Gerry Harvey’s Harvey Norman (HVN) group “punished’ investors and analysts yesterday by not holding a results briefing because he is upset with the increasing scrutiny of the company and its accounting.
It seems a bit of a dummy spit (analysts have questioned the way property revaluations are taken into the accounts and the still opaque way the franchising business is treated in the accounts) because the retailer reported a solid set of figures.
Net profit before tax jumped by $104.22 million, or almost 40%, to $366.23 million for the half year, including property revaluations worth $75.74 million.
Reversing out contributions from its $2.6 billion property business, the retailer’s after tax profit was up a solid 19.7% to $204.27 million for the half year.
A combination of a warm spring and summer, as well as the housing and renovation booms, and rising property prices, and the last boost from the collapse of Dick Smith were the main drivers behind the solid result. Interim dividend was lifted 1 cent to 14 cents a share – which is hardly a ringing endorsement though of the overall result.
Harvey Norman revealed franchise sales grew 5.2% to $2.86 billion. It said the profitability of the franchising operation up 14.4% at $172.13 million.
That growth in profits from the franchised retail operation reflects a $17.09 million jump in franchise fees to $430.20 million, which Harvey Norman attributed to the rise in franchisee sales.
Same-store sales in the Harvey Norman franchise network were up 4.7% to $2.84 billion and chairman Gerry Harvey said the group’s franchise model and its dominance of the home and lifestyle categories supported the jump in franchisee sales.
“Housing continues to be robust and franchisees large-store formats and tech-savvy staff have been able to showcase the integration of home lifestyle and technology that is really exciting consumers,” Mr Harvey said in yesterday’s statement.
Harvey Norman said the result reflected strong retail spending in NSW and Victoria as well as the "wealth effect" of higher house prices in these markets.
"Technology is changing at an ever-increasing pace and every day brings a new product to help up manage our work commitments and to better enjoy our home and leisure time," Mr Harvey said.
Harvey Norman’s company-operated retail operations reported a net profit before tax of $51.56 million, up 22.06% from $42.06 million in the previous first half.
The group’s Northern Irish operation again lost money, though the loss fell to $2.15 million in the six months to December and all other overseas operations recorded a profit.
"We are seeing strong gains in brand recognition and market share in our overseas markets and this is translating into increased sales revenue," Mr Harvey said.
“At the same time the businesses have achieved material cost efficiencies and improved supplier relationships which have driven profitability,” he said.
Harvey Norman shares closed up half a per cent at $5.15.
