, any more?

Thanks, Steve. Another question from Stephen Mayne. After closing at $113.52 last night, the share price went down to $105.09 this morning after investors responded to the sales update. This is not a great look for the departing CEO who only left 27 days ago, but our stock was arguably priced to perfection, and we all remember the 2003 IPO price was just $1. That said, are the Chair and CEO surprised by today's drop in the share price? And what specific data point in the sales update do they believe triggered it?

Thanks, Stephen. Look, we don't look at the share price day by day. We look to run our business, get the results. And over time, things will happen that are in the best interest of shareholders. Sometimes it pops up, sometimes it pops down. We don't control that. What we can control is how we go to market with our performance. Nick talked to you about the sales result. It's pretty solid, to be honest, and in line with what we thought. So we're very happy with how things are going. Any more from Stephen?

Let's have a question from someone else from Jeff Rogers. And Jeff says, there's a new store in my regional center of one that's just opened. I haven't entered it yet. Well done for bringing JB Hi-Fi to South Gippsland, a growing region with the only competitor, Harvey Norman, having a good but not as good location for many years is regional areas and ongoing growth strategy.

Yes. I think I talked to that earlier, we see that as an opportunity. Wonthaggi, Cameron gave us a review of yesterday. It started with a bang. So that's good news for us. Do you want to talk about any other regional?

Yes. Look, regionals is a strategy for us. We historically struggled to get to those smaller catchments. But as our range has got broader, as tech has got more important in people's life, we can get to what our smaller catchments now. And so we opened Warnerboo, Wonthaggi, Mt Barker in South Australia, Albany in WA, and they're all going well. So we'll continue to look for regional opportunities.

Okay. Any more?

Another question from Stephen Mayne. Now that CEO succession has been completed, could Chair, Stephen Goddard, please comment on his chair succession plan? Stephen first joined the Board in 2016 and became Chairman in July 2020. Is he planning to serve as Chair for a full 3-year term until 2028? Is this his last term?

I'd say I just got voted in. So I'm looking forward to the future. So maybe we'll deal with that in a year or 2's time. I'm not going anywhere. So thanks. Any other questions, Doug?

Yes, we have another question from Jeff Rogers. Has the resale of Telstra Internet services been successful to date? Jess as his own experience could have been better.

Okay. Do you want to handle that?

Yes. Telstra is a really important partner for us. It has been very successful in mobile phone and Internet services, and we'll continue to support Telstra as a partner, and they'll continue to support us. So no -- sorry, if it hasn't -- if your experience wasn't as great as it should have been, but overall, it has been very successful.

Thank you. Another question from Stephen Mayne. You have covered the 15% proxy protest vote against the rem report and the 24% against the CEO's LTI grant, but there was also a modest 5% proxy protest vote against the Chair's reelection compared with less than 2% with the other directors. What was the issue with the Chair's reelection? Did a proxy adviser recommend against? And is it a 10-year issue?

95% are right. But no, look, a couple of shareholders advised us that if they have an issue with the rem report, they will vote against the Chair of the Rem Committee, which I am. We've had letters from others, some one from overseas actually, who said, in line with your comments about audit, they feel that if we don't change our auditor, they'll vote against the Chair as well. So there's a little bit of these things going on. 95% is pretty good. So I'm okay with that as long as you all are. So thank you.

No more questions online. Thanks, Stephen.

Okay. Any more from the floor? Please.

Just one more. I don't want to know the name of the company, but is JB Hi-Fi looking around for any more acquisitions?

We are continually looking at growth opportunities. So we look at everything, to be honest. So we've got in Nick's old team, now Dave's team. We've got people who scour the market. It's easy to buy something. It's not as easy to buy something that's going to be really good for the business over the longer term.

So when you see The Good Guys, that was a great acquisition. e&s, we think will be a terrific acquisition over time as well. But you've got to be out there looking, you've got to be judicious in what you actually do and make sure that it's forever. So that's what we're doing. Any others?

Okay. Thank you, ladies and gentlemen. If you haven't voted already, please cast your votes now. A reminder for those that are attending the meeting online, you can vote by selecting the voting icon. For those attending in person, if you can hold up your yellow card, and we'll collect them.

[Voting]

Okay. Please raise your hand if it hasn't been collected. We're all good. I think online, I've given plenty of notice. So thanks, everyone. Voting is now closed.

The voting results from the meeting will be released to the ASX later today. On behalf of the Board, I'd like to thank you for participating in today's AGM.

I now declare the meeting closed, and I invite you to join the directors of the company for refreshments in the next room. Thanks, everyone.

Good morning, and welcome to the JB Hi-Fi Group 2025 Full Year Results Investor Conference Call. Today's call will commence with a short presentation from JB Hi-Fi's Group CEO, Terry Smart; Group COO, Nick Wells; and Group CFO, David Giansalvo. [Operator Instructions] and the call will conclude around 11:30 a.m.

