A1 RICHMOND ROAD HOMEBUSH WEST,
N.S.W 2140 LOCKED BAG 2
SILVERWATER DC, NSW 1811
AUSTRALIA
Telephone: (02) 9201 6111
Facsimile: (02) 9201 6250
HARVEY NORMAN
HOLDINGS LIMITED
A.C.N 003 237 545
28 September 2018
The Manager Announcements
Australian Securities Exchange Limited
Exchange Centre
20 Bridge Street
SYDNEY NSW 2000
Dear Sir
Pursuant to listing rule 4.5, we enclose a copy of the 2018 Annual Report for Harvey
Norman Holdings Limited, for your attention.
We would appreciate if this Annual Report be treated as having been lodged with
ASIC pursuant to section 317 of the Corporations Act 2001.
We confirm that this Annual Report is the same as those to be sent to shareholders.
We expect to have the printed Annual Report for posting to shareholders on 15th October 2018.
If you have any queries, please do not hesitate to contact the writer.
Yours faithfully
Chris Mentis
Chief Financial Officer / Company Secretary
TEAM HARVEY
H
A
R
V
E
Y
N
O
R
M
A
N
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
8
2018
A N N U A L R E P O R T
HARVAEY NOR M AN HOL DI NG S L I MIT ED
ABN 54 0 0 3 237 545
HOLDINGS LIM ITED
KEY DATES:
31 August 2018
Announcement of Full-Year Profit to 30 June 2018
Announcement of Final 2018 Dividend
12 October 2018
Record date for Determining Entitlement to
Final 2018 Dividend
2 November 2018
Payment of Final 2018 Dividend
27 November 2018
Annual General Meeting of Shareholders
The Annual General Meeting of the Shareholders of Harvey
Norman Holdings Limited will be held at Tattersalls Club 181
Elizabeth Street, Sydney, at 11:00am
28 February 2019
Announcement of Half-Year Profit to 31 December 2018
Announcement of Interim 2019 Dividend
5 April 2019
Record date for Determining Entitlement to
Interim 2019 Dividend
1 May 2019
Payment of Interim 2019 Dividend
COMPANY INFORMATION
Registered Office:
A1 Richmond Road, Homebush West NSW 2140
Ph: 02 9201 6111
Fax: 02 9201 6250
Share Registry:
Boardroom Pty Limited
Level 12, 225 George Street, Sydney NSW 2000
Ph: 02 9290 9600
Auditors:
Ernst & Young
Securities Exchange Listing:
Shares in Harvey Norman Holdings Limited (“HVN”) are quoted on the
Australian Securities Exchange Limited (“ASX”)
Solicitors:
Brown Wright Stein
Company Secretary:
Mr Chris Mentis
HARVEY NORMAN HOLDINGS LIMITED
ACN 003 237 545
2
FRANCHISEE AGGREGATED SALES REVENUE*
$5.76bn
up 2.6% on previous year
COMPANY-OPERATED SALES REVENUE
$1.99bn
up 8.8% on previous year
PROFIT BEFORE TAX
$530.17m
down 17.1% on previous year
PROFIT BEFORE TAX
(excluding net property revaluations, Coomboona
JV trading losses and Coomboona JV impairment)
$532.54m
down 0.96% on previous year
PROFIT AFTER TAX &
NON-CONTROLLING INTERESTS
$375.38m
down 16.4% on previous year
* Sales made by franchisees in Australia do not form part of the financial
results of the consolidated entity.
Contents
Financial Highlights
Chairman and CEO’s Report
Directors’ Report
Operating and Financial Review
Remuneration Report
Corporate Governance Statement
Statement of Financial Position
Income Statement
07
08
10
13
32
61
67
68
Statement of Comprehensive Income
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
Directory of Harvey Norman ®, Domayne ®
and Joyce Mayne ® Shopping Complexes
69
70
72
73
138
139
147
148
3
TEAM HARVEY JUNIOR:
BUILDING A BRIGHT FUTURE
FOR THE SPORTSWOMEN
OF TOMORROW.
Harvey Norman® has been a driving force behind the promotion of female
athletes for over a decade – ensuring they get the support they need and the
recognition they deserve. In 2017, the Team Harvey project was launched as
a way to harness corporate sponsorship to highlight the achievements of
Australian sportswomen, provide them assistance in achieving their goals,
and to help create new pathways for young women to get involved in the
sports they love.
To continue that work, in 2018 we launched Team Harvey Junior – an
initiative that provides sponsorship for junior female sporting teams
across the country.
Research has shown that girls have fewer opportunities to
play sports during their high school years than boys have at
that same age. Contributing factors and obstacles include a lack of
access to adequate local playing facilities, a cut in school sports
budgets, transportation & safety issues, and peer pressure about
body image. It is also often the case that the quality level of sports
activities offered for girls declines after a certain age, where the
availability of coaching and resources may be more focused on
boys’ programs that are traditionally better funded.
That’s where our sponsorship can help.
We started with a call-out to Australian girls in sport with the
plan to give ten youth teams a head-start with $5,000 each
in sponsorship. The response we received shows just how
much work there is to be done in this area, with over 1,500
submissions coming in from 103 different sports, covering
all states and territories, and representing young athletes
from 8-16 years old.
The sponsorship we provide can help with purchasing
new uniforms, cover training or travel expenses, and
help with resurfacing a court or pitch. It’s a small start,
but we’re proud that our sponsorship is playing a part
to help ensure a bright future for young girls in sport
in Australia.
4
5
6
FINANCIAL HIGHLIGHTS
Reconciliation of Reported Profit to Underlying Profit
Reported profit before tax
Less: Net property revaluation increment
Year Ended 30 June
2018
2017
2016
$530.17m
$639.81m
2
$493.76m
($51.65m)
($108.05m)
($48.36m)
Profit before tax excluding net property revaluation increment
$478.53m
$531.76m
$445.41m
Add back: Coomboona JV impairment losses
Add back: Coomboona JV trading losses
Underlying profit before tax
Reported profit after tax & non-controlling interests
Less: Net property revaluation increment (after tax)
$49.44m
-
-
$4.57m
$5.95m
$2.71m
$532.54m
$537.70m
$448.11m
$375.38m
$448.98m
$348.61m
($36.15m)
($75.72m)
($33.86m)
Profit after tax excluding net property revaluation increment (after tax)
$339.23m
$373.25m
$314.74m
Add back: Coomboona JV impairment losses (after tax)
Add back: Coomboona JV trading losses (after tax)
Underlying profit after tax & non-controlling interests
$34.61m
-
-
$3.20m
$4.16m
$1.90m
$377.03m
$377.42m
$316.64m
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
7
CHAIRMAN AND CEO’S REPORT
Dear Shareholder,
The underlying results for the year ended 30 June 2018 have seen us deliver a solid profit before tax of $532.54 million. On an underlying
basis, this represents a marginal reduction of 0.96% from the unprecedented, record-breaking underlying profit result that we delivered in
the 2017 financial year of $537.70 million. This underlying result is exclusive of net property revaluation adjustments and the impairment
losses and joint venture trading losses incurred with respect to our investment in the Coomboona Holdings Pty Limited dairy joint venture in
Northern Victoria.
Reported profit before tax was $530.17 million for the year ended 30 June 2018, a decrease of $109.63 million, or 17.1%, from $639.81 million
for the year ended 30 June 2017.
The PBT return on our net assets was 18.05% for the 2018 financial year. These results represent the ongoing strength of our underlying
business model, and demonstrate the value of our integrated retail, franchise, property and digital strategy. This integrated approach
ensures that we will continue to evolve to meet the needs and demands of both customers and emerging new technologies. Our
franchisees and company-operated stores are consistently at the leading edge of Home and Lifestyle retailing – meeting the needs of their
customers via an integrated in-store and online engagement model that enables them to effectively anticipate and respond to changes in
key product categories.
The performance of our overseas Harvey Norman® branded company-operated stores has been outstanding and this segment now
represents 22% of the total consolidated profit before tax result. Each offshore region has delivered their best trading result and highest
profitability, both individually and in aggregate, since launching overseas. The retail segment result for the Harvey Norman® company-
operated stores overseas reached $116.13 million for the current year, up a solid 15.1% from an excellent, unprecedented segment result of
$100.86 million in the 2017 financial year. From humble beginnings with the introduction of the Harvey Norman® brand overseas in 1997, the
past 20 years of trading outside of the Australian market, has propelled the Harvey Norman® brand to a strong global player with solid results
achieved by the 89 company-operated stores across 7 countries. Retail sales in New Zealand were just under $1 BILLION in local currency,
whilst sales in Asia were just under $0.500 BILLION for the 2018 financial year.
We intend to capitalise on the excellent performance overseas and plan to invest substantially in growing our offshore Harvey Norman® store
network, particularly in South East Asia. Our robust balance sheet and strong cash flows enable us to seize on opportunities as they arise.
We are actively exploring new sites and there is an expectation to open up to 18 new Harvey Norman® company-operated stores overseas
within the next 2 years. We expect to have circa 107 Harvey Norman® company-operated stores overseas by the end of 2020. This
anticipated 20% expansion in store locations overseas is likely to be the beginning of our biggest organic growth spurt in over a decade.
Our plans for expansion overseas are strong, particularly in Malaysia. Since 2010, the population growth in Malaysia has been in excess of
400,000 per year and currently sits at 32.1 million. There is the potential to increase our retail footprint in Malaysia from 16 Harvey Norman®
stores today to over 50 stores by the end of 2023.
Country
Launch of Flagship Store
Current # Stores
30 June 2018
Expected
Growth, 2 Yrs
Expected # Stores
by 2020
Singapore (2000)
Millenia Walk, December 2015
Malaysia (2004)
Ireland (2003)
Ikano, Kuala Lumpur, November 2017
Tallaght, Dublin, July 2017
Ireland (2003)
Northern Ireland (2008)
Tallaght, Dublin, July 2017
Boucher Road, South Belfast, Nov 2015
13
Slovenia (2002)
BTC City, Ljubljana, June 2017
Croatia (2011)
Zagreb, TBC September 2018
New Zealand (1997)
Wairau Park, Auckland, June 2018
13
16
13
2
5
1
39
89
+3
+9
+2
+3
-
-
+3
+1
+18
16
25
15
16
2
5
4
40
107
Our Flagship strategy is continuously evolving and we will soon have one Flagship store in each of the eight countries in which we, or our
franchisees, operate. These stores will provide customers with the kind of tactile and interactive shopping experience that can’t be found
online, and generate excitement in the retail sector as a whole. The Flagship stores are unrivalled in terms of design and technology,
showcasing the best global brands and product range available on the market, creating a truly unparalleled shopping experience. On 30
June 2018, we launched our Flagship store at Wairau Park, Auckland (New Zealand) to much acclaim. We have had a delay in the delivery of
our Flagship store at Zagreb, Croatia which is on track to be launched by the end of September 2018. In Australia, we have already seen the
positive impact of the launch of the first stage of the Auburn Flagship complex in Sydney with the transformation of the Computers and
Electrical categories. The final stage of the Auburn Flagship complex will be completed by September 2018 with the launch of the Furniture,
Bedding and Floorcoverings categories. Our Flagship strategy further cements the positioning of our brand as an international leader in
Home and Lifestyle retailing.
In Australia, our franchisee model continues to perform solidly, making them the dominant player in the domestic Home and Lifestyle market.
Aggregated franchisee sales revenue increased 2.6% – or $144.28 million – to reach $5.76 billion for the year, and quarterly aggregated
franchisee sales revenue continues to grow steadily. Comparable aggregated franchisee sales revenue increased 2.2% - or $124.32 million –
to $5.72 billion for the current year. Amid increasing competition within an already competitive market, franchisees performed well, meeting
market pressures which had accelerated within the last 6 months of the 2018 financial year. Franchisees have continued to invest in their
people and ensure that their staff are equipped with the best skills and tools to seamlessly service their customers.
8
CHAIRMAN AND CEO’S REPORT (CONTINUED)
The franchising operations segment result reduced by 7.2% from $304.53 million in the 2017 year to $282.54 million in the 2018 financial
year. The franchising operations margin was 4.90% for the 2018 financial year compared to 5.42% for the preceding year. The franchising
operations segment was negatively impacted by a combination of lower franchise fees received from franchisees and higher tactical support
required during the year to protect, enhance and promote the Harvey Norman®, Domayne® and Joyce Mayne® brands. Tactical support
increased by $10.50 million relative to prior year, of which $7.80 million related to tactical support to assist a B2B franchisee with a
restructure in Q4 of FY18. Like our franchisees, we have further invested in our people, our brand, and in the development and enhancement
of the tools we provide our franchisees to enable them to seamlessly service their customers. This investment has contributed to the
reduction in the franchising operations segment result during the 2018 financial year.
Our ongoing commitment to ensuring a seamless relationship with the customer has seen the ongoing identification and introduction of new
opportunities and the continued development and enhancement of existing capabilities. The ongoing development of the Online-to-Offline
(O2O) Strategy and the evolution of delivery services and fulfilment options offered by franchisees in Australia is at the core of the ‘Customer
First’ approach. The Click & Collect App is fully operational across Australia and New Zealand, enabling customers to track the status of their
order through real-time notifications. The LivePerson digital service platform provides customers with the ability to communicate with
franchisees through whichever channel they desire at whatever time suits them best. Franchisees and customers have benefitted from the
technological initiatives carried out during the year, including the developments in real-time inventory and delivery-tracking systems, quick
reserve options and the evolution of delivery pathways.
Our strong property portfolio was valued at $2.86 billion as of 30 June 2018 and still continues to be our driving point of difference and
competitive advantage in the Australian market. With emerging or restructured competitors – both big or small, online or physical – our
robust investment property portfolio keeps us a step-ahead and ready to anticipate and respond to the evolving and dynamic needs of
consumers. Our physical complexes provide the flexible, large footprint needed to showcase the best on offer and demonstrate the
maximum capabilities of those products to integrate and connect our busy day-to-day lives.
All-in-all, the 2018 financial year has been a strong one, particularly on the back of the previous record-breaking 2017 financial year result.
We’d like to thank all of our staff for their continued enthusiasm, and pay tribute to the hard work of our franchisees throughout the year. As
a shareholder, your continued support and confidence in our direction ensures a prosperous future for us all.
G. HARVEY K.L. PAGE
Chairman Chief Executive Officer
Sydney Sydney
28 September 2018 28 September 2018
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
9
DIRECTORS’ REPORT
Directors
Unless otherwise indicated, all directors (collectively termed “the Board”) held their position as a director throughout the entire financial year
and up to the date of this report.
Gerald Harvey
Executive Chairman
Mr. G. Harvey was the co-founder of Harvey Norman Holdings Limited in 1982 with Mr. I.J. Norman.
Mr. G. Harvey has overall executive responsibility for the strategic direction of the consolidated entity,
and in particular, property investments.
Kay Lesley Page
Executive Director and CEO
Ms. Page joined Harvey Norman in 1983 and was appointed a director of Harvey Norman Holdings
Limited in 1987.
Chris Mentis
B.Bus., FCA, FGIA, Grad Dip App
Fin
Executive Director, CFO &
Company Secretary
John Evyn Slack-Smith
Executive Director & COO
David Matthew Ackery
Executive Director
Michael John Harvey
B.Com
Non-Executive Director
Christopher Herbert Brown
OAM, LL.M, FAICD, CTA
Non-Executive Director
Kenneth William Gunderson-
Briggs
B.Bus., FCA, MAICD
Non-Executive Director
(Independent)
Ms. Page became the Chief Executive Officer of the Company in February 1999 and has overall
executive responsibility for the consolidated entity.
Ms. Page is a Director of the Trustee of the Sydney Cricket and Sports Ground Trust.
On 30 July 2018, Ms. Page was appointed as an independent member of the Place Management NSW
Board.
Mr. Mentis was appointed a director of Harvey Norman Holdings Limited on 30 August 2007.
Mr. Mentis joined Harvey Norman as Financial Controller on 15 December 1997. On 20 April 2006, he
became Chief Financial Officer and Company Secretary. Mr. Mentis is a Fellow of the Institute of
Chartered Accountants and a Fellow of the Governance Institute of Australia, with extensive experience
in financial accounting.
Mr. Mentis has overall executive responsibility for the accounting and financial matters of the
consolidated entity.
Mr. Slack-Smith was a Harvey Norman® computer franchisee between 1993 and 1999. Mr. Slack-Smith
became a director of the Company on 5 February 2001. Mr. Slack-Smith has overall executive
responsibility for the operations of the consolidated entity.
Mr. Ackery was appointed a director of Harvey Norman Holdings Limited on 20 December 2005. Mr.
Ackery has overall executive responsibility for the relationship between the consolidated entity and
Harvey Norman® home appliances, home entertainment and technology franchisees and strategic
partners.
Mr. Ackery is the Chairman of the public company, St. Joseph’s College Foundation Limited.
Mr. M. Harvey joined Harvey Norman in 1987, having completed a Bachelor of Commerce degree. Mr. M.
Harvey gained extensive experience as a Harvey Norman® franchisee from 1989 to 1994. Mr. M. Harvey
became a director of the Company in 1993 and was appointed Managing Director in July 1994. Mr. M.
Harvey ceased to be an Executive Director and Managing Director on 30 June 1998.
Mr. Brown holds the degree of Master of Laws from the University of Sydney. Mr. Brown is the senior
partner in Brown Wright Stein Lawyers. Brown Wright Stein Lawyers has acted as lawyers for the
consolidated entity since 1982. Mr. Brown was appointed a director of the Company in 1987, when it
became a listed public company. Mr. Brown is a member of the Audit, Remuneration and Nomination
Committees.
Mr. Brown is the Chairman of Windgap Foundation Limited. In 2013 he was awarded the Medal of the
Order of Australia (OAM) for service to the community, particularly to people with disability.
Mr. Gunderson-Briggs was appointed a director of Harvey Norman Holdings Limited on 30 June 2003.
Mr. Gunderson-Briggs is a chartered accountant and a registered company auditor. Mr. Gunderson-
Briggs has been involved in public practice since 1982 and a partner in a chartered accounting firm
since 1990. Mr. Gunderson-Briggs’ qualifications include a Bachelor of Business from the University of
Technology, Sydney and he is a Fellow of the Institute of Chartered Accountants. Mr. Gunderson-
Briggs was appointed Chairman of the Remuneration Committee on 16 December 2015 and is a
member of the Audit and Nomination Committees.
Mr. Gunderson-Briggs is an independent non-executive director of Australian Pharmaceutical
Industries Limited, a company listed on the ASX. Mr. Gunderson-Briggs finished his tenure as the
Chairman of Glenaeon Rudolf Steiner School Limited in May 2018.
Graham Charles Paton
AM, B.Ec, FCPA, MAICD
Non-Executive Director
(Independent)
Mr. Paton holds a Bachelor of Economics degree from the University of Sydney. During his 23 years as
a partner of an international chartered accounting practice, he was involved in the provision of
professional services to the retail industry. He retired from public practice in July 2001. Mr. Paton is a
Fellow and Life Member of CPA Australia and was the National President of that professional
accounting body in 1993/1994.
In 2001, Mr. Paton was awarded membership of the General Division of the Order of Australia for his
services to the accounting profession and for his services to the deaf community through his
chairmanship of the Shepherd Centre for Deaf Children for the decade to 2001.
Mr. Paton was appointed a director of Harvey Norman Holdings Limited on 20 June 2005 and was
appointed the Senior Independent Director on 16 December 2015. Mr. Paton was appointed Chairman
of the Nomination Committee on 16 December 2015, Chairman of the Audit Committee on 9 March
2006 and is a member of the Remuneration Committee.
Mr. Paton is an independent non-executive director of Gazal Corporation Limited, a company listed on
the ASX.
10
DIRECTORS’ REPORT (CONTINUED)
Company Secretary
Mr. C. Mentis is a chartered accountant and became Company Secretary on 20 April 2006. Mr. Mentis
has extensive experience in financial accounting and has been with the consolidated entity since 1997.
Mr. Mentis is a Fellow of the Governance Institute of Australia.
Committee Membership
As at the date of this report, the Company had an Audit Committee, a Remuneration Committee and a
Nomination Committee. Members acting on the committees of the board during the year were:
Audit Committee:
G.C. Paton AM (Chairman)
C.H. Brown OAM
K.W. Gunderson-Briggs
Remuneration Committee:
K.W. Gunderson-Briggs (Chairman)
C.H. Brown OAM
G.C. Paton AM
Nomination Committee:
G.C. Paton AM (Chairman)
C.H. Brown OAM
K.W. Gunderson-Briggs
Directors’ Meetings
DIRECTOR
G. Harvey
K.L. Page
J.E. Slack-Smith
D.M. Ackery
C. Mentis
M.J. Harvey
C.H. Brown
K.W. Gunderson-Briggs
G.C. Paton
Full Board
Audit
Remuneration
Nomination
11 [11]
11 [11]
10 [11]
10 [11]
11 [11]
10 [11]
11 [11]
11 [11]
10 [11]
n/a
n/a
n/a
n/a
n/a
n/a
8 [8]
8 [8]
8 [8]
n/a
n/a
n/a
n/a
n/a
n/a
5 [5]
5 [5]
5 [5]
n/a
n/a
n/a
n/a
n/a
n/a
1 [1]
1 [1]
1 [1]
The number of meetings of the Board of Directors and of its Board Committees during the 2018
financial year were:
Full Board: 11
Audit Committee: 8
Remuneration Committee: 5
Nomination Committee: 1
The above table represents the directors’ attendance at meetings of the Board, Audit Committee,
Remuneration Committee and Nomination Committee. The number of meetings for which the director
was eligible to attend is shown in brackets.
In addition, the executive directors held regular meetings for the purpose of signing various
documentation.
Principal Activities
The principal activities of the consolidated entity are that of an integrated retail, franchise, property and
digital system including:
Franchisor;
Sale of furniture, bedding, computers, communications and consumer electrical products in New
Zealand, Singapore, Malaysia, Slovenia, Ireland, Northern Ireland and Croatia;
Property investment;
Lessor of premises to Harvey Norman®, Domayne® and Joyce Mayne® franchisees and other third
parties;
Media placement; and
Provision of consumer finance and other commercial loans and advances.
Significant Changes in the
State of Affairs
In the opinion of the directors, there were no significant changes in the state of affairs of the
consolidated entity that occurred during the year ended 30 June 2018.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
11
DIRECTORS’ REPORT (CONTINUED)
Significant Events After
Balance Date
On 31 August 2018, the Company announced a renounceable, pro-rata entitlement offer of new fully-
paid ordinary shares in the Company to raise approximately $163.85 million (before costs) (Entitlement
Offer), with an offer price of $2.50 per share. The Entitlement Offer forms part of the Company’s
ongoing capital management program. It is intended that the proceeds of the Entitlement Offer will be
used to reduce the amount of Company consolidated entity debt.
With the exception of the above, there have been no circumstances arising since balance date which
have significantly affected or may significantly affect:
the operations;
the results of those operations; or
the state of affairs of the entity or consolidated entity in future financial years.
Corporate Governance
The Company is committed to good corporate governance and disclosure. The Company has
substantially adopted the ASX Corporate Governance Council's "Corporate Governance Principles and
Recommendations" for the entire financial year.
Directors’ Relevant Interests
At the date of this report, the relevant direct and indirect interest of each director in the ordinary shares
and performance rights instruments of the Company and related bodies corporate are:
DIRECTOR
G. Harvey
K.L. Page
J.E. Slack-Smith
D.M. Ackery
C. Mentis
M.J. Harvey
C.H. Brown
K.W. Gunderson-Briggs
G.C. Paton
TOTAL
Ordinary Shares
Options
Performance Rights
349,444,821
17,507,642
899,818
489,134
915,341
2,974,897
183,323,726
9,137
15,682
555,580,198
-
-
-
-
-
-
-
-
-
-
187,500
337,500
225,000
225,000
225,000
-
-
-
-
1,200,000
Share Options
Performance Rights
At the date of this report, there were no unissued ordinary shares under options (2017: 1,134,000).
During the year ended 30 June 2018, 1,134,000 options were exercised resulting in the creation of
1,134,000 new shares in the Company.
At the date of this report, there were 1,200,000 unissued ordinary shares under performance rights
(2017: 800,000), being a right to acquire ordinary shares in the Company at nil exercise price. On 30
November 2015, a total of 400,000 performance rights under Tranche 1 of the 2016 Long-Term
Incentive (LTI) Plan were granted to executive directors following Board adoption of the scheme and
shareholder approval of the LTI Plan in 2015. On 28 November 2016, a total of 400,000 performance
rights under Tranche 2 of the 2016 LTI Plan were granted to executive directors in accordance with the
terms and conditions of the LTI Plan. On 1 December 2017, a total of 400,000 performance rights under
Tranche 3 of the 2016 LTI Plan were granted to executive directors in accordance with the terms and
conditions of the LTI Plan.
Dividends
The directors recommend a fully franked final dividend of 18.0 cents per share to be paid on 2
November 2018 (total dividend, fully franked - $200,554,004). The following fully franked dividends of
the Company have also been paid, declared or recommended since the end of the preceding financial
year:
Payment Date
Amount
2017 final fully-franked dividend
1 December 2017
2018 interim fully-franked dividend
1 May 2018
$133,634,629
$133,702,669
The total dividend in respect of the year ended 30 June 2018 of 30.0 cents per share represents
89.05% (2017: 64.46%) of profit after tax and non-controlling interests, as set out on page 68 of the
financial statements.
Excluding the non-cash net property revaluation increments, the total dividend in respect of the year
ended 30 June 2018 of 30.0 cents per share represents 98.54% (2017: 77.55%) of profit after tax and
non-controlling interests, as set out on page 68 of the financial statements.
