Harvey Norman Holdings' (ASX:HVN) profit was down by 19.3 per cent, to $207.7 million for the first half of the 2018 financial year, despite franchisee sales revenue reaching $3 billion during the period.
The publicly-listed electronics and home goods retail group told shareholders on 28 February that profit was negatively impacted by a reduction in the net property revaluation increment by nearly $53 million – from $75.74 million in the previous half year to $22.76 million.
On top of that, the company recognised for the first-time a $20.67 million impairment loss for the write-down of the equity-accounted investment in the Coomboona Holdings joint venture had a negative impact on the 1H18 results.
Harvey Norman-operated sales revenue was $1.02 million, a 4.7 increase year-on-year.
Meanwhile, its operated retail segment includes the retail trading operations of the Harvey Norman-branded company-operated stores in New Zealand (39 stores), Singapore (13 stores), Malaysia (16 stores), Ireland (13 stores), Northern Ireland (two stores), Slovenia (five stores) and Croatia (one store), and the Space Furniture branded stores in Singapore, Malaysia and Australia.
This segment also includes the retail operations of other non-franchised retail brands in Australia.
Earnings before interest, tax, depreciation, impairment and amortisation were down 12.2 per cent, posting a total $377.7 million.
However, sales made by franchisees in Australia are not part of the company’s financial results. Total franchisee aggregated sales revenue was $3 billion, or 4.8 per cent growth from the previous corresponding period’s $2.86 billion.
“We're very much focused on raising the bar of our retail experience, and this period has seen a concerted focus towards completing our Flagship store strategy by the end of the 2018 financial year," Harvey Norman chairman, Gerry Harvey, said.
"After the successful development and implementation of our Flagship stores in Singapore, Slovenia, Ireland and Northern Ireland, this last half year saw more great progress towards our goal.
“In October/November we finished the first of two stages of the Flagship complex at Auburn in Sydney. In November we completed the Flagship store at Ikano in Kuala Lumpur," he added.
"The Zagreb Flagship upgrade, the completion of the 2ndstage of the Flagship complex at Auburn and the full upgrade of the Flagship store at Wairau Park in Auckland will be completed by June 2018."
In November, the Australian Shareholders Association (ASA) called for a governance reform at the electronics, IT and homewares retail operator.
The ASA claimed the company's executive chairman, Gerry Harvey, responded with hostility at the company’s annual general meeting held on 14 November. There was, however, no detailed information on what the company’s founder may have said.
Questions were raised about the company's franchise operations.
The ASA believes Harvey Norman should have Gerry Harvey replaced as chairman by an independent non-executive director. ASA claimed that Gerry Harvey leads a board that is about to be “totally non-independent” because of its “intentional lack of renewal”.
The financials come as Harvey Norman was named by NSW Fair Trading as the most complained about trader in the state during the month of January.
Technology retailers continued to dominate NSW Fair Trading’s monthly Complaints Register list, with Harvey Norman, The Good Guys, Kogan, Apple, Samsung Electronics and Android Enjoyed all being named among the top 10.