Harvey Norman Holdings Ltd · ASX:HVN
Harvey Norman — HY2019 Earnings Presentation
27 slides from Harvey Norman's earnings presentation, Feb 28, 2019
Slide 1: Analyst Presentation for the Half-Year Ended 31 December 2018
For personal use only ANALYST PRESENTATION FOR THE HALF-YEAR ENDED 31 DECEMBER 2018 ACN 003 237 545
Slide 2: Contents
2 CONTENTS Flagship Strategy Update . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Key Financial Highlights HY19 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 For personal use only Our Strategy for Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 R
Slide 3: International Success: Opening New Avenues
INTERNATIONAL SUCCESS 3 O PENING NEW AVENUES The last six months have seen outstanding results from our stores in Singapore and Malaysia, building on the growth we’d already experienced in the region and really delivering in an impressive manner. Performance like this further enhances the sterling r
Slide 4: Key Financial Highlights HY19
KEY FINANCIAL HIGHLIGHTS HY19 4 • Net assets exceed $3 BILLION milestone net assets soared to $3.15 billion as at 31 December 2018, with the robust tangible, property portfolio of $2.93 billion representing approx. 93% of the total net asset base 545 FRANCHISEES • Outstanding performance of Harvey N
Slide 5: Financial Highlights
5 F IN AN C IAL H IG H L IG H T S N ET ASS ETS Landmark $3 billion net asset milestone surpassed in HY19, with the net asset position of the consolidated entity soaring to $3.15 billion as at IN E XC ESS OF 31 December 2018. Total assets have grown to $4.83 billion, up 7.2% from the comparative peri
Slide 6: Our Strategy for Success
6 O U R ST RAT EGY FO R S U C C E S S A D I VER SI FI E D, UN I Q UE We operate an integrated retail, franchise, property and digital strategy that continues to deliver strong, stable income streams. For personal use only B USI N ESS M O D EL I NTERNATI ONAL Significant retail footprint across 8 cou
Slide 7: Reported Profit Before Tax
REPORTED PROFIT BEFORE TAX 7 REPORTED PBT HALF YEAR ENDED 31 DECEMBER 2018 For personal use only NET PROFIT BEFORE TAX $ 315.68m UP BY 7.5 % REPORTED PBT HALF YEAR ENDED 31 DECEMBER 2018 315.68m PROFIT BEFORE TAX AS REPORTED ($M) NET BEFORE TAX PROFIT (Including net property revaluations) $ $ 366.23
Slide 8: Key Contributors to Reported Profit Before Tax
KEY CONTRIBUTORS TO REPORTED PROFIT BEFORE TAX 8 Increase of $22.07m in Reported PBT due to: For personal use only • $15.71m increase in profitability of overseas company-operated retail segment ($77.53m vs $61.82m) up +25.4% outstanding performance of Harvey Norman® brand overseas: Singapore & Mala
Slide 9: Reconciliation of Underlying Profit to Reported Profit Before Tax
RECONCILIATION OF UNDERLYING PROFIT TO REPORTED PROFIT BEFORE TAX 9 HY2019 HY2018 Incr/(Decr) REPORTED PROFIT BEFORE TAX $315.68m $293.61m +7.5% For personal use only Less: Net property revaluation increment (a) ($36.56m) ($22.76m) Profit Before Tax Excluding Net Property $279.12m $270.85m +3.1% Rev