The Dividend Policy of the Company is to pay such dividends as do not compromise the capability of
the Company to execute strategic objectives.
12
DIRECTORS’ REPORT (CONTINUED)
OPERATING AND FINANCIAL REVIEW
Underlying Profit
HIGHLIGHTS: UNDERLYING PROFIT
The performance of our overseas Harvey Norman® branded company-operated stores has been
outstanding and this segment now represents 22% of the total consolidated profit before tax result.
Each offshore region has delivered their best trading result and highest profitability, both individually and
in aggregate, since launching overseas.
The PBT return on net assets was 18.05% for FY2018.
Our Flagship Strategy is continuously evolving and we will soon have 1 Flagship store in each of the 8
countries in which we, or our franchisees, operate.
A solid result for FY2018, particularly on the back of the previous record-breaking FY2017 result.
We plan to invest substantially in growing our offshore Harvey Norman® store network, with an
expectation to open up to 18 new stores overseas within the next 2 years, particularly in South East Asia.
$532.54 million underlying net profit before tax down by -0.96% from $537.70 million in FY17
(excluding net property revaluation adjustments, Coomboona trading losses and Coomboona impairment losses)
Including:
$116.13 million profit from the company-operated offshore retail operations, up +15.1% from $100.86 million in FY17;
$282.54 million franchising operations segment profit result, down -7.2% from $304.53 million in FY17, mainly due to a
combination of lower franchise fees received from franchisees and higher tactical support required to protect, enhance
and promote the brands, in addition to a rise in other costs to operate the franchising operations segment. Franchisees
in Australia performed well in the face of increased competition and competitive pricing, which had accelerated in the 2nd
half of FY18. Franchisees have continued to invest in their people to ensure that their staff are equipped with the best
skills and tools to drive sales growth and seamlessly service their customers;
$136.92 million profit from the property segments (excluding net property revaluation adjustments), down -1.8% from
$139.42 million in FY17 primarily due to increased borrowing costs for the acquisition and refurbishment of property
assets as rents and outgoings remained strong;
$5.88 million profit from the equity investments segment, down -3.2% from $6.08 million in FY17, reflecting a reduction
in the market value of the listed securities portfolio, net of the dividends and any capital profits or losses generated from
the sale of listed securities during the year; and
($8.94) million net loss from non-core joint ventures included in the other segment and other non-franchised retail
segment (excluding Coomboona JV trading losses and Coomboona JV impairment losses), an improvement of +32.2%
from the net loss of ($13.19) million in FY17 mainly due to an improvement in the trading results of our credit facilities
segment (excluding the Coomboona joint venture), lower impairment losses recognised on commercial loans to a non-
core retail business by $1.49 million and the impairment loss of $0.43 million recognised in the prior year in respect of a
mining camp accommodation joint venture.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
13
DIRECTORS’ REPORT (CONTINUED)
OPERATING AND FINANCIAL REVIEW (continued)
Reported Profit Before Tax (PBT)
HIGHLIGHTS: REPORTED PROFIT BEFORE TAX
Profit before tax for the year-ended 30 June 2018 was negatively impacted by two main factors:
(1) A reduction in the net property revaluation increment for the property portfolio by $56.41 million,
down from $108.05 million in FY17 to $51.65 million in FY18 primarily due to the impact of
rezoning potential to medium-density residential leading to a significant increase for a property
in NSW in the previous year; and
(2) The recognition of impairment losses of $49.44 million in respect of the Coomboona Holdings
dairy joint venture (Coomboona JV) comprised of: (i) a $20.67 million write-down of the equity-
accounted investment in the Coomboona JV in December 2017, and (ii) an estimated shortfall in
the recovery of the loans advanced to the Coomboona JV of $28.78 million.
$530.17 million net profit before tax for FY18 compared to $639.81 million for FY17,
a decrease of $109.63 million or -17.1% from prior year
Main factors contributing to the result:
$15.27 million increase in the profitability of the overseas company-operated retail locations to $116.13
million, up +15.1% from $100.86 million in FY17. The increased contribution from each region included: Singapore &
Malaysia +$5.71 million (+29.6%) due to the reformat and launch of the Flagship store at Ikano, Kuala Lumpur
(Malaysia) and the new Viva City Mega Mall in Kuching, Sarawak (Malaysia) both in November 2017, the opening of the
Viva City Factory Outlet (Singapore) in July 2017, the expansion to full-format stores of the Parkway Parade (Singapore)
and North Point (Singapore) stores and the continued growth in the Flagship Millenia Walk (Singapore) store; Ireland &
Northern Ireland +$3.90 million (+157%) due to the launch of the Flagship store in Tallaght, Dublin (Ireland) in July
2017 and the ongoing success of the Boucher Road Flagship store in South Belfast (Northern Ireland). During the year
there was a realignment of accounting treatment of lease incentives income in Ireland by $1.03 million and a release of
the lease incentive relating to the Holywood store in Northern Ireland of $1.08 million; New Zealand +$2.88 million
(+3.6%) resulting from modest sales and market share growth in New Zealand during FY18 amidst a slowdown in the NZ
economy and a cooling housing market in Auckland; and Slovenia & Croatia +$2.77 million (+60%) due to the launch
of the refurbished Flagship store at BTC City Ljubljana (Slovenia) in June 2017 creating a positive ‘halo-effect’ for the
other four Harvey Norman® company-operated stores in Slovenia with growth rates in excess of 20%. Pleasingly, the
store at Zagreb (Croatia) has performed well, boosting sales by over 17% during the renovation period. The refurbished
Zagreb Flagship store will be launched by the end of September 2018.
($58.90) million decrease in the overall property segment profit result to $188.57 million, down -23.8% from
$247.47 million in FY17, mainly attributable to a ($56.41) million or -52.2% decrease in the net property revaluation
increment from $108.05 million in FY17 to $51.65 million in FY18 and higher borrowing costs (due to the increased
utilisation of debt facilities for property acquisitions) offset by higher rent and outgoings collected from property segment
assets.
($43.81) million deterioration in the net loss from non-core joint ventures included in the other segment and
other non-franchised retail segment to a net loss of ($62.95) million, from a net loss of ($19.14) million in FY17.
This is mainly due to higher impairment losses by $47.52 million for the write-down of the equity-accounted investment
in the Coomboona JV of $20.67 million in December 2017, the impairment loss for the estimated shortfall in the recovery
of loans advanced to the Coomboona JV of $28.78 million, offset by lower impairment losses recognised on commercial
loans to a non-core retail business by $1.49 million and the impairment loss of $0.43 million recognised in the prior year in
respect of a mining camp accommodation joint venture.
($21.99) million decrease in the franchising operations segment profit result to $282.54 million, down -7.2%
from $304.53 million in FY17. Franchisees achieved aggregated franchisee sales growth of 2.6% to $5.76 billion – a solid
effort from franchisees despite increased competition and competitive pricing to maintain market share, particularly in
the 2nd half of FY18. Despite higher aggregated franchisee sales revenue during the year, there was reduction in gross
revenue from franchisees during the year by $2.63 million, or -0.3%, to $1.04 billion. Coupled with the higher tactical
support payments by $10.50 million, of which $7.80 million tactical support was paid to assist a B2B franchisee with a
restructure in Q4 of FY18, the performance of the franchising operations segment reduced by $21.99 million relative to
prior period and the franchising operations margin moderated from 5.42% in FY17 to 4.90% in FY18.
14
DIRECTORS’ REPORT (CONTINUED)
OPERATING AND FINANCIAL REVIEW (continued)
Reported PBT Return on Net Assets %
The consolidated entity attributes the achievement of a consistently strong PBT return on net assets to the following key drivers focussed
on creating sustainable growth and maximising value to our stakeholders:
We operate a diversified, unique business model – the consolidated entity operates an integrated retail, franchise, property and digital
strategy that continues to deliver strong, stable income streams.
We are not just limited to the Australian market and we have a significant retail footprint across 8 countries – the consolidated entity
has 195 franchised complexes in Australia and 89 Harvey Norman® company-operated stores across 7 offshore regions.
Our Board of Directors and management team in Australia and each offshore region are business savvy and experienced in retail and
property, who have an in-depth understanding and appreciation of the key drivers of the discretionary retail market – the consolidated
entity continues to invest in its leaders and their people and prides itself on the longevity, tenure and breadth of knowledge of the
Harvey Norman®, Domayne® and Joyce Mayne® brands of key personnel to effectively position the brand in each of the differing
markets.
Our retail strategy and retail mix encompasses the entire Home and Lifestyle market - franchisees and company-operated stores
continue to be dominant players across all key categories within the Home and Lifestyle market. This diversified offering and the
extensive product range is flexible and capable of withstanding changing competitive pressures and headwinds of specific product
categories to effectively respond to evolving consumer dynamics and desires.
Our robust property portfolio of $2.86 billion continues to be our point of difference and competitive advantage - with emerging or
restructured competitors – both big or small, online or physical – the resilient investment property portfolio keeps the consolidated
entity a step-ahead and provides the flexible, large footprint needed to showcase the best on offer.
Net Profit After Tax & Non-Controlling Interests (PAT&NCI)
Net profit after tax and non-controlling interests (NCI) decreased by 16.4%, or $73.60 million, to $375.38 million for the year-ended 30 June
2018, from $448.98 million in the previous year. The effective income tax rate for the year-ended 30 June 2018 was 28.32% compared to an
effective income tax rate of 29.20% for the year-ended 30 June 2017.
Excluding the after tax net property revaluation increments, the Coomboona JV trading losses and the Coomboona JV impairment loss from
the result, underlying net profit after tax and non-controlling interests for the 2018 financial year reduced by 0.1%, or $0.38 million, to
$377.03 million, from $377.42 million in the previous year.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
15
DIRECTORS’ REPORT (continued)
OPERATING AND FINANCIAL REVIEW (continued)
PLANNED
OFFSHORE GROWTH
WITHIN THE NEXT TWO YEARS
Ikano, Kuala Lumpur (Malaysia Flagship store)
The performance of the overseas Harvey Norman® branded
through the utilisation of existing cash reserves in the Asian business
company-operated stores has been outstanding and this segment
or from external borrowings to be sourced locally in Singapore. The
now represents 22% of the total consolidated profit before tax
growth in South East Asia will predominantly be in Malaysia where
result. Each offshore region has delivered their best trading result
there is an expectation to open up to 9 new stores by the end of 2020.
and highest profitability, both individually and in aggregate, since
This will grow the brand in Malaysia from the 16 stores today to 25
launching overseas.
Harvey Norman® stores within a 2-year period. 3 new sites have been
The consolidated entity intends to capitalise on the excellent
identified for growth in Singapore.
performance overseas and plans to invest substantially in growing
In Croatia, the consolidated entity has earmarked 3 new locations
the offshore Harvey Norman® store network. The robust balance
for expansion in the region. We expect to open 1 more store in New
sheet and strong cash flows enables the consolidated entity to
Zealand and 2 more stores in the Republic of Ireland.
seize on opportunities as they arise. The consolidated entity is
actively exploring opportunities to expand overseas and there is an
expectation to open up to 18 new Harvey Norman® stores offshore
within the next 2 years, particularly in South East Asia.
The consolidated entity owns an 80.2% controlling interest in
Pertama Holdings Pte Limited (Pertama), a company incorporated
in Singapore. A subsidiary of Harvey Norman Holdings Limited has
granted to Pertama a licence to use the Harvey Norman® trademarks in
Singapore and Malaysia. Pertama intends to expand its retail footprint
in Singapore and Malaysia through the planned opening of 12 new
retail sites. The expansion opportunities will be funded by Pertama
The consolidated entity expects to have circa 107 Harvey Norman®
branded company-operated stores by the end of the 2020
financial year, a 20% expansion in store locations overseas within
a 2-year period.
In Malaysia, the consolidated entity has recognised the growth
potential of the Harvey Norman® brand in the region. Since 2010, the
population growth in Malaysia has been in excess of 400,000 per year
and currently sits at 32.1 million. There is the potential to increase the
retail footprint in Malaysia from 16 Harvey Norman® stores today to
over 50 stores by the end of 2023.
1997
2000
2002
2003
2004 2008
2011
NEW ZEALAND
SINGAPORE
SLOVENIA
IRELAND
MALAYSIA
NORTHERN IRELAND
CROATIA
PLANNED OFFSHORE GROWTH (NEXT 2 YEARS)
NEW ZEALAND
MALAYSIA
SINGAPORE
IRELAND
SLOVENIA
5
CROATIA
1
+3
NORTHERN IRELAND
2
+9
16
+3
13
13
+2
39
+1
16
EXISTING COMPANY-OPERATED STORES
PLANNED INCREASE IN COMPANY-OPERATED STORES
DIRECTORS’ REPORT (continued)
OPERATING AND FINANCIAL REVIEW (continued)
HARVEY NORMAN®
FLAGSHIP STRATEGY –
SETTING A COURSE FOR EXCELLENCE
When we decided to create a Flagship store or complex in each of
In Australia, we have already seen the positive impact of the launch
our territories we had one overarching goal in mind: providing an
of the Auburn Flagship complex in Sydney with the transformation
industry-leading, immersive customer experience.
of the Computers and Electrical categories. The final stage of the
We wanted these stores to be nothing short of game-changing
the launch of the Furniture, Bedding and Floorcoverings categories.
when it came to how our customers engaged with our brand. It was
about providing the absolute best shopping experience. Creating a
We’re raising expectations while we’re raising the bar. Customers
space where the latest innovations and designs combined with the
want a better experience, from when they walk in the door to after
biggest range of quality brands and products in a truly interactive
their purchases have arrived home. The perception of our brand is
format. Much more than just a place to buy furniture or appliances,
changing, and it’s our Flagship stores and complexes that are leading
Auburn Flagship complex will be completed by September 2018 with
customers would receive a level of service – both before and after
the way forward.
sale – that would be unsurpassed in the industry.
Our plan was to well and truly set a course for the future of the
Harvey Norman® brand on a global scale, and in doing so we have
created eight of the best Home and Lifestyle stores in the world. Our
Flagship stores will provide our 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.
During the 2018 financial year, 3 Flagship stores were launched:
Tallaght, Dublin (Ireland) in July 2017, Ikano, Kuala Lumpur (Malaysia)
AUSTRALIA - Auburn, Sydney (targeted launch Sep 2018)
CROATIA - Zagreb (targeted launch Sep 2018)
IRELAND - Tallaght, Dublin (launched Jul 2017)
MALAYSIA - Ikano, Kuala Lumpur (launched Nov 2017)
NEW ZEALAND - Wairau Park, Auckland (launched Jun 2018)
NORTHERN IRELAND - Boucher Road, South Belfast
(launched Nov 2015)
in November 2017 and Wairau Park, Auckland (New Zealand) in June
SINGAPORE - Millenia Walk (launched Dec 2015)
2018. We are completing the reformat of the Zagreb (Croatia) store and
intend to launch it as a Flagship store by the end of September 2018.
SLOVENIA - Ljubljana (launched Jun 2017)
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
Wairau Park, Auckland
(New Zealand Flagship store)
17
DIRECTORS’ REPORT (CONTINUED)
OPERATING AND FINANCIAL REVIEW (continued)
Company-Operated Retail Segment
Total aggregated company-operated retail sales revenue is almost at the $2 billion milestone for the 2018 financial year, the strongest-ever
sales performance for the retail segment, growing by $157.72 million, or 8.6%, to $1.99 billion relative to $1.83 billion in the previous year.
Retail sales for the 39 Harvey Norman® stores in New Zealand alone have almost reached $1 BILLION in local currency, whilst sales in Asia are
nearly at $0.500 BILLION for the 2018 financial year. Total company-operated revenue broke the $2 billion barrier in the 2018 financial year
hitting $2.03 billion for the year, an increase of $158.53 million, or 8.5%, in aggregate relative to $1.88 billion in the 2017 financial year.
Each offshore region has reported stronger sales growth and market share gains during the year with the Flagship stores in each country
leading the way and providing increased brand awareness and consumer traction to existing or new stores in the region. The commendable
performance of the company-operated retail segment affirms the concerted focus on developing and enhancing the Flagship strategy. The
aim of the consolidated entity is nothing short of creating the best Home and Lifestyle retail destinations in the world, with Harvey Norman®
being the ‘go to’ brand for an aspirational and interactive shopping experience.
The result before tax for the company-operated retail segment increased $14.11 million, or 15.5%, to $104.96 million for the year ended 30
June 2018, from $90.85 million in the 2017 financial year. This is an excellent result considering the overseas company-operated stores
grew from a record base in the preceding year.
In local currency, the market-leading Harvey Norman® brand in New Zealand was just under the $1 BILLION mark with sales soaring to
$NZ987.20 million up by 4.9%, or $NZ46.50 million, from $NZ940.69 million in the previous financial year. This was particularly remarkable
due to the headwinds faced by the New Zealand economy during the year, with a slowdown in the housing market, the net migration
decrease and a change in government in October 2017, all impacting the retail climate and consumer sentiment in its own way.
18
DIRECTORS’ REPORT (CONTINUED)
OPERATING AND FINANCIAL REVIEW (continued)
Company-Operated Retail Segment (continued)
The 72,000 sq feet Flagship store at Wairau Park, North Auckland has undergone a significant renovation during the year and the store
continued to trade strongly throughout the refurbishment period. The Wairau Park Flagship store launched in its new format to much
acclaim at the end of June 2018, boosting sales early into the 2019 financial year.
No new company-operated stores were opened in the New Zealand market during the 2018 financial year, however sales were assisted by a
full year’s trading of the Queenstown store which opened in October 2016. There were sales and market share growth in all key categories,
amid an increasingly competitive market. Continued strong supplier collaborations to promote exclusive, high-end product lines and
competitive pricing strategies, has given the company-operated stores in New Zealand a noteworthy competitive edge. Translated into
Australian dollars, sales revenue increased 2.4%, or $20.99 million, to $909.52 million.
The business has continued to focus on cost control to achieve optimal operating leverage, coupled with an unwavering desire to
outperform previous performance and surpass the market in general to maintain the clear market leader position. Despite the challenges
faced during the 2018 financial year, the retail result in New Zealand increased by $2.88 million, or 3.6%, to $82.31 million for the year ended
30 June 2018, up from $79.43 million in the 2017 financial year.
Aggregated sales revenue for the Harvey Norman® and Space Furniture® brands combined was just under the $0.500 BILLION mark with
retail sales of $S497.92 million in local currency, up by 14.0%, or $S61.23 million, from $S436.69 million in the 2017 financial year.
In Singapore, the 13 Harvey Norman® branded stores increased sales revenue in local currency by $S55.78 million, or 20.3%, to $S330.28
million for the 2018 financial year, from $S274.50 million in the previous year. Growth in sales revenue was assisted by the opening of the
new Viva City Factory Outlet in July 2017 and the expansion of the existing stores located at Parkway Parade (in August 2017) and North
Point City (in December 2017) to incorporate full-concept stores during the current year. The unrivalled strength of the Millenia Walk Flagship
store continued to underpin sales during the year, bolstering the appeal of the Harvey Norman® brand in Singapore.
Sales revenue from the 16 Harvey Norman® branded stores in Malaysia were strong, especially during the last 6 months of the 2018 financial
year following the launch of the Ikano, Kuala Lumpur Flagship store in November 2017. The successful Flagship launch drove the
commendable rise in sales revenue in local currency by $S14.44 million, or 10.5%, to $S152.33 million for the 2018 financial year, from
$S137.89 million in the previous year. This was a significant improvement to the Malaysian sales performance reported in the December 2017
half where retail sales had remained consistent with the previous corresponding half.
The November 2017 Ikano launch was well-received and pleasingly, overall, the relocation and reformat of the site has delivered strong sales
despite a temporary closure during the renovation period which had covered a large part of the first half of 2018. The solid performance of
Ikano, coupled with the reinvigorated Harvey Norman® brand in Malaysia, had a positive halo-effect on the other existing stores in Kuala
Lumpur. Sales were also assisted by a full year’s trading of the Sunway Velocity store which had opened in the previous year. The
consolidated entity has earmarked Malaysia to be the main region for growth over the next 2 years. The consolidated entity expects to
continue its investment in Malaysia with an expected expansion of the Harvey Norman® company-store network in Malaysia by an additional
9 sites by the end of 2020.
Sales revenue for the Space Furniture® brand in Singapore was lower by $S7.78 million in the 2018 financial year due to a significant
reduction in project sales following the sharp slowdown in construction within the prestige property market. Softer consumer sentiment in
the high-end retail furniture market had also impacted the Space Furniture® retail sales in Singapore. Sales were lower for the Space
Furniture brand in Malaysia by $S1.20 million due to a reduction in project sales. Sales were boosted in the previous financial year by the
renovation sale as the Space Furniture® store in Malaysia was reconfigured and refurbished.
The segment profit result of the two brands in Asia was $25.01 million for the year-ended 30 June 2018 compared to a segment result of
$19.30 million in the previous year, an increase of $5.71 million, or 29.6%. This is an excellent result in a highly competitive market.
Sales revenue from the 5 company-operated stores in Slovenia increased €10.23 million, or 18.2%, to €66.56 million for the 2018 financial
year, up from €56.33 million in the previous year. Translated into Australian dollars, sales revenue increased $20.99 million, or 25.8%, to
$102.40 million.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
19
DIRECTORS’ REPORT (CONTINUED)
OPERATING AND FINANCIAL REVIEW (continued)
Company-Operated Retail Segment (continued)
The Flagship store at BTC City, Ljubljana was redeveloped, renovated and was launched in June 2017. The Ljubljana Flagship store provides
an unparalleled, all-encompassing and interactive shopping experience in Slovenia and the greater Central European region. The
repositioning of the Harvey Norman® brand in Slovenia has had the positive impact of driving sales growth in all stores across all key product
categories, boasting growth rates well in excess of 20%.
The retail result in Slovenia was a profit of $6.65 million for the year ended 30 June 2018, an increase of $2.19 million, or 49.1%, from $4.46
million profit in the previous year.
Sales revenue for the Zagreb, Croatia store increased €1.98 million, or 10.8%, to €20.38 million for the 2018 financial year, from €18.40 million
in the previous year. Translated into Australian dollars, sales revenue increased 17.9%, or $4.77 million, to $31.35 million.
The renovation of the Zagreb Flagship store is predominantly complete and is due to be relaunched by September 2018.
Croatia had reported its first full-year profit in June 2017. This profitable trend has continued with a profit of $0.75 million for the year ended
30 June 2018. We expect this trend to continue after the relaunch of the reinvigorated Zagreb Flagship store next month.
Ireland:
In Ireland, sales revenue from the 13 company-operated stores increased €21.81 million, or 12.8%, to €192.30 million for the 2018 financial
year, up from €170.49 million in the 2017 year. Comparable store sales growth were also good, increasing by €7.11 million or 4.2% during the
year. Translated into Australian dollars, sales revenue increased by $49.43 million, or 20.1%, to $295.84 million from $246.41 million in the
previous year, partly due to a 6.45% appreciation in the Euro relative to the Australian dollar during the year. Retail sales increased across all
key product categories.
The 61,000 sq feet Flagship store situated in the Airton Retail Park in Tallaght was launched in July 2017. This Flagship store has reinforced,
and significantly enhanced, the Harvey Norman® brand in Ireland and has set a new retailing benchmark in the region. With many global
brands having their European headquarters in London, the Tallaght Flagship store serves also as a regional showcase of global capability,
raising the bar in terms of the latest shop-fitout, interior design concepts and experiential and value-added retail. The success of the
Tallaght Flagship, which is also the first freehold land purchase in the Republic of Ireland, has led to positive flow-on effects to the existing
store base with each of the stores in Ireland growing sales during the year.
The retail trading environment in Ireland has continued to improve with key indicators in the Irish economy demonstrating that the economy
is performing well. Irish consumer confidence has increased along with improved employment rates and net inward migration. Construction
activity has picked-up and house completions have increased, however, while the outlook is positive, there are potential headwinds in terms
of the continuing uncertainty around Brexit.
The retail segment result in Ireland generated a profit of $1.98 million for the 2018 financial year, an improvement of $2.12 million from a loss
of $0.14 million in the previous year. This result includes an adjustment of $1.03 million to realign the accounting treatment of lease
incentives in Ireland recognised in the current year.
Northern Ireland:
Sales revenue from the two company operated stores in Northern Ireland contracted by £0.25 million, or -2.5%, to £10.07 million for the 2018
financial year, from £10.33 million in the previous year. Translated into Australian dollars, sales increased marginally by $0.13 million, or 0.7%,
to $17.48 million mainly due to a 3.28% appreciation in the British Pound Sterling relative to the Australian dollar during the year.
The Flagship store on the iconic Boucher Road in South Belfast has been trading for nearly 3 years and continues to report strong sales each
period. The impact of the stronger brand positioning following the launch of the Flagship store can be seen in the robust performance of the
second Belfast store at Holywood, with sales growth of 15.3% relative to prior year, supported by the refurbishment and upgrade of the site
12 months ago.
The 2 company-operated stores in Northern Ireland incurred a trading loss of $0.57 million for the current year, a solid turnaround from the
trading loss incurred in the previous year of $2.35 million. This reduced trading loss incorporates an adjustment to release the remaining
lease incentive received in respect of the previous Holywood retail store lease of $1.08 million.
20
DIRECTORS’ REPORT (CONTINUED)
OPERATING AND FINANCIAL REVIEW (continued)
Company-Operated Retail Segment (continued)
Other Non-Franchised Retail
The non-franchised retail segment consists primarily of retail and wholesale trading operations in Australia which are wholly-owned,
controlled or jointly-controlled by the consolidated entity and does not include the operations of any Harvey Norman®, Domayne® and Joyce
Mayne® franchisee.
