Harvey Norman boosts profit by 9pc

Franchises are attracting more customers but earning lower revenue. Photo / APN

Harvey Norman Holdings says its full-year profit increased 9 per cent as the retailer's outlook remains "cautious".

Net profit after tax increased to A$252.26 million ($315.87 million) in the year to June 30, up from A$231.41 million in the previous year. Revenue was A$2.7 billion, compared with A$2.45 billion in the previous year.

The company offered a final fully franked dividend of A6c per share.

"The outlook for 2011/12 remains cautious due to global volatility, increased utility costs, possible increase in unemployment numbers, dampened housing markets and weak equity markets," the company said.

It said it had a "strong balance sheet" underpinned by a A$2.04 billion property portfolio and generated strong cash flows from franchising.

"We are well placed to take advantage of emerging opportunities," it said.

Harvey Norman brands had experienced a "strong increase" in customer transactions even though revenue was down, mainly because the strong Australian dollar had reduced prices on imported goods.

"There has been much commentary about the cautious consumer, however our franchisees have never experienced so much customer traffic and transactions," the company said.

While this had put pressure on costs, each franchisee business had many more customers but lower revenue.

During the financial year, extensive floods had caused serious disruptions in the company's Queensland and Northern New South Wales markets, while the Christchurch earthquakes had impacted on the New Zealand market.

Sales from the franchised Harvey Norman complexes, commercial divisions and other sales outlets in Australia fell by 5.3 per cent for the period July 1 to August 29, compared with the corresponding period the year before.

The company said it anticipated increased sales in the lead-up to the Rugby World Cup in New Zealand and the London Olympics as it ramped up its online strategy.

"We look forward to the Rugby World Cup enhancing the television category and, of course, in the second half of the upcoming financial year, the world will be gearing up for the biggest ever Olympics in London, which is always good for our AV/IT business."

The company said the most significant addition to the business in the first half of fiscal 2012 would be the launch of its e-commerce site in early October.

"Using market intelligence, we have already gained from our successful photo-finishing and Domayne sites. We are confident our on-line transactional strategy will produce incremental dollars to the existing channel," the company said.

"Added to this, we will be pioneering a software-on-demand, multi-channel offer as an extension to our successful photo-finishing business."

- AAP