We welcome representatives of the media to this call and as with previous calls, remind you, we will only be taking questions from investors. Terry Smart is available for media comment after the call and can be reached on (03) 8530-7454.

I will now introduce and hand over to JB Hi-Fi's Group CEO, Terry Smart.

Thank you. Thank you for joining us this morning. And as always, thank you for your interest in the business. We'll get straight into the presentation and turn to Page 4, the group model. You'll all be very familiar with this now. So just a few comments, JB and The Good Guys and our product offering channels to market and target customer base. And now the acquisition of e&s has allowed us to round out our home appliance product offering by expanding our reach into the new product segments of premium appliances and bathroom, along with targeting new customer base of renovators, architects, boutique and volume builders, and large commercial construction customers.

Moving down to our value proposition. We remain focused on this value proposition of being known and trusted for value driven by our strategy of best brands, big range and low prices. And further down and our passionate and knowledgeable team members will remain focused on delivering exceptional customer service. And of course, all of this is supported by our key competitive advantages, which I'll cover on the next page. So over to Page 5.

Again, you'll be familiar with these, so just a few key reminders. Firstly, scale and now updated to include diversification. You understand our scale and benefits as described but also with our multi-brand strategy and diverse categories comes the benefits of category and brand diversification, which means it helps to reduce the reliance on any single category or brand performance.

Secondly, our low-cost operating model ensures we can deliver ongoing customer value, gives us agility and resilience by ensuring we can respond to market price activity and maintain focus on market share, and also compete effectively with traditional competitors and new market entrants. And finally, the benefits of operating leverage with the group function, enabling us to drive efficiencies across a large cost base.

Thirdly, multichannel. Multichannel, just maximizing our customer reach and sales through a wide range of sales channels. And of course, a significant benefit of multichannel retailing is our store base or store network, which provides confidence with after-sales support regardless of the sales channel used when buying.

Lastly but importantly, people and culture. This is such a key driver for the business in delivering best customer experience by knowledgeable and passionate teams. Having a dynamic and flexible environment allows the business to pivot quickly and adapt to any changing market conditions and talent retention, highly engaged teams, who have a connection with our brands and their purpose, diverse and inclusive workforce and unrelenting focus on health and safety.

Over to Page 6. Today, we released our FY '25 sustainability report, outlining our commitment to having a positive impact on our people, our community and our environment. As set out in the report, we are committed too with our people. That is the health, safety and well-being of our people by creating and maintaining a safe and healthy workplace, and fostering diversity and inclusion, gender equality, nondiscrimination and equal opportunities across our workforce. With our communities, it's making a positive impact in our communities in which our team members live and work and working with our supplier partners to protect and further human rights.

And for our environment, our commitment to net 0 direct carbon emissions by 2030 and proactively reducing our waste consumption and improve sustainability of all packaging.

Over now to Page 8 and the group performance. We will talk through this in more detail as we move through the presentation, but it was another strong year of sales and earnings in FY '25 as we built on the momentum of the previous year. The table details our statutory results. And for clarity, we have included in the footnotes our normalized group performance, excluding the one-off $13.7 million expense in relation to the resolution of the ACCC proceedings against The Good Guys. Excluding this one-off, EBIT was up 9.4% to $707.8 million. NPAT was up 8.5% to $476.1 million, and EPS was up 8.5% to $4.355 per share.

In addition to the FY '25 results, the Board today declared a special dividend of $1.00 per share fully franked or $109.3 million. And together with the final dividend, we'll distribute $224 million to shareholders. Also announced an increase in the dividend payout ratio from 65% to a range of 70% to 80% of NPAT from FY '26. Also announced that I will retire from the group on the 3rd of October and be succeeded by Nick Wells.

Over now -- turning to Page 9. I'll take this as read as we'll cover off the individual brand results in the coming pages.

10, the divisional performance, starting with JB Hi-Fi Australia. Again, I'll take the summary page as read as we'll cover in greater detail on the next pages.

So now to Page 11, JB Hi-Fi Australia FY '25 sales results. Total sales increased by 7.5% to $7.1 billion with comparable sales up 7.2%, driven by continued customer demand, new product releases and well-executed promotional activity. The key growth categories are mobile phones, small appliances, computers -- sorry, computer games hardware and as we have noted, the games hardware, particularly in Q4, which -- with the launch of the Nintendo Switch 2. Software sales were 2.9% of total sales, and online sales increased by 16.4% to $1.9 billion (sic) [ $1.19 billion ] or 16.8% of total sales.

FY '25 earnings. Gross profit increased by 6.4% to $156 billion (sic) [ $1.56 billion ], with gross margin down 21 basis points to 22%, driven by sales mix and ongoing competitor activity. Cost of doing business was 12.4%, down 19 basis points and in absolute terms, grew 5.8% with disciplined cost control throughout the year.

Depreciation increased by 4.9% with an increase in both depreciation on right-of-use assets and depreciation on fixed assets. EBIT increased by 8% to $530.3 million with EBIT margin up 3 basis points to -- up 3 basis points to 7.5%.

