‘Sound strategic decision-making’ behind 48.9 per cent jump in Harvey Norman profits

Harvey Norman today delivered strong financial results for full year ended 30 June 2014 “despite some short term weakness associated with the Federal Budget and a generally challenging retail environment,” chairman Gerry Harvey said.

Profitability improved across all of Harvey Norman’s operating segments leading to a net profit after tax (NPAT) of $211.70 million, a 48.9 per cent increase from $142.21 the year before.

Global sales increased to $5.77 billion, a 3.5 per cent increase on the prior year and a 4.7 per cent increase on a like-for-like basis.

“This is a solid financial result underpinned by sound strategic decision-making and the strength of our integrated retail, franchising, property and digital system,” Harvey said.

“Continued development of our Omni Channel strategy together with a moderate improvement in consumer sentiment fuelled consecutive quarterly growth in Australian franchisee like-for-like sales, despite some short term weakness associated with the Federal Budget and a generally challenging retail environment.”

Franchisee sales revenue reached $4.77 billion, up 1.1 per cent and like-for-like sales revenue was $4.75 billion, up 3 per cent. Before tax, the franchisee segment revenue was up 26.7 per cent to $143.72 million.

High profitability in the franchising segment was driven by a focus on homemaker categories and a 19.7 per cent reduction in tactical support provided to franchisees.

“In recent years, we have been steadfast in our commitment to provide appropriate tactical support to promote the Harvey Norman brand and our competitive position. It is rewarding to see the benefits to our approach reflected in this result,” Harvey said.

Company-owned stores’ earning before tax jumped from $12.53 million to $28.72 million.

Appreciation in the Euro, Pound and New Zealand dollar also positively affected results of the company-owned international stores and sales improved in New Zealand, Slovenia, Croatia and Ireland. In Northern Ireland the business made a slimmer loss than the year prior.

In FY14 six company-owned stores were opened (two in New Zealand, two in Singapore and two in Malaysia) and one company-owned store closed in Singapore.

Eight franchised complexes closed during the year, including seven Harvey Normans and one Joyce Mayne store.

The strong overall results include a drop of $11.56 million in the value of Harvey Norman’s property portfolio.

“Our property portfolio provides the backbone for our retail and franchising operations and differentiates us from our competitors, providing unrivalled financial stability. We have doubled our net asset base over the last ten years and, with conservative gearing levels, we are ideally positioned to take advantage of growth opportunities.”

The results were accompanied with an upbeat forecast for the future thanks to a strong outlook for the Australian housing market.

“With a robust outlook for the housing market in Australia, we are well-placed to harness our market-leading position in the homemaker categories to build market share and deliver improved performance. Market conditions, together with our consistent strategy and operational focus, gives me confidence in the outlook for Harvey Norman,” he said.

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