Harvey Norman profits up 77.4 per cent, sales up 16.5 per cent

By Martin Vedris

SYDNEY: It has been a huge year for Harvey Norman —the company’s financial results released today for the year to 30 June 2007 report a 77.4 per cent increase in net profit after tax and minority interests of $407.25 million compared to $229.56 million in 2006.

Sales for the year ended 30 June 2007 from the franchised Harvey Norman, Domayne and Joyce Mayne complexes, company-owned stores in New Zealand, Slovenia, Ireland and other trading operations (excluding operations of Pertama Holdings Limited – Singapore and Rebel Sport Limited) totalled $5.34 billion compared to $4.58 billion for the prior year — an increase of 16.5 per cent.

According to the report released to the Australian Stock Exchange today, the retail franchise system in Australia, utilising the Harvey Norman, Domayne and Joyce Mayne brand names and integrated with an astute property strategy, continues to be a significant contributor to the total result of the consolidated entity. The franchising operations segment result before tax for the current year was $242.62 million excluding the final commission received in relation to the FlexiGroup Limited IPO, compared to $169.30 million for the previous financial year — an increase of 43.3 per cent.

The franchising operations margin, calculated as the franchising operations segment result before tax over franchise sales revenue, was 5.39 per cent for the current year compared to 4.28 per cent in the previous financial year.

The consolidated profit from continuing operations before tax and minority interests was $473.47 million for the year ended 30 June 2007, compared to $319.91 million for the previous financial year, an increase of 48.0 per cent.

Included in profit from continuing operations before tax and minority interests for the current period is the final commission received in relation to the FlexiGroup Limited initial public offering in December 2006 of $40.98 million and a net property revaluation increment of $65.68 million (FY06: $46.51 million) relating to investment properties, joint ventures and land and buildings held for resale.

Net profit from continuing operations after tax and minority interests was $324.10 million for the year ended 30 June 2007 compared to $217.75 million for the prior year, an increase of 48.8 per cent.

On 30 March 2007, the consolidated entity sold its shares in Rebel Sport Limited and deconsolidated its 52.82 per cent controlling interest on that day. Profit from discontinued operations after tax and minority interests was $83.15 million for the year ended 30 June 2007, compared to $11.81 million for the year ended 30 June 2006. The current period includes a $72.47 million after tax gain on the sale of shares in Rebel.

The Harvey Norman property portfolio consists of Harvey Norman, Domayne and Joyce Mayne owned complexes in Australia, New Zealand and Slovenia, properties held under several joint venture agreements and land and buildings owned by the consolidated entity in Australia for development and resale at a profit.

– The total value of the Harvey Norman property portfolio as at 30 June 2007 was $1.41 billion, broken down as follows:

– Investment properties in Australia of $1.02 billion;

– Owned land and buildings in New Zealand, Singapore and Slovenia of $207.09 million;

– Investment properties under construction recorded as property, plant and equipment of $79.62 million; and

– Joint venture properties accounted for using the equity method of $106.42 million.

According to the company, the group’s property portfolio is an essential complement to the Harvey Norman brand and retail system. The report states that ownership of the Harvey Norman, Domayne and Joyce Mayne retail complexes enables shareholders to participate in the benefits of ownership of high quality commercial retail and warehouse property, tenanted by leaders in the retail industry.

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