Harvey Norman reports significant growth in 1H23 Results

Key Highlights:

• Harvey Norman announced its 1H23 results and reported a growth in its net asset.
• Reported PBT declined by 14.6% to AU$612.24 million.
• Reported Profit After Tax & NCI slipped 15.1% to AU$430.91 million.

Harvey Norman Holdings Limited (ASX: HVN), one of Australia's top retailers, announced its 1H23 results, demonstrating significant growth in consolidated net assets and a strong balance sheet. The Company's Chairman, Gerry Harvey, attributed the growth to the success of their Omni Channel Strategy, which has resulted in stable returns and sustainable growth.

According to the announcement:

The consolidated net assets of the Company grew by AU$1.18 billion from pre-COVID levels of AU$3.28 billion as at 31 December 2019 (1H20) to AU$4.46 billion as at 31 December 2022 (1H23). This was driven by a robust and tangible property portfolio totalling AU$3.94 billion that continues to deliver growth in terms of rental returns and capital appreciation.

Despite a decrease of AU$89.57 million or -14.6% in PBT for 1H23, the Company's PBT remains well above pre-COVID levels, increasing by AU$221.52 million or 73.6% from 1H20, delivering a 3-year CAGR of 20.2%.

The company-operated overseas retail stores result comprises 24% of total PBT, excluding net property revaluations. However, overseas retail profitability declined this half by AU$28.88 million or -22.5% to AU$99.60 million, primarily due to difficult trading conditions in New Zealand.

During 1H23, Harvey Norman opened their 28th company-operated store in Malaysia at 1 Utama Shopping Centre, Selangor, and their 16th company-operated store in Ireland at Fonthill, Dublin. The Company plans to recommence its offshore expansion plans, including the intention to grow the stores in Malaysia to 80 stores by the end of 2028. The Company aims to improve its strong balance sheet, maintain the strong balance sheet, maintain strong cash reserves and low debt levels to ensure they have the capacity to seize development and expansion opportunities as they arise

In Australia, the franchising operations segment PBT result was AU$237.65 million for 1H23, a decrease of AU$55.21 million or -18.9%, from AU$292.85 million in 1H22. However, when compared to 1H20, the franchising operations segment PBT result was well above pre-pandemic levels, growing by AU$113.79 million, or 91.9%, from AU$123.86 million, and delivering a 3-year CAGR of 24.3%.

Outlook:

• The consolidated entity is confident in its ability to deliver stable returns and sustainable growth despite macroeconomic headwinds and cost of living pressures affecting discretionary retail.
• The Company will continue to invest in technological initiatives and the digital infrastructure necessary to strengthen customer loyalty and promote its brands.
• The Company opened one franchised complex in Australia and two company-operated stores overseas while closing two small company-operated stores in Singapore.
• They plan to open additional franchised complexes and company-operated stores in Australia, New Zealand, Malaysia, and Hungary in the coming years.
•  The Company intends to fund the expansion plans in Malaysia from existing cash reserves and operating cash flows.

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