Source: Harvey Norman Ltd

Harvey Norman Holdings Limited (ASX:HVN) operate retail franchises under three brand names; Harvey Norman specialising in technology products, Domayne selling furniture and bedding and Joyce Mayne. The franchise business model allows Harvey Norman stores to establish themselves as community partners benefiting the Company brand.

What are the FY19 results for HVN?

This morning (20th August 2019) HVN reported their FY19 results that are detailed below:

  • Net Profit After Tax (NPAT) up 8.4% to $574.6m
  • Offshore sales revenue of $2.01b up 9.5%
  • Aggregated franchises revenue of $5.66b down 1.8%
  • Earnings per share (EPS) up 4.5% to 34.70 cents
  • Total dividend distribution for FY19 of 33 cents per share

What are the key drivers of this result?

The strong growth in profit was reported as a result of the continued sales revenue generated by the 90 Company owned stores as well as improved profitability of offshore operations, driven by the opening of additional stores in Singapore, Malaysia, Ireland and Croatia. The marginal decline in franchisee revenue is a result of subdued market conditions in Australia and a decrease in franchisee fees paid to HVN as per franchisee agreements. Despite this HVN’s franchisees are well positioned and have maintained sales despite worsening market conditions by improving their sales teams and logistics efforts. Harvey Norman have also expanded their property investments generating 9% revenue growth and 36% valuation growth from property assets.

What is the future outlook for HVN?

Harvey Norman plans to open an additional 21 stores by the end of FY 2020 taking the total  Company operated stores to 111, the Company is also expecting its franchisee sales revenue to increase as 3.3% growth was reported in July 2019. HVN is also weary of increased competition from online retailers as the digital market place continues to grow, however Harvey Norman is taking steps to integrate its physical and online stores in order to provide the best services to customers.

How has the market reacted?

The share price has dropped 1.07% in response to a price of $4.62.

 

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This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

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August 30, 2019