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Harvey Norman lifts NZ profit on increased homewares sales

Monday 4th December 2017

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Harvey Norman's New Zealand profit rose 15 percent in the latest financial year, with furniture, bedding and electronics sales strong. 

In the year ended June 30, sales rose 6.4 percent to $953 million while net profit increased to $36.4 million from $31.5 million a year earlier, accounts for Harvey Norman Stores (NZ) filed to the Companies Office show. 

In the group annual report for the latest financial year, published to the ASX in September, parent Harvey Norman Holdings reported a 15.6 percent increase in pretax earnings from the retail segment in New Zealand to A$79.4 million "as the Harvey Norman brand remains the market leader across all product categories in the New Zealand market".

"A full year of trading from the Westgate full-format store, which opened in April 2016, delivered a solid result," chair Gerald Harvey and chief executive Katie Page said in the report. "The success of the Westgate store is expected to grow as more residential development projects are undertaken in West Auckland. During 2017, the NZ business opened a new electrical and computers store in Queenstown in October 2016, which is working well to establish itself in the local market."

The company said the New Zealand economy continued to perform well with low unemployment and record net migration driving sales. Furniture and bedding sales recorded strong growth in the year, while promotions, exclusive product ranges and offers improved sales in its electrical and computer product categories.

"Despite aggressive competition, floor gross margins across all product categories remained consistent with prior year and gross profit increased across the board reflecting the sustainable sales growth strategy adopted by each category," Harvey Norman said.

The New Zealand division paid $36.3 million in dividends to its Australian parent and $19.2 million in management fees.

In 2017, the group reported net profit of A$449 million as revenue from company-operated stores rose 2.1 percent to A$1.83 billion. Sales from its Australian franchisees rose 5.4 percent to A$5.62 billion, although those sales are not part of the group's financial results. 

Harvey Norman is planning to renovate and relaunch its first ever store in New Zealand -  in Wairau Park, Auckland, which it opened in July 1997 - by June 2018. It began the strategy in December 2015 when it launched its first flagship in Singapore, and in the latest year launched one in Ireland and one in Slovenia. It is renovating a flagship complex Australia and plans to open flagships in Malaysia and Croatia in the year ahead. 

Separate accounts for Harvey Norman Limited, the group's New Zealand property holding company, showed annual net profit jumped nearly 25 percent to $38.9 million as its investment property became more valuable and sales rose.

Revenue rose 4.8 percent to $63.6 million, with net profit bolstered by a 75.5 percent gain in the net revaluation of investment properties to $13.9 million. The retailer's investment properties were worth $258.2 million at the end of the latest financial year, it said.

The bulk of that company's revenue comes from the rent and outgoings it receives, which amounted to $41.5 million in the latest year, up from $39.1 million in 2016. Its revenue from administration fees rose 7 percent to $21 million. Harvey Norman has 39 company-operated stores and outlets in New Zealand.

The ASX-listed shares last traded at A$4.06, up 1 percent today and down 22 percent this year.


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