Harvey Norman : Analyst Presentation

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1. Key Financial Highlights

2. Key Drivers of Improved Profitability

3. Strategy

1. Global Sales Revenue

2. Franchisee Sales Revenue

3. Review of the Income Statement for the half year ended 31 December 2015

12 Review of the Balance Sheet as at 31 December 2015

14 Review of the Statement of Cash Flows for the half year ended 31 December 2015

16 Segment Analysis: Franchising Operations, Property & Company-Operated Retail

20 Outlook

Questions (limited to 30 minutes)

HY2016 DEC15	HY2015 DEC14	Incr/(Decr)
EBIT	$276.65m	$218.21m	+26.8%
REPORTED PBT	$262.01m	$200.79m	+30.5%
PBT (excluding impairment losses1)	$279.52m	$205.74m	+35.9%
PBT (excluding property revaluations2)	$240.82m	$196.93m	+22.3%
REPORTED NPAT	$185.51m	$141.98m	+30.7%
NPAT (excluding impairment losses1 )	$197.76m	$145.45m	+36.0%
NPAT (excluding property revaluations2)	$170.66m	$139.13m	+22.7%
Net Assets	$2.65bn	$2.54bn	+4.1%
Net Debt to Equity %	22.29%	22.18%
Dividends Per Share	13.0c	9.0c	+44.4%
Special Dividend	-	14.0c
EPS	16.70c	13.19c	+26.6%

1 HY2016 impairment losses was $17.51m before tax ($12.26m after tax) HY2015 impairment losses was $4.96m before tax ($3.47m after tax)

2 HY2016 net property revaluation increment was $21.19m before tax ($14.85m after tax) HY2015 net property revaluation increment was $3.86m before tax ($2.85m after tax)

Main factors impacting net profit before tax:

• a 30.7% (+$35.33m) increase in the profitability of the franchising operations segment to $150.42m for HY16 due to:

  • 10.2% (+$38.34m) increase in franchise fees;

  • -26.5% (-$10.54m) decrease in tactical support provided to franchisees;

• an increase of $17.33m in the net property revaluation increment, from $3.86m in HY15 to $21.19m in HY16;

• a $10.94m turnaround in the profitability of the company-operated stores in Asia, from a loss of

  $5.48m in HY15 to a profit of $5.46m in HY16;

• a 30.8% (+$7.96m) increase in the profitability of the company-operated stores in New Zealand;

• a $4.89m turnaround in the profitability of the company-operated stores in Ireland & Northern Ireland, from a loss of $4.07m in HY15 to a profit of $0.82m in HY16 (its first profit since Dec-2007);

• recognition of an impairment loss of $17.51m, $13.20m from the write-down of equity-accounted investments and loans advanced to several mining camp accommodation joint ventures and $4.31m from the impairment of commercial loans in Australia, compared to $4.96m in prior period;

• a $4.17m decrease in the contribution of the mining camp accommodation joint ventures from a profit of $1.18m in HY15 to a trading loss of $3.00m in HY16; and

• $1.79m in equity-accounted start-up losses attributable to the 49.9% investment in Coomboona Holdings Pty Limited, comprising dairy farm operations, pedigree breeding and a genetics division.