FY12 "very disappointing," Harvey Norman says
Page 1 of 1
Nicholas Grove is a Morningstar journalist.
Harvey Norman (HVN) on Friday announced 31.6 per cent year-on-year fall in net profit to $172.5 million for fiscal 2012, a year that chairman Gerry Harvey described as "very disappointing".
The profit result was in line with Morningstar's forecast of $171.9 million.
The electrical and furniture retailer announced a fully franked final dividend of 4 cents a share, to be paid on 3 December 2012 to shareholders on the register at 5pm on 2 November 2012.
The final dividend brought the full-year dividend payment to 9 cents a share, also in line with Morningstar's expectations.
Earnings before interest and tax (EBIT) fell from $416.9 million in fiscal 2011 to $276.9 million in fiscal 2012, the company said in its annual report.
Basic earnings per share fell from 12 cents to 9 cents, it said.
During the year, Gerry Harvey said the company witnessed "unprecedented" price and margin deflation in the television and devices categories.
He also said external factors such as the demise of WOW Sight & Sound, the closure of several Retravision stores and the restructure of Woolworths' (WOW) Dick Smith brand created a glut of products being sold at "never before seen prices".
However, he said initiatives to execute the company's "Omni Channel" strategy, incorporating its retail, franchise, property and digital operations, will provide a competitive advantage and capability to take advantage of any upswing in consumer confidence.
Harvey described the company's balance sheet as "robust," with a low net debt to equity ratio of 26.6 per cent.
The company's $2.12-billion property portfolio also provides strength and stability to the balance sheet, he said.
"Property ownership offers a distinct advantage over our competitors as it provides us with a reliable income stream in an uncertain retail climate," he said.
Morningstar senior equities analyst Tim Montague-Jones said the results did not come as a surprise given the preliminary figures that were released earlier this month.
Regarding the Omni Channel strategy, Jones indicated he was unsure whether it would be successful given he expected consumers would continue to look at Harvey Norman as an "old-style, bricks-and mortar brand".
"When people go online, do they go and look at Harvey Norman or do they go to other online channels? I think over time, there has to be a competitive advantage of an online channel compared to a bricks-and-mortar channel," he said.
"I think Harvey Norman has a few structural problems ahead of itself."
To watch a video on Harvey Norman's earnings results, please click here.