Over to Page 12 and JB Hi-Fi New Zealand performance. Again, as per JB Australia, I'll take this summary page as read as we'll cover in the following page.

So Page 13, JB Hi-Fi New Zealand FY '25 sales. Total sales increased by 20.8% to NZD 396.3 million with comparable sales up 9.2%. The key growth categories were mobile phones, computers, audio and small appliances. Software sales was 4.8% of total sales. Online increased by 48.1% to NZD 63 million or 15.9% of total sales.

FY '25 earnings, gross profit increased by 21.3% to NZD 67.3 million with gross margin up 6 basis points to 17%. Cost of doing business was 14.7% -- at 14.7%, down 86 basis points and in absolute terms, grew 14.1% with disciplined cost control throughout the year and continued investment in new stores and strategic initiatives. EBITDA was NZD 9 million, up 104.3%. EBIT was negative NZD 0.2 million, up NZD 2 million.

Now turning to Page 14, The Good Guys. Again, I'll take the summary page as read as we will -- we'll go through more detail in the following page.

So over to Page 15, FY '25 sales for The Good Guys. For The Good Guys, total sales increased 6.9% to $2.87 billion with comparable sales up 6.5%. The key growth categories were floor care, portable appliances, cooking and computers. Online sales increased by 9.9% to $425.4 million or 14.8% of total sales. FY '25 earnings for The Good Guys, gross profit increased by 8.2% to $672.4 million with gross margin up 28 basis points to 23.5%, driven by continued strong execution by the team.

Cost of doing business were 14.6%, up 65 basis points and in absolute terms grew 11.9%. Underlying cost of doing business, that is excluding the one-off expense as per the footnote and we previously explained, was 14.2%, up 17 basis points and in absolute terms grew, 8.2%, with the investment in store wages to support increased store traffic.

Depreciation increased by 5.5% with an increase in both depreciation on right-of-use assets and depreciation of fixed assets. Statutory EBIT increased 1.1% to $159.8 million, with EBIT margin down 32 basis points to 5.6%. However, underlying EBIT was up 9.7% to $173.5 million, with underlying EBIT margin up 15 basis points to 6.1%, so a solid result for The Good Guys.

Now over to Page 16, e&s. As you're aware, on the 2nd of September 2024, the group completed the acquisition of 75% of e&s. Results are presented for that period of ownership. FY '25 sales, total sales were up 5.2% to $225.2 million with comparable sales up 4.2%. Sales growth was primarily driven by the commercial division. FY '25 earnings, EBIT was $4.2 million, in line with group's expectation with EBIT margin of 1.9%.

I'll now hand over to Dave just to talk through balance sheet and cash flow.

Thanks, Terry. On Slide 18, the balance sheet and starting with inventory. Inventory was $1.3 billion, up 18.7% or $204.8 million year-on-year. Excluding E&S, inventory was up 12.8% or $139.5 million, with a planned increase to inventory to support 6 additional stores and sales in both Q4 of FY '25 and Q1 of FY '26.

Inventory turnover was down 27 basis points to 6.7x. Excluding e&s, inventory turnover was 6.9x, down 8 basis points. Payables were up 22.9% or $165.1 million year-on-year, in line with the increase in inventory.

Slide 19, highlights on the cash flow statement. Operating cash flows and operating cash conversion continued to be strong. CapEx was $82.1 million, up 10.4% or $7.7 million year-on-year with investments in the store portfolio, online and strategic initiatives. Investing cash flows include $47.6 million cash consideration for the purchase of e&s less $6.8 million of acquired cash balances.

Dividends paid of $385.9 million include the payment of ordinary dividends of $298.4 million and the FY '24 special dividend of $0.80 per share or $87.5 million that was paid in September of 2024. Net cash was $284.1 million, down $18.5 million with continued strong cash generation, offset by the additional cash outflows for the acquisition of e&s and the payment of the FY '24 special dividend.

On Slide 20, capital management. As a result of the group's continued strong financial performance and cash flow generation, the group has an elevated net cash position and a significant franking credit balance. Taking this into account, the Board has today declared a final dividend of $1.05 per share fully franked, up $0.02 per share or 1.9%, bringing the total ordinary dividend to $2.75 per share, up $0.14 per share or 5.4% and representing 65% of NPAT for FY '25 and a special dividend of $1.00 per share fully franked. The combined final dividend and special dividend will distribute $224 million to shareholders. The record date for both dividends is the 22nd of August, with payment to be made on the 5th of September.

The Board has reviewed the group's capital structure and today announced an increase to the dividend payout ratio from 65% to a range of 70% to 80% of NPAT from FY '26. The capital management initiatives announced today reflects the Board's commitment to maximizing return to all shareholders whilst maintaining an optimal capital structure that provides the group with continued balance sheet capacity to invest in both organic and inorganic opportunities.

