Harvey Norman profit falls 19%

Impacted by net property revaluation, joint venture impairment.

Harvey Norman has reported a 19.3% slide in net profit after tax for the half year ended 31 December 2017 due to a reduced net property revaluation and $20.67 million impairment loss for the write-down of its dairy investment, the Coomboona Holdings joint venture.

Excluding the above significant items, underlying profit before tax was $296.08 million – an increase of 0.8% compared to the previous corresponding period.

Since releasing its half year results at 10.00 AEST, the Harvey Norman share price has dropped more than 13%.

Harvey Norman chairman, Gerry Harvey said, “The strength, stability and flexibility of our expansive, high-quality retail developments continues to be an integral point of difference, and this allows us to maximise the ability of our physical retail offerings to provide a complete interactive customer experience.”

Company-operated retail segment

Harvey Norman’s company-operated retail segment saw an 11.3% increase in profit and a 4.5% increase in revenue. All overseas company-operated stores reported sales growth, higher profitability and market share gains.

Ireland & Northern Ireland

  • Sales revenue for Ireland was up by $24.93 million due to the 3.73% appreciation in the Euro and opening of the Tallaght flagship in Dublin in July 2017
  • Sales revenue for North Ireland saw a slight increase by $0.16 million due to continued dominance of Boucher Road, South Belfast flagship store, slightly offset by the 0.15% devaluation of British Pound

Singapore & Malaysia

  • Sales revenue for Singapore and Malaysia was up $13.11 million
  • Continued strong performance of the Millenia Walk superstore, opening of the new Viva City factory outlet and expansion of existing stores at Parkway Parade and North Point City in Singapore
  • Full 6-month trade of the Sunway Velocity store in Malaysia and re-opening of the reinvigorated flagship at Ikano, Kuala Lumpar

Slovenia & Croatia

  • Sales revenue for Slovenia and Croatia was up $13.08 million
  • Appreciation in Euro and redevelopment of the Ljubljana flagship store in Slovenia
  • Croatia performed well and this trend is expected to continue after the relaunch of the reinvigorated Zagreb flagship store later in the year

New Zealand

  • Sales revenue for NZ was up $2.69 million with a full 6-month trade of the Queenstown store and strong sales growth during key promotional periods
  • Modest sales and market share growth in New Zealand amidst a slowdown in the economy and cooling housing market in Auckland
  • Offset by $10.25 million reduction in sales revenue from other non-franchised retail controlled entities

Franchising operations segment

Australia

  • Aggregated franchisee sales revenue increased 4.8% compared to the previous half year, breaking the $3 billion barrier for the first time for a December reporting period
  • Comparable sales saw a 4.1% increase compared to the previous half year
  • Profit from franchising operations was down 2.9% to $167.21 million
  • Performance of Australian franchisees described as solid ‘given the increased competitive landscape and franchisees’ additional investment in staff wages’
  • Aggregated sales for the period 1 January to 26 February, 2018 increased by 0.5% compared to the previous corresponding period and 0.2% on a comparable sales basis impacted by a double digit fall in seasonal sales

Commenting on the result, Harvey Norman chairman, Gerry Harvey said, “Our franchisees continue to be dominant in the home and lifestyle categories – with an increase in aggregated sales revenue of 4.8% from this period last year. This is a really solid result when you consider the previous half-year period saw the strongest results on record and it shows our franchisees have kept up that momentum to deliver an unprecedented result.”

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