GERRY HARVEY: INVESTORS HAVE GOT IT WRONG
HARVEY Norman chairman Gerry Harvey has dismissed the savage market reaction to the retailer’s first-half results, saying investors have “got it wrong”.
Shares in the furniture and electronics retailer fell heavily yesterday after it booked a net profit of $207.7 million for the six months to December — down 19.3 per cent from the same period a year earlier.
A sharp drop in the value of non-retail investments weighed heavy on the bottom line, while the group’s property revaluations were also far more modest than they were a year ago.
The slide in interim profit came despite an increase in sales over the same period.
Company-operated store sales revenue was up 4.7 per cent to $1.02 billion and franchise sales up 4.8 per cent to $3 billion.
Shares in the group nonetheless tumbled yesterday, down 12.45 per cent to $4.01.
“I just think they (the market) have got it wrong,” Mr Harvey said.
“I don’t get why they do that and it makes it an extraordinary good buy for anyone.”
Harvey Norman booked property revaluations of $22.7 million for the half, compared with $75.7 million for the same period last year.
The first-half result also suffered amid a large slide in the value of the group’s nonretail investments.
In 2015, the company spent $34 million buying a major stake in a Goulburn Valley dairy farm as part of a diversification strategy that has also involved investing in property and mining camps.
The latest accounts show its 49.9 per cent interest in the Coomboona Holdings dairy business triggered equity accounting losses of $4.57 million for Harvey Norman, compared with trading losses of $3.26m for the same period last year.
Harvey Norman was forced to write down its stake in Coomboona by $20.7 million.
Mr Harvey said the writedown was tiny compared with the billions of dollars Harvey Norman was worth, but it would dampen his enthusiasm to make non-retail investments in the future.
The market’s harsh reaction to the large fall in the retailer’s property revaluations was also misguided, he said.
He noted Harvey Norman at least had a large and valuable property portfolio, whereas as other retailers were just tenants beholden to landlords. “So the market has just got it wrong, simple as that. They just don’t get it,” he said.