I'll now hand back to Terry for the July trading update.

Thanks, Dave. Now on to Page 22 for the FY '26 trading update, sales update for the period 1st of July to 31st of July 2025. Pleasingly, sales momentum continued into July, supported by new product launches and an improved stock position. Total sales for JB Hi-Fi Australia was 6.1% with comparable sales growth of 5.1%. Total sales growth for JB Hi-Fi New Zealand was 38.4% (sic) [ 38.1% ] with comparable sales growth of 23.7%. Total sales growth The Good Guys was 4.3% (sic) [ 4.2% ] with comparable sales growth of 3.8%. And total sales growth for e&s was 1%, with comparable sales growth of minus 2% (sic) [ minus 2.7% ].

Now on to group focus areas on Page 24. The group continues to leverage and evolve its unique offer and capabilities, with particular group focus in 4 areas being retail execution, multichannel, brand reach and supply chain. With retail execution, that's about continuing to prove value and that's actively promoting and demonstrating the value we offer customers; keeping it simple, never want to overcomplicate the business and as such, staying focused on things such as metrics that matter; customer engagement, creating and evolving our engaging in-store experience; and operational efficiencies, continue to drive efficiencies and reinvest in customer-facing roles.

With multichannel, it's about online, and that's leveraging and maximizing the significant online traffic. And part of that opportunity is to leverage the traffic -- or part of that opportunity to leverage the traffic is marketplace, and we'll continue to look to expand the range of marketplace and drive awareness. Membership programs and that is around delivering personalization at scale. And enhanced sales channels, that's create consistent customer experiences across all channels but also ensuring we stay connected with shoppers however their shopping journeys may evolve.

Brand reach, that involves stores -- some store expansion: JB Hi-Fi New Zealand expansion, 3 new stores in FY '26; e&s integration and expansion, 1 new store in FY '26; JB Hi-Fi Australia, 5 new stores and 1 closure in FY '26; The Good Guys, no new stores but 2 major relocations in FY '26; and the commercial growth, continue to expand our customer base.

And then finally, supply chain, which is focused on delivery options, creating best-in-class customer experiences, optimized inventory flow, enhanced stock availability, especially during those peak trading events and evolving the supply chain network to align with our multichannel strategy to improve flow of bulky products.

Over now to our investment checklist on Page 26. You all know this well by now, so I won't go through it. However, all remain key to our continued ongoing success.

We'll now hand over to questions. Thank you.

[Operator Instructions] Your first question comes from Adrian Lemme with Citi.

Congrats, Terry, on the result and your very successful second stint as CEO. And congrats to Nick as the new CEO.

Look, my first question was about The Good Guys gross margins. I calculated, if I'm right, that the second half gross margins were up something like 87 basis points. Are you able to give more color on what's driven that significant turnaround? Are you triggering more rebates with the better sales growth? Have you tightened up promotions, et cetera?

Adrian, to be honest, there's a bit of lumpiness in the halves and a bit of what we're cycling in the prior year as well. So if you look second half '24, it was probably one of the lower gross margins halves we had at Good Guys for quite a while, so we're cycling that this year. And then there is a little bit of benefit in this half from that continued strong growth that we've been seeing in Good Guys over an extended period of time. So a bit about the comp and a little bit about some good execution and some good growth in the second half.

Okay. Can I ask a second question? Obviously, we saw very strong growth in inventory. Should we take that as a sign of your outlook into Black Friday rather than you've got any excess inventory? And if so, what are the key categories that are driving that increase, please?

Yes. Thanks, Adrian. So yes, the increase in inventory, I think we've always sort of said that we manage inventory to forward weeks cover, which sort of reflects -- or part of it then reflects the sales growth that you're seeing in the numbers at the moment. In addition to that, then there's probably just some abnormal things there. There's a little bit more new stores in the network, and that obviously drives increased inventory. So I think we've called out sort of 6 or 7 there, and then there was also Westgate in New Zealand that opened very early in July that you kind of stock out. So that's contributing as well.

And then finally, within -- there's always something happening with suppliers. And at that point, there was an ERP change with one of our suppliers where we bought ahead of what might be disruption to stock flow. So again, all those things contributing to sort of what you see growing ahead of the sales growth that you saw in July.

Your next question comes from Shaun Cousins with UBS.

Terry, congrats on both your tenure as a CEO and thanks for the engagement in answering our questions over the years. And good luck, Nick, in the new role. Maybe just to start on gross margins in JB Australia. While it fell as expected, it only fell on our numbers maybe 27 basis points to sort of 22.18%. Can you discuss the impacts be it product mix, supplier support and in-store discounting? And maybe within that, if you could also touch on the broader competitive intensity with Officeworks signaling more vocally their intent to compete in Amazon and traditional peers, Harvey's and Bing Lee, please.

Yes. I think, Shaun, we were pretty pleased with that second half gross margin in JB Australia to sort of first half, we ducked -- we were down at sort of 22% or even slightly lower, 21.84%, and we were always targeting around that 22% gross margin. So to get it back up to 22.18%, I think it was, in the second half was a good result.