Slide 10: Underlying Profit Before Tax
$ 262.01m 293.61m 7.5 ON PCP 200.79m $ UNDERLYING PROFIT BEFORE TAX 10 RECORD UNDERLYING PBT FOR THE 4TH CONSECUTIVE DECEMBER HALF $ 75.74m For personal use only UNDERLYING 36.56m FROM A RECORD $ $ 297.04m 0.3 % COMPARATIVE 21.19m $ 22.76m $ PROFIT 3.86m $ FOR UP BEFORE 2014 TAX* 2015 2016 HY19 2017
Slide 11: Composition of Underlying Profit Before Tax
COMPOSITION OF UNDERLYING PROFIT BEFORE TAX 11 Underlying profit before tax of $297.04m for HY19 is comprised of: For personal use only • $158.47m franchising operations segment profit result, down -5.2% from $167.21 million in HY18 • $77.53m profit from the offshore company-operated retail operatio
Slide 12: Key Statistics: Balance Sheet
HALF YEAR ENDED 31 DECEMBER HALF YEAR ENDED 31 DECEMBER KEY STATISTICS: BALANCE SHEET 12 COMPOSITION OF TOTAL ASSETS OF $4.83bn HY2019 HY2018 Incr/(Decr) COMPOSITION OF TOTAL ASSETS OF $4.83bn TOTAL ASSETS $4.83bn $4.51bn +7.2% $ 169.34m For personal use only OTHER ASSETS TOTAL LIABILITIES ($1.68bn)
Slide 13: Outstanding Performance Overseas: Successful Offshore Expansion
OUTSTANDING PERFORMANCE OVERSEAS: SUCCESSFUL OFFSHORE EXPANSION AND SOLID OFFSHORE PERFORMANCE 13 RETAIL SEGMENT PROFIT RESULT HY2019 HY2018 Incr/(Decr) NEW ZEALAND $42.01m $41.08m +2.3% For personal use only SINGAPORE & MALAYSIA $20.76m $12.30m +68.7% IRELAND & NORTHERN IRELAND $10.34m $3.91m +164.
Slide 14: Significant Increase in Offshore Company-Operated Retail Revenue
OUTSTANDING PERFORMANCE OVERSEAS: SIGNIFICANT INCREASE IN OFFSHORE COMPANY-OPERATED RETAIL REVENUE 14 OFFSHORE COMPANY-OPERATED Main reason for revenue growth was rise in offshore sales revenue by $114.80m (+12.2%), from RETAIL REVENUE $937.60m to $1,052.39m: For personal use only OVER $1 BILLION •
Slide 15: Highest-Ever Offshore Company-Operated Retail Profit Result
OUTSTANDING PERFORMANCE OVERSEAS: HIGHEST-EVER OFFSHORE COMPANY-OPERATED RETAIL PROFIT RESULT 15 • $8.46m (+68.7%) increase in Singapore & Malaysia result from $12.30m in HY18 to $20.76m in HY19 OVERSEAS COMPANY-OPERATED on track with investment and expansion plans in Malaysia, with the expectation
Slide 16: Headline & Comparable Aggregated Total Sales Revenue
HEADLINE & COMPARABLE AGGREGATED TOTAL SALES REVENUE 16 AGGREGATED SALES INCREASE / (DECREASE) IN CONSTANT LOCAL CURRENCIES: For personal use only TOTAL SALES 1Q2019 2Q2019 HY2019 HEADLINE AGGREGATED SALES OF vs. vs. vs. $ 4.0bn FOR HY19 1Q2018 2Q2018 HY2018 vs $3.93bn FOR HY18 AUSTRALIAN FRANCHISEE
Slide 17: Franchisee Aggregated Sales Revenue
FRANCHISEE AGGREGATED SALES REVENUE 17 AGGREGATED FRANCHISEE SALES REVENUE HY DECEMBER 2018 TOTAL FRANCHISEE SALES * COMPARABLE FRANCHISEE SALES * For personal use only DECEMBER 2018 DECEMBER 2018 $ 2.95bn DOWN BY 1.7 % $ 2.94bn DOWN BY 0.6% * Sales made by franchisees in Australia do not form part
Slide 18: Segment Analysis: Franchising Operations
SEGMENT ANALYSIS: FRANCHISING OPERATIONS 18 HY2019 HY2018 Incr/(Decr) % For personal use only AGGREGATED FRANCHISEE HEADLINE SALES REVENUE $2.95bn $3.00bn (-$0.05bn) (-1.7%) FRANCHISING OPERATIONS SEGMENT RESULT $158.47m $167.21m (-$8.74m) (-5.2%) FRANCHISING OPERATIONS MARGIN % 5.37% 5.57% -20bps F
