Harvey Norman earnings surge thanks to property boom

Harvey Norman earnings surged 39pc in the first half thanks to the property boom and the demise of Dick Smith.

Harvey Norman digital head Gary Wheelhouse in one of the Sydney stores. Pic: Sam Mooy

Earnings at retailer Harvey Norman have surged by more than a third in the first half as the group continued to benefit from the nation’s property boom and the demise of former foe Dick Smith Electronics.

For the six months to December 31, the household goods retailer (HVN) booked net profit of $257.3 million, up 38.7 per cent on the prior corresponding period.

The result was driven by property revaluations worth $75.7m, up almost fourfold on last year.

The company said that, excluding the impact of revaluations, after-tax earnings were up 20 per cent to $204.3m, while pre-tax profit jumped 20.6 per cent to $290.5m, a record half-year trading result for the company.

The group said housing sector activity, lower unemployment and the wealth effect from higher house prices had underpinned the result.

“The Harvey Norman model, integrating retail, franchise operations, property and digital, is adapting to and managing the evolving retail environment,” chairman Gerry Harvey said.

“Our franchisees’ dominance in the home and lifestyle categories and early recognition of the potential of the Internet of Things and connected devices has seen franchisees really capitalise on consumers’ passion and demand for technology.”

Franchisee sales rose 5.2 per cent to $2.86 billion in the period, aided by a home building boom that has encouraged growth in the household goods space despite challenged general retail conditions.

Its comparable aggregated sales for the first-half lifted 5.4 per cent, with a positive impact from a rising New Zealand dollar and negative flow-on effects from a weaker euro and pound.

In Australia, comparable sales climbed 4.7 per cent for the period, with the company noting an acceleration in the first eight weeks of the second-half.

From January 1, 2017 until February 26, 2017, the group booked a 7.4 per cent lift in comparable 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.

Gerry Harvey

Its company-operated retail division saw earnings advance 22.6 per cent to $51.6m, with all its offshore divisions recording a profit aside from Northern Ireland.

“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.”

The company has taken the unusual step of abandoning the regular post-results conference call with analysts despite being able to spruik higher earnings.

Harvey Norman declared an interim full-franked dividend of 14c a share.