Mix didn't have a massive material impact in the second half, so that was reasonably helpful. Competitive environment, it's still competitive. We're still seeing some of those competitors you mentioned to be pretty aggressive in particular categories, and we continue to meet the market on price. We would say we -- that the on-floor discounting or the effective discounting has probably just normalized. It's back to -- I think we said previously, back to where it was historically. And that's probably in the base now. So we didn't see an increase in that effective discounting in the half.

Great. And maybe just secondly, around cost of doing business, that sort of fell pre-D&A down, I think, some 31 basis points. Can you just talk a bit about some of the drivers of that across be it operating leverage, how you've been able to flex or manage labor costs, fair works going up, but in terms of how you've been able to manage your labor better and then how you've been able to manage your rents as well, please?

Yes. Again, I think the team has done a really good job of managing that cost in the second half. I would acknowledge there is definitely some operating leverage benefits there, like that -- I think with almost, well, 7% -- almost 8% sales growth in the second half is definitely helping from a cost of doing business percentage perspective, but the operations team absolutely continue to manage labor really closely.

From a rental perspective, we've sort of -- we've gone through those last couple of years where we do have in JB Australia half of the leases with annual increases tied to CPI. We've had those coming through the last few years. We're probably now back to a level where those annual increases are more manageable. And then on renewals, we continue to be an important tenant for our landlords, so we continue to push for what we think is appropriate rent for what we bring to those centers.

Your next question comes from Michael Simotas with Jefferies.

Good morning, everyone. And firstly, I'd just like to echo that congratulations for Terry and Nick. First question I've got is on The Good Guys CODB, so fairly high rate of growth in costs across both of the halves for The Good Guys. How much of that was discretionary investment that you wanted to put into the business versus investment that you needed to make? And how should we think about that going forward? Is there more cost investment ahead of sales that you want to do? Or is this the base that we should work on?

I think it's definitely us putting the labor back into the business that we thought is necessary given the sales environment. And I think we -- I don't think. We did call that out in previous times that we felt that's gone a bit too tight on wages given the sales increase.

And then looking forward, Michael, we'd say we probably feel like we've gotten the mix right, again, the labor-to-customer ratio feels pretty right now.

Okay. All right. Good. And then the second one for me, just whether you're seeing any signs of the categories that are more directly driven by housing starting to fire. I mean, e&s, still early days, but it's a bit softer, and it might be worth talking about Victoria specifically as well. But some of those sort of premium appliance categories that are more driven by housing, are you starting to see any signs of life?

I think if you think of -- yes, e&s would be the one that we should see that premium side come through. If you think of The Good Guys, they are really focused in the replacement market, and they've been seeing some solid growth coming out of the HA categories. Obviously, that's replacement, though, so it doesn't necessarily indicate it's a function of the housing side of it as yet. So I would say we haven't seen too much as yet, but we are hoping that, that will start to improve over the coming years.

Your next question comes from Tom Kierath with Barrenjoey.

Congrats, Terry and Nick. Just one on the fourth quarter comp in JB Aus. I think you did 8.2%. Is that kind of driven more by Nintendo Switch, like a product-specific launch? Or are you actually starting to see now better foot traffic kind of coming back into the stores maybe as the consumer kind of recovers a bit?

Yes. Thanks, Tom. So yes, it was an elevated comp relative to perhaps the Q3 that you saw running into it. If you think about it, that Nintendo Switch launch -- Nintendo Switch 2 launched in Q4, and that did drive a lot of that incrementality. So I think the baseline of Q3 and perhaps what you're seeing with July is probably more like what you'd expect, excluding the launch of Nintendo Switch 2.

Yes. Got it. Got it. And then secondly, obviously, with the stuff that's going on in China and the U.S. with tariffs, how are the kind of discussions going with suppliers at the moment? Might we start to see some deflation here if you can negotiate better terms or that your suppliers can negotiate better terms out of China? What's the latest on that front?

Look, supply is -- seems to change every day. So even suppliers are just struggling to actually keep up with what it may mean for them. Generally, when they are looking at the U.S., it's the different manufacturing plants. So we're not getting any feedback that we're going to see any benefits or conversely any negative impacts coming to us at this stage.

Your next question comes from Josephine Forde with Bank of America.

My question is also on the fourth quarter sales, was really strong. I'm just curious, do you see a solid runway for new product launches coming into market in FY '26?

Yes. Look, the great thing about the business is there is always those product launches. And likes of Apple will be -- will launch. We don't know. We're not giving any detail, but you -- it's fairly regular. So there is some -- what we are anticipating to be reasonable launches, but really, it's just more of the same that we see every year and coming through.

