By Claire Reilly
Harvey Norman has released its annual report for the 2013 financial year today, showing declines in earnings and profits, largely driven by weaker results in the first half of the reporting period.
Profits (before tax) were slashed in the six months to December 2012 by more than a third, down to $99.55 million from the previous year’s result of from $163.47 million. Earnings before interest and tax (EBIT) painted a similarly grim picture, falling from $188.12 million in FY12 to $123.03 million in FY13.
However, the retailer fared significantly better in the second half of the financial year, with EBIT up almost 25 per cent to $110.69 million (from $88.74 million in FY12) and profits before tax climbing to $88.40 (from the FY12 figure of $63.94 million).
This stronger second-half performance was not enough to negate poor figures from the start of the year, with most figures tracking badly year-on-year. Franchisee sales revenue was down to $4.72 billion (FY12: $4.83 billion), company-operated sales revenue from Harvey Norman’s overseas businesses was down to $1.32 billion (FY12: $1.40 billion) and EBIT for the year dropping to $233.72 million (FY12: $276.86 million).
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Speaking about the results, Harvey Norman chairman called out the strong performance of the retailer’s franchisees in the second half of the year.
“Trading conditions in Australia remained competitive, however, the second half of the 2013 financial year displayed early signs of modest growth,” he said of the company’s performance in the 2013 financial year. “This was evidenced by an increase in sales from Harvey Norman franchised complexes during that second half.
“Franchise fees received from our franchisees have reduced relative to prior year reflective of the reduction in franchise sales revenue,” he added. “Harvey Norman franchisees continue to train and invest in their people to drive sales revenue and enhance the overall customer experience. We will continue to support our franchisees with the provision of tactical support to equip them with the necessary means to manage the difficult trading environment.”
Harvey’s outlook for the future was optimistic, driven by hopes for a stronger housing market and increased consumer confidence.
“The historical lows we are seeing in the cash rate and home loan rates should be a catalyst to stimulate the housing market and Harvey Norman will be a direct beneficiary of any improvement in the housing market.
“In the NSW Treasurer’s Economic Update this month, Mike Baird highlighted recent ANZ research that the NSW economy has improved to the point that it will be the driver of the national economy over the coming years.
“The optimism surrounding the NSW economy stems from its diversified industry structure, the recovery in the housing sector and the government’s large infrastructure program. Thirty-six percent of our Harvey Norman complexes are in the state of NSW [and] we look forward to the improvement in Australia’s biggest economy.
“We remain cautiously optimistic about an improvement in domestic retail confidence and look forward to capitalising on any uptick in consumer sentiment by strengthening our retail offering through sustained investment in service, commitment to our omnichannel strategy, and the enhancement of our robust integrated retail, franchise, property and digital platforms.”