Total revenue for the other non-franchised retail segment was $159.82 million for the year ended 30 June 2018, a marginal reduction of
$0.24 million, or 0.1%, from segment revenue of $160.06 million generated in the previous year.
The result for the non-franchised retail segment was a loss of $11.17 million for the 2018 financial year, compared with a loss of $10.02 million
for the previous year. The segment loss for the current year included an impairment loss of $16.92 million to write-down the commercial
loans made to a retail joint venture in Australia compared to a write-down of $18.41 million in the previous year.
Other Segment
The Other segment is primarily comprised of credit facilities provided to related and unrelated parties, other unallocated income and expense
items and the equity-accounted joint venture investment in Coomboona Holdings Pty Limited (CHPL).
The Other segment recorded a loss of $51.78 million for the year ended 30 June 2018 compared to a loss of $9.12 million for the year ended
30 June 2017, a deterioration in the losses incurred by $42.66 million.
HNM Galaxy Pty Limited, acting in its capacity as trustee of the HNM Galaxy Unit Trust (HN JV Entity), holds 49.9% of the issued shares in
CHPL. Eternal Sound Limited, acting in its capacity as trustee for the AAA Settlement Trust (Eternal Sound JV Entity), holds 50.1% of the
issued shares in CHPL. CHPL holds all of the issued shares in companies which carry on the business of dairy farm operations, land
ownership and a pedigree breeding and genetics division in Northern Victoria (the Coomboona JV). The 49.9% interest of the consolidated
entity in the Coomboona JV is equity-accounted.
The Coomboona JV commenced trading in September 2015 and the equity-accounted trading losses were $4.57 million for the year ended
30 June 2018 compared to equity-accounted trading losses of $5.95 million for the prior year.
In February 2018, a dispute arose between the HN JV Entity and the Eternal Sound JV Entity in relation to a number of matters, including the
future direction of the Coomboona JV. On 27 February 2018, the HN JV Entity demanded that the Coomboona JV repay outstanding
indebtedness due by the Coomboona JV to the HN JV Entity in the sum of $18.51 million. The poor trading performance of the Coomboona
JV, the notice provided by the HN JV Entity to the Coomboona JV to demand repayment of the outstanding indebtedness due to the HN JV
Entity of $18.51 million, in addition to the dispute between the HN JV Entity and the Eternal Sound JV Entity regarding the future direction of
the Coomboona JV, were indicators of impairment during the December 2017 review period. The impairment assessment performed in
respect of the investment in the Coomboona JV as at 31 December 2017 concluded that the entire investment balance of $20.67 million was
impaired and should be written-down. This resulted in the recognition of an impairment loss of $20.67 million to write-down the Coomboona
JV equity-accounted investment to nil as at 31 December 2017.
On 23 March 2018 the directors of CHPL appointed Ferrier Hodgson as administrators of CHPL and subsidiaries of CHPL (Administrators). On
the same day, National Australia Bank Limited (NAB), the first-ranking creditor to CHPL, appointed McGrath Nicol as receivers and managers
of CHPL and subsidiaries of CHPL (Receivers). As at 9 May 2018, CHPL and subsidiaries of CHPL were indebted to NAB in an amount of
approximately $36 million (NAB Debt). The NAB Debt was secured by first ranking mortgages and securities granted by CHPL and
subsidiaries of CHPL to NAB (NAB Securities). On 9 May 2018 (Assignment Date), NAB assigned the NAB Debt and NAB Securities to Network
Consumer Finance Pty Limited (NCF), a wholly-owned subsidiary of Harvey Norman Holdings Limited, for a price of $36.06 million, with the
consent of the Administrators.
The total indebtedness of CHPL to its creditors NCF and the HN JV Entity, both wholly-owned subsidiaries of Harvey Norman Holdings
Limited, as at 30 June 2018 amounted to $74.99 million as follows:
first-ranking secured creditor (NAB): the total value of commercial loans granted to the Coomboona JV by NCF of $36.28 million; and
second-ranking secured creditor (HN JV Entity): the total value of commercial loans granted to the Coomboona JV by the HN JV
Entity of $38.71 million, repayable on demand.
The recoverable amount of the indebtedness of CHPL to NCF and the HN JV Entity, totalling $74.99 million in aggregate, was assessed as at
30 June 2018. An impairment loss of $28.78 million was recognised in June 2018 to reduce the carrying amount of the Coomboona JV non-
trade receivables to its recoverable amount. Each of the key assumptions in the impairment assessment is subject to judgement regarding
the estimated shortfall in the repayment of the loans advanced by NCF and the HN JV Entity to CHPL.
Combined, the Coomboona JV equity-accounted trading losses of $4.57 million, the impairment of the Coomboona JV investment in
December 2017 of $20.67 million and the estimated impairment loss for the shortfall in the recoverability of funds advanced by NCF and the
HN JV Entity of $28.78 million, totalled $54.01 million and was recognised as losses in the income statement for the 2018 financial year.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
21
DIRECTORS’ REPORT (continued)
OPERATING AND FINANCIAL REVIEW (continued)
THE FRANCHISING OPERATIONS
SEGMENT IN AUSTRALIA
Auburn, Sydney
(Australia Flagship complex)
Harvey Norman Holdings Limited (HNHL) and subsidiaries
of HNHL own valuable intellectual property rights, including the trade
marks Harvey Norman®, Domayne® and Joyce Mayne®, software and
other confidential information to promote and enhance the brands.
A subsidiary of HNHL (a franchisor) grants separate franchises to
independent franchisees to use the Harvey Norman®, Domayne®
or Joyce Mayne® trade marks in Australia and to conduct the retail
business of the franchisee at or from a store within a particular
branded complex, pursuant to the terms of a franchise agreement.
195 Franchised complexes in Australia trading
under the Harvey Norman®, Domayne® and
Joyce Mayne® brand names.
Each franchisee owns and controls the franchisee business of
that franchisee. Each franchisee has control over the day-to-day
operations of the franchisee business and has the discretion and
power to make the decisions necessary to drive sales, control floor
margins and contain operating costs to maximise profitability of the
franchisee business.
Each franchisee pays franchise fees to a franchisor pursuant to a
franchise agreement between that franchisee and that franchisor.
The franchising operations segment in Australia captures and
records the franchisee fees received from franchisees including
gross franchise fees, rent and outgoings for the use of a branded
complex and interest on the financial accommodation facility that is
made available to each franchisee.
540 Number of franchisees who are responsible
for the day-to-day management and control
of their respective franchisee businesses
The franchising operations segment also includes the costs of
operating the franchised system and monitoring and evaluating
the performance and compliance of franchisees with their
franchise agreements.
22
HN
18
DM
1
HN
2
HN
37
DM
3
JM
4
HN
10
DM
1
HN
57
DM
12
JM
2
HN
38
DM
2
HN
6
ACT
HN
1
DM
1
169 FRANCHISED
COMPLEXES
20 FRANCHISED
COMPLEXES
6 FRANCHISED
COMPLEXES
DIRECTORS’ REPORT (CONTINUED)
OPERATING AND FINANCIAL REVIEW (continued)
Franchising Operations Segment
The Franchising Operations Margin (%)
The franchising operations segment result decreased by $21.99 million, or 7.2%, to $282.54 million in the 2018 financial year from $304.53
million in the previous year. This was a solid result particularly as it was on the back of a strong 13.6% growth in the 2017 financial year and
the massive 34% increase in the 2016 financial year. The result generated by the franchising operations segment represented 53% of the
total consolidated profit before tax result for the 2018 financial year.
Revenue in this segment reduced by $7.64 million, or 0.8%, to $932.67 million primarily due to a decrease in franchise fee income of 1.8%, or
$14.41 million, to $768.45 million in the 2018 financial year from $782.86 million in the previous year. Tactical support payments to protect,
enhance and promote the brand increased by $10.50 million, or 16.3%, to $74.98 million for the year ended 30 June 2018, up from $64.48
million in the previous year. Higher tactical support payments were required during the year to assist franchisees to better compete in their
respective markets. This increase was inclusive of $7.80 million in tactical support payments to assist a B2B franchisee with a restructure in
Q4 of the 2018 financial year. Excluding the restructure of the B2B franchisee, tactical support would have been $67.17 million, a minimal
increase of $2.70 million or 4.2% from the previous year. Other costs to operate the franchising operations segment, including interest and
depreciation costs, have also increased during the year contributing to the reduction in the profitability of the franchising operations
segment for the 2018 financial year.
The franchising operations margin reduced from 5.42% in the 2017 financial year to 4.90% in the 2018 financial year, a reduction of 52 basis
points. If the tactical support payments relating to the B2B franchisee were excluded from the calculation, the franchising operations margin
would have been 5.04% for the year ended 30 June 2018.
As the below table demonstrates, this reduction was predominantly in the last 6 months of the 2018 financial year. For the December 2017
half, the franchising operations segment result decreased by $4.91 million, or 2.9%, from the December 2016 half. The franchising operations
margin was 5.57% for the December 2017 half, compared to 6.01% for the December 2016 half, a reduction of 44 basis points. The
franchising operations segment result reduced further in the second half of the year, with a reduction of $17.08 million, or 12.9%, in the June
2018 half relative to the June 2017 half. This resulted in a franchising operations margin of 4.18% for June 2018 half, compared to 4.81% for
the June 2017 half, a reduction of 63 basis points.
The deterioration in the second half result and margin can primarily be attributed to:
a reduction in franchise fees by $15.83 million, or 4.4%, for the 2nd half of the year (1st half was actually higher by $1.42 million); and
an increase in tactical support by $7.67 million, or 21.5%, for the 2nd half of the year, mainly relating to the tactical support provided to
the B2B franchisee in Q4 (tactical support for the 1st half was up by $2.83 million).
FRANCHISING OPERATIONS SEGMENT
ANALYSIS BY HALF YEAR
Half Year Ended 31 December
Half Year Ended 30 June
Full Year Ended 30 June
2015
2016
2017
2016
2017
2018
2016
2017
2018
# Franchised complexes in Australia
191
193
195
192
194
195
192
194
195
Franchising operations segment result
$150.42m $172.13m $167.21m
$117.73m $132.41m $115.33m
$268.15m $304.53m $282.54m
Franchisee aggregated sales revenue
$2.72bn $2.86bn $3.00bn
$2.61bn
$2.75bn
$2.76bn
$5.33bn $5.62bn
$5.76bn
Franchising Operations Margin (%)
5.53%
6.01%
5.57%
4.51%
4.81%
4.18%
5.03%
5.42%
4.90%
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
23
DIRECTORS’ REPORT (CONTINUED)
OPERATING AND FINANCIAL REVIEW (continued)
Franchising Operations Segment (continued)
Franchisee Sales Revenue Underpins the Franchising
Operations Segment
Headline Australian franchisee aggregated sales revenue increased 2.6%, or $144.28 million, to $5.76 billion for the year ended 30 June 2018
from $5.62 billion in the prior year. Comparable Australian franchisee aggregated sales revenue increased 2.2% to $5.72 billion for FY18.
Sales made by franchisees in Australia do not form part of the financial results of the consolidated entity. Retail sales in Harvey Norman®,
Domayne® and Joyce Mayne® in Australia are made by independently owned franchisee businesses that are not consolidated with the
consolidated entity’s results. Australian franchisee aggregated sales revenue is reported to the market as it is a key indicator of the
performance of the franchising operations segment.
performance of the franchising operations segment.
Key Property Statistics and the Impact of the Housing Market on Retail Spending
Spending on household goods is fundamentally driven by population growth, household income, consumer confidence and activity in the
residential property market.
Population growth presently remains robust with the Australian resident population increasing by 400,000 in the 12 months to 30 June 2018
(Australian Bureau of Statistics, cat 3101.0) and the Australian population reached 25 million people in August 2018.
Looking ahead, national population growth is expected to remain solid, with the Australian resident population projected to reach 26.5 million
by the end of FY22 (BIS Economics forecast). Victoria and NSW will account for the majority of the increase. With the transition from the end
of the mining investment boom coming to an end, other states should also see a recovery in resident inflows as economic conditions
improve.
Over 400,000 new jobs were added between December 2016 and December 2017, the most in 12 years (Commsec Chief Economist Craig
James, AFR, 25-28 Jan 2018). The majority of these (just over 300,000) were full time positions, a reversal of the trend in recent years. This
shift has helped absorb some of the spare capacity in the labour market, with the unemployment rate falling to 5.4% at 30 June 2018 from
5.8% in the first calendar quarter of 2017 (Australian Bureau of Statistics cat 6202.0) and underemployment rate dropping back to 8.3% at
May 2018 from a high of 8.9% in February 2017 (Australian Bureau of Statistics cat 6202.0). Furthermore the participation rate at 65.5% is at
the highest level since 2011 (ANZ research paper titled ‘Quick Reaction Australia – another strong jobs report’ 14 December 2017).
Moving forward, the volume of renovation activity is forecast to grow by 3.2% in 2019, 5.7% in 2020, and then a further 0.9% in 2021 taking
the total value of the renovations market to $35.57 billion (Housing Industry association Renovations Roundup Dec 2017). Although
conditions remain somewhat challenging for households with household income rising by only 1.9% in 2017 and house prices now declining
in the major capital cities, consumers remain optimistic about the outlook, with the ANZ-Roy Morgan confidence index recording a net
positive outlook (as at 30 June 2018) for the next twelve months.
24
DIRECTORS’ REPORT (continued)
OPERATING AND FINANCIAL REVIEW (continued)
HARVEY NORMAN®
THE CONNECTED SMART HOME
The Connected Smart Home category continues to grow, with Harvey
entertainment experience has also encouraged growth in
Norman®, Domayne® and Joyce Mayne® franchisees leading the way
franchisees’ audio sales, with minimalistic wireless speakers in high
with the latest technological innovations including advancements
demand and providing great value to their customers.
in smart technology and design, inventive ways of cooking the
traditional family meal, TVs with cinematic sound and picture quality
– culminating in the evolution of the Connected Smart Home. Voice
activation has been a key feature of the Connected Smart Home
this year. The launches of ‘Google Home’ and ‘Google Mini’ have
brought the Smart Home category to the fore as these devices
begin to demonstrate how the Connected Smart Home can work,
fuelling growth in the connected categories of security, automation
and entertainment. Voice assisted devices are expected to take the
Smart Home to the next level and will aspire to seamlessly integrate
a consumer’s connected life to their place of abode.
Franchisees’ audio-visual category has seen strong growth
over the past year, with the latest designs and advancements in
picture technology in large-screen televisions making a significant
contribution. With more and more consumers desiring ‘king-sized’
screens and undeniably sharper picture quality, the impending
launch of the 4K Satellite broadcast is the next evolution of
television, and is expected to deliver unprecedented resolution,
colour depth and contrast and higher refresh rates than ever
before. Harvey Norman® franchisees will be heavily involved
in the launch of the 4K broadcast in Australia and franchisees
have cleverly positioned themselves as the premium 4K UHD TV
destination. Franchisees intend to showcase the 4K broadcast
capabilities in-store to give their customers the ultimate immersive
viewing experience. The demand for a cinematic-quality home
The latest innovations in smart technology have generated growth in
the Home Appliance category, with flexible and internet-connected
refrigeration leading the way. The increase in demand for self-
cleaning appliances and desire for a healthier lifestyle has propelled
their cooking range throughout the year, while franchisees continue
to have a leading market share in fully-automatic coffee machines.
Harvey Norman® franchisees bucked the trend in the flat laptop
market, where franchisees led the way and demonstrated solid
growth in the laptop category on the back of the recent push towards
Modern PCs. The strong demand for online gaming and the rapid
rise of ‘E-Sports’ continues to fuel the awareness of gaming and the
growth in sales of gaming PCs, accessories and content throughout
2018. The Smartphone category continued to grow strongly and
there was significant growth in portable audio with advances in
Bluetooth speakers and headphones.
Franchisees continue to maintain solid partnerships with leading
global designer brands and expect this growth to continue
throughout the 2019 financial year. As their consumers continue to
live a more mobile and active life, franchisees strive to ensure that
their product offering meets this insatiable demand. The need to be
‘thinner, lighter, faster’ continues with customers’ upgrading to keep
up with the latest trends.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
25
DIRECTORS’ REPORT (continued)
OPERATING AND FINANCIAL REVIEW (continued)
A BETTER CUSTOMER EXPERIENCE
O2O STRATEGY
The Online-to-Offline (O2O) Strategy of Harvey Norman®, Domayne®
and Joyce Mayne® franchisees continues to develop and enhance
the service offering to their customers. The O2O Strategy is well
positioned to mitigate any potential disruptions and has been further
enhanced over the 2018 financial year. Franchisees are committed
to delivering a seamless experience to their customers with the
introduction, upgrade or enhancement of the following initiatives:
• LivePerson – LivePerson is a digital service platform that gives
customers the ability to communicate with Harvey Norman® under
whichever channel they desire, whether that be email, SMS, Apple
Business Chat, WhatsApp, Facebook Messenger or Livechat. This
platform also facilitates after hours and augmented customer
support during peak trading periods to respond to commonly asked
questions and queries using AI conversational bots. LivePerson
brings together the AI and automations necessary to provide a great
customer experience across multiple touch points at scale, along
with services such as order status updates and reservation changes.
These services allow customers of Harvey Norman® franchisees to
message in the same “time-shifted” way they message friends and
family, moving in and out of conversations to multi-task or go on
about their day. Push notifications and history allow the consumer to
continue on their own time.
• Near Real-Time Inventory – Providing customers with accurate and
up-to-date stock information confirming their local franchisee has
the product they are interested in purchasing.
• Quick Reserve – Allowing customers to quickly reserve a product
and know that product will be available when they arrive at their
franchised complex.
• 2-Hour Click and Collect – At the heart of the Harvey Norman O2O
strategy, Click & Collect is a convenient and popular way to shop with
over 80% of customer’s orders notified in under 2 hours.
• Improved Expert Reviews – Franchisees have access to reports
that provide unbiased editorial content and ratings on products,
specifications, and user reviews to aid the customer in their selection
process.
• Improved Site Search – The Harvey Norman® online self-learning
search algorithm provides customers with the most relevant and
suitable product to assist the search process.
• Furniture Collections – Enhancing the Harvey Norman® online
Furniture pages to include collections to provide customers an
enhanced online experience.
Supporting the O2O strategy, several Customer Service initiatives were
also introduced, upgraded or enhanced during the 2018 financial year
including the following:
• Harvey Norman® Voice continues to grow and resonates strongly
with customers. This digital platform was created to provide
enhanced one-on-one engagement with a cross-section of Harvey
Norman® customers to obtain feedback prior to changing processes
or investing in system enhancements. Listening to customers is
central to the Customer First mindset.
• Mobile First – As one of the first retailers in Australia to launch PWA
(Progressive Web App) Harvey Norman® franchisees are utilising
this cutting-edge technology to optimise the customer experience
on mobile to engage and inspire customers and drive franchisee
sales growth.
• Store Location Management System - Provides a single source
of truth across all information services for franchised complexes
including location information, contact details, trading hours, and
local events, allowing customers to easily obtain information about
their nearest Harvey Norman® franchised complex.
DELIVERY SERVICES AND FULFILMENT
OPTIONS OF FRANCHISEES
The delivery services and fulfilment options of franchisees are
constantly evolving to provide a better and more seamless customer
experience, right from simply booking a delivery at the time of
purchase, to the installation of their product and the removal of any
packaging – and everything in between. Taking advantage of the
latest innovations in smart technology, franchisees are focused on the
improvement of Last Mile delivery, specifically to provide products to
customers, where, how and when they want the product.
The delivery service offering has been enhanced over the 2018
financial year to offer a seamless experience to the customer with the
introduction, upgrade and enhancement of the following initiatives:
• Same Day and Scheduled Delivery – Enabling customers to
order same day or scheduled delivery from franchised complexes
located within all metropolitan areas as part of the Harvey
Norman® O2O strategy.
• Standard Delivery Offering – Enabling customers to choose the
delivery service that best suits their needs. Whether customers prefer
a quick ‘Store to Door’ drop-off, a ‘Delivery Plus’ for basic connection
or a full ‘Premium Delivery’ service.
• Bulky Good Deliveries – Franchisees are enhancing the way they
communicate after purchase: creating digital delivery booking
systems with timely notifications and real-time tracking of deliveries
to the customer’s door. It’s all about getting the delivery experience
right for each customer and giving them control over their delivery.
• Home Installation – The development of an online platform to
enhance the customer experience by recommending and connecting
franchise customers with quality installation companies.
• Branded Trucks – Customers will not only enjoy transparency of
the delivery process but will also experience an enhanced service
offering with clean branded trucks and uniformed drivers.
• Pick Up from Warehouse – Customers can choose to pick up
bulky goods from the warehouse immediately after the purchase.
Customer pick-up areas at the warehouse are undergoing a major
refit to accommodate the increase in customer demand. Courier and
bike parking bays have been allocated to facilitate quicker pickup and
delivery of goods to customers.
26
DIRECTORS’ REPORT (CONTINUED)
OPERATING AND FINANCIAL REVIEW (continued)
Review of the Property Segment
Composition of the Property Portfolio
The robust property portfolio was valued at $2.86 billion as of 30 June 2018 and still continues to be the consolidated entity’s driving point of
difference and competitive advantage in the Australian market. With emerging or restructured competitors – both big or small, online or
physical – the resilient investment property portfolio keeps us a step-ahead and ready to respond to the evolving and dynamic needs of
consumers. The physical complexes provide the flexible, large footprint needed to showcase the best on offer from global brands and
demonstrate the maximum capabilities of those products to integrate and connect our busy day-to-day lives.
As at 30 June 2018, total property assets amounted to over 62% of the consolidated entity’s total asset base of $4.58 billion. Growth in the
property portfolio was mainly due to the continued solid market conditions in the large-format retail sector delivering capital appreciation
during the year, the concerted focus on completing the Flagship strategy of the consolidated entity and the acquisition and refurbishment of
other investment properties in Australia. The following tables represent the composition of property segment assets at each balance date
and the number of owned and leased retail use properties as at 30 June 2018.
TOTAL PROPERTY SEGMENT ASSETS AS AT 30 JUNE
Investment properties
Owner-occupied land & buildings in New Zealand, Singapore, Slovenia,
Ireland & Australia
2016
2
$2.046bn
2017
2018
$2.242bn
$2.429bn
$389.80m
$413.85m
$432.46m
Joint venture assets
TOTAL PROPERTY SEGMENT ASSETS
OWNED & LEASED RETAIL USE
PROPERTIES AS AT 30 JUNE 2018
# of owned retail
use properties
# of leased retail
use properties
$2.05m
$2.66bn
$2.54m
$2.86bn
$2.54m
$2.44bn
Total
195
39
5
1
13
2
13
16
95
18
5
-
1
-
-
-
100
21
-
1
12
2
13
16
119
165
284
Australia: Franchised complexes
New Zealand
Slovenia
Croatia
Ireland
Northern Ireland
Singapore
Malaysia
TOTAL
Net Property Revaluation Adjustments
The investment property portfolio in Australia and properties held in joint venture entities are subject to a semi-annual review to fair market
value. At each reporting period, one-sixth of the investment property portfolio is independently valued with the remaining five-sixths
reviewed for fair value by Directors. The entire portfolio is independently valued every three years.
During the year ended 30 June 2018, thirty-seven (37) sites within the investment property portfolio in Australia were independently valued,
representing 28.5% of the total number of sites and 22.6% of the fair value of the investment property portfolio in Australia. The balance of
the portfolio was reviewed for comparability resulting in the preparation of internal valuations for twenty-one (21) additional sites. The
valuation for the current year resulted in a net increase of $51.65 million relating to investment properties in Australia compared to a net
increase of $107.38 million in the previous year. The prior year figure had included the impact of rezoning potential to medium-density
residential for a property in NSW.
NET PROPERTY REVALUATION ADJUSTMENTS
AS AT 30 JUNE
RECORDED IN THE INCOME STATEMENT
(Net Property Revaluation Increment)
RECORDED IN EQUITY
(Asset Revaluation Reserve)
($ million)
AUSTRALIA
NEW ZEALAND
SLOVENIA
SINGAPORE
IRELAND
TOTAL
2016
2017
2018
2016
2017
2018
$47.79m
$107.38m
$51.65m
-
$1.12m
-
$0.57m
-
-
-
-
$0.67m
-
-
-
-
-
-
$7.61m
$16.03m
$9.72m
$0.04m
$2.96m
$0.08m
$1.31m
-
-
-
$0.66m
$2.76m
$48.36m
$108.05m
$51.65m
$8.96m
$20.11m
$13.22m
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
27
DIRECTORS’ REPORT (CONTINUED)
OPERATING AND FINANCIAL REVIEW (continued)
Review of the Financial Position of the Consolidated Entity
The consolidated entity has tangible property assets of $2.86 billion, representing 63% of the total asset base of $4.58 billion.
Total assets increased by 9.3%, or $387.90 million, to $4.58 billion as at 30 June 2018, from $4.19 billion in the previous year. The value of
the investment property portfolio increased by $187.64 million, or 8.4%, to $2.43 billion as at 30 June 2018 primarily due to the net property
revaluation increment of $51.65 million during the current year and the acquisition of other investment property assets during the current
year.
Cash and cash equivalents increased by $90.32 million relative to the previous year. Property plant and equipment assets increased by
$35.23 million, or 5.6%, to $660.34 million due to the development of the Flagship store at Tallaght, Dublin, capital appreciation in the
freehold properties located offshore and the refurbishment and upgrades of the company-operated Flagship stores and Flagship complex
during the year to finalise the consolidated entity’s Flagship strategy.
