JB Hi-Fi mulls more IT acquisitions

JB Hi-Fi is planning to expand its Education business nationally as it seeks to grow its Commercial unit to $500 million.

The education division is dominated by Network Neighborhood, the integrator in which it acquired a majority stake last February, then took full ownership in December.

JB Hi-Fi chief financial officer Richard Murray revealed the national expansion ambitions to CRN this morning, as the retailer announced its half-year results.

The retailer grew sales 6.8 percent to hit $1.94 billion for the six months to 31 December 2013. JB Hi-Fi also grew net profit after tax by 10 percent to reach $90.3 million for the period.

Online sales also grew, however, they still only represented 2.2 percent of total sales.

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It also opened five new JB Hi-Fi stores and one new Home outlet, while seven of its existing stores were converted to Home stores.

Beyond the Home strategy, JB Hi-Fi also has big plans for its Commercial business.

While it doesn’t break out specific numbers for Commercial, it has a stated aim to hit $500 million in the medium term, which would represent roughly 20 percent of turnover.

Murray said: "If we acquired something we’d get their quicker and if we do it organically it'd take longer; we are focused on doing it profitably."

According to JB Hi-Fi's investor presentation, the business "remains on track to deliver on our longer term sales target of $500 million per annum, through both organic growth and strategic acquisitions".

Education

One of the biggest opportunities for organic growth will come from state education departments, particularly in Queensland, New South Wales and Western Australia.

When JB Hi-Fi took 100 percent ownership of Network Neighbourhood in December, the "trigger point" was its contract renewal to supply technicians to the Victorian government Department of Education and Early Childhood Development (DEECD).

Network Neighborhood is the largest single supplier to the DEECD, with 160 techs across 350 schools.

Today, Murray told CRN: "New South Wales and Queensland are considering the same sort of programs and we are helping them work through the best way to structure these.

"Governments are resource-constrained, IT is massive part of all schools' budgets and they are trying to stretch that further, that’s why BYOD is a huge opportunity going forward."

JB Hi-Fi has also been moving staff from its Commercial unit into Network Neighbourhood banner to focus on education.

Part of its focus on BYOD for schools is an expansion of its partnership with PC maker Lenovo. Late last year, Lenovo joined with JB Hi-Fi to establish its first retail presence in Australia, said Murray.

"Lenovo and Apple would be our two biggest partners for NN," he added.

Murray also shed some light on JB Hi-Fi's M&A strategy.

Within Commercial, education is the most likely site for further acquisition; the retailer is looking to buy strong businesses that can bring intellectual property and new client relationships – not to rescue struggling operations.

"The challenge is finding businesses that have scale that plug a gap into our existing business," said Murray.

"The challenge is finding business that operate in a corporatised manner. It is a challenge when you buy smaller owner-operator business to roll them into a larger organisation. We see a lot of these businesses and, to be perfectly frank, it must also stack up for JB.

"Owner-operators are passionate about their own businesses; the challenge for them is seeing the bigger picture and aligning with where JB sees the future," he said.

Network Neighbourhood new general manager, Brett Armstrong, has also joined.

Armstrong, who replaces NN founder Hugh Marquis, spent the past nine years with the nationwide IT consultancy Winthrop, with a particular focus on private and Catholic education.