Reporting season: Harvey Norman
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Q: Were Harvey Normanï¿½s earnings above, in line with, or below your expectations?
Tim Montague-Jones: Harvey Norman reported $172 million of net profit for the full year 2012, which is in line with our forecast of $172 million.
Q: Was the dividend above, in line with, or below your expectations?
Montague-Jones: The dividend was $0.09 per share, which is also in line with our expectation of $0.09 per share.
Q: What were the key drivers of the result?
Montague-Jones: The key driver of the weakness in the result, as we all know, has been the massive price deflation, particularly from the flat screen TV market, where you've seen television screens five years ago of about $5,000 or $6,000 go down to $500, $600 or $700. So the margin on the sale is a lot less. So, you're comparing a lower margin business to a higher margin comparable number. So, it's very difficult to get the relative sales and margins coming through the business.
Also the computer segment; laptops, they've also seen significant price deflation. Also, as we all know, the economic conditions are tough and electrical retailers are finding it extremely difficult because it's a discretionary expense and we've seen Dick Smith has been closing stores and liquidating stock. So, this liquidated stock also floods the market and makes it difficult for competitors like Harvey Norman to extract some good returns out of that segment of the market.
Q: Was there anything about the result that surprised you?
Montague-Jones: The market was pretty well informed of what the profit was going to be at the sales result. So, hence there's no real surprise in the performance of the business that has come to light today.
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