Harvey Norman shares drop despite record profit

Electronics retail giant Harvey Norman has reported its highest net profit of $449 million, an additional 29 percent, or $100 million on last year's result.

Without impairments, the retailer's underlying net profit was $664.82 million for the financial year ending 30 June 2017, the highest it has been in the company's history.

"To say that we're pleased by the record-breaking results we are presenting today would indeed be an understatement," chairman and founder Gerry Harvey said.

Despite the strong results, Harvey Norman's shares fell 30 cents to $4.09 at the time of writing. The company said it would cut its final dividend by 5 cents, taking the full year dividend to 26 cents, compared to 30 cents last year.

Harvey Norman's network of franchisee stores spans eight countries, including 542 stores in Australia and 194 complexes. The company also has retail stores in New Zealand, Singapore, Malaysia, Ireland, Northern Ireland, Slovenia and Croatia.

Aggregated franchisee revenue topped a record $5.62 billion, an increase of 5.4 percent, which delivered $304.4 million to Harvey Norman based on increased franchisee fees.

Harvey Norman also operates 87 of its own stores in Australia, which made $160 million in revenue, down 4.1 percent. The local company-operated stores also accrued a $10.2 million loss, which included an $18.4 million write-down in commercial loans to a retail joint venture.

The retailer's property portfolio was valued at $2.66 billion, which the company said was the linchpin of its franchising and retail strategy, and delivers a steady stream of reliable income.

"Quarterly aggregated sales revenue continues to grow steadily year-on-year, and with each franchisee having ownership having ownership and control of the day-to-day operations of their franchisee business, each franchisee has an uncapped potential to maximise their earnings. We continue to encourage the entrepreneurial spirit of each of our franchisees," Harvey said.

Harvey Norman opened up about its strategy to open a flagship complex in the Western Sydney suburb of Auburn in June next year. The company plans to open a flagship store in each country it operates in that "sets the tone for the brand for that region".

"And while in the digital age a company's website is also rightly considered as a flagship store for the brand, we believe it is vital to have a physical space that tells the world what we're about," the company told investors.

"It is these physical complexes and stores that provide customers with the kind of tactile and interactive shopping experience that can't be found online – where they can feel an air of excitement when they walk through the door."