Total liabilities increased by $262.87 million, or 19.1%, to $1.64 billion as at 30 June 2018 from $1.38 billion in the prior year mainly due to
higher utilisation of the Syndicated Facility and other external borrowings to fund development and expansion during the year.
The consolidated entity consistently reports a solid net asset base, with robust growth of 4.4% during the year, or an increase of $125.03
million, to $2.94 billion as at 30 June 2018 from $2.81 billion as at 30 June 2017.
28
DIRECTORS’ REPORT (CONTINUED)
OPERATING AND FINANCIAL REVIEW (continued)
Net Debt to Equity Ratio
The overall debt levels of the consolidated entity remain within an acceptable range, with a low net debt to equity ratio of 25.50% as at 30
June 2018 compared to a ratio of 22.59% as at 30 June 2017. Net debt comprises total interest-bearing loans and borrowings, net of cash
and cash equivalents.
Solid Cash Flows and Operating Cash Conversion Ratio
Pleasingly, cash and cash equivalents increased by $90.32 million relative to prior year, with substantial growth in net cash flows from
operating activities by $29.03 million, or 6.8%, to $454.17 million for the year ended 30 June 2018. This was primarily achieved by an
increase in net receipts from franchisees by $64.58 million, or 7.3%, to $947.06 million during the year. Net receipts from franchisees are
affected by the movement in the aggregate amount of financial accommodation provided to franchisees for the current year relative to the
movement in the prior year. During the 2018 financial year the movement in the aggregate amount of financial accommodation provided to
franchisees was lower than the movement in the aggregate amount of financial accommodation provided in the prior year. This reduction
was in line with a reduction in the inventory reserves held by franchisees during the 2018 financial year relative to the 2017 financial year.
There was a reduction in the net cash financing outflows by $219.02 million during the 2018 year primarily due to the proceeds received from
increased borrowings of the Syndicated Facility to fund the acquisition and refurbishment of investment properties and property, plant and
equipment assets. This was offset by higher investing cash flows by $104.72 million to fund expansion, growth and refurbishments and
upgrades of existing capital assets.
The consolidated entity’s operating cash conversion ratio, calculated as operating cash flows before net interest and tax paid as a proportion
of EBITDIA (excluding property revaluations), is strong with an operating cash conversion rate of 97.6% for the 2018 financial year, an
increase of 720 basis points on the cash conversion rate of 90.4% for the 2017 financial year.
Capital Management Policy
create long-term sustainable value for shareholders;
The objective of the consolidated entity’s capital management policy is to:
maintain optimal returns to shareholders and benefits to other stakeholders;
source the lowest cost of available capital; and
prevent the adverse outcomes that can result from short-term decision making.
The Capital Management Policy stipulates a net debt-to-equity target for the consolidated entity of less than 50%.
The capital structure of the consolidated entity consists of:
debt, which includes Interest-Bearing Loans and Borrowings disclosed in Notes 18 and 21 of this report;
Cash and cash equivalents disclosed in Note 28(a); and
Equity attributable to equity holders of the parent, comprising ordinary shares, reserves and retained profits as disclosed in Notes 24,
25 and 26 respectively.
The consolidated entity’s borrowings consist primarily of bank debt provided by a syndicate of ten banks (including each of the “Big 4”
Australian Banks). Concentration risk is minimised by staggering facility renewals and utilising a range of maturities of up to 3 years.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
29
DIRECTORS’ REPORT (CONTINUED)
OPERATING AND FINANCIAL REVIEW (continued)
Outlook
The Flagships that have been launched to date have outperformed expectations. In the first half of the 2019 financial year, we complete the
launch of 1 Flagship store in each of the 8 countries in which we, or our franchisees, operate. The Wairau Park Flagship store in New Zealand
was launched on 30 June 2018 and is already exceeding expectations. We were disappointed we couldn’t launch our Auburn Flagship
complex in Australia and our Zagreb Flagship store in Croatia for the start of the 2019 financial year. These will be completed and launched
by the end of September 2018 and, looking at the results of our other Flagship stores, we are confident they will deliver similar results. Each
of the Flagship stores is designed to provide an unrivalled customer experience in terms of store design, customer service and premium
product offering.
The consolidated entity is looking to capitalise on the solid performance of the overseas Harvey Norman® branded company-operated stores
and is actively exploring new sites with an expectation to open up to 18 company-operated stores within the next two years. Particular
emphasis has been placed on South East Asia with the expectation of opening 9 new stores in Malaysia over the next two years. In Australia,
1 Joyce Mayne® franchised complex in the Northern Territory will open in the 2019 financial year.
The consolidated entity will continue to invest in our people, our brands and in the development and enhancement of the tools provided to
our franchisees to enable them to seamlessly service their customers.
Summary of Key Business Risks
The Board is optimistic about the consolidated entity’s future trading performance but acknowledges that there are several factors that may
pose a risk to the achievement of the business strategies and future financial performance as outlined above.
Every business faces risks with the potential to impair its ability to execute its strategy or achieve its financial objectives. There are a number
of key risks, both specific to the Harvey Norman® integrated retail, franchise, property and digital system and external risks, for example the
macroeconomic environment, over which the consolidated entity has no control. The consolidated entity acknowledges the existence of
these risks, and in the first instance seeks to identify and understand individual risks, and then – to the extent possible – manage and/or
minimise risks.
Deterioration in macroeconomic conditions resulting in declining consumer sentiment:
The consolidated entity has a significant exposure to the economy of the countries in which it operates. There are a number of general
economic conditions, including interest and exchange rate movements, overall levels of demand, housing market dynamics, wage growth,
employment, economic and political instability and government fiscal, monetary and regulatory policies, that can impact the level of
consumer confidence and discretionary retail spending, thereby affecting revenue from sales to customers and franchise fees. The
consolidated entity seeks to reduce its exposure to these risks by closely monitoring both internal and external sources of information that
provide insights into any changes in demand within the economies in which it operates.
Competition resulting in a loss of market share for franchisees in Australia and company-
operated stores in overseas markets:
The integrated retail, franchise, property and digital system, and diverse category mix assists in maintaining the consolidated entity’s
competitive position. Market consolidation and/or acquisition may result in further competition and changes to market share. Franchisees in
Australia and company-operated stores in 7 overseas regions operate across a number of categories in the strongly performing Home and
Lifestyle market. Diversity mitigates the risk from existing and potential single-category competitors.
Emergence of competitors in new channels:
The Harvey Norman® Omni Channel Strategy provides customers of franchisees with a diverse, consistent and distinctive Harvey Norman®
customer experience through a range of channels. The Harvey Norman® Omni Channel Strategy integrates retail, online, mobile, and social
channels. The online operations of franchisees in Australia and the company-operated online operations overseas continue to grow. The
digital platform provides new opportunities for growth and new ways to embrace and engage with customers. Data analytics are an
important element of the Harvey Norman® Omni Channel Strategy, and are utilised to improve customer experience.
The Harvey Norman® Omni Channel Strategy sets the Harvey Norman® brand apart from other online and digital competitors as the digital,
physical complex and distribution channels are fully integrated, providing customers of franchisees with a multitude of engagement options
to meet their needs. The Harvey Norman® Omni Channel Strategy, supported by the retail property portfolio of the consolidated entity,
makes the Harvey Norman® brand a strong competitor in the market.
Economic downturn in the property sector leading to softening property asset values, falling
market rentals and reduction of future capital returns on property assets:
With a property portfolio of $2.86 billion, the consolidated entity is exposed to potential reductions in commercial property values. The
consolidated entity has a selective and prudent acquisition and development strategy and maintains high-quality complexes and a solid,
dynamic, complementary tenancy mix in order to maximise the profitability of the property segment.
30
DIRECTORS’ REPORT (CONTINUED)
OPERATING AND FINANCIAL REVIEW (continued)
Summary of Key Business Risks (continued)
Counterparty risks of service providers:
This risk relates to the inability of service providers to meet their obligations, including compliance obligations. The consolidated entity
closely monitors and evaluates the performance of external service providers to mitigate counterparty risk.
Counterparty risk associated with the mining camp accommodation joint ventures:
Commodity prices are inherently volatile. The provision of services to the mining industry is inherently risky. The consolidated entity has
continued its joint ventures with counterparties to provide mining camp accommodation services. The risk in respect of mining camp
accommodation joint ventures includes the ability of counterparties to meet financial and other obligations under mining camp
accommodation joint venture agreements.
The consolidated entity closely monitors and evaluates the performance of counterparties of the mining camp accommodation joint
ventures by monitoring compliance with joint venture agreements; adopting a prudent and conservative approach to the review of mining
camp accommodation cash flows, including future cash flow projections; and ensuring that an adequate level of security is maintained for
any funds advanced to mining camp accommodation joint ventures.
Counterparty risk associated with the KEH Partnership retail joint venture:
The consolidated entity is a party to a joint venture with counterparties to provide online and retail services. The risk in respect of this retail
joint venture includes the ability of counterparties to meet financial and other obligations under the retail joint venture agreement.
The consolidated entity closely monitors and evaluates the performance of counterparties of the retail joint venture by monitoring
compliance with the joint venture agreement; adopting a prudent and conservative approach to the review of online and retail cash flows,
including future cash flow projections; and ensuring that an adequate level of security is maintained for any funds advanced to the retail
joint venture.
Compliance by franchisees with franchise agreements:
The risk relates to franchisees acting in breach of the terms and conditions of their respective franchise agreements. The consequences of
non-compliance may include damage to the brand, fines or other sanctions from regulators, and/or a reduction in franchise fees received
from franchisees.
The franchisor continually monitors and evaluates the financial and operating performance of each franchisee to actively assess compliance
with executed franchise agreements. Instances of non-compliance are promptly addressed to protect the Harvey Norman® brand and/or
intellectual property of the franchisor.
Information Technology (“IT”) security and data security breaches:
This risk relates to the potential failure in IT security measures resulting in the loss, destruction or theft of customer, supplier, financial or
other commercially-sensitive information including intellectual property. This has the potential to adversely affect our operating results
which would lead to lawsuits, damage the reputation of the Harvey Norman® brand, and/or create other liabilities for the consolidated entity.
There are a number of key controls either planned or already in place, including an ongoing program of investment in cyber security
software; the implementation, maintenance and supervision of operational policies and contracts intended to preserve the confidentiality
and integrity of IT systems; regular independent audit and review of IT security; and the ongoing review, practise and updating of a response
plan relating to IT systems and incidents.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
31
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED)
Letter from the Chairman of the Remuneration Committee
Dear Shareholders
The consolidated entity has delivered a solid result for the 2018 financial year achieving an underlying profit before tax of $532.54 million,
representing a marginal reduction of 0.96%, from the unprecedented, record-breaking underlying result of the 2017 financial year of $537.70
million. The reported net profit before tax for the 2018 financial year of $530.17 million was at 83% of the previous year’s record net profit of
$639.81 million.
The consolidated entity delivered a strong increase of 4.4% in the net asset base for shareholders to $2.94 billion as at 30 June 2018. The
profit before tax (PBT) return on net assets was 18.05% for the 2018 financial year.
Each of the executive directors have a significant shareholding in the Company, which provides alignment of the executive management
with that of shareholders. The directors and other members of the key management personnel team are committed to growing the business
and creating long-term sustainable value for all stakeholders of the consolidated entity.
Remuneration Outcomes
The achievements of the year are reflected in the remuneration outcomes.
Executive directors achieved 81.26% of their 2018 Short Term Incentive (“STI”) targets for performance against a balanced scorecard
of measures.
Return on Net Assets (“RONA”) of 17.15% for the year resulted in a probable vesting of 40% for the long-term incentives granted in
December 2017, under the Tranche 3 of the 2016 LTI Plan.
Tranche 2 of the 2016 LTI Plan, granted in November 2016 was reassessed for probable vesting to 60%, down from 80% last year.
Tranche 1 of the 2016 LTI Plan, granted in November 2015 was reassessed for probable vesting, remaining unchanged at 60%.
The 2015 LTI Plan PCI, assessed in the 2017 financial year to be $3,455,800, was paid to Executive Directors on 4 July 2018.
The total at risk compensation expense was $782,864 or 17.3% less than the expense in the 2017 financial year.
The total “take-home” pay was $557,648 or 4.7% more than the 2017 financial year, due to the payout of incentives from previous
financial periods.
Changes to Remuneration
The Framework
The Board regularly reviews the executive remuneration structure to ensure it continues to drive shareholder value and to attract and retain
the talent needed to achieve its strategic objectives.
The framework for the executive remuneration structure remained essentially the same as was in place for the 2017 financial year comprised
as follows:
Benchmarked fixed remuneration;
At risk short term incentives in the form of performance cash incentives, subject to a balanced scorecard of measures relevant to the
given financial year;
At risk long term incentives in the form of performance rights as issued under the terms of the 2016 LTI Plan;
The use of RONA as the measure of financial performance captures the effect of all impairments and write-downs, apart from
property revaluation increments and decrements; and
The evaluation of the performance of the executive director cohort as a team.
In respect of the STI, entry at the base level of financial achievement was required before the non-financial performance conditions became
activated. This framework was introduced in 2016 to align the executive remuneration structure to best practice with the focus on long-term
sustainable returns.
2018 STI Plan
The Board adopted an STI Plan for Executive Directors relevant to the desired outcomes of the 2018 financial year. The STI Plan is subject to
both financial conditions (calculated exclusively in respect of RONA) as to a 50% weighting and non-financial conditions as to 50% weighting,
whereby minimum financial performance conditions (i.e. entry-level achievement) must be achieved prior to the activation of the non-
financial performance conditions.
With respect to the 2018 STI Plan, the minimum financial performance conditions (entry-level to the 2018 STI Plan) was set at 15% of RONA
and the maximum achievement level set at 18% of RONA. Graduated achievement points were set from 15% RONA to 18% RONA.
The Board is confident that the remuneration policies continue to support the financial and strategic goals of the consolidated entity. On
behalf of the Board, I invite you to review the full report and thank you for your continued interest.
Yours sincerely
K.W GUNDERSON-BRIGGS
Remuneration Committee Chairman
32
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
Contents of the 2018 Remuneration Report
This remuneration report for the year ended 30 June 2018 outlines the remuneration arrangements of the consolidated entity in accordance
with the requirements of the Corporations Act 2001 (Cth), as amended, (the “Act”) and its regulations. This information has been audited as
required by section 308(3C) of the Act.
The remuneration report is presented under the following sections:
Introduction
Executive contractual arrangements
1.
2. Remuneration principles and strategy
3. Remuneration governance
4. Remuneration mix - target
5. Details of short-term and long-term incentive plans
6. Performance and executive remuneration outcomes in FY18
7.
8. Non-executive director remuneration arrangements
9. Relationship between remuneration and the performance of the Company
10. Compensation of key management personnel
11. Additional disclosures relating to options, performance rights and shares
12.
13. Loans to key management personnel and their related parties
14. Other transactions and balances with key management personnel and their related parties
‘Take-Home Pay’ for key management personnel Directors of the Company
1. Introduction
The remuneration report details the remuneration arrangements for key management personnel (“KMP”) who are defined as those persons
having authority and responsibility for planning, directing and controlling the major activities of the consolidated entity, directly or indirectly,
including any director (whether executive or otherwise) of the consolidated entity.
Details of KMP of the Company and consolidated entity during the 2018 financial year are set out below. Unless otherwise indicated, the
individuals were KMP for the entire financial year. For the purposes of this report, the term "executive" includes the chief executive officer
(“CEO”), executive directors and senior executives of the consolidated entity.
Key Management Personnel
Position
Term as KMP
Executive Directors
Gerald Harvey
Executive Chairman
Full financial year
Kay Lesley Page
Executive Director & Chief Executive Officer
Full financial year
John Evyn Slack-Smith
Executive Director & Chief Operating Officer
Full financial year
David Matthew Ackery
Executive Director
Full financial year
Chris Mentis
Executive Director, Chief Financial Officer & Company Secretary
Full financial year
Non-Executive Directors
Christopher Herbert Brown OAM
Non-Executive Director
Michael John Harvey
Non-Executive Director
Kenneth William Gunderson-Briggs
Non-Executive Director (Independent)
Graham Charles Paton AM
Non-Executive Director (Independent)
Senior Executives
Martin Anderson
General Manager – Advertising
Thomas James Scott
General Manager – Property
Gordon Ian Dingwall
Chief Information Officer
Full financial year
Full financial year
Full financial year
Full financial year
Full financial year
Full financial year
Full financial year
Frank Robinson
General Manager – Technology & Entertainment
Commenced 1 August 2017
Haydon Ian Myers
General Manager – Home Appliances
Resigned 31 July 2017
Lachlan Roach
Rob Nelson
Ajay Calpakam
General Manager – Home Appliances
Commenced 1 October 2017
General Manager – Audio Visual
Resigned 31 July 2017
General Manager – Audio Visual
Commenced 1 August 2017
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
33
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
2. Remuneration Principles and Strategy
The executive remuneration strategy of the consolidated entity in 2018 is designed to attract, motivate and retain high performing
individuals and align the interests of executives with shareholders.
The relevant factors in determining the suitability of a board member, including the executive directors, are integrity, business savvy, an
owner-oriented attitude and a deep genuine interest in the business of the consolidated entity.
In applying these principles to the consolidated entity:
a) Business savvy requires a deep understanding of one or more of the sectors of retail, property, franchising and digital.
b)
Integrity requires a level of fundamental honesty, candour and frankness in dealing with colleagues, regulators and other third parties.
Integrity necessarily requires a director to bring an open mind and independent judgment to the discussion of any matter of concern to
the Board.
c) An owner orientation or perspective of an owner requires the individual to either have:
i.
ii.
"skin in the game" by holding, controlling or benefitting from a significant parcel of shares where the financial interests of
the director are aligned with the long term beneficial interest of shareholders; or
a perspective of advising owners of businesses and understanding that wealth generation is derived from the building of
business interests that create long term sustainable value.
Directors with an owner orientation retain an open mind to consider diverse views but are not strictly beholden to the whims of
fashionable thinking and are able to form their own views as to what constitutes best practice in corporate governance.
d)
Interest in and time to do the job means:
i.
ii.
the person has an executive role, meaning that the person's career is based on job performance at the company; or
the individual has a limited number of outside interests (i.e. the person is not a professional non-executive director),
In both cases, the individual has an independence of mind and outlook.
Applying these criteria to the current Board, the Board is satisfied that each director, including the executive directors, bring to the Board the
necessary skills and attributes specified.
The following table illustrates how the remuneration strategy of the consolidated entity in 2018 aligns with the strategic direction and links
remuneration outcomes to performance.
34
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
2. Remuneration Principles and Strategy (continued)
Objective of the consolidated entity in 2018
To be recognised as a leader in the sectors in which the consolidated entity
operates and build long-term sustainable value for shareholders
Remuneration strategy linkages to
objectives of the consolidated entity in
2018
Align the interests of executives
with shareholders
The remuneration framework
incorporates “at risk”
components, through STI and
LTI plans
Long-term performance is
assessed against financial
performance conditions calculated
exclusively in respect of RONA
Attract, motivate and retain
high performing individuals
Longer-term remuneration
encourages retention and
multi-year performance focus
Short-term performance is assessed
against a suite of financial and non-
financial measures relevant to the
success of the consolidated entity in
2018 and generating returns for
shareholders
The remuneration offering is competitive
for companies of a similar sector, size
and complexity
Component
Vehicle
Purpose
Link to Performance
Fixed Remuneration
Comprises base salary,
superannuation contributions and
other benefits
To provide competitive fixed
remuneration set with
reference to role, market and
experience
Consolidated entity and individual
performance are considered during the
annual remuneration review
Short-Term Incentive (STI)
Paid as cash as performance cash
incentive (PCI)
Rewards executives for their
contribution to achievement of
consolidated entity outcomes
(1) 50% subject to financial conditions, of
which:
(a) Entry point at 15% RONA;
(b) Maximum achievement at 18% RONA;
(c) Graduated achievement points from
15% RONA to 18% RONA as follows;
(i)
50% satisfied at 15.0% RONA
(ii)
60% satisfied at 15.5% RONA
(iii)
70% satisfied at 16.0% RONA
(iv) 80% satisfied at 16.5% RONA
(v) 85% satisfied at 17.0% RONA
(vi) 90% satisfied at 17.5% RONA
(vii) 100% satisfied at 18.0% RONA
(2) 50% subject to non-financial
conditions.
Vesting of LTI performance rights is
conditional upon achievement, in
aggregate, of Minimum RONA over the
2018, 2019 and 2020 financial years of
16% (for 20% vesting) with full vesting
(i.e. 100%) achieved at 20% RONA
Long-Term Incentive (LTI)
Awards under the LTI Plan are
granted in the form of performance
rights, being a right to acquire one
ordinary share in the Company at
nil exercise price
Rewards executives for their
contribution to the financial
performance of the
consolidated entity and the
effective utilisation of net
assets to generate wealth for
shareholders
Where Return on Net Assets
(“RONA”) means the fraction
APBT (annual net profit before income tax excluding property revaluation increments or decrements)
Net Assets (excluding non-controlling interests) at the close of the preceding financial year
3. Remuneration Governance
Remuneration Committee
The remuneration committee is responsible for making recommendations to the Board on the remuneration arrangements for executive
directors and non-executive directors (“NEDs”).
The remuneration committee assesses the appropriateness of the nature and amount of remuneration of NEDs and executives on a periodic
basis by reference to relevant employment market conditions, with the overall objective of ensuring maximum stakeholder benefit from the
retention of a high performing director and executive team. In determining the level and composition of executive remuneration, the
remuneration committee has not engaged external consultants to provide independent advice or make any remuneration recommendation
in respect of the 2018 financial year.
The remuneration committee comprises three NEDs, two of whom are independent NEDs. Further information on the committee’s role,
responsibilities and membership is located on the website: www.harveynormanholdings.com.au.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
35
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
3. Remuneration Governance (continued)
Remuneration Approval Process
The Board approves the remuneration arrangements of the chief executive officer (“CEO”) and executives and all awards made under the
long-term incentive plans of the Company, following recommendations from, and certain determinations by, the remuneration committee.
The Board sets the aggregate remuneration of NEDs, subject to shareholder approval.
The remuneration committee approves, having regard to the recommendations made by the CEO, the level of the short term incentive (“STI”)
pool, in the form of performance cash incentive (“PCI”), for executive directors.
No director participated in deliberations about, or decisions, in respect of the remuneration of that director.
No executive director was present at any meeting of directors which considered any long term incentive plan or short term incentive plan of
the Company, and no executive director voted on those matters.
4. Remuneration Mix - Target
For the 2018 financial year, the executive remuneration framework comprised fixed remuneration, STI and LTI as outlined below.
The consolidated entity aims to reward executives with a level and mix of remuneration appropriate to their position and responsibilities,
while being market competitive.
The policy of the consolidated entity is to position fixed remuneration around the median of comparator groups. Target total remuneration is
intended to provide the opportunity to earn top quartile rewards for outstanding performance.
During the 2018 financial year, remuneration benchmarking was undertaken with reference to both sector peers and comparator groups
comprising companies of a similar financial size.
Remuneration levels are considered annually through a remuneration review which considers market data and the performance of the
consolidated entity and individual.
The following summarises the target remuneration mix of the executives.
Fixed remuneration
Target STI
Target LTI
CEO
Executive Chairman
64%
78%
24%
12%
22%
Other Executive Directors
52%-57%
31%-34%
11%-14%
5. Details of Short-Term and Long-Term Incentive Plans
The extent to which the financial condition and non-financial conditions are satisfied will be documented in a Performance Report and an
Internal Audit Report, for consideration by the Remuneration Committee in accordance with the terms and conditions of the short-term and
long-term incentive plans. The Performance Report is a report prepared for, and on behalf of, the CEO addressing whether each weighted
non-financial condition has been satisfied or, where relevant, the extent (expressed as a percentage) to which each weighted non-financial
condition has been satisfied. The Internal Audit Report is a report prepared by the Chief Internal Auditor of the Company, which is an
objective appraisal of the Performance Report and documents the findings of the audit of the Performance Report.
2018 STI Plan
The consolidated entity operates an annual STI program available to executive directors and awards a performance cash incentive (PCI)
subject to the achievement of clearly defined measures, targets, initiatives and conditions.
36
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
5. Details of Short – Term and Long – Term Incentive Plans (continued)
2018 STI Plan
Who participates?
Executive directors
How is the STI delivered?
STI awards, in the form of a cash bonus or performance cash incentive (“PCI”), have been made
When is the STI paid?
What is the 2018 STI opportunity?
annually to executive directors in order to align remuneration with the achievement of a number of
performance measures, targets and initiatives covering both financial and non-financial, corporate and
individual measures of performance.
The payment of the 2018 STI Plan PCI to an executive under the 2018 STI Plan is to be made on 28
September 2018, or as soon as reasonably practicable after that date, subject to the satisfaction of
2018 STI Plan Performance Conditions and 2018 STI Plan Service Conditions.
Executive directors, excluding the Executive Chairman, have a target STI opportunity of between 38%
to 64% of fixed remuneration. The target STI opportunity is set at a level so as to provide sufficient
incentive to executive directors to achieve the operational targets and such that the cost to the
consolidated entity is reasonable in the circumstances.
