Harvey Norman Holdings Limited (ASX: HVN) has reported its December 2018 result, here’s what you need to know.
Harvey Norman Holdings is a major retailer that both operates company-run stores and also franchises Harvey Norman stores. There are Harvey Normans in Australia, New Zealand, Slovenia, Croatia, Ireland, Northern Ireland, Singapore and Malaysia. Gerry Harvey and Ian Norman opened the first store over 50 years ago in 1961.
What Harvey Norman Reported
The retailer and franchisor said that sales of products to customers grew by 15% to $1.175 billion and gross profit increased by 15% to $376 million. Offshore company-operated Harvey Norman retail sales grew 12.4% to $1.05 billion.
Revenue received from franchisees declined by 1% to $519.8 million. Total franchisee sales revenue declined 1.7% to $2.95 billion. Total overseas retail profit grew by 25.4% to $77.5 million and now represents a quarter of total profit before tax.
Reported profit after tax grew by 7.3% to $222.8 million and net assets increased by 9.3% to $3.15 billion. According to Bell Potter, analysts were expecting profit to be $202 million.
The company now operates in Australia, New Zealand, Singapore, Slovenia, Ireland, Northern Ireland, Malaysia and Croatia. Singapore & Malaysia profit grew 68.7% to $20.8 million and Ireland & Northern Ireland profit grew 164.4% to $10.3 million.
Harvey Norman Dividend
The interim dividend was maintained by the Harvey Norman Board at 12 cents per share.
Harvey Norman Management Comments
Harvey Norman Chairman Gerry Harvey said: “The last six months have seen outstanding results from our stores in Singapore and Malaysia, building on the growth we’d already experienced in the region and really delivering in an impressive manner. We’ve found this region to be a very fertile testing-ground for taking new ideas to market, both in retail presentation and proof-of-concept.”
Is Harvey Norman A Buy?
Harvey Norman said it was going to continue to focus on its flagship strategy. It also said it expects to grow to 25 Harvey Norman stores in Malaysia with the potential to reach 50 by the end of 2023. It’s also looking for new retail sites in Singapore.
In the first two months of 2019, Australian franchisee sales have fallen another 3.2%, New Zealand sales have also declined 3.2% in local currency terms. However, Malaysia, Ireland and Northern Ireland sales continue to grow nicely.
I always thought Harvey Norman looked troubled due to the potential for earnings declines due to the link to the Australian housing market, as well as rising online competition. However, it continues to do quite well and the overseas profit looks interesting.
I wouldn’t buy Harvey Norman for my own portfolio, but if the overseas segment continues to become a bigger part of total profit it could be a contrarian consideration.
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