Yes, it feels like the pace of innovation is really stepping up and we're sort of at the beginning of rapid advancement in AI technologies. But perhaps my second question, I'm just interested in commercial growth. Can you expand on the opportunity in commercial for JB Australia and The Good Guys? We know your competitor has launched its business platform in Australia a few months back, so I'm just interested in the progress you guys have made to date growing government and corporate customers across those businesses, please.

Yes. I think when you look at commercial, it's probably important to divide it into the different brands. In JB, we have JB Hi-Fi Business and JB Hi-Fi Education. And JB Hi-Fi Business, we've done a lot of work on sort of repositioning that business getting it very clear on its customer proposition, and that's probably very focused on SMB and trying to grow the customer base. And we're making investment in systems and people and processes to do that and feel like that's well set up now for growth.

Education, we still think -- talk about tech and category growth. We still think technology and education will be a good opportunity for JB Hi-Fi, so that will continue to grow. Similar to JB, Good Guys have a commercial business, which talks to probably that SMB type customer as well. What -- where we had a gap in commercial was in -- really in the developer and commercial construction customer market, and that is where e&s are very strong. And so that was a big part of the reason for the acquisition of e&s is to access that new customer in that commercial segment. And so we think there's good opportunity to grow in that commercial construction market with e&s.

Okay. But have you seen good customer acquisition in the full year to date in those commercial customers across the business?

Look, in our commercial business, we had a reasonably soft couple of years in commercial. Like I think Terry was saying, I like to think that we'd start to see that improve over the next 12 months.

Your next question comes from Caleb Wheatley with Macquarie.

Congratulations again, Terry and Nick. My first question, just going back to JB Aus. I appreciate your comments on the benefit that Switch 2 had. But I think you've also been talking to some of the benefits maybe come from the COVID replacement cycle and Windows 11 laptop. Have you started to see any of that benefit roll through as yet? Or are we still likely to see it through FY '26, please?

Look, the -- when you -- we think it was a bit hard to hear there. But the AI PC type categories continue to perform well for the business. Obviously, it's a really strong category for us, but we believe that, that COVID replacement cycle has to be starting to flow through, but there is still -- still feels like there's more to come with that into the next financial year.

Great. That's clear. And then my second question, just on the FY '26 focus areas. You've called out supply chain there as well. Just keen to hear how you're seeing the opportunities on that supply chain and if it ties into an earlier question on commercial. Is it a response to sort of step up given the growth in online? Could you just provide a bit more color on the thoughts around the supply chain focus, please?

Yes. We -- what we have been doing and continue to do is try and make our supply chain as efficient as possible and adjust some changes in the business. So I think we've done a really good job on that outbound customer delivery, so that last mile fulfillment to customer, we're doing a good job.

Where we have a bit more of a challenge at the moment is we've seen significant growth in bulky goods over a number of years. And if you think we have what we call our HDCs, they are big and bulky home delivery centers. Since we put those in place close to the acquisition of Good Guys, I think, back in sort of 2017, 2018, we've had significant growth in the business. And so we just have some space challenges in those HDCs, and we need to do some work around how we evolve those HDCs to manage that increased volume.

So we're doing that work at the moment and similarly as to the -- how we flow some of those sort of semi-bulky products into our stores, and that's items like robotic vacuum cleaners and coffee machines and microwaves. So we did -- it's more a continued evolution of what we've been doing over the last few years, Caleb.

Your next question comes from Ben Gilbert with Jarden.

Just interested in, in terms of looking forward. So it feels like commercial, which I think historically has been well over sort of $0.5 billion, you've got Windows, Switch coming through, et cetera. There's a lot of hardware growth that should be driving sales over the next sort of 6, 12, 18 months. How does that fit into your expectations around gross margin? I think you've previously sort of given some guidance around sort of levels sort of feel about right for JB and Good Guys. Is that still your thinking? And I suppose particularly interested around things like attachment rates, et cetera, and how you're holding that margin given how strong the hardware sales have been.

Yes, there -- yes, we are still -- in terms of gross margin, our thinking hasn't changed around more about -- it's about maintaining those existing gross margins in JB and Good Guys. Commercial, it's -- yes, it is a lower gross margin business, but as a percentage of the overall business, it's still not that significant in JB and Good Guys. And so we're comfortable we can continue to grow commercial within JB and Good Guys without having a really significant impact on the gross margin.

And maybe just a second one for me, first of all, just around the CapEx side of things. Just how are you thinking about the outlook for CapEx from here? In particular, I suppose in the context of questions around supply chain, is there an inflection point in terms of sales? Or does marketplace then become a certain level where you think you need to do a bigger look of investment around supply chain?

Not necessarily marketplace. No, look, we -- look, we're comfortable managing our existing installed base within that CapEx envelope. If we were to do something more material on supply chain, then we would absolutely need to consider that capital investment and making sure we get an appropriate return on it, Ben. So at the moment, that isn't contemplated. And then if we were to do something, we would obviously inform you at the right time.

Your next question comes from Craig Woolford with MST Marquee.

