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Harvey Norman “A Dead Set Outrage”, Another Dud Investment

“Trust me”, claimed Gerry Harvey earlier this year, as shares in Harvey Norman were going south, “sell your boat, sell your car, sell your house, buy not Harvey Norman shares” he bleated.

As shares in his retail business crashed over 12% due to poor retail results, Harvey announced a $20.67 million write-down of, and $4.57 million trading losses from Harvey Norman’s 50 per cent stake in a Coomboona dairy farm which he purchased on a hunch and then slapped the risk on the Harvey Norman books.

“They’re all mad,” Gerry insisted. “If the share price goes down to $4 then sell your house.” It closed last week at $3.65 after Coomboona was placed into administration and the receivers called in.

Now Gerry Harvey has finally come clean announcing that Coomboona now owed the Company $37.9 million and that Harvey Norman had fully assumed Coomboona’s debt to NAB of $36.06 million. The Financial Review said “for the tally, that’s a total debt accrued by Harvey Norman of $73.15 million.

He has lumbered Harvey Norman shareholders with 100 per cent of the debt despite the retail Company only owning half of the joint venture in the Coomboona dairy farm.

In other words, Harvey Norman has become a massive sinkhole for risk ventures spanning mobile accommodation and dairy farming.

Harvey Norman had already tipped in $33.88M in equity contribution to Coomboona which has now been written down to zero) or as the AFR reported “that is $107.8 million of loot down the drain”.

$45 million of which has been written off during the past five months.

But wait for it, there is still up to $7.8 million still owed to creditors. Maybe Gerry and Katie can pay this out of their own billions.

Apparently, the cows still need to be fed and milked, in a business now running at an annual (implied) loss of $18.12 million a year.

Valuers claim that the property could fetch in the vicinity of $50 million. Although the longer the huge operating losses accumulate, the lower that number is going.

For Harvey’s fellow HVN shareholders, his latest double-down will destroy more of their capital. Why? If it’s to salvage Gerry’s reputation in the front bar of the Coomboona Hotel, he should damn well pay for it himself said the AFR.

Compare that $45 million cash outflow since December 31 to fund this crazy foray with the $22.5 million Harvey Norman saved by cutting its dividend by 2ยข a share (which no doubt contributed significantly to pushing the share price below the $4 “sell your caravan” mark). It’s a dead set outrage.

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