Harvey Norman Financial Analysis

Harvey Norman Holdings Ltd (HVN.ASX) is one of the largest retailers in Australia which operates under a franchise system. The primary objective of this report is to analyse the publicly available past financial statements to gain an understanding on the performance of Harvey Norman.

Harvey Norman managed to record a healthy sales growth since 2013. One of the reason was the aggressive pricing policy as demonstrated by the GP Mark-up Index (Sales/Cost of Goods Sold). At the same time the company managed to keep the operational & admin expenses at a consistent level. However, it can be noticed that the sales growth of owned stores has decreased in 2015, which is not consistent with the franchise revenue growth.

The sales per owned store growth is look like a roller coaster – up & down year by year. However, franchise revenue per franchised complex growth has seen a consistent growth since 2012. One of the reasons for this growth is the decrease in the no of franchised complexes from 212 in the year 2012 to 194 in the year 2015.

The net profit margin has been increasing in the last couple of years. In the meantime, Depreciation per Revenue ratio declined from 6.8% in 2013 to 4.8% in 2015 even though the gross property, plant & equipment grew at a decreasing rate.

Harvey Norman has managed to maintain their working capital level consistent over the last 5 years. In fact, Harvey Norman managed to bring down the working capital cycle from 147 days in 2013 to 100 days in 2015.

Earnings before interest, tax, depreciation & amortisation (EBITDA) fell considerably from 2011 to 2014. However, we can see an increase in EBITDA in the year 2015. The net cash flow from operations has also increased from 2012.

Overall Harvey Norman performed well under uncertain economic environments and it continues to grow its sales as evident from the 2016 half yearly results.


NOTE: All the data extracted from Annual Reports available on Harvey Norman’s corporate website.


Waruna Abeysinghe CPA, ACMA is a chartered qualified Management Accountant with experience in providing management accounting solutions to small & medium businesses. Waruna is also an experience financial analyst and has worked in various industries from banking, government, education, retail to constructions.

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