Gerry Harvey takes shot at ASX costs as profits slump

Harvey Norman executive chairman Gerry Harvey has said burdensome compliance requirements will lead to the retailer delisting from the ASX in the coming decades after the company posted a 34.7 per cent profit drop as consumers sought more affordable household purchases.

Harvey bemoaned the climbing costs associated with continuous disclosure obligations required of an ASX-listed company and said the retail giant he co-founded would most likely not exist in its current form in the next two decades.

Harvey Norman executive chairman Gerry Harvey anticipates a private equity takeover within the next two decades.Credit: Louise Kennerley

“I don’t think we’ll be a public company 10 or 20 years from now. I think we’ll be owned by private equity or privatisation,” Harvey said. “Exactly what, I don’t know … It’s a case of, you’ve got to move with the times.”

He said the company had always had conversations with private equity in the past 50 years and he said he was “sure” a takeover would happen. “I’ve got no doubt it’ll eventuate.”

The Australian Stock Exchange has been losing more players than it has gained recently: 156 companies delisted from the ASX in the 2024 financial year, far outnumbering the 56 that joined, as a dearth of IPOs and cashed-up private equity firms meant companies sourced their investment dollars from outside the sharemarket.

When Harvey Norman floated on the local exchange almost 37 years ago on September 3, 1987, the veteran retailer said regulatory requirements were a “tenth” of what they are now.

“I’ve got the longest tenure of anyone in Australia… I have watched with interest how this has progressed over 50 years. If you look at where it is today, how much better off are we?” Harvey said.

“You can predict with a fair degree of certainty, I think, that the public company is going to be extinguished, and big companies are going to be owned by private equity and superannuation funds,” he said.

“Whatever we’re doing to public companies now is making it impossible for them to co-operate.”

Harvey Norman recorded a 4 per cent slide in revenue to $4.1 billion and a 35 per cent drop in net profit to $352.5 million as Australians pulled back on their spending and sought to trade down and find cheaper alternatives. Business costs, including wages and power, are also weighing on profits.

The retailer predominantly caters to the more premium market. Harvey said it had sold less product but that its market share had increased in the higher end of the market.

“We would lose some market share to all of those other retailers out there, online or not online, that are selling in the middle to [lower] market area because they don’t sell in the up-market area,” Harvey said.

Meanwhile, stores based in the country are performing well, which Harvey said was because of strength in the agriculture sector and a boost from the shift to remote work that has made the country a more appealing place to live.

The company will pay a fully franked dividend of 12¢ a share to be paid on November 13. Investors appeared unimpressed by the company’s results, sending Harvey Norman’s share price 6.4 per cent lower in afternoon trading.

“Overall it looks like a nice clean result from Harvey Norman, with [second-half] trends improving, cash flow good and no surprises for us. We had seen some risk into this result, so it’s a good outcome,” wrote Jarden analysts in a note.

The 87-year-old Harvey believes sales will pick up in the current financial year, supported by a new wave of artificial intelligence-powered products including fridges and washing machines, with July notching a 3.5 per cent rise on 2024.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.