For the year ended 30 June 2018, the aggregate maximum amount of 2018 STI Plan PCI, potentially
payable, was $2,800,000 as follows:
(i)
(ii)
(iii)
(iv)
(v)
in respect of Gerald Harvey, nil;
in respect of Kay Lesley Page, $800,000;
in respect of John Evyn Slack-Smith, $700,000;
in respect of David Matthew Ackery, $700,000; and
in respect of Chris Mentis, $600,000.
What are the STI performance conditions for FY2018?
Actual STI payments awarded to each executive depend on the extent to which specific measures,
targets, initiatives and conditions for the 2018 financial year (“STI Targets”) are met. STI Targets cover
financial and non-financial measures of performance.
The primary weighting of the 2018 STI Plan Performance Conditions are as follows:
(a)
(b)
as to 50% - the Financial Condition; and
as to 50% - the Non-Financial Conditions
(a) 50% Financial Condition
(b) 50% Non-Financial Conditions
RONA [Aggregate APBT Aggregate Net Assets]
as defined in Section 2 above was selected as
the STI performance measure as it:
drives profitable use of assets and provides an
alignment between comparative shareholder
return and reward for executive directors; and
minimises the effects of market cycles
The Non-Financial Conditions are assessed in
respect of the year ended 30 June 2018 and
include the following non-financial measures in:
Customer experience (12.50%);
Improve productivity (5%);
Flagship Strategy (20%); and
Franchisee learning, development and growth
(12.50%).
The Financial Condition is calculated in respect
of the year ended 30 June 2018 and will be
achieved as follows:
Entry point at 15% RONA
Maximum achievement level at 18% RONA
Graduated achievement points from 15%
RONA to 18% RONA as follows:
(i)
50% satisfied at 15.0% RONA
(ii)
60% satisfied at 15.5% RONA
(iii)
70% satisfied at 16.0% RONA
(iv) 80% satisfied at 16.5% RONA
(v)
85% satisfied at 17.0% RONA
(vi)
90% satisfied at 17.5% RONA
(vii)
100% satisfied at 18.0% RONA
How is performance assessed?
On an annual basis, after consideration of reports and performance against STI Targets, the
remuneration committee makes a final determination of the amount of STI to be paid to the CEO and
other executive directors.
The extent to which the Financial Condition is satisfied will be documented in the Performance Report
and an Internal Audit Report, for consideration by the Remuneration Committee in accordance with the
terms and conditions of the 2018 STI Plan.
The Remuneration Committee (acting on behalf of the Company) may at any time, in its absolute
discretion, decrease the amount of the PCI which is, or may become, payable to an executive under
the 2018 STI Plan by serving a written notice to the relevant executive at any time before the payment
date.
Details of the 2018 STI Targets and levels of achievement in the 2018 financial year are set out in pages
40 and 41 of this report.
What happens if an executive leaves?
For "Bad Leavers" (defined by the Company as resignation or termination for cause), any STI is
forfeited, unless otherwise determined by the Board. For any other reason, the Board has discretion to
award STI on a pro-rated basis taking into account time and the current level of performance against
performance hurdles.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
37
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
5. Details of Short – Term and Long – Term Incentive Plans (continued)
Tranche 3 FY2018 of the 2016 LTI Plan
LTI grants are made annually to executive directors in order to align remuneration with the creation of
sustainable shareholder value over the long-term.
Who participates?
Executive directors which have an impact on the performance of the consolidated entity against the
relevant long-term performance measures.
How is the LTI delivered?
What is the LTI opportunity?
Shareholders at the AGM held on 24 November 2015 approved the terms and conditions of the 2016 LTI
Plan that permitted the grant of performance rights to executive directors, being a right to acquire one
ordinary share in the Company at nil exercise price, in three separate tranches in the 2016, 2017 and
2018 financial years. The granting of performance rights under the 2016 LTI Plan replaced the previous
LTI Plan (that was in place up to the 2015 financial year) that had previously delivered long-term
incentives as a performance cash incentive (PCI).
A performance right is the right to acquire one ordinary share in the Company at nil exercise price. No
amount is payable in respect of the grant of a performance right. If exercised, each performance right
will be converted into one ordinary share in the Company.
Executive directors have a target LTI opportunity of between 17% to 28% of fixed remuneration.
A total of 400,000 performance rights under Tranche 3 FY2018 of the 2016 LTI Plan were granted to
executive directors on 1 December 2017.
The performance rights were independently valued by Mercer Consulting (Australia) Pty Limited at
grant date with a fair value of $3.34 per entitlement share granted under Tranche 3 on 1 December
2017, based on a share price of $4.02. The fair value was derived from a discounted cash flow
technique where the value of the performance right is the face value of the share at grant date less the
present value of the dividends expected to be paid on the share but not received by the holder during
the vesting period. Subject to the satisfaction of the financial performance condition (calculated
exclusively based on RONA) and service conditions of the 2016 LTI Plan, the total fair value of Tranche
3 performance rights amounted to $1,336,000 in aggregate.
Tranche 3 FY2018
Grant date
Vesting date
First exercise date
Last exercise date
Key Dates
1 December 2017
31 December 2020
1 January 2021
30 June 2023
Executive Director
Number Granted
Fair Value at Grant
Date
Fair Value of
Performance Rights
Gerald Harvey
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
62,500
112,500
75,000
75,000
75,000
400,000
$3.34
$3.34
$3.34
$3.34
$3.34
$208,750
$375,750
$250,500
$250,500
$250,500
$1,336,000
What are the performance conditions for
Performance conditions are deemed to be an essential component of all variable reward entitlements.
Tranche 3 of the 2016 LTI Plan?
38
The proposed allocation of performance rights will be subject to service conditions and financial
performance conditions. The Board (after consideration of the recommendations of the Remuneration
Committee), may, in its discretion, impose additional non-financial performance conditions which must
be satisfied as a condition of exercise of any performance rights by the Grantee.
100% Financial Condition
(viii)
With the exception of the service condition, the Board has resolved that the conditions in respect of the
achievement of Tranche 3 of the 2016 LTI Plan will be all financial, based exclusively on RONA, where
Tranche 3 RONA means the fraction:
Tranche 3 Aggregate APBT Tranche 3 Aggregate Net Assets, expressed as a percentage. Where:
Tranche 3 Financial Years means the financial years ending 30 June 2018, 2019 and 2020;
Tranche 3 Aggregate APBT means the aggregate amounts of the annual net profit before income
tax of the consolidated entity for each of the Tranche 3 Financial Years, but excluding property
revaluation increments or decrements;
Tranche 3 Aggregate Net Assets means the amounts of the net assets of the consolidated entity,
excluding non-controlling interests, as at each of 30 June 2017, 2018 and 2019 as described in the
annual report of the consolidated entity in respect of each of the Tranche 3 Financial Years.
Full vesting of the Tranche 3 performance rights is conditional upon achievement, of Tranche 3 RONA
of at least 20%, with a lesser vesting as set out in the table below:
Tranche 3 RONA Achieved
Less than 16%
16%
17%
18%
19%
20%
Tranche 3 % of Performance Rights that will
become exercisable
Nil
20%
40%
60%
80%
100%
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
5. Details of Short – Term and Long – Term Incentive Plans (continued)
Tranche 3 FY2018 of the 2016 LTI Plan
(continued)
What are the service conditions of Tranche 3 of the
2016 LTI Plan?
The service condition in respect of a Grantee in respect of performance rights of that Grantee under a
Tranche will be deemed satisfied if at the time of exercise of the performance rights:
How will the 2016 LTI Plan be administered?
(a)
(b)
(c)
the Grantee has not resigned or provided notice of resignation of employment from the
Company, except in order to retire from the workforce;
the Company has not terminated the employment of the Grantee for cause; and
the Board has not determined that the performance rights should lapse as a result of any
fraud, gross misconduct or conduct of the Grantee which brings the Company into
disrepute.
The LTI Plan will be administered by the Board. The Board has the right (after consideration of any
recommendations of the Remuneration Committee), and subject to the Listing Rules and applicable
legal requirements, to:
make all determinations required under the LTI Plan; and
waive or modify the application of all or any service conditions, non-financial terms and conditions
of the LTI Plan and performance rights granted under the LTI Plan as the Board considers
appropriate.
How is performance assessed?
Level of satisfaction of LTI Plan conditions is monitored by the Remuneration Committee, with
assistance from internal audit, each year, with the vesting outcomes ultimately determined at the end
of the three year performance period.
The LTI award for each of the financial years will be measured over a three year period, with Tranche 3
of the 2016 LTI Plan measured over the period for financial years ending 30 June 2018, 30 June 2019
and 30 June 2020.
When does the LTI vest?
Performance rights granted under Tranche 3 of the 2016 LTI Plan will vest on 31 December 2020,
subject to meeting the financial performance conditions in FY2018, FY2019 and FY2020 and service
conditions, and will be capable of exercise between 1 January 2021 and 30 June 2023.
How are potential LTI awards treated on termination?
How are potential LTI awards treated if a change of
control occurs?
In general, where a participant resigns or is terminated for cause before a performance right vests, all
unvested performance rights will lapse. The Board (after consideration of the recommendations of the
Remuneration Committee of the Board), has discretion to determine the treatment of any unvested
performance rights where a participant ceases employment in “good leaver” circumstances (such as
by reason of death, disability or otherwise in circumstances approved by the Board).
In the event of fraud, dishonesty or breach of obligations, the Board may make a determination,
including lapsing an award of performance rights, to ensure no unfair benefit is obtained by a
participant.
In the event of a takeover, scheme of arrangement or other transaction which may result in a person
becoming entitled to exercise control over the Company, the Board has a discretion to determine
whether any unvested performance rights should vest, lapse or become subject to different
performance conditions, or whether any resulting shares that are subject to a restriction period, should
become unrestricted.
Are executives eligible for dividends?
Performance rights will not carry any voting or dividend rights. Performance rights are non-
transferable except in limited circumstances or with the consent of the Board. If exercised, each
performance right will be converted into one ordinary share in the Company. Executives will then be
entitled to dividends on those ordinary shares after conversion.
6. Performance and Executive Remuneration Outcomes in
FY18
6A. Actual Remuneration Earned by Key Management Personnel (KMP) in FY18
The compensation expensed in respect of KMP in FY18 is set out in Table 1 (for Directors) and Table 2 (for Executives) on pages 48 and 49 of
this report. This provides shareholders with a view of the remuneration earned by KMP for performance in the 2018 financial year and the
value of any LTIs expensed during the financial year.
The ‘take-home pay’ for KMP Directors of the Board of the Company, representing the benefits paid to each Director during the year ended
30 June 2018, or as soon as practicable after that date, is set out in Section 12 of the Remuneration Report on page 54.
6B. Fixed Remuneration
Executive contracts of employment do not include any guaranteed base pay increases. The fixed remuneration of executive directors is
reviewed annually by the remuneration committee. The process consists of a review of Company, business unit and individual performance,
relevant comparative remuneration internally and externally and, where appropriate, external advice independent of management.
The fixed component of the remuneration of executive directors is disclosed in Table 1 on page 48 of this report.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
39
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
6C. Actual Performance Against Short Term Incentive (STI) Measures
A combination of financial and non-financial measures is used to measure performance for STI awards. The aggregate maximum amount of
2018 STI Plan PCI potentially payable was $2,800,000. 50% of the STI is dependent on the satisfaction of financial performance conditions
(exclusively based on RONA) and 50% is measured against the achievement of set non-financial measures. Actual performance against
those measures is as follows for FY18:
(a) 85.00% achievement of the 50% Financial Condition (score of 42.50%) = $1,190,000 payable for FY18
(b) 77.52% achievement of the 50% Non-Financial Conditions (score of 38.76%) = $1,085,280 payable for FY18
The total 2018 STI Plan PCI payable in respect of the 2018 financial year is $2,275,280, representing a total achievement of 81.26% of the
maximum 2018 STI PCI as shown in the tables below. The payment of the 2018 STI Plan PCI is to be made on or before 28 September 2018,
or as soon as reasonably practicable after that date, subject to the satisfaction of the 2018 STI Plan Service Conditions.
Financial Conditions of the 2018 STI Plan
Achievement of 50% Financial Condition
Calculation of FY18 RONA
FY 18 APBT (net profit excluding property revaluation)
FY 17 Net Assets (excluding non-controlling interests)
$478.53 million
$2,790.46 million
= 17.15% RONA
Gerald Harvey
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
Maximum
2018 STI PCI
% Financial
Conditions
2018 STI PCI Financial
Condition
2018
RONA %
% Financial Condition
Satisfied
2018 STI PCI
Payable
Nil
$800,000
$700,000
$700,000
$600,000
n/a
50%
50%
50%
50%
Nil
n/a
n/a
Nil
$400,000
17.15%
85.0% (42.5% score)
$340,000
$350,000
17.15%
85.0% (42.5% score)
$297,500
$350,000
17.15%
85.0% (42.5% score)
$297,500
$300,000
17.15%
85.0% (42.5% score)
$255,000
$2,800,000
$1,400,000
$1,190,000
For the 2018 financial year $1,400,000, being 50% of the aggregate maximum 2018 STI Plan PCI of $2,800,000, was subject to the RONA
financial condition. The entry point for the financial condition is at 15% RONA with the maximum achievement level at 18% RONA, with
graduated achievement points from 15% RONA to 18% RONA. RONA for the 2018 financial year was 17.15% and therefore 85.00% of the
financial condition in respect of the 2018 STI Plan PCI was satisfied.
Non-Financial Conditions of the 2018 STI Plan
Achievement of 50% Non-Financial Conditions
For the 2018 financial year $1,400,000, being 50% of the aggregate maximum 2018 STI Plan PCI of
$2,800,000, was subject to set non-financial performance measures including:
Customer experience (12.50%);
Improve productivity (5%);
Flagship Strategy (20%); and
Franchisee learning, development and growth (12.50%)
Maximum 2018
STI PCI
% Non-Financial
Conditions
2018 STI PCI Non-
Financial Conditions
% Non-Financial
Conditions Satisfied
2018 STI PCI
Payable
Gerald Harvey
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
Nil
$800,000
$700,000
$700,000
$600,000
$2,800,000
n/a
50%
50%
50%
50%
Nil
n/a
Nil
$400,000
77.52% (38.76% score)
$310,080
$350,000
77.52% (38.76% score)
$271,320
$350,000
77.52% (38.76% score)
$271,320
$300,000
77.52% (38.76% score)
$232,560
$1,400,000
$1,085,280
The Remuneration Committee had regard to certificates and reports from officers of the Company, other Board committees and
management, including the Performance Report and Internal Audit Report, and noted that 77.52% of the non-financial performance hurdles
for the 2018 STI Plan were substantially achieved. Based on a score of 50%, an amount of $1,085,280 representing 38.76% of the aggregate
maximum STI amount attributable to the non-financial performance measures will become payable to executive directors.
40
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
6C. Actual Performance Against Short Term Incentive (STI) Measures (continued)
Achievement of the Non-Financial Performance Conditions for the 2018 STI Plan are set out in the following table.
Assessment of Non-Financial Conditions of the 2018 STI Plan
Measure
Target
Customer
Experience
Grant licences to use tools
to reinforce and enhance
the "Shop with
Confidence" Harvey
Norman® brand positioning
through the Customer
Service Standards.
Primary
Weighting
12.5%
Improve
Productivity
Implement productivity
improvements that lead to
either cost reductions or
revenue improvement.
5.0%
Initiatives and Conditions
Each franchisee in a Harvey
Norman® complex to achieve an
aggregate satisfaction rating from
customer experience surveys of no
less than 50% for that complex in
Australia (expected achievement of
75%) and, in aggregate, customer
satisfaction rating of no less than
50% for company-operated stores
in New Zealand (expected
achievement of 75%).
Each franchisee in Australia and
company-operated stores in New
Zealand to achieve a reduction in
the number of total consumer
complaints over the prior year. Full
achievement of this initiative is at a
5% reduction in consumer
complaints.
Implement specified projects and
develop the tools to support the
“Shop With Confidence” brand
positioning during FY2018.
All stores in New Zealand to
successfully complete the SAM
Project by June 2018.
Weighting of
Initiatives &
Conditions
Achievement
Score
60%
66.8%
5.01%
40%
0%1
0%
100%
100%
5.0%
Flagship Strategy
20.0%
A Flagship store strategy
to be developed and
opened in Ireland,
Malaysia, Australia and
New Zealand to position
the Harvey Norman® brand
to customers and suppliers
for future growth
Open a new Flagship store at
Tallaght, Ireland
Open a new Flagship store at IPC
Shopping Centre, Malaysia
Open a new Flagship franchised
complex at Auburn, Australia
Open a new Flagship store at Wairau
Park, New Zealand
25%
25%
25%
25%
100%
100%
100%
100%
5.0%
5.0%
5.0%
5.0%
Franchisee learning,
development and
growth
Ongoing refinement of the
12.5%
process by each
franchisee that promotes
and encourages
measureable improvement
in the knowledge and
capability of the franchisee
and their employees.
Franchisees to identify and
nominate a minimum number of 50
candidates to attend the
“Franchisees in Training (FIT)”
development course during FY2018.
Achieve a participation rate of
female FITs in the FIT course of no
less than 40% for the courses run
within the 2018 financial year.
Achieve a successful completion
rate of 75% by participants in the FIT
course during FY2018.
30%
100%
3.75%
30%
0%2
0%
40%
100%
5.0%
Total
50.0%
38.76%
1 Timetable for execution of specified projects not achieved
2 Achievement of 38% was 2 percentage points below threshold
Service Conditions of the 2018 STI Plan
The 2018 STI Plan Service Conditions will be deemed to be satisfied, if and only if, as at the relevant payment date being 28 September 2018:
the Executive has not resigned or provided notice of resignation of employment from the Employer, except in order to retire from the
workforce;
the Employer has not terminated the employment of the Executive for cause; or
the Board has not determined that the incentives should be revoked or lapse as a result of any breach of the law, corrupt conduct,
bribery, fraud, gross misconduct or conduct of the Executive which brings the Company or the Employer into disrepute.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
41
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
6D. Actual Performance Against Long-Term Incentive (LTI) Measures for Tranche 3 of the
2016 LTI Plan
With the exception of the service condition, the Board has resolved that the conditions in respect of Tranche 3 of the 2016 LTI Plan will be all
financial, based exclusively on RONA, where Tranche 3 RONA means the fraction Tranche 3 Aggregate APBT Tranche 3 Aggregate Net
Assets, expressed as a percentage. Tranche 3 of the 2016 LTI Plan will be measured over a three-year period for financial years ending 30
June 2018, 30 June 2019 and 30 June 2020. The financial condition of Tranche 3 will be wholly satisfied if the cumulative RONA over the
measurement period is 20%, with lesser vesting as set out in the LTI Plan conditions on pages 38 and 39. Tranche 3 will not vest if the RONA
is less than 16% on a cumulative basis over the three-year measurement period.
A total of 400,000 performance rights were granted to executive directors on 1 December 2017. The performance rights were independently
valued by Mercer Consulting (Australia) Pty Limited at a fair value of $3.34 per entitlement share, based on a share price of $4.02 as at grant
date, resulting in a total fair value of Tranche 3 of $1,336,000. The Remuneration Committee had regard to certificates and reports from
officers of the Company, other Board committees and management, including the Performance Report and Internal Audit Report, and has
estimated, based on the available evidence, that the financial performance condition for Tranche 3 of the 2016 LTI Plan will be 40% achieved
by the end of the vesting period and 40% of the estimated fair value of the performance rights will meet the performance condition.
The probability of 40% vesting has been estimated based on the calculation of Tranche 3 RONA for the 2018 financial year of 17.15% (see
table below for the calculation). A 17.15% RONA for FY18 resulted in a 40% vesting for year 1 of the three-year measurement period. A 40%
vesting probability will result in an estimated cumulative Tranche 3 fair value of $534,400 over the vesting period. An amount of $100,526
has been recognised as remuneration to executive directors and expensed in the income statement on a straight-line basis for the year
ended 30 June 2018.
Achievement of 100% Financial Condition for
Tranche 3 of 2016 LTI Plan
Calculation of FY18 RONA
FY 18 APBT (net profit excluding property revaluation)
FY 17 Net Assets (excluding non-controlling interests)
$478.53 million
$2,790.46 million
= 17.15% RONA
Number of
Performance
Rights
Fair Value
per Right
Fair Value of
Performance
Rights
Probability of
Vesting %
Estimated Value of
Tranche 3 2016 LTI
Plan to Vest
Tranche 3 LTI Plan
Expense in FY2018
Gerald Harvey
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
62,500
112,500
75,000
75,000
75,000
$3.34
$3.34
$3.34
$3.34
$3.34
$208,750
$375,750
$250,500
$250,500
$250,500
40%
40%
40%
40%
40%
$83,500
$150,300
$100,200
$100,200
$100,200
$15,706
$28,273
$18,849
$18,849
$18,849
400,000
$1,336,000
$534,400
$100,526
Subject to the satisfaction of the financial performance condition and service conditions of the 2016 LTI Plan, Tranche 3 will vest on 31
December 2020. The exercise price for each performance right will be nil. If exercised, each performance right will be converted into one
ordinary share of the Company. Unexercised performance rights, will lapse, irrespective of whether they have become exercisable on 1 July
2023 or:
such earlier date specified by the Board;
the Board determines the performance rights granted to a Grantee should lapse, as a result of any fraud, gross misconduct or conduct
by that Grantee which brings the Company into disrepute; or
the Board determines the relevant requirements in relation to performance rights granted to a Grantee, including performance
conditions and a service condition, have not and are incapable of being met.
6E. Reassessment of Tranche 2 of the 2016 LTI Plan PCI Performance Conditions and
Expense Recognised in FY18
In 2017, a total of 400,000 performance rights were granted to executive directors on 28 November 2016 under Tranche 2 of the 2016 LTI
Plan. The performance rights were independently valued by Mercer Consulting (Australia) Pty Limited at a fair value of $3.87 per entitlement
share, based on a share price of $4.73 as at grant date, resulting in a total fair value of Tranche 2 of $1,548,000. Tranche 2 of the 2016 LTI
Plan will be measured over a three-year period for financial years ending 30 June 2017, 30 June 2018 and 30 June 2019.
In the 2017 Remuneration Report, it was reported that the estimated achievement of Tranche 2 of the 2016 LTI Plan would have been 80% by
the end of the vesting period and that 80% of the estimated fair value of the performance rights would meet the performance condition. The
probability of 80% vesting had been estimated based on the calculation of Tranche 2 RONA for the 2017 financial year of 19.94%.
42
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
6E. Reassessment of Tranche 2 of the 2016 LTI Plan PCI Performance Conditions and Expense Recognised in
FY18 (continued)
The financial performance condition of Tranche 2 is subject to reassessment during each of the Tranche 2 Financial Years meaning the
financial years ending 30 June 2017, 2018 and 2019. A reassessment of the Tranche 2 Aggregate APBT and Tranche 2 Aggregate Net Assets
for the 2017 and 2018 financial years resulted in a revised RONA for the two-year aggregated period of 18.51%. A revised aggregated RONA
of 18.51% for the Tranche 2 Financial Years has resulted in a revised probability of vesting of 60%. A decrease in the vesting probability from
80% in the prior year to 60% in the current year will result in an estimated cumulative expense in respect of Tranche 2 of $928,800, a
decrease of $309,600 from the previous cumulative Tranche 2 expense of $1,238,400.
Reassessment of 100% Financial Condition for
Tranche 2 of 2016 LTI Plan
Calculation of Aggregated RONA for Tranche 2
Financial Years (2017 and 2018)
Tranche 2 Aggregated APBT (2017 + 2018)
Tranche 2 Aggregated Net Assets (2016 + 2017)
$1,010.28 million
$5,456.76 million
= 18.51% RONA
Probability
Vesting % in
FY17
Tranche 2
Fair Value in
FY17
Revised
Probability
Vesting in FY18
Revised
Tranche 2 Fair
Value in FY18
Decrease due to
Reassessment
Tranche 2 LTI Plan
Expense in FY2018
Gerald Harvey
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
80%
80%
80%
80%
80%
$193,500
$348,300
$232,200
$232,200
$232,200
$1,238,400
60%
60%
60%
60%
60%
$145,125
($48,375)
$261,225
($87,075)
$174,150
($58,050)
$174,150
($58,050)
$174,150
($58,050)
$37,706
$67,871
$45,247
$45,247
$45,247
$928,800
($309,600)
$241,318
6F. Reassessment of Tranche 1 of the 2016 LTI Plan PCI Performance Conditions and
Expense Recognised in FY18
In 2016, a total of 400,000 performance rights were granted to executive directors on 30 November 2015 under Tranche 1 of the 2016 LTI
Plan. The performance rights were independently valued by Mercer Consulting (Australia) Pty Limited at a fair value of $3.52 per entitlement
share, based on a share price of $4.08 as at grant date, resulting in a total fair value of Tranche 1 of $1,408,000. Tranche 1 of the 2016 LTI
Plan will be measured over a three-year period for financial years ending 30 June 2016, 30 June 2017 and 30 June 2018.
In the 2016 Remuneration Report, it was reported that the estimated achievement of Tranche 1 of the 2016 LTI Plan would have been 40% by
the end of the vesting period and that 40% of the estimated fair value of the Tranche 1 performance rights will meet the performance
condition. The probability of 40% vesting had been estimated based on the calculation of Tranche 1 RONA for the 2016 financial year of
17.56%.
The financial performance condition of Tranche 1 is subject to reassessment during each of the Tranche 1 Financial Years meaning the
financial years ending 30 June 2016, 2017 and 2018. A reassessment of the Tranche 1 Aggregate APBT and Tranche 1 Aggregate Net Assets
for the 2016, 2017 and 2018 financial years has resulted in a revised RONA for the three-year aggregated period of 18.21%. A revised
aggregated RONA of 18.21% for the Tranche 1 Financial Years results in a probability of vesting of 60%. This revised probability of vesting is
consistent with the FY 2017 estimate vesting probability of 60%. The cumulative expense in respect of Tranche 1 is $844,800, consistent
with the previous cumulative Tranche 1 expense reported in the 2017 Remuneration Report.