So well done, Terry, on an outstanding career with JB Hi-Fi, amazing performance of the business over many years. Just first question on the gross margin outlook. I constantly wrestle with the half year figures. So just to be clear, on The Good Guys, you want us to interpret the full year result as the right yardstick for The Good Guys gross margin. And switching back to JB Australia. Are you signaling that competitive conditions put downward pressure on gross margins from here or you can sustain the 22%?

It's about maintaining it. So our -- we've said it over an extended period of time, 22% in gross margin in JV feels right. The team worked incredibly hard to try and maintain that gross margin, and they do a great job of it. And similarly, Craig, in Good Guys, yes, it's about maintaining those full years. It is -- we appreciate both businesses. It is a bit choppy half-on-half this year. Yes, so it's more about maintaining those full year gross margin.

Okay. And just like, yes, you are a low-cost business. It was still -- I'm calculating ex e&s operating costs were up about 6.6% in FY '25, so still a fairly elevated cost backdrop, which is understandable given what's happening more broadly with wages and rent. As we roll forward to '26, do you see any opportunities for cost efficiencies given where prevailing wage rate determinations have been and what that rental environment looks like?

We just -- I know it sounds simple, but we just continue to manage the cost of sales. And we look at it within the brands, and so when you look into brands, we talked a little bit about Good Guys, about we thought we had to put some labor back into Good Guys. So that was a contributing factor in FY '25.

In JB, we had sales growing at 7.5% and costs only growing at slightly less than 6%. So we've said it before. We believe when the sales are there, we want to make sure customers have a good experience and get service. And so we will put the labor in to make sure we maintain that service. And that labor is still the vast majority of our cost base. So we can roll forward. We'll continue to roster and manage our labor in line with our view on the sales outlook.

Your next question comes from Sean Xu with CLSA.

I was looking at some market analysis released 3 days ago by a consumer market data agency called Fonto, and they mentioned Temu came on the top being the fast-growing consumer retail brand in Australia for FY '25. I would love to get your -- just get your updated view on the stuff around Chinese manufacturers selling directly to Australian consumers through the app on the back of, I guess, Temu's even more aggressive expansion locally in Australia here post tariff impact on their U.S. export business, please?

Look, to date, Sean, we haven't seen an impact, and I'll come back to that group model slide that Terry ran through earlier. We are typically known for the biggest brands and the best brands. And to date, we haven't felt a material impact through Temu.

Yes. I mean -- and again, when I think about categories, they are higher involvement categories, higher dollar value. Generally, people want extra gratification and they know they can get it. And a lot of the product, it just doesn't necessarily overlap with what may be on Temu other than maybe accessories, some accessory products, but we're not experiencing or being able to identify anything that's being impacted by it.

Your next question comes from Chami Ratnapala from Bell Potter Securities.

As the others stated as well, double congratulations to you, Terry and Nick, as well. Well done. Two questions from me quickly if that's okay. I think, firstly, quite a few questions on the gross margins. Just want to add the New Zealand and online sort of impacts here as well. Firstly, I mean, New Zealand is still pretty high growth in July. Do you feel like you've had to give away a bit of margin to drive this high growth? Or any sense of margin for us for that part of the business in July? And then on the other hand, as the online penetration increases for the business, how do you view margins as well there?

Starting off with New Zealand, sorry, and not specifically commenting on July. New Zealand, we are seeing really good sales growth in New Zealand. We're really pleased with the share we're taking in New Zealand. Our challenge from here is that -- is to start to improve the gross margin at the same time. And so that is something we're very focused on working on over the next 12 months.

It is still very competitive in New Zealand. It has been a tough market over there for a couple of years. So like I said, I think our team are doing a great job of executing and taking share in a really tough market.

Coming to online separately. Look, I think, online, we've said previously, there's a few moving parts when you could bear an online P&L to a store P&L, but overall, we're very comfortable that our margins, we can generate online pretty consistent what we can generate through our bricks-and-mortar business.

Perfect. And then secondly on e&s, I believe there is a new store, the first one under your sort of ownership, under the new management ownership, which seems a bit more smaller. Just trying to understand the strategy going forward. I think in the past, it's been noted, the optimal size of around 2,000 square meters. What's the sort of strategy around this going forward for FY '26?

Yes. There's probably 2 new stores that you've seen. There's one in Victoria in Epping, and then there's one that we will open shortly down in Hobart, probably both a little bit smaller than that 2,000 square meters. I think going forward, yes, we're just -- we like to think we can retail from multiple different store sizes. I think a standard store is around that 2,000 square meters going forward. The Hobart opportunity is definitely smaller. It's more opportunistic, taking over a site from a retailer that exited the market down there. So we're trading out of what we effectively inherited down there, and going forward, we'll look at getting a more consistent size store as we expand.

Your next question comes from Bryan Raymond with JPMorgan.