Slide 19: Segment Analysis: Franchising Operations (continued)
SEGMENT ANALYSIS: FRANCHISING OPERATIONS (continued) 19 HY2019 HY2018 Incr/(Decr) % For personal use only FRANCHISING OPERATIONS SEGMENT RESULT $158.47m $167.21m (-$8.74m) (-5.2%) FRANCHISEE OPERATIONS SEGMENT REVENUE $468.64m $469.26m (-$0.62m) (-0.1%) FRANCHISING OPERATIONS MARGIN % 5.37% 5.57% -2
Slide 20: Segment Analysis: Property
SEGMENT ANALYSIS: PROPERTY 20 HY2019 HY2018 Incr/(Decr) % For personal use only PROPERTY SEGMENT REVENUE $164.80m $148.54m $16.25m +10.9% NET PROPERTY REVALUATION INCREMENT $36.56m $22.76m $13.80m +60.6% PROPERTY SEGMENT EBITDIA $119.85m $105.15m $14.70m +14.0% PROPERTY SEGMENT RESULT BEFORE TAX $10
Slide 21: Review of the Income Statement
REVIEW OF THE INCOME STATEMENT 21 HY2019 HY2018 Incr/(Decr) % SALES REVENUE* $1,175.25m $1,022.24m $153.01m +15.0% For personal use only GROSS PROFIT $376.09m $324.96m $51.13m +15.7% REVENUE RECEIVED FROM FRANCHISEES $519.76m $524.73m (-$4.97m) (-0.9%) REVENUES & OTHER INCOME $114.00m $93.97m $20.03
Slide 22: Review of the Income Statement (continued)
REVIEW OF THE INCOME STATEMENT (continued) 22 HY2019 HY2018 Incr/(Decr) % For personal use only TOTAL EXPENSES ($698.76m) ($650.89m) $47.87m +7.4% SHARE OF NET PROFIT OF JV ENTITIES $4.59m $0.84m $3.75m +445.4% PROFIT BEFORE TAX $315.68m $293.61m $22.07m +7.5% INCOME TAX EXPENSES ($89.48m) ($83.84m)
Slide 23: Review of the Balance Sheet
REVIEW OF THE BALANCE SHEET 23 DEC 2014 DEC 2015 DEC 2016 DEC 2017 DEC 2018 For personal use only TOTAL ASSETS $4.32bn $4.54bn $4.81bn $4.51bn $4.83bn TOTAL LIABILITIES $1.78bn $1.90bn $2.04bn $1.63bn $1.68bn TOTAL EQUITY* $2.54bn $2.65bn $2.77bn $2.88bn $3.15bn * Excludes non-controlling interests
Slide 24: Review of the Statement of Cash Flows
REVIEW OF THE STATEMENT OF CASH FLOWS 24 HY2019 HY2018 Incr/(Decr) % For personal use only OPERATING CASH FLOWS $145.36m $262.61m (-$117.25m) (-44.6%) • -$216.20m increase in payments to suppliers & employees • -$97.32m reduction in net receipts from franchisees OPERATING CASH FLOWS +$93.07m increas
Slide 25: Review of the Statement of Cash Flows (continued)
REVIEW OF THE STATEMENT OF CASH FLOWS (continued) 25 HY2019 HY2018 Incr/(Decr) % For personal use only INVESTING CASH FLOWS ($63.15m) ($191.32m) $128.17m +67.0% FINANCING CASH FLOWS ($103.87m) $11.73m (-$115.60m) (-985.6%) NET INCREASE/(DECREASE) IN CASH FLOWS ($21.66m) $83.01m (-$104.67m) CASH & CA
Slide 26: Outlook
OUTLOOK 26 • Continue to invest in the next iteration of the Flagship Strategy For personal use only • On track with investment and expansion plans in Malaysia, with expectation of growing to 25 Harvey Norman® stores in Malaysia within the next 2 years, with potential to increase to over 50 stores b
Slide 27: Questions
QUESTIONS (limited to 30 minutes) 27 For personal use only
Harvey Norman Holdings — HY2019 Earnings Presentation on 6ix