Reassessment of 100% Financial Condition for
Tranche 1 of 2016 LTI Plan
Calculation of Aggregated RONA for Tranche 1
Financial Years (2016, 2017 and 2018)
Tranche 1 Aggregated APBT (2016 + 2017 + 2018)
Tranche 1 Aggregated Net Assets (2015 + 2016 + 2017)
$1,455.69 million
$7,993.84 million
= 18.21% RONA
Probability
Vesting % in
FY17
Tranche 1
Fair Value in
FY17
Revised
Probability
Vesting in FY18
Revised
Tranche 1 Fair
Value in FY18
Adjustment due
to Reassessment
Tranche 1 LTI Plan
Expense in FY2018
Gerald Harvey
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
60%
60%
60%
60%
60%
$132,000
$237,600
$158,400
$158,400
$158,400
$844,800
60%
60%
60%
60%
60%
$132,000
$237,600
$158,400
$158,400
$158,400
$844,800
-
-
-
-
-
-
$42,714
$76,883
$51,255
$51,255
$51,255
$273,362
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
43
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
6G. Reassessment of the 2015 LTI Plan PCI Performance Conditions and Expense
Recognised in FY18
In previous years up to the 2015 financial year, the LTI was delivered as a performance cash incentive (PCI).
The 2015 LTI Plan, adopted by the Board during the 2015 financial year, remained in existence for the assessment of the 2015 LTI award
granted to executive directors. The LTI award for the 2015 financial year was measured against financial and non-financial performance
conditions measured in the 2015 financial year and reassessed in the 2016 and 2017 financial years, subject to the terms and conditions of
the 2015 LTI Plan.
In the 2017 financial year, the Remuneration Committee had regard to certificates and reports from officers of the Company, other Board
committees and management, including the Performance Report and Internal Audit Report, and had reassessed the probable achievement
of the 2015 LTI Plan PCI to be 93.4%, an increase of 3.4% from 90.0% in 2016, due to a further 3.4% achievement of set non-financial
performance conditions thereby increasing the non-financial performance conditions score from 40% to 43.4%.
A revised assessment of 93.4% vesting probability resulted in the vesting of 93.4% of the 2015 LTI Plan PCI and a payment due of
$3,455,800, with a payable date of on or about 30 June 2018, subject to the achievement of the 2015 LTI Plan Service Conditions. An
amount of $863,359 has been recognised as remuneration to executive directors in respect of the 2015 LTI Plan PCI and expensed in the
income statement for the year ended 30 June 2018. The aggregate value of the 2015 LTI Plan PCI of $3,455,800 was paid on 4 July 2018.
Revised
2015 LTI PCI
Payable in FY18
2015 LTI Plan
PCI Expense
in FY2018
$438,980
$109,671
$821,920
$205,339
$747,200
$186,672
$747,200
$186,672
$700,500
$175,005
$3,455,800
$863,359
Reassessment of the 2015
LTI Plan Performance
Conditions and Cumulative
Expense
Maximum
2015 LTI Plan
PCI
Revised
Probability
Vesting in
FY18
Gerald Harvey
Kay Lesley Page
$470,000
$880,000
John Evyn Slack-Smith
$800,000
David Matthew Ackery
$800,000
Chris Mentis
Total
$750,000
$3,700,000
93.4%
93.4%
93.4%
93.4%
93.4%
44
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
6H. Summary of Performance and Executive Remuneration Outcomes in FY18
Remuneration Component
Maximum
Amount
Achievement
Score
Amount
Payable
Vesting
Period
2018
Remuneration
Amount
2017
Remuneration
Amount
Value of STI and LTI Disclosed in 2018 and 2017 Remuneration Reports
2018 STI Plan PCI
Financial conditions (50%)
Non-financial conditions (50%)
Total 100%
2017 STI Plan PCI
Financial conditions (50%)
Non-financial conditions (50%)
Total 100%
Total Short-Term Incentive PCI
$1,400,000
$1,400,000
$2,800,000
$1,175,000
$1,175,000
$2,350,000
85.00%
77.52%
42.50%
38.76%
100%
88.2%
50%
44.1%
$1,190,000
$1,085,280
$2,275,280
$1,175,000
$1,036,236
$2,211,236
1 Year
1 Year
$1,190,000
$1,085,280
$2,275,280
-
-
-
-
-
-
$1,175,000
$1,036,236
$2,211,236
$2,275,280
$2,211,236
Tranche 3 (FY18) of 2016 LTI Plan
Financial conditions (100%)
$1,336,000
Non-financial conditions (0%)
Total 100%
-
$1,336,000
Tranche 2 (FY17) of 2016 LTI Plan
Financial conditions (100%)
$1,548,000
Non-financial conditions (0%)
Total 100%
-
$1,548,000
Tranche 1 (FY16) of 2016 LTI Plan
Financial conditions (100%)
$1,408,000
Non-financial conditions (0%)
Total 100%
-
$1,408,000
40%
-
60%
-
60%
-
40%
-
60%
-
60%
-
$534,400
4 Years
$100,526
-
(Yr 1 of 4)
$534,400
-
$100,526
-
-
-
$928,800
4 Years
$241,318
$235,834
-
(Yr 2 of 4)
-
-
$928,800
$241,318
$235,834
$844,800
4 Years
$273,362
$326,785
-
(Yr 3 of 4)
-
-
$844,800
$273,362
$326,785
Total LTI Performance Rights
2015 LTI Plan PCI
Financial conditions (50%)
Non-financial conditions (50%)
Total 100%
2014 LTI Plan PCI
Financial conditions (20%)
Non-financial conditions (80%)
Total 100%
Total LTI Performance Cash
Incentive
Total Value of STI and LTI
$1,850,000
$1,850,000
$3,700,000
$740,000
$2,960,000
$3,700,000
100%
86.8%
50%
43.4%
$1,850,000
4 Years
$1,605,800
(Yr 4 of 4)
$3,455,800
60%
98.13%
12%
78.5%
$444,000
4 Years
$2,904,500
$3,348,500
$615,206
$562,619
$462,184
$401,175
$863,359
-
-
-
$462,183
$464,118
$926,301
$110,924
$725,629
$836,553
$863,359
$1,762,854
$3,753,845
$4,536,709
The total value of STI and LTI expensed in the Income Statement for the 2018 financial year and disclosed in this remuneration report was
$3.75 million compared to $4.54 million expensed in the 2017 financial year, a decrease of $0.78 million or 17.3%, relative to the previous year.
This reduction correlates with the reduction in reported profit before tax by 17.1% during the year, from $639.81 million in the 2017 financial
year to $530.17 million in the 2018 financial year.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
45
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
7. Executive Contractual Arrangements
Remuneration arrangements for KMP are formalised in employment agreements. Details of these contracts are below.
Chief Executive Officer
The CEO, Ms. K.L. Page is employed under a rolling contract.
fixed remuneration of $2,100,000 per annum;
Under the terms of the present contract the CEO’s total potential employment cost is $3,275,750 comprised of:
maximum STI opportunity in respect of the year ended 30 June 2018 of $800,000; and
maximum LTI opportunity in respect of the year ended 30 June 2018 of $375,750.
The CEO’s termination provisions are as follows:
CEO’s Termination Provisions
Notice Period
Payment in Lieu of
Notice
Treatment of STI on Termination Treatment of LTI on Termination
Employer-initiated termination
5 weeks
5 weeks
Pro-rated for time and
performance
Board discretion
Termination for serious misconduct
None
None
Unvested awards forfeited
Unvested awards forfeited
Employee-initiated termination
5 weeks
5 weeks
Unvested awards forfeited,
subject to Board discretion
Unvested awards forfeited,
subject to Board discretion
Minimum Shareholding Requirement
There are no minimum shareholding requirements imposed on the CEO.
Other KMPs
All other KMPs have rolling contracts.
Standard KMP Termination Provisions
Notice Period
Payment in Lieu of
Notice
Treatment of STI on Termination Treatment of LTI on Termination
Employer-initiated termination
4-5 weeks
4-5 weeks
Pro-rated for time and
performance
Board discretion
Termination for serious misconduct
None
None
Unvested awards forfeited
Unvested awards forfeited
Employee-initiated termination
4-5 weeks
4-5 weeks
Unvested awards forfeited,
subject to Board discretion
Unvested awards forfeited,
subject to Board discretion
8. Non-Executive Director Remuneration Arrangements
Remuneration Policy
The Board seeks to set aggregate remuneration at a level that provides the consolidated entity with the ability to attract and retain directors
of the highest calibre, whilst incurring a cost that is acceptable to shareholders.
The amount of aggregate remuneration sought to be approved by shareholders and the fee structure is reviewed annually against fees paid
to NEDs of comparable companies. The Board considers published material from external sources and makes its own enquiries when
undertaking the annual review process.
The Company’s constitution and the ASX listing rules specify that the NED fee pool shall be determined from time to time by a general
meeting. The latest determination was at the 2006 annual general meeting (AGM) held on 21 November 2006 when shareholders approved
an aggregate NED pool of $1,000,000 per year.
The Board will not seek any increase for the NED pool at the 2018 AGM.
Structure
The remuneration of NEDs consists of directors’ fees. NEDs do not receive retirement benefits, nor do they participate in any incentive
programs. Each NED receives a fee for being a director of the Company. The structure of NED remuneration is separate and distinct from
executive remuneration. The remuneration of NEDs for the years ended 30 June 2018 and 30 June 2017 are disclosed in Table 1 on page 48
of this report.
46
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
9. Relationship between Remuneration and the Performance
of the Company
The graphs below illustrate the Company’s performance for the past five financial years.
Where:
NPAT & NCI = net profit after tax & non-controlling interests
APBT = net profit before tax excluding property revaluation adjustments
STI PCI = short-term performance cash incentive
LTI = long-term incentive
EPS = earnings per share
AT RISK REM = the sum of STI PCI & LTI
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
47
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
10. Compensation of Key Management Personnel
TABLE 1: Compensation of Key Management Personnel Expensed for the Year Ended 30 June 2018 – Directors of Harvey Norman
Holdings Limited:
Short Term Benefits
Salary & Fees
Performance
Cash
Incentive
Other
Short
Term
Non-
Monetary
Benefits
Post
Employment
Superannuation
Long Term Incentives
Other
Performance
Cash
Incentive
Performance
Rights
Long Service
Leave (a)
Total Remuneration
% at risk
Gerald Harvey
Executive Chairman
Kay Lesley Page
Executive Director/CEO
John Evyn Slack-Smith
Executive Director/COO
David Matthew Ackery
Executive Director
Chris Mentis
Executive Director/CFO
Michael John Harvey
Non-Executive Director
Christopher Herbert Brown
Non-Executive Director
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Kenneth William Gunderson-Briggs
2018
Non-Executive Director
Graham Charles Paton
Non-Executive Director
2017
2018
2017
719,551
746,620
2,062,925
2,064,922
1,229,951
1,230,384
1,211,951
1,212,384
897,533
905,799
54,795
54,795
132,420
132,420
158,788
173,377
132,420
132,420
-
-
10,400
10,400
650,080
658,666
568,820
541,047
568,820
541,047
487,560
470,476
-
-
-
-
-
-
-
-
-
-
-
-
18,000
18,000
-
-
-
-
-
-
-
-
-
-
-
-
17,026
15,462
-
-
-
-
32,418
24,585
-
-
-
-
-
-
-
-
20,049
19,616
20,049
19,616
20,049
19,616
20,049
19,616
20,049
19,616
5,205
5,205
12,580
12,580
15,085
16,098
12,580
12,580
109,671
223,930
205,339
419,274
186,672
381,157
186,672
381,157
175,005
357,336
-
-
-
-
-
-
-
-
96,126
87,909
173,027
158,237
115,351
105,491
115,351
105,491
115,351
105,491
-
-
-
-
-
-
-
-
-
-
-
-
20,499
20,506
20,499
20,506
14,959
15,097
-
-
-
-
-
-
-
-
955,797
1,088,475
3,128,446
3,336,177
2,141,342
2,298,201
2,141,342
2,298,201
21.5%
28.6%
32.9%
37.1%
40.7%
44.7%
40.7%
44.7%
1,742,875
44.6%
1,898,400
49.2%
60,000
60,000
145,000
145,000
173,873
189,475
145,000
145,000
-
-
-
-
-
-
-
-
Total for the 2018 Financial Year
2018
6,600,334
2,275,280
28,400
49,444
145,695
863,359
615,206
55,957
10,633,675
35.3%
Total for the 2017 Financial Year
2017
6,653,121
2,211,236
28,400
40,047
144,543
1,762,854
562,619
56,109
11,458,929
39.6%
(a) Table 1 includes the accrual for long service leave entitlements in respect of the years ended 30 June 2018 and 30 June 2017. The Chairman (G. Harvey) and Chief Executive Officer (K.L. Page) do not
have a long service leave accrual as they have elected to forgo this employee entitlement.
The listed Parent Company, Harvey Norman Holdings Limited, does not have any employees.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
48
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
10. Compensation of Key Management Personnel (continued)
TABLE 2: Compensation of Key Management Personnel Expensed for the Year Ended 30 June 2018 – Senior Executives of Harvey
Norman Holdings Limited:
Short Term Benefits
Salary &
Fees
Performance
Cash
Incentive
Other
Short
Term
Non-
Monetary
Benefits
Post
Employment
Superannuation
Long Term Incentives
Other
Performance
Cash
Incentive
Perfor-
mance
Rights
Termination
Benefits
Long
Service
Leave
Total
Remuneration
% at
risk
Thomas James Scott
GM – Property
Martin Anderson
GM – Advertising
Gordon Ian Dingwall
Chief Information Officer
Rob Nelson (a)
GM – Audio Visual
Ajay Calpakam (b)
GM – Audio Visual
Haydon Ian Myers (c)
GM – Home Appliances
Lachlan Roach (d)
GM – Home Appliances
Geoff Van Der Vegt (e)
2018
2017
2018
2017
2018
2017
2018
2017
574,804
521,160
295,936
362,438
464,951
430,384
28,496
342,384
2018
362,083
2017
2018
2017
-
33,252
393,183
2018
293,677
2017
2018
-
-
GM – Technology & Entertainment
2017
400,722
Frank Robinson (f)
2018
444,583
GM – Technology & Entertainment
2017
-
Total for the 2018 Financial Year
2018
2,497,782
Total for the 2017 Financial Year
2017
2,450,271
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,821
9,000
8,250
-
-
-
6,750
-
-
-
13,750
-
-
-
25,034
24,568
-
-
-
-
-
-
-
44,717
-
-
-
39,630
-
-
20,049
19,616
21,828
21,394
20,049
19,616
1,671
19,616
20,049
-
1,671
19,616
15,037
-
-
17,981
20,049
-
30,571
25,034
120,403
9,000
108,915
117,839
(a)
(b)
(c)
(d)
(e)
(f)
(g)
resigned 31 July 2017
commenced 1 August 2017
resigned 31 July 2017
commenced 1 October 2017
resigned 31 May 2017
commenced 1 August 2017
this amount represents the cash payment of employee leave entitlements upon resignation
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
40,680(g)
-
-
-
103,385(g)
-
-
-
-
11,292
-
-
9,580
8,686
4,932
6,041
7,749
7,173
-
5,706
6,035
-
-
6,553
4,895
-
-
-
7,410
-
604,433
549,462
347,730
414,441
492,749
457,173
72,668
376,706
396,417
-
138,308
464,069
320,359
-
-
469,625
485,792
-
144,065
40,601
2,858,456
11,292
34,159
2,731,476
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
49
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
11. Additional Disclosures Relating to Options, Performance Rights and Shares
TABLE 3: Options Granted to Executive Directors as Part of Remuneration:
The table below discloses the number of share options granted to executive directors as remuneration during the year ended 30 June 2018 as well as the number of options that vested, were exercised or
lapsed during the year. Share options do not carry any voting or dividend rights and can be exercised once the vesting conditions have been met until their expiry date.
Options Granted as Remuneration
During the Year
Options Vested During the Year
Unvested Options at
Options Exercised During the Year
30 June 2018
Grant Number
Value of
Options
Granted $
Number of
Options
Vested
Value of
Options
Vested $
Number of
Unvested
Options
Value of
Unvested
Options $
Number of
Options
Exercised
Value of Options
Exercised $
Remaining Unexercised Options at
30 June 2018
Number of
Remaining
Unexercised
Options
Value of
Remaining
Unexercised
Options $
John Evyn Slack-Smith
Chris Mentis
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
567,000
$159,894
567,000
$159,894
1,134,000
$319,788
-
-
-
-
-
-
-
-
-
Movement in option holdings during the year ended 30 June 2018:
There were no share options issued pursuant to the 2010 Share Option Plan during the 2018 financial year.
a)
b) On 4 September 2017, J.E. Slack-Smith exercised 567,000 options over 567,000 shares representing his full entitlement in respect of the Third Tranche of Options, previously granted on 29 November 2012,
at the exercise price of $1.827 per option. The total consideration paid by J.E. Slack-Smith was $1,035,909.
c) On 8 March 2018, C. Mentis exercised 567,000 options over 567,000 shares representing his full entitlement in respect of the Third Tranche of Options, previously granted on 29 November 2012, at the
exercise price of $1.827 per option. The total consideration paid by C. Mentis was $1,035,909.
Movement in option holdings during the year ended 30 June 2017
a) On 3 March 2017, C. Mentis exercised 250,000 options over 250,000 shares representing his full entitlement in respect of the Second Tranche of Options, previously granted on 29 November 2011, at the
exercise price of $2.0267 per option. The total consideration paid by C. Mentis was $506,675.
b) On 23 March 2017, J.E. Slack-Smith exercised 250,000 options over 250,000 shares representing his full entitlement in respect of the Second Tranche of Options, previously granted on 29 November 2011,
at the exercise price of $2.0267 per option. The total consideration paid by J.E. Slack-Smith was $506,675.
TABLE 4: Option Holdings of Key Management Personnel for the Year Ended 30 June 2018
1 July 2017
Granted as
Remuneration
Options Exercised
Net Change Other
30 June 2018
Total
Exercisable
Not Exercisable
Vested as at 30 June 2018
John Evyn Slack-Smith
Chris Mentis
Gerald Harvey
Total
567,000
567,000
1,134,000
-
-
-
-
(567,000)
(567,000)
(1,134,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Apart from the KMPs disclosed above, no other director or senior executive had any other option holdings during the year ended 30 June 2018. During the 2018 financial year, J.E. Slack-Smith and C. Mentis
each exercised 567,000 options over 567,000 shares in respect of the Third Tranche of Options that had vested on 31 December 2015 and were exercisable from 1 January 2016 to 30 June 2018. There were no
vested options remaining as at 30 June 2018.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
50
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
11. Additional Disclosures Relating to Options, Performance Rights and Shares (continued)
TABLE 5: Performance Rights Granted to Executive Directors as Part of Remuneration:
The table below discloses the number of performance rights granted to executive directors as remuneration during the year ended 30 June 2018 as well as the number of performance that vested, were
exercised or lapsed during the year.
Performance rights do not carry any voting or dividend rights and can be exercised once the vesting conditions have been met until their expiry date.
Performance Rights Granted as
Remuneration During Year
Performance Rights Vested During
the Year
Unvested Performance Rights at
30 June 2018
Performance Rights Exercised
During the Year
Number of
Rights
Granted
Value of
Performance
Rights Granted $
Number of
Performance
Rights Vested
Value of
Performance
Rights Vested $
Gerald Harvey
Kay Lesley Page
62,500
$208,750
112,500
$375,750
John Evyn Slack-Smith
75,000
$250,500
David Matthew Ackery
75,000
$250,500
Chris Mentis
Total
75,000
$250,500
400,000
$1,336,000
-
-
-
-
-
-
-
-
-
-
-
-
-
Movement in performance rights during the year ended 30 June 2018:
Number of
Unvested
Performance
Rights
Value of
Unvested
Performance
Rights $
187,500
$670,625
337,500
$1,207,125
225,000
$804,750
225,000
$804,750
225,000
$804,750
1,200,000
$4,292,000
Number of Performance
Rights Exercised
-
-
-
-
-
-
a) A total of 400,000 performance rights under Tranche 3 FY2018 of the 2016 LTI Plan were granted to executive directors on 1 December 2017. The performance rights were independently valued by Mercer
Consulting (Australia) Pty Limited at grant date with a fair value of $3.34 per entitlement share granted under Tranche 3 on 1 December 2017, based on a share price of $4.02. The fair value was derived
from a discounted cash flow technique where the value of the performance right is the face value of the share at grant date less the present value of the dividends expected to be paid on the share but not
received by the holder during the vesting period. Subject to the satisfaction of the financial performance condition (calculated exclusively based on RONA) and service conditions of the 2016 LTI Plan, the
total fair value of Tranche 3 performance rights amounted to $1,336,000 in aggregate.
b) As at 30 June 2018, a total of 1,200,000 performance rights under Tranche 1 FY2016 (as to 400,000 performance rights), Tranche 2 FY2017 (as to 400,000 performance rights) and Tranche 3 FY2018 (as to
400,000 performance rights) of the 2016 LTI Plan were outstanding, unvested and not capable of exercise.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
51
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
11. Additional Disclosures Relating to Options, Performance Rights and Shares (continued)
TABLE 6: Performance Rights of Key Management Personnel for the Year Ended 30 June 2018
1 July 2017 Balance
at the Beginning of
Year
Granted as
Remuneration
Options Exercised
Net Change Other
30 June 2018
Balance at End of the
Year
Vested as at 30 June 2018
Total
Exercisable
Not Exercisable
125,000
225,000
150,000
150,000
150,000
800,000
62,500
112,500
75,000
75,000
75,000
400,000
-
-
-
-
-
-
-
-
-
-
-
-
-
187,500
337,500
225,000
225,000
225,000
1,200,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
KMP: Board of Directors
Gerald Harvey
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Gerald Harvey
Total
Apart from the KMPs disclosed above, comprised of the executive directors of the Company, each of the non-executive directors or senior executives of the Company did not have any performance rights during
the year ended 30 June 2018.
The closing balance of the performance rights in the Company of 1,200,000 as at 30 June 2018 is comprised of:
a) Balance at the beginning of year: 400,000 performance options under Tranche 1 FY2016; fair value at grant date of $3.52; to vest on 31 December 2018; exercisable between 1 January 2019 and 30 June
2021;
b) Balance at the beginning of year: 400,000 performance options under Tranche 2 FY2017; fair value at grant date of $3.87; to vest on 31 December 2019; exercisable between 1 January 2020 and 30 June
2022; and
c) Granted as remuneration during the year: 400,000 performance options under Tranche 3 FY2018; fair value at grant date of $3.34; to vest on 31 December 2020; exercisable between 1 January 2021 and
30 June 2023.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
52
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
11. Additional Disclosures Relating to Options, Performance Rights and Shares (continued)
TABLE 7: Shareholdings/Relevant Interests of Key Management Personnel for the Year Ended 30 June 2018
KMP: Board of Directors
Gerald Harvey
Kay Lesley Page
1 July 2017
Balance at the
Beginning of Year
On Exercise of
Options
Net Change
Other
30 June 2018
Balance at the
End of Year
337,889,449
17,507,642
-
-
2,267,589
340,157,038
-
17,507,642
John Evyn Slack-Smith
699,818
567,000
(367,000)
899,818
David Matthew Ackery
489,134
-
Chris Mentis
Gerald Harvey
Michael John Harvey
Kay Lesley Page
Christopher Herbert Brown
John Evyn Slack-Smith
Kenneth William Gunderson-Briggs
Graham Charles Paton
KMP: Senior Executives
Thomas James Scott
348,341
567,000
2,974,897
183,323,726
3,137
15,682
31,835
-
-
-
-
-
-
-
-
-
3,000
-
-
489,134
915,341
2,974,897
183,323,726
6,137
15,682
31,835
Total
543,283,661
1,134,000
1,903,589
546,321,250
Movement in shareholdings / relevant interests during the year ended
30 June 2018:
(a) On 1 September 2017, G. Harvey Nominees Pty Limited, a company associated with G. Harvey,
acquired 1,000,000 shares in the Company, on-market, for an average consideration of $3.93 per
share or $3,930,200 in total.
(b) On 4 September 2017, J.E. Slack-Smith exercised 567,000 options in respect of the Third Tranche
of Options at the exercise price of $1.827 per option or $1,035,909 in total. 567,000 new shares in
the Company were issued pursuant to this transaction.
(c) On 5 September 2017, J.E. Slack-Smith sold 367,000 shares in the Company on-market from
Whitewood Investments Pty Limited as trustee for Whitewoods Trust, entities associated with J.E.
Slack-Smith, for an average sale price of $3.89 per share or $1,429,170 in total.
(d) On 7 September 2017, J.E. Slack-Smith sold 200,000 shares in the Company, off-market, to
Whitewood Investments Pty Limited as trustee for Whitewoods Trust, an entity associated with
J.E. Slack-Smith, for an average sale price of $3.93 of $786,000 in total.
(e) On 6 December 2017, K. Page Pty Limited, a company associated with K.L. Page, sold 241,838
shares in the Company, off-market, to K L Page Superannuation Fund Pty Limited, another
company associated with K.L. Page, for an average sale price of $4.14 per share or $1,000,000 in
total.