And once again, congrats to Terry and to Nick. Just my first question is just on trying to reconcile a couple of comments actually. Just I want to confirm one of the answers before. The Nintendo Switch 2 drove most of the acceleration from 3Q to 4Q. So that was a 220 basis point acceleration. Is that -- so confirm that's right. And if so, then there was no sort of mix effect on gross margin -- or no material mix effect, I think, Nick, you might have mentioned earlier, on gross margin in the second half. So I just want to make sure I'm understanding those 2 things are both there.

Yes, that was -- it was very -- as you probably have seen, it's been a very successful launch. So the pre-orders all were delivered in that Q4, which gives a good bump in sales. Mix, overall, there's lots of things happening in mix. And yes, so overall, for the half, as I say, there's not a material mix impact from the Switch.

Okay. Okay. And just a follow-up there. Did the Switch have much or any other product releases have a meaningful impact in July? Or was that pretty -- was that -- I think it was a few months ago that got released, from memory. Or was July a clean -- a cleaner read, is what I'm trying to get, in terms of trading performance?

Look, it's definitely cleaner than Q4. There's some benefit from the Switch, again, in July. But as Terry said earlier, we're constantly seeing new or old product come in to the business. And so whilst there might be something new this year, it's likely or it is that we'll be cycling something in the year before and there will be something completely different coming in the next few months. So yes, July is -- I would say is July is reasonably clean.

Okay. Okay. Great. And then just more broadly, seems like a lot of the key categories you guys are in, in particular in JB Australia, are seeing good ASP growth at the moment. You mentioned earlier, AI laptops are example of that. We're seeing it in smartphones as well to some degree. How would you characterize overall the sales growth you're generating between volume and price? Are you seeing kind of good volume growth to go alongside what appears to be a good ASP cycle? Yes, I'd just be interested in your broad comments there. I'm sure it is category specific, but I'd be interested in anything you can add there.

Yes. Broadly, yes, you are. You're seeing good volume growth and ASP growth in JB. So both are contributing in JB. In Good Guys, the growth is more driven by volume growth, say, more -- less ASP growth and more volume growth in Good Guys.

[Operator Instructions] Your next question comes from Phil Kimber with E&P.

Congratulations as well. JB sort of do management transitions best in class, so well done. My question, firstly, just on category. You mentioned Switch was strong, but we've had industry feedback that the AV category had been a little bit more challenging recently. Any sort of color you could provide on that would be great.

Yes, pretty consistent with what we've seen. TVs in the second half had been a bit more challenging, and yes, it's -- particularly ASP. ASP in the TV category has probably been the biggest challenge most recently.

And that's -- is that because of discounting, respectively, or people trading down?

Yes, there are people trading down. It's -- we've called out repeatedly in the pack around proving value and making sure we demonstrate value. We can see people are still actively looking for value in that category. And so the Chinese brands have been very strong over the last 12 to 18 months, and that does put some pressure on ASP in the category.

Great. And then just a question around written sales versus delivered. I assume your sales that you're reporting as delivered sales. Is there any -- I'm thinking maybe for Good Guy mainly here and perhaps e&s trading given they had a bit of a soft July. Is there anything we should be aware of? Like there was more deliveries made in June, so you captured the sales quicker than you otherwise would have. And just trying to think about how that can work from a very short-term focus on just July sales.

Yes. It's definitely more [ maybe with ] e&s than it is in JB, Good Guys. The gap between what we would call written and delivered in JB and Good Guys is reasonably short. As you're expecting, JB went -- and then in Good Guys, as Terry mentioned, it's primarily replacement product in Good Guys. So customers tend to purchase and want it quite quickly. That's very different to e&s, where there is definitely a longer lead time between written and delivered. And as a result, you're right. It can be lumpy in an individual month. And that -- so what we reported there is all the numbers we reported on delivered. So that is delivered in e&s in that particular month, and it will move around month-to-month.

And was that why e&s was just a bit soft? Like it went from 4% for the year like-for-like to minus 2.7%.

Yes. Yes, it is. It is why we never love giving 1-month figures, but we do it. But yes, it is absolutely that.

Your next question comes from Michael Simotas with Jefferies.

Just wanted to understand the thinking around the lift in the dividend payout ratio. I mean, clearly, the balance sheet is very conservative, and we've been talking about that for a while. Is this meant to be in lieu of special dividend, so that will sort of take you to the level of distribution that you want to do? Or is there still some potential for specials going forward as well?

Yes. Thank you. So the -- you can see that the net cash position of $284 million at 30 June, then the distribution of the final and the special dividend will distribute $224 million of that back to shareholders and get you back closer to sort of a net cash position.

Moving forward then, the dividend payout ratio change helps to manage that cash balance moving forward and in effect, is a replacement for a special dividend in the sense that we have the possibility to move up and down that range to return excess capital to shareholders over and above sort of what would ordinarily be like a net 0 cash position.

We have no further questions. I'll now hand back for any closing remarks.

Thank you. Thanks, everyone, for your kind comments for myself and for Nick, and appreciate your interest. And I like to think that's the end of it. Thank you.