Harvey Norman repays JobKeeper after record profit

Gerry Harvey will repay $6m in JobKeeper after profit soared from retail sales, a $3.37bn property portfolio and overseas expansion.

Harvey Norman chairman Gerry Harvey and CEO Katie Page. The retailer is riding a property and retail boom. Picture: Sam Ruttyn

Harvey Norman chairman and co-founder Gerry Harvey said the retailer’s success built partly on its bulging $3bn property portfolio and ambitious overseas expansion had proven the knockers wrong, with these two engines of growth proving their worth through Covid-19.

But the billionaire looks to have listened to the crowd over his retailer keeping tens of millions of dollars in JobKeeper payments despite the company’s consistently strong profitability since the pandemic emerged, and has agreed to pay back $6.02m in JobKeeper.

Meanwhile as his stores across much of Australia – his home market – and New Zealand remain closed, Mr Harvey is doing a roaring trade in his overseas stores in central Europe and Ireland while his burgeoning Malaysian fleet of stores can open to customers who have been double vaccinated.

That helped bolster earnings through 2021, with the latest results showing offshore stores increasing profits by almost 60 per cent and generating one in every five dollars of pre-tax profits.

“There are a couple of things that people have knocked us on for a number of years, and one has been going overseas but that is making around 20 per cent of our profit and we are heading 50 per cent, so all the people who knocked you on that are looking pretty silly,” Mr Harvey told The Australian on Tuesday after the retailer posted a 75.1 per cent rise in full-year net profit to $841.41m. Revenue for the year of $9.721bn, was up 14.9 per cent.

Mr Harvey showed he hasn’t lost any hunger for a further international expansion with Harvey Norman is planning to open two stores in Budapest in calendar 2023.

The offshore company-operated retail segment had excelled, Harvey Norman said, generating profits of $240.79m across seven overseas countries, up by $88.72m or 58.3 per cent.

Separately, Harvey Norman’s sizeable property portfolio, taking in commercial and industrial property, and also often criticised by some, has shot up to be worth $3.37bn and a key contributor to group earnings for 2021.

“The other thing they were knocking us on was property, we have been knocked on property relentlessly, for so long, and now no-one can knock us on property now, our property has gone through the roof,” Mr Harvey said.

While the recent lockdowns and store closures in New South Wales, ACT and Victoria had dented its momentum, plunging same store sales growth by 19 per cent between July and August, Mr Harvey said wherever its stores remained open in Australia sales were booming.

“We haven’t got a drop in sales anywhere where our stores are open, the sales are strong, so in NSW and Victoria completely closed and now we are closed in New Zealand.

“The evidence in Australia is that all our stores that are open are going through the roof, and especially in country areas because the country has never been this good, maybe ever, sheep and cattle, wheat and sorghum, at very high prices, lots of rain, lots of grass – we now have the dearest sheep and cattle in the world – so all the farmers at the moment have never had it so good and this is really making country areas very strong.

“Consumer sentiment in country areas is strong.”

The latest annual results showed a potent mix of government stimulus packages to encourage home building, consumers stuck at home through lockdowns and spending more on their households including the latest gadgets to enjoy entertainment had powered Harvey Norman to deliver record earnings.

The whitegoods, consumer electronics and furniture retailer has also ridden the wave of rising property values across Australia to rocket its property portfolio by more than 11 per cent to be worth $3.37bn, while its successful overseas stores from Asia to Europe are delivering a growing portion of group profitability.

Although the retailer lowered its final dividend the strong results helped the company to lift its full-year dividend by almost 50 per cent. The final dividend, payable on November 15, was reduced to 15c per share, from 18c. But the full-year dividend of 35c per share was up from the full year payout of 24c per share in 2020.

The market was underwhelmed by the slimmer dividend, and Harvey Norman shares fell 4 per cent before closing down 18c, or 3.2 per cent, at $5.38.

Mr Harvey said despite his booming offshore operations and strong store sales in Australian states that weren’t in lockdown he felt it prudent and cautious to cut the dividend and hold back some cash.

For its flagship Australian business, Harvey Norman booked strong growth in technology with high demand for smart phones, gaming laptops and PCs that provide power and performance.

Its Australian business posted a 12.8 per cent lift in Australian sales to $6.95bn with like for like sales better by 12.9 per cent. The Australian franchising operations segment delivered a record profit result of $628.19m, an increase of $279.6m or 80.2 per cent, from $348.59m in the previous year.

The company ended the year with total assets of $6.67bn, up by 14.5 per cent.

Harvey Norman has thrived amid a rise in spending on homes during the pandemic. Picture: Bianca De Marchi

Originally published as Harvey Norman repays JobKeeper after record profit