(f) On 6 March 2018, Demlon Pty Ltd as trustee for SKGB Trust, a company associated with K. W.
Gunderson-Briggs, acquired 3,000 shares in the Company, on-market, for an average
consideration of $3.88 per share or $11,640 in total.
(g) On 8 March 2018, C. Mentis exercised 567,000 options in respect of the Third Tranche of Options
at the exercise price of $1.827 per option or $1,035,909 in total. 567,000 new shares in the
Company were issued pursuant to this transaction.
(h) On 21 March 2018, G. Harvey as Trustee for Harvey 2003 Option Trust, an entity associated with G.
(i)
Harvey, acquired 1,000,000 shares in the Company, on-market, for an average consideration of
$3.77 per share or $3,766,475 in total.
On 27 March 2018, G. Harvey as Trustee for Harvey 2003 Option Trust, an entity associated with G.
Harvey, acquired 267,589 shares in the Company, on-market, for an average consideration of
$3.64 per share or $974,425 in total.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
53
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
12. ‘Take-Home Pay’ for KMP Directors of the Company
The below table shows the ‘take-home pay’ for each director of the Company, representing the benefits paid to each director during the year
ended 30 June 2018, or as soon as practicable after that date. Total ‘take-home pay’ for the directors of the Company amounted to $12.49
million for the year ended 30 June 2018. The total value of remuneration expensed for directors of the Company in respect of the 2018
financial year was $10.63 million (refer to Table 1 on page 48 of this report). For the 2018 financial year, total ‘take-home pay’ was $1.86
million higher than the value of remuneration expensed to the income statement.
KMP:
Board of Directors
Salary &
Fees
Other
Short
Term
Non-
Monetary
Benefits
Super-
annuation
Short-Term
Performance
Cash Incentive (a)
Long-Term
Performance
Cash Incentive (b)
FY2018
Total Take-
Home Pay
FY2017
Total Take-
Home Pay
Gerald Harvey
719,551
10,400
-
20,049
-
438,980
1,188,980
1,201,986
Kay Lesley Page
2,062,925
John Evyn Slack-Smith
1,229,951
-
-
David Matthew Ackery
1,211,951
18,000
Chris Mentis
Gerald Harvey
Michael John Harvey
Kay Lesley Page
Christopher Herbert Brown
John Evyn Slack-Smith
Kenneth William Gunderson-
Briggs
897,533
54,795
132,420
158,788
Graham Charles Paton
132,420
-
-
-
-
-
17,026
20,049
658,666
821,920
3,580,586
3,407,350
-
-
20,049
20,049
541,047
541,047
747,200
2,538,247
2,392,050
747,200
2,538,247
2,392,050
32,418
20,049
470,476
700,500
2,120,976
2,000,350
-
-
-
-
5,205
12,580
15,085
12,580
-
-
-
-
-
-
-
-
60,000
60,000
145,000
145,000
173,873
189
189,475
145,000
145,000
Total Take-Home Pay 2018
6,600,334
28,400
49,444
145,695
2,211,236
3,455,800
12,490,909
Total Take-Home Pay 2017
6,653,121
28,400
40,047
144,543
1,718,650
3,348,500
11,933,261
a)
The short-term performance cash incentive of $2.21 million represented the payment of the 2017 STI Plan PCI that was earned in
respect of the 2017 financial year, and was paid to executive directors in October 2017.
b) The long-term performance cash incentive of $3.46 million represented the payment of the 2015 LTI Plan PCI that was earned in
respect of the 2015 financial year, and was expensed over a 4-year vesting period for the financial years ending 30 June 2015, 30 June
2016, 30 June 2017 and 30 June 2018. This was paid to executive directors on 4 July 2018.
13. Loans to Key Management Personnel and their Related
Parties
There were no loans granted to key management personnel during the year ended 30 June 2018 (2017: nil). There were no loans
outstanding from key management personnel as at 30 June 2018 (2017: nil).
54
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
14. Other Transactions and Balances with Key Management
Personnel and their Related Parties
(i)
Loans from directors to subsidiaries of Harvey Norman Holdings Limited:
Derni Pty Limited (a wholly owned subsidiary of Harvey Norman Holdings
Limited) borrowed money from entities and related parties associated with G.
Harvey, M.J. Harvey and K.L. Page. Interest is payable at commercial rates.
These loans are unsecured and repayable at call.
Net amounts (paid to) / received from entities associated with the above
mentioned directors and their related parties.
Interest paid/payable
(ii)
Lease of business premises from Ruzden Pty Limited:
The consolidated entity leases business premises at Bundall, Queensland from
Ruzden Pty Limited. Mr G. Harvey, Ms K.L. Page, Mr M.J. Harvey and I.J.
Norman Nominees Pty Limited (C.H. Brown) have an equity interest in Ruzden
Pty Limited. The lease arrangements were approved by shareholders in the
General Meeting held 25 May 1993, and in the General Meeting held 31 August
1999. The lease is subject to normal commercial terms and conditions. Rent
paid by the consolidated entity to Ruzden Pty Limited was:
(iii)
Legal fees paid to a director-related entity:
Legal fees were paid to the firm of which Mr C.H. Brown is a partner for
professional services rendered to the consolidated entity in the normal course
of business.
(iv) Other income derived by related entities of key management personnel:
Certain franchises are operated by entities owned or controlled by relatives of
key management personnel under normal franchisee terms and conditions.
Aggregated net income derived by entities owned or controlled by relatives of
key management personnel was:
(v) Perth City West Retail Complex
CONSOLIDATED
June
2018
$000
June
2017
$000
39,566,536
46,139,265
(6,572,729)
897,393
2,823,879
787,533
4,692,124
4,588,056
3,469,948
3,636,482
762,655
1,256,314
By a contract for sale dated 31 October 2000, Gerald Harvey, as to a one-half share as tenant in common, and a subsidiary of Harvey
Norman Holdings Limited, as to a one-half share as tenant in common, purchased the Perth City West retail complex for a purchase
price of $26.60 million. In the financial statements of the consolidated entity, the day-to-day management of this entity has been
accounted for as a joint venture as disclosed in Note 37 to the financial statements. This transaction was executed under terms and
conditions no more favourable than those which it is reasonable to expect would have applied if the transaction was at arm’s length.
The property was purchased subject to a lease of part of the property in favour of a subsidiary of Harvey Norman Holdings Limited
(the "Lessee"). That lease had been granted by the previous owner of the property on arm's length normal terms and conditions.
Gerald Harvey is entitled to one-half of the rental paid by the Lessee. The amount of rental and outgoings paid by the Lessee to
Gerald Harvey and the subsidiary of Harvey Norman Holdings Limited for the year ended 30 June 2018 was $0.77 million each (2017:
$1.67 million).
(vi) The Byron at Byron Resort, Spa and Conference Centre
By a contract for sale dated 15 May 2002, a company (of which Gerald Harvey was a director) acting in its capacity as trustee of a
trust, as to a one-half share as tenant in common (the “GH entity”), and a subsidiary of Harvey Norman Holdings Limited, as to a one-
half share as tenant in common, purchased the Byron at Byron Resort, Spa and Conference Centre (the “Byron Bay JV”). In the
financial statements of the consolidated entity, the day-to-day management of this entity has been accounted for as a joint venture
as disclosed in Note 37 to the financial statements. This transaction was executed under terms and conditions no more favourable
than those which it is reasonable to expect would have applied if the transaction was at arm’s length. No capital distribution was
received by each of the GH entity and a subsidiary of Harvey Norman Holdings Limited (2017: $0.30 million). A subsidiary of Harvey
Norman Holdings Limited held a conference at The Byron at Byron Resort and paid the Byron Bay JV conference fees amounting to
$0.12 million for the year ended 30 June 2018 (2017: $0.11 million).
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
55
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (continued)
14. Other Transactions and Balances with Key Management Personnel and their Related Parties (continued)
(vii) Gepps Cross Retail Complex
By a contract for sale dated 18 December 2007, a subsidiary of the Company (“HNHL G.C. Entity”) and Axiom Properties Fund Limited
(“G.C. Co-Owner”) purchased land located in Gepps Cross, South Australia (“G.C. Land”) in equal shares as tenants in common, for the
purpose of constructing and subsequently managing a retail complex on the G.C. Land (“the Gepps Cross Joint Venture”). In
November 2009, HNHL G.C. Entity and the G.C. Co-Owner granted a lease of part of the G.C. Land and retail complex to a subsidiary of
the Company (“G.C. Lessee”) on arm’s length commercial terms (“G.C. Lease”). In August 2010, the G.C. Co-Owner informally advised
the Company that the G.C. Co-Owner intended or wished to dispose of its interest in the Gepps Cross Joint Venture, triggering first
and last rights of refusal in the HNHL G.C. Entity. At a meeting of the Company held 26 August 2010, it was resolved that the
Company not purchase the share of the G.C. Co-Owner in the Gepps Cross Joint Venture (including G.C. Land). On 6 October 2010,
HNHL G.C. Entity formally waived the right to purchase the interest of the G.C. Co-Owner in the Gepps Cross Joint Venture (including
the G.C. Land).
By a contract for sale dated 23 December 2010, GH Gepps Cross Pty Limited, an entity associated with Gerald Harvey (“Gerald Harvey
Entity”) and MJH Gepps Cross Pty Limited, an entity associated with Michael Harvey (“Michael Harvey Entity”) and, M&S Gepps Cross
Pty Limited, purchased the one-half share as tenant in common of the G.C. Co-Owner in the G.C. Land and retail complex. The sale
was subject to the G.C. Lease. The Gerald Harvey Entity is entitled to one-quarter of the rental and outgoings paid by the G.C. Lessee
amounting to $0.81 million for the year ended 30 June 2018 (2017: $0.79 million). The Michael Harvey Entity is entitled to one-eighth
of the rental and outgoings paid by the G.C. Lessee amounting to $0.40 million for the year ended 30 June 2018 (2017: $0.40 million).
In the financial statements of the consolidated entity, the day-to-day management of the Gepps Cross Joint Venture has been
accounted for as equity accounted investment as disclosed in Note 37. The Gerald Harvey Entity is entitled to one-quarter of the
profits generated by the retail complex on the G.C. Land amounting to $1.54 million for the year ended 30 June 2018 (2017: $1.55
million). The Michael Harvey Entity is entitled to one-eighth of the profits generated by the retail complex on the G.C. Land amounting
to $0.77 million for the year ended 30 June 2018 (2017: $0.78 million).
(viii) Gazal Corporation Limited
Mr. G.C. Paton is an independent, non-executive director of Gazal Corporation Limited, a public company listed on the Australian Stock
Exchange.
A wholly-owned subsidiary of the consolidated entity previously owned 4.17 million shares in Gazal Corporation Limited with a market
value of $9.33 million as at 30 June 2017. In April 2018, following an on-market share buy-back, the consolidated entity disposed of
4.17 million shares in Gazal Corporation Limited for total consideration of $10.41 million. The consolidated entity received dividends
during the year amounting to $0.33 million for the year ended 30 June 2018 (2017: $0.67 million).
Mr G.C. Paton was not present at, did not direct, manage or otherwise participate in, and did not vote in respect of any of the
arrangements between the consolidated entity and Gazal Corporation Limited.
56
DIRECTORS’ REPORT (CONTINUED)
ENVIRONMENTAL AND SOCIAL SUSTAINABILITY
The consolidated entity acknowledges that integrating sustainable growth into its strategy, business practices and decision making is
essential for long-term value creation. The consolidated entity believes that the sustainability of its operations is, in part, linked to the
successful monitoring and management of its economic, social and environmental risks and opportunities and therefore the consolidated
entity aims to adopt sustainable practices that will generate better long-term returns and benefits for investors and stakeholders, both
internal and external.
The Board of Directors, as the Company’s highest governance body, alongside management is charged with establishing a business strategy
that supports responsible decision making and sustainable value creation.
The Company’s Code of Conduct reinforces the consolidated entity’s commitment to honest, fair and transparent business practices and
outlines the standards of behaviour that the consolidated entity expects of its employees.
In addition, the consolidated entity has adopted other policies such as the Conflicts of Interest Policy, the Gifts and Benefits Policy, the
Intellectual Property Policy and a Confidentiality and Privacy Policy, all of which aim to reinforce corporate governance best practices.
The consolidated entity is a member of the following organisations and associations:
Consumer Electronics Association
Australasia Furniture Research and Development Institute (AFRDI)
New Zealand Leather and Shoe Research Association (LASRA)
National Retailers Association, including representation on the Technical Standards Committee (NRATSC)
Energy Users Association of Australia
Soft Landings Product Stewardship Scheme (Founding Member)
Diversity Council of Australia
Environmental Regulation Performance
The consolidated entity submits a National Greenhouse Gas and Emissions Report (NGER) to the Clean Energy Regulator annually.
The consolidated entity’s environmental obligations are regulated under both State and Federal Law. There were no environmental breaches
notified to the consolidated entity by any Government agency during the year ended 30 June 2018 and up to the date of this report.
Actions of the Franchisor
The consolidated entity acts as a landlord in a number of retail complexes utilised by Harvey Norman®, Domayne® and Joyce Mayne®
franchisees. At those premises, the landlord provides lighting and air conditioning for the utilisation of franchisees at the site and also
provides electricity to the site.
The consolidated entity has undertaken the following recent actions with respect to solar energy, LED lighting and stormwater harvesting
systems:
Solar Energy
Following an analysis across 13 franchised complexes and 24 months of data, the consolidated entity can report:
A net saving across the franchised complexes that were analysed of 1,308,310KWh of electricity, or 10.59%;
A reduction in C02 emissions across these franchised complexes of 1,209 tonnes, an 11.66% reduction, which is equivalent to taking
200 cars off the road for a 12-month period.
Approximately 60% of the previously planned installations are complete. Sites are regularly analysed for participation in the program and it is
expected that the program will continue beyond the current scope to franchised complexes that demonstrate appropriate payback.
LED Lighting
The LED program is in the process of being implemented within 35 franchised complexes in Australia and 13 company-operated stores in
New Zealand. Using estimates based on the energy consumption of the existing T8 lighting fittings at these locations, the estimated savings
from reduced consumption of energy and repairs and maintenance spend on lighting are in excess of $1.40 million per annum and an
average payback of 2.7 years. Further analysis and tracking of savings will be undertaken as the program is rolled-out.
Stormwater Harvesting Systems
During the 2018 financial year, the consolidated entity has installed rainwater harvesting systems at 3 franchised complexes, with a fourth
system to be installed in November 2018. When complete, the four systems will collect rainwater totalling 916,000 litres, which is used for
irrigation and reduces the reliance on the mains water supply.
Actions of Franchisees
Franchisees have taken a product stewardship approach to waste. The Australian Packaging Covenant (“APC”) is a sustainable packaging
initiative which aims to change the culture of business to design more sustainable packaging, increase recycling rates and reduce packaging
litter.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
57
DIRECTORS’ REPORT (CONTINUED)
ENVIRONMENTAL AND SOCIAL SUSTAINABILITY (continued)
Environmental Regulation Performance (continued)
Harvey Norman®, Domayne® and Joyce Mayne® franchisees have improved on their waste management performance and offering to
customers during the 2018 financial year as follows:
Waste Stream
e-Waste
Mattresses
Polystyrene
Cardboard and Plastic Recycling
Recycling as a percentage of franchised
complex waste (excluding the above
initiatives)
Percentage Improvement During
2018 Financial Year
Description
E-waste recycling is available through most
Harvey Norman®, Domayne® and Joyce
Mayne® franchised complexes.
Harvey Norman® and Domayne® franchisees
are founding members of the Soft Landings
Mattress Product Stewardship Scheme.
Approximately 80% of franchised complexes in
Australia recycle this separate waste stream.
Each franchisee in each franchised complex in
Australia carries out cardboard and plastic
recycling.
5.7% overall increase on FY2017
volumes
11,848 mattresses recycled via the
Soft Landings Product Stewardship
and Social Enterprise Scheme. Some
franchisees may have used alternate
service providers, particularly in
Melbourne.
19.3% increase in polystyrene
recycling (measured in tonnes) in
FY2018.
Harvey Norman®, Domayne® and
Joyce Mayne® franchised complexes
recycled 6,824 tonnes of cardboard
and paper and 47.69 tonnes of plastic
(LDPE) in FY2018.
Average landfill diversion:
-
-
40% (measured by weight)
47% (measured by volume)
Plastic Bag Usage by Customers
Net distribution of plastic bags
reduced by 7.5% in FY2018. Use of
reusable smart bags increased by
2.3%.
From February 2018, all plastic bags supplied to
Harvey Norman®, Domayne® and Joyce
Mayne® franchisees were a minimum of 40
microns.
Social Sustainability
Maintaining a well-trained, engaged and committed workforce is a key priority for the consolidated entity. The consolidated entity has
adopted a well-developed training strategy to ensure that all employees are given opportunities to develop and improve their skills and
expertise throughout their careers.
The consolidated entity also conducts an Engagement & Diversity Survey on an annual basis. The survey aims to measure the satisfaction
levels of employees and collects feedback and comments on topics such as diversity initiatives and flexible working arrangements.
Employee Learning and Development
The consolidated entity has provided its employees with an increasing range of training opportunities over the years from mandatory
sessions and programs (inductions, compliance, customer service, culture awareness etc.) to optional courses providing vocational
recognition and certification. The consolidated entity actively encourages employees to participate in these courses.
The consolidated entity has appointed a Learning and Development team to support its Learning and Development framework. This team
has been engaged to scope, develop, design and implement training programs and strategies.
The training conducted throughout the organisation includes, but is not limited to:
Online e-learning for all employees through an externally hosted Learning Management System.
There is a combination of compulsory training and role-based training allocated and assigned to employees and undertaken in the
workplace. Online training modules may include:
- Orientation for new employees;
- Occupational Health and Safety;
- Discrimination, harassment and workplace bullying; and
- Cultural Awareness.
Professional development for individuals in specialised roles to maintain and update requisite skills and knowledge.
This training is conducted by external bodies including:
- Accounting (Chartered Accountants of Australia and New Zealand and CPA Australia);
- Compliance (Australian Compliance Institute);
- Digital Innovation (Data Science and Analytics and User Experience (UX));
- Human Resources (National Retailers Association seminars);
- Information Technology;
- Legal (College of Law, Law Society of NSW, LegalWise, Australian Corporate Lawyers Association seminars);
- Management;
- Procurement (Supply Chain School and Chartered Institute of Purchasing and Supply);
- Microsoft Office Applications (Excel, Word, Access and PowerPoint);
58
DIRECTORS’ REPORT (CONTINUED)
ENVIRONMENTAL AND SOCIAL SUSTAINABILITY (continued)
Employee Learning and Development (continued)
-
-
Annual conferences to educate and reinforce knowledge of employees; and
Diversity awareness in order to reinforce the Company's commitment to an inclusive culture and diversity in the workplace and to
add value to diversity-related initiatives.
The Learning Management framework is a comprehensive platform that supports the consolidated entity’s growth and development
initiatives. This enables structured learning paths that promote further training and development for employees.
The consolidated entity may provide financial reimbursement to employees that obtain a degree relevant to their role and responsibilities,
including equipment and travel.
Corporate employees are reviewed annually as part of the ‘Salary Review’ process where performance is benchmarked to market rates and
career development is discussed as part of employee succession planning.
OTHER INFORMATION
Indemnification of Officers
During the financial year, insurance and indemnity arrangements were continued for officers of the consolidated entity.
An indemnity agreement was entered into between the Company and each of the directors of the Company named earlier in this report and
with each full-time executive officer, director and secretary of all group entities. Under the agreement, the Company has agreed to
indemnify those officers against any claim or for any expenses or costs which may arise as a result of work performed in their respective
capacities.
Rounding of Amounts
The amount contained in the financial statements and the Directors’ Report have been rounded to the nearest thousand dollars (unless
specifically stated to be otherwise) under the option available to the Company under Australian Securities and Investments Commission
Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191. The company is an entity to which this legislative instrument
applies.
Auditor Independence and Non-Audit Services
During the year, the auditors of Harvey Norman Holdings Limited, Ernst & Young, provided non–audit services to the consolidated entity. In
accordance with the recommendation from the Audit Committee of the Company, the directors are satisfied that the provision of the non-
audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
Also, in accordance with the recommendation from the Audit Committee, the directors are satisfied that the nature and scope of each type
of non–audit service provided means that auditor independence was not compromised.
Details of the amounts paid or payable to the auditor, Ernst & Young, for the provision of non–audit services during the year ended 30 June
2018 are as follows:
Tax compliance services $234,984 (2017: $205,823);
Other services $42,769 (2017: $71,756)
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
59
DIRECTORS’ REPORT (CONTINUED)
OTHER INFORMATION (continued)
Auditor Independence and Non-Audit Services (continued)
The directors received the following declaration from the auditor of Harvey Norman Holdings Limited.
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Auditor’s Independence Declaration to the Directors of Harvey Norman Holdings Limited
As lead auditor for the audit of Harvey Norman Holdings Limited for the financial year ended 30 June 2018, I declare to the best of my knowledge
and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Harvey Norman Holdings Limited and the entities it controlled during the financial year.
Ernst & Young
Renay Robinson
Partner
Sydney
28 September 2018
Signed in accordance with a resolution of directors.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
G. HARVEY
Executive Chairman
Sydney
28 September 2018
K.L. PAGE
Executive Director / Chief Executive Officer
Sydney
28 September 2018
60
CORPORATE GOVERNANCE STATEMENT
Introduction
The board of directors (Board) of Harvey Norman Holdings Limited (HVN or the Company) is committed to a high standard of corporate
governance, and is responsible for establishing, maintaining and monitoring the corporate governance framework of the consolidated entity.
The Board has benchmarked its practices against the ASX Corporate Governance Council's (CGC) published guidelines and the CGC corporate
governance principles and recommendations (27 March 2014 edition) (Principles). The Board guides and monitors the business and affairs of
the Company on behalf of the shareholders by whom they are elected and to whom they are accountable.
This Corporate Governance Statement (Statement) summarises the Company's corporate governance practices including compliance with the
Principles for the year ended 30 June 2018. The Statement has been approved by the Board.
Further details about corporate governance policies adopted by the Company and the Board and committee charters may be accessed via the
Company's website www.harveynormanholdings.com.au (website).
The Board
Role and Responsibilities
The role and responsibility of the Board is to set and approve the strategy of the Company, to identify significant business risks and ensure
arrangements are in place in order to manage those risks and review the performance of the CEO. The Board aims to foster a culture of
compliance, with an emphasis on ethical behaviour, accountability, corporate and individual integrity and respect for others.
The Board has established guidelines for the composition of the Board and meeting processes.
The responsibility for implementation of strategy and risk management and operations of the business is delegated, by the Board, to the CEO
and the executive management team. The CEO reports to the Board on operational issues that include:
a) Recommendations on strategic initiatives and developing and implementing corporate strategies;
b) Preparation for approval by the Board of budgets and cash flow forecasts and management of operations within the financial
constraints imposed by the Board;
c) Maintenance of effective compliance and risk management frameworks;
d) Evaluation of the performance of key executives, including succession and learning and growth activities;
e) Achievement of financial and non-financial key performance indicators as set by the Board; and
f)
Information to keep the Board and ASX fully informed having regard to continuous disclosure obligations.
The Company's continuous disclosure policy sets out procedures supporting the Company's compliance with its continuous disclosure
obligations under the ASX listing rules. The policy is available on the Governance page of the website.
Matters which are specifically reserved for the Board are set out in the Board Charter, which is available on the Governance page of the
website. Other functions reserved for the Board include:
a) Approving the annual and half-yearly financial reports;
b) Approving and monitoring the progress of major capital expenditure, capital management, and acquisitions and divestitures;
c) Ensuring that any significant risks are identified, assessed, appropriately managed and monitored; and
d) Reporting to shareholders.
Board Structure and Composition
The relevant factors in determining the suitability of a board member are integrity, business savvy, an owner-oriented attitude and a deep
genuine interest in the business of the consolidated entity.
In applying these principles to the consolidated entity:
a) Business savvy requires a deep understanding of one or more of the sectors of retail, property, franchising and digital.
b)
Integrity requires a level of fundamental honesty, candour and frankness in dealing with colleagues, regulators and other third parties.
Integrity necessarily requires a director to bring an open mind and independent judgment to the discussion of any matter of concern to
the Board.
c) An owner orientation or perspective of an owner requires the individual to either have:
i.
ii.
"skin in the game" by holding, controlling or benefitting from a significant parcel of shares where the financial interests of
the director are aligned with the long term beneficial interest of shareholders; or
a perspective of advising owners of businesses and understanding that wealth generation is derived from the building of
business interests that create long term sustainable value.
Directors with an owner orientation retain an open mind to consider diverse views but are not strictly beholden to the whims of
fashionable thinking and are able to form their own views as to what constitutes best practice in corporate governance.
d)
Interest in and time to do the job means:
i.
ii.
the person has an executive role, meaning that the person's career is based on job performance at the company; or
the individual has a limited number of outside interests (i.e. the person is not a professional non-executive director),
but in both cases the individual has an independence of mind and outlook.
Applying these criteria to the current Board, the Board is satisfied that each Director brings to the Board the necessary skills and attributes
specified.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
61
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
Board Structure and Composition (continued)
The length of service of each director is set out below.
Name
Gerald Harvey
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Michael John Harvey
Christopher Herbert Brown
Kenneth William Gunderson-Briggs
Graham Charles Paton
Position
Executive Chairman
Executive Director and CEO
Executive Director and COO
Executive Director
Executive Director, CFO and Company Secretary
Non-Executive Director
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Appointed to the Board
1987
1987
2001
2005
2007
1993
1987
2003
2005
Directors of the Company are considered to be independent when they are independent of management and free from any business or other
relationship that could interfere materially with, or could reasonably be perceived to interfere materially with, the exercise of their unfettered
and independent judgement.
