HVN 0.69% $4.32 harvey norman holdings limited

harvey norman founder lifts share stake

  1. 3,567 Posts.
    Good to see sales are strong into March, goes to show war or no war Gerry will still lift sales. Also note the analyst comments which I agree with entirely i.e. PE is cheap considering the level of growth... that's why the stock doesn't have a PE of 40 anymore, it's only 14.


    Harvey Norman founder lifts share stake
    March 15 2003
    By Mark Todd

    Gerry Harvey bought another $4 million worth of shares in Harvey Norman yesterday, taking a contrary view to the market, which sold the stock down heavily in response to the retailer reporting a 15.6 per cent rise in interim net profit.

    Shares in Harvey Norman fell 5.9 per cent, or 12¢, to $1.92 with followers of the stock complaining about an apparent deterioration in cash flow, pressure on margins, and a slowdown in growth. Mr Harvey, the company's founder and executive chairman, suggested the latest sell off was "maybe a bit silly".

    Harvey Norman shares are now at their lowest point since October 1998.

    "You could knock me over with a feather after hearing some of the things these guys are saying about the result," Mr Harvey said. "The reality is that our business is quite strong."

    Net profit in the six months ended December 31, 2002, increased to $78.5 million from $67.9 million as sales by company-owned and franchised stores gained 13.8 per cent to $1.6 billion. Harvey Norman declared a half-cent rise in the interim dividend to a fully franked 2.5¢ a share, payable on May 5.

    Mr Harvey said it was unrealistic to expect the company to continue to double in size every three years, as it did in the 12 years to 1999. However, sales were still expanding at a "very strong" clip, up 14.5 per cent to $2.1 billion for the eight months to the end of February.

    Like-for-like sales during the same period were up 10.1 per cent, with the rate of sales growth in the first two weeks of March actually bettering that for January and February.

    Operating cash flow was a concern for some investors, who noted a $20 million decline to $16 million. The fall was caused by a jump in payments to suppliers and employees as Harvey Norman prepared for the opening of new stores late in the half.

    "It's not a problem," Mr Harvey said. "It didn't even come up in the board meeting. It's just not a concern."

    He shrugged off worries about an easing in the housing cycle and of a possible escalation in competition, led by Woolworths, in the electrical goods category. The company will introduce two new "hybrid" concepts to take advantage of the high demand for digital cameras, home entertainment, personal computers, and software.

    To illustrate his confidence in the business, Mr Harvey snapped up another 2 million shares in Harvey Norman for about $3.9 million. He already controls about a third of the company.

    Not everyone was scared off by the result. UBS Warburg analyst Michael Peet suggested the rate of profit growth was perfectly acceptable for a company with a price/earnings ratio about 14 times forecast profits.

    Harvey Norman, which once routinely traded at a handsome premium to the overall sharemarket P/E ratio, is now at a slight discount.

    "I don't think it's a bad result at all, the stock has been harshly treated," Mr Peet said.

    "They're at the cutting edge of retail and no one is giving them any credit."
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