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COVID Honeymoon Over For Harvey Norman, As Profits Fall

The COVID honeymoon appears to be over for Harvey Norman, as poor franchise performances impact the retail giant’s bottom line.

The company’s yearly net profits fell 3.6 per cent to $811.53 million, a decrease of almost $30 million.

EBITDA was down 1.4 per cent, to $1.44 billion, a drop of $20.5 million from the previous year.

“In Australia, our franchisees were negatively affected by the prolonged government-mandated lockdowns and closures,” explained Gerry Harvey.

Franchising operations profit (before tax) were down 23.7 per cent during the first half, with the $292.85 million profit marking a $91.1 million drop from the previous year.

The homewares giant’s net profits took a 6.7 per cent hit during the first half of FY22, but bucked this to increase by 0.7 per cent in the final six month period.

The overall results would have been far more severe save for Harvey Norman’s increasing overseas footprint, and its Australian real estate holdings.

Harvey Norman’s company-operated overseas retail stores made up 25 per cent of total profits before tax. 24 per cent of the company’s total asset base is now located overseas.

“Solid cash reserves and ample inventory levels provides a robust working capital resource to continue to grow the businesses organically and take advantage of expansion opportunities within each country or in neighbouring regions,” the company explained of these operations.

“Cash conversion in FY22 has significantly improved compared to FY21 predominantly due to a $53.43 million increase in net cashflows from operating activities, from $543.87 million in FY21 to $597.30 million for FY22,” said Gerry Harvey.

“The solid cash flows generated from operating activities this year will enable us to further enhance and promote our brand locally and overseas to grow our businesses, refurbish our existing stores and invest in new property acquisitions and pay down external debt.”

The Board has recommended the payment of a fully-franked final dividend of 17.5 cents per share, to be paid on 14 November.

Shares were down a modest 0.9 per cent this morning. They are down 20.26 per cent over the past twelve months.

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