A majority of the Board does not consist of independent directors. The majority of the Board consists of executive directors. The Board
recognises the CGC's recommendation that a majority of the Board should consist of independent directors.
The Board believes that each executive director (and each non-executive director who is not independent) is able to bring, and does bring
quality independent judgement to all relevant issues falling within the scope of the role of that executive director and that the Company, as a
whole, benefits from the long-standing experience of that director in relation to the operations and business relationships of the Company.
The Board notes that while the two independent, non-executive members have each served more than nine years, having regard to the
totality of the defining characteristics of an independent director and the specific skills and experience of these directors, the Board still
believes each of them are able to bring quality independent judgement to the issues that come before the Board.
The Board recognises the CGC's recommendation that the Chair should be an independent director. As Chair, Mr Gerald Harvey is not an
independent director.
The Board believes that Mr Gerald Harvey is the most appropriate person to lead the Board as Executive Chairman and that he is able to
bring, and does bring quality independent judgement to all relevant issues falling within the scope of the role of Chairman and that the
Company, as a whole, benefits from his long standing experience of its operations and business relationships.
The Company has in place with each Director a written agreement which sets out the terms of their appointment.
Board Committees
The Board has established specialist Audit, Nomination, Remuneration and Risk Committees.
The membership and responsibilities of these Committees are discussed throughout this Statement and in the Board and Committee
charters that may be accessed on the Governance page of website.
Performance and Board Procedure
The performance of the Board and key executives is reviewed regularly against both measurable and qualitative indicators that align with the
financial and non-financial objectives of the Company. The Nomination Committee conducted performance evaluations of each director,
committee and the Board for the reporting period.
Opportunities are made available to Directors to undertake appropriate professional development, to develop and maintain the skills required
for them to perform their role as a director of the Company.
Directors may seek independent professional advice at the expense of the Company, subject to procedures agreed by the Board.
The Company Secretary is responsible for all matters concerning the proper functioning of the Board and its Committees, including
convening, conducting and recording of meetings, compliance with policy and charters, and advising the Board and its Committees as to
governance matters. The Company Secretary is able to meet with the Chair on any matter regarding the functioning of the Board and its
Committees.
Nomination Committee
The Board has established a Nomination Committee, which meets at least annually, to ensure that the Board continues to operate within the
established guidelines, including when necessary, selecting candidates for the position of director and undertaking appropriate checks,
including character and qualifications, of any potential candidate. Material information relating to any potential candidate is provided to
shareholders before shareholders are asked to vote on the election or re-election of a director. There is an induction program for new
directors.
The Nomination Committee was comprised of non-executive directors, Graham Charles Paton (Chairman), Christopher Herbert Brown and
Kenneth William Gunderson-Briggs for the year.
The Nomination Committee recognises the CGC's recommendation that the Chair of the committee should be an independent director. Mr
Graham Charles Paton is an independent director.
Details of attendance at meetings of the Nomination Committee are set out in the Directors’ Report on page 11 of this report. Additional
details regarding the Nomination Committee, including its charter, are available on the Governance page of the website.
62
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
Audit Committee
The members of the Audit Committee during the year were:
Graham Charles Paton (Chairman)
Christopher Herbert Brown
Kenneth William Gunderson-Briggs
each of whom is a non-executive director and the Chairman is independent.
Details of each Audit Committee member's qualifications and their attendance at meetings of the Audit Committee during the past year are
set out in the Directors’ Report on pages 10 and 11 of this report. Additional details about the Audit Committee, including its charter, are
available on the Governance page of the website.
Risk
The identification and effective management of risk, including calculated risk-taking is viewed as an essential part of the approach of the
Company to creating long-term shareholder value.
The Board determines the risk profile of the Company and is responsible for overseeing and approving risk management strategy and
policies, internal compliance and internal control. The Board has established a separate Risk Committee, to assist the Board, and has
appointed a Chief Risk Officer to collate, monitor, evaluate and report material risks to the Board.
The Board recognises the CGC's recommendation that the chair should be an independent director and that the Risk Committee should
consist of a majority of independent directors. The Board considers that the frequent reporting to the Audit Committee by both the
chairman of the Risk Committee and the Chief Risk Officer (the latter as providing private reports to the Audit Committee) provides an
adequate and appropriate level of involvement by the independent directors in the risk management function.
The Risk Committee is not comprised of a majority of independent directors and is not chaired by an independent director. The Risk
Committee is comprised of four executive directors, including the CEO and CFO. The Chief Risk Officer is required to attend all meetings of
the Risk Committee to inform and assist members of the Risk Committee to carry out its functions. The chairman of the Risk Committee and
the Chief Risk Officer, both regularly attend meetings of the Audit Committee to inform members of the Audit Committee of risk matters
considered by the Risk Committee. The chairman of the Risk Committee regularly reports to the Board on matters considered by the Risk
Committee.
The Board, in conjunction with the Chief Risk Officer, oversees an annual assessment of the effectiveness of risk management and control.
The tasks of undertaking and assessing risk management are delegated to the Chief Risk Officer through the CEO, including responsibility for
the day to day design and implementation of the risk management system of the Company. The Chief Risk Officer reports to the Board on
the key risks of the Company and the extent to which the Chief Risk Officer believes these risks are being adequately managed.
The annual assessment has been undertaken for the year ended 30 June 2018. The key business risks identified by the Board are
summarised in the Directors' Report on pages 30 and 31 of this report.
The Chief Risk Officer is required by the Board to carry out risk specific management activities in core areas, including strategic risk,
operational risk, reporting risk and compliance risk. The Chief Risk Officer is then required to assess risk management and associated internal
compliance and control procedures and report to the Board on the efficiency and effectiveness of these efforts by benchmarking
performance substantially in accordance with Australian/New Zealand Standard for Risk Management (AS/NZS ISO 31000:2009 Risk
Management).
The Board has a number of mechanisms in place to ensure that management’s objectives and activities are aligned with the risks identified
by the Board. These include:
a) Board approval of strategic plans designed to meet stakeholders’ needs and manage business risk; and
b)
Implementation of Board approved operating plans and budgets and Board monitoring of progress against these budgets, including the
establishment and monitoring of financial and non-financial KPIs.
The Board has adopted a comprehensive set of policies and procedures directed towards achieving the recognition and management of risks
relating to:
a) Effectiveness and efficiency in the use of the resources of the Company.
b) Compliance with applicable laws and regulations; and
c) Preparation of reliable published financial information.
Additional details about the Risk Committee, including a copy of its charter, is available on the Governance page of the website.
Internal Audit
The internal audit function provides an objective assessment of:
a)
The systems of internal control;
b) The risk and control framework; and
c) Generally, compliance by the Company with risk management protocols of the Company.
The Board has appointed a Head of Internal Audit to monitor and assess the internal control environment of the Company. The tasks of
undertaking and assessing internal control effectiveness are delegated to the Head of Internal Audit through the Chief Executive Officer,
including responsibility for the day to day design and implementation of the internal control system of the Company. The Head of Internal
Audit reports to the Board on the key internal controls of the Company and the extent to which the Head of Internal Audit believes these
controls are effective.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
63
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
Internal Audit (continued)
In order to ensure the independence of the internal audit function, the Head of Internal Audit meets privately with the Audit Committee,
without management present, on a regular basis. The Audit Committee is responsible for making the final decision on the Head of Internal
Audit’s tenure.
CEO and CFO Certification
The CEO and CFO have provided written statements to the Board in accordance with section 295A of the Corporations Act 2001 and have also
certified to the Board in relation to the year ended 30 June 2018, that:
a)
Their view provided on the Company’s financial report is founded on a sound system of risk management and internal compliance and
control which implements the financial policies adopted by the Board; and
b) The Company’s risk management and internal compliance and control system is operating effectively in all material respects.
The Board agrees with the views of the ASX on this matter and notes that due to its nature, internal control assurance from the CEO and CFO
can only be reasonable rather than absolute. This is due to factors such as the need for judgement, the use of testing on a sample basis, the
inherent limitations in internal control and because much of the evidence available is persuasive rather than conclusive. CEO and CFO control
assurance is not, and cannot, be designed to detect all weaknesses in control procedures.
In order to mitigate this risk, internal control questions are required to be answered and completed by the key management personnel of all
significant business units, including finance managers, in support of the written statements of the CEO and CFO.
Remuneration
The Company aspires to maximise shareholder value by retaining a high quality Board and executive team. Directors and key executives are
remunerated fairly and appropriately with reference to relevant employment market conditions. To assist in achieving this objective, the
Remuneration Committee links the nature and amount of executive directors’ and officers’ remuneration to the Company’s financial and
operational performance. The expected outcomes of the remuneration structure are:
a) Retention and motivation of key executives;
b) Attraction of high quality management to the Company; and
c) Performance incentives that allow executives to share in the success of Harvey Norman Holdings Limited.
The Remuneration Report (contained with the Directors' Report on pages 32 to 56 of this report) contains a description of the Company’s
remuneration philosophy and framework and the remuneration received by directors and executives in the current year. The Remuneration
Report also sets out executive contractual arrangements.
There is no scheme to provide retirement benefits to non-executive directors.
The Board is responsible for determining and reviewing compensation arrangements for the Directors themselves, the Chief Executive
Officer and executive team. The Board has established a Remuneration Committee, comprising three non-executive directors. Members of
the Remuneration Committee throughout the year were Kenneth William Gunderson-Briggs (Chairman), Christopher Herbert Brown and
Graham Charles Paton. No director participates in deliberations about, or decisions, in respect of the remuneration of that director.
The Remuneration Committee recognises the CGC's recommendation that the Chair should be an independent director. Mr Kenneth William
Gunderson-Briggs is an independent director.
Details of attendance of meetings of the Remuneration Committee are set out in the Directors’ Report on page 11 of this report. Additional
details about the Remuneration Committee, including its charter, are available on the Governance page of the website.
Share Trading Policy
A copy of the Share Trading Policy is available on the Governance page of the website. An executive or director of the Company must not
trade in any securities of the Company at any time when he or she is in possession of unpublished, price-sensitive information in relation to
those securities. If the executive or director is not in possession of unpublished, price-sensitive information, then they are able to trade
securities in Trading Windows.
Trading Windows apply during each period of 30 days starting:
a) One day following the announcement of the half yearly and full year results as the case may be; and
b) One day following the holding of the Annual General Meeting.
Before commencing to trade outside a Trading Window, an executive must first obtain the approval of the Company Secretary or CEO to do
so and a director must first obtain approval of the Chairman.
Approval to trade outside Trading Windows will only be granted in exceptional circumstances. As required by the ASX Listing Rules, the
Company notifies the ASX of any transaction conducted by directors in the securities of the Company.
64
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
Shareholder Communication Policy
The Company aims to promote and achieve effective communication with its shareholders at all times. In this pursuit, the Company has a
Shareholder Communication Policy which is available on the Governance page of the website.
The Company is committed to:
a) Ensuring that shareholders and the financial markets are provided with full and timely information about the activities of the Company
in a balanced and understandable way;
b) Complying with continuous disclosure obligations contained in applicable ASX listing rules and Corporations Act 2001 in Australia; and
c) Communicating effectively with its shareholders and making it easier for shareholders to communicate with the Company.
Through the release of information to the market via the ASX;
To promote effective communication with shareholders and encourage effective participation at general meetings, information is
communicated to shareholders:
a)
b) Through the distribution of the Annual Report and Notice of Annual General Meeting;
c)
d) Through letters and other forms of communications directly to shareholders; and
e) By posting relevant information to the website.
Through shareholder meetings and investor relations presentations;
Shareholders may receive or send communications to the Company or its share registry electronically.
The website has a dedicated Reports and Announcements page for the purpose of publishing all important company information and
relevant announcements made to the market.
The external auditor is required to attend the Annual General Meeting and be available to answer any shareholder questions about the
conduct of the audit and preparation of the audit report.
Code of Conduct
The Company's Code of Conduct applies to its directors, senior executives and employees and outlines the standards of behaviour the
Company expects in order to promote a culture of fair and ethical behaviour, in compliance with applicable laws and standards. The Code of
Conduct is published on the Governance page of the website.
Diversity
The Company is committed to promoting an environment that embraces and promotes diversity. The Company has established a Diversity
Policy that aims to create a more competitive and inclusive environment for all of its employees. This policy includes requirements for the
Board to establish measurable objectives for achieving gender diversity and for the Board to assess annually both the objectives and
progress in achieving them.
Diversity Policies
The Company has a Board Diversity Policy and an Employee Diversity Policy; these policies are published on the Governance page of the
website.
The Company recognises the importance of having a diverse workplace and embraces the benefits that a diverse workforce brings to an
organisation. The Company believes that increasing diversity in the workplace is essential to producing greater value for its shareholders as
it allows the Company to become more innovative, responsive, productive and competitive.
The Company is committed to promoting an environment that embraces and promotes diversity. The Company’s Diversity Policy is
conducive to the selection of well qualified employees and senior management candidates from diverse backgrounds, experiences and
perspectives. The Company recognises that employees of all levels will assume changing domestic responsibilities throughout their careers.
The Company is committed to promoting an environment that embraces and promotes diversity and that is conducive of the appointment of
well qualified candidates to the Board. The Company recognises that members of the Board will assume changing domestic responsibilities
throughout their careers.
The number of female and male applicants to advertised positions.
Present Measurements
The consolidated entity presently measures:
a)
b) The number of female and male employees.
c)
d) The number of female and male employees in full time, part time and casual roles.
e) The salaries of female and male employees and whether a pay gap exists in the consolidated entity.
f) Other measures including the age of employees, the ethnicity of employees and the length of service of employees.
The different positions held by female and male employees.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
65
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
Diversity (continued)
Workforce Gender Profile
The table below shows the female composition of employees, senior executives* and board members over the last three financial years.
Data was taken as at 30 June each year.
FEMALE COMPOSITION AT 30 JUNE
Female Employees
Female Senior Executives*
Female Board Members
2016
43.68%
25.89%
11.11%
2017
44.82%
29.81%
11.11%
2018
44.93%
32.69%
11.11%
* The holder of a Senior Executive position in the consolidated entity has primary responsibility for a business unit within the consolidated
entity.
The consolidated entity is a participant in the annual Workplace Gender Equality Report (WGEA Report).
Diversity Measures, Targets and Initiatives
The consolidated entity is committed to increasing diversity in the workplace and, in particular, increasing the participation of women in the
consolidated entity so as to broaden the talent pool from which future leaders of the consolidated entity can be drawn.
During the financial year ended 30 June 2018, the following measures, targets and initiatives were undertaken in accordance with the diversity
objectives of the consolidated entity:
Policies and Procedures
a)
The Diversity and Reconciliation Intranet page was reviewed and updated, making information and resources available to employees on
key diversity areas including gender, culture, generational & mature age, disability and family & work-life balance. In particular the
creation of additional resources for expectant parents and to refine “keeping-in-touch” and “flexible work” practices to ensure
employees feel supported while on parental leave and returning to work.
b) Reviewed and updated Human Resources (“HR”) policies and processes to ensure that they are inclusive in nature and do not expressly
or implicitly operate in a manner contrary to the Employee Diversity Policy or the Board Diversity Policy.
c) Continued development of role-based training content for the Learning Management System (“LMS”), which assists managers to
identify any skill or knowledge gaps of employees and ensures consistency of opportunity across all employees in equivalent roles.
d) Wherever possible, included:
a) At least one female on a short list of applicants for all senior management roles; and
b) At least one woman in the selection panel for all senior management roles.
Monitoring
a) Delivered the annual employee diversity survey to monitor underlying changes to the composition of the workforce, cultural heritage
and caring responsibilities and assess the consolidated entity’s progress in improving workplace diversity and engagement. The results
of this survey were made available to employees on the Diversity and Reconciliation Intranet page.
b) Annual refresher training was delivered for Bullying, Harassment and Discrimination. An audit was conducted to capture completed
training by employees and the Board in an effort to eliminate bullying and harassment in the workplace.
c) As part of the annual governance reporting the business created a workplace profile, as at 30 March 2018, and analysed this data to
monitor and evaluate any gender pay gaps within the consolidated entity.
d) Continued to leverage existing recruitment systems to enable regular reporting and assessment of progress towards the adopted
gender diversity objectives. An example of this is the continued rollout of recruitment and on-boarding technology to improve and
promote consistent recruitment processes and better enable reporting across the consolidated entity.
Community
a) Renewed membership of the Diversity Council Australia to reinforce the consolidated entity's commitment to an inclusive culture and
diversity in the workplace and to add value to diversity related initiatives.
b) Engaged the Diversity Council of Australia to deliver targeted face to face training to Senior Managers showcasing the impact of
“Unconscious Bias” and “Words at Work” to encourage the promotion of fair and unbiased people practices.
c) Conducted the annual “Taste of Harmony” event in March 2018 to raise awareness and embrace the cultural diversity of the workplace.
Money raised as part of this annual diversity event was once again donated to “Fitted for Work”, a local charity with a mission statement
to “help women experiencing disadvantage get work and keep it”.
d) Once again participated in the “NRL All Stars Youth Summit” in February 2018 to further develop and grow relationships with younger
members of the indigenous community and assist in their journey of attaining education and employment.
e) Continued to develop the partnership with Australia Indigenous Mentoring Experience (“AIME”) to support in promoting employment
opportunities to Indigenous Australians. Harvey Norman and AIME have developed an action plan for the 2019 financial year that
includes attending outreach sessions and careers days to build relationships with Indigenous students.
66
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018
Current Assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Other assets
Intangible assets
Total current assets
Non-Current Assets
Trade and other receivables
Investments accounted for using equity method
Other financial assets
Property, plant and equipment
Investment properties
Intangible assets
Total non-current assets
Total Assets
Current Liabilities
Trade and other payables
Interest-bearing loans and borrowings
Income tax payable
Other liabilities
Provisions
Total current liabilities
Non-Current Liabilities
Interest-bearing loans and borrowings
Provisions
Deferred income tax liabilities
Other liabilities
Total non-current liabilities
Total Liabilities
NET ASSETS
Equity
Contributed equity
Reserves
Retained profits
Parent entity interests
Non-controlling interests
TOTAL EQUITY
Note
28(a)
7
8
9
10
11
12
37
13
14
15
16
17
18
19
20
21
20
5(d)
23
24
25
26
27
CONSOLIDATED
June
2018
$000
June
2017
$000
170,544
724,690
31,463
345,287
45,144
490
1,317,618
78,443
4,497
18,283
660,337
2,429,397
69,067
3,260,024
80,224
640,686
29,191
315,968
45,878
486
1,112,433
78,777
26,355
30,076
625,112
2,241,754
75,237
3,077,311
4,577,642
4,189,744
289,986
422,191
15,608
66,825
35,354
829,964
503,203
11,645
280,735
14,163
809,746
238,628
386,651
42,541
41,571
34,034
743,425
333,858
13,052
267,219
19,283
633,412
1,639,710
1,376,837
2,937,932
2,812,907
388,381
185,384
2,337,241
2,911,006
26,926
2,937,932
386,309
174,950
2,229,200
2,790,459
22,448
2,812,907
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
67
INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2018
Sales revenue
Cost of sales
Gross profit
Revenues and other income items
Distribution expenses
Marketing expenses
Occupancy expenses
Administrative expenses
Other expenses
Finance costs
Share of net profit of joint ventures entities
Profit before income tax
Income tax expense
Profit after tax
Attributable to:
Owners of the parent
Non-controlling interests
Earnings Per Share:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Dividends per share (cents per share)
Note
3
3
4
4
4
4
37
5(a) & 5(c)
CONSOLIDATED
June
2018
$000
1,993,760
(1,326,339)
667,421
1,240,703
(41,602)
(374,322)
(241,220)
(585,683)
(114,573)
(26,344)
5,792
530,172
(150,122)
380,050
375,378
4,672
380,050
June
2017
$000
1,833,123
(1,235,602)
597,521
1,305,344
(36,189)
(384,885)
(226,994)
(492,453)
(107,666)
(20,072)
5,200
639,806
(186,840)
452,966
448,976
3,990
452,966
6
6
26
33.71 cents
33.67 cents
40.35 cents
40.30 cents
30.0 cents
26.0 cents
The above Income Statement should be read in conjunction with the accompanying notes.
68
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2018
Profit for the year
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation
Net fair value (losses) / gains on available-for-sale investments
Net movement on cash flow hedges
Income tax effect on net movement on cash flow hedges
Items that will not be reclassified subsequently to profit or loss:
Fair value revaluation of land and buildings
Income tax effect on fair value revaluation of land and buildings
Other comprehensive income for the year (net of tax)
CONSOLIDATED
June
2018
$000
June
2017
$000
380,050
452,966
(221)
(1,830)
16
(4)
15,553
(2,693)
10,821
(6,942)
4,050
18
(6)
25,467
(5,362)
17,225
Total comprehensive income for the year (net of tax)
390,871
470,191
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
385,067
5,804
390,871
467,496
2,695
470,191
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
69
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2018
Attributable to Equity Holders of the Parent
Contributed
Equity
Retained
Profits
Asset
Revaluation
Reserve
Foreign
Currency
Translation
Reserve
Available for
Sale Reserve
Cash Flow
Hedge Reserve
Employee
Equity
Benefits
Reserve
Acquisition
Reserve
Non-
controlling
Interests
TOTAL
EQUITY
$000
$000
$000
$000
$000
$000
$000
$000
$000
$000
At 1 July 2017
386,309
2,229,200
131,304
42,374
13,732
(20)
9,611
(22,051)
22,448
2,812,907
Other comprehensive income:
Revaluation of land and buildings
Reverse expired or realised cash
flow hedge reserves
Currency translation differences
Fair value of forward foreign exchange
contracts
Fair value of available for sale
financial assets
Other comprehensive income
Profit for the year
Total comprehensive income for the
year
-
-
-
-
-
-
-
-
-
-
-
-
-
13,222
-
-
-
-
-
375,378
13,222
-
-
-
(1,715)
-
-
(1,715)
-
-
-
-
-
(1,830)
(1,830)
-
375,378
13,222
(1,715)
(1,830)
Cost of share based payments
Shares issued
Dividends paid
Distribution to members
-
2,072
-
-
-
-
(267,337)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20
-
(8)
-
12
-
12
-
-
-
-
-
-
-
-
-
-
-
-
745
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(362)
-
1,494
-
-
1,132
4,672
12,860
20
(221)
(8)
(1,830)
10,821
380,050
5,804
390,871
-
-
(976)
(350)
745
2,072
(268,313)
(350)
At 30 June 2018
388,381
2,337,241
144,526
40,659
11,902
(8)
10,356
(22,051)
26,926
2,937,932
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
70
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED)
Attributable to Equity Holders of the Parent
Contributed
Equity
Retained
Profits
Asset
Revaluation
Reserve
Foreign
Currency
Translation
Reserve
Available for
Sale Reserve
Cash Flow
Hedge Reserve
Employee
Equity Benefits
Reserve
Acquisition
Reserve
Non-controlling
Interests
TOTAL
EQUITY
$000
$000
$000
$000
$000
$000
$000
$000
$000
$000
At 1 July 2016
385,296
2,125,186
111,199
48,021
9,682
(32)
8,995
(22,051)
22,378
2,688,674
Other comprehensive income:
Revaluation of land and buildings
Reverse expired or realised cash
flow hedge reserves
Currency translation differences
Fair value of forward foreign exchange
contracts
Fair value of available for sale
financial assets
Other comprehensive income
Profit for the year
Total comprehensive income
for the year
Cost of share based payments
Shares issued
Dividends paid
Distribution to members
-
-
-
-
-
-
-
-
-
-
-
-
-
20,105
-
-
-
-
-
-
(5,647)
-
-
-
448,976
20,105
-
(5,647)
-
448,976
20,105
(5,647)
-
1,013
-
-
-
-
(344,962)
-
-
-
-
-
-
-
-
-
-
-
-
-
4,050
4,050
-
4,050
-
-
-
-
-
32
-
(20)
-
12
-
12
-
-
-
-
-
-
-
-
-
-
-
-
616
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,295)
-
-
(1,295)
3,990
20,105
32
(6,942)
(20)
4,050
17,225
452,966
2,695
470,191
-
-
(645)
(1,980)
616
1,013
(345,607)
(1,980)
At 30 June 2017
386,309
2,229,200
131,304
42,374
13,732
(20)
9,611
(22,051)
22,448
2,812,907
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
71
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2018
Cash Flows from Operating Activities
Net receipts from franchisees
Receipts from customers
Payments to suppliers and employees
Distributions received from joint ventures
GST paid
Interest received
Interest and other costs of finance paid
Income taxes paid
Dividends received
CONSOLIDATED
June
2018
$000
June
2017
$000
Note
947,058
2,134,595
(2,388,310)
10,125
(66,102)
5,871
(25,619)
(166,161)
2,713
882,476
1,992,891
(2,252,918)
11,546
(44,621)
4,971
(19,420)
(152,454)
2,669
Net Cash Flows From Operating Activities
28(b)
454,170
425,140
Cash Flows from Investing Activities
Payments for purchases of property, plant and
equipment and intangible assets
Payments for purchase of investment properties
Proceeds from sale of property, plant and equipment
and properties held for resale
Payments for purchase of units in unit trusts and other
investments
Payments for purchase of equity accounted
investments
Proceeds from sale of /(payments for purchase of)
listed securities
Proceeds from insurance claims
Loans granted to joint venture entities, joint venture
partners and unrelated entities