Harvey Norman forecasts 40% drop in profits

Published on Tue, 07/08/2012, 12:00:50

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By Claire Reilly

Harvey Norman has released its preliminary sales and profit report for the 2011-2012 financial year, announcing a 7 per cent decline in global sales across the group (excluding Singapore). The results have caused the company to forecast a drop in profits of almost 40 per cent.

For the year ended 30 June 2012, sales from Harvey Norman complexes, commercial divisions and other sales outlets across Australia, New Zealand, Slovenia, Croatia, Ireland and Northern Ireland were $5.74 billion.

This figure was down on 2011, when the company reported $6.18 billion in global sales. Furthermore, the company’s like-for-like sales were also down by 6.5 per cent when compared to the 2010-2011 financial year.

According to a statement from chief financial officer, Chris Mentis, the company is predicting a drop in profits of almost $150 million.

“Unaudited preliminary accounts for the year ended 30 June 2012 indicate profit before tax and minority interests for the consolidated entity of $227.6 million compared to $373.9 million for the year ended 30 June 2011, a reduction of 39.1 per cent ($146.3 million) [emphasis added].

“The unaudited preliminary accounts for the year ending 30 June 2012 indicate profit before tax and minority interests of $227.6 million, and included a net property revaluation decrement of ($25.0 million).  The profit before tax and minority interests of $373.9 million for year ending 30 June 2011 included a net property revaluation increment of $15.4 million."

Mentis also noted that, were these property valuation variations to be excluded, the company would be forecasting a drop in its unaudited preliminary profit before tax statement of 29.5 per cent.

In terms of sales, the Australian and New Zealand markets fared the worst, posting 8.1 per cent and 4.0 per cent declines in sales respectively. Slovenia and Croatia saw a combined increase in sales of 35.4 per cent (when measured in local currencies); however like-for-like sales were down 10.4 per cent.

Ireland saw a 6.3 per cent increase in total and like-for-like sales, while Northern Ireland’s total and like-for-like sales climbed 2.0 per cent.

“Global sales have been negatively affected by a 6.0 per cent deterioration in the Euro, a 4.7 per cent deterioration in the UK Pound, and positively affected by a 1.7 per cent appreciation in the NZ$, for the year ended 30 June 2012 compared to the year ended 30 June 2011.

“Trading conditions continue to be challenged coupled with deflationary headwinds particularly in the technology categories,” said Mentis of the results. “Home appliances, furniture and bedding remain stable and the businesses are well placed for any upturn in housing starts.

“Our retail franchisees will continue to innovate, invest and improve their product offering, online channel, staff training and strategic category enhancements.”

This article first appeared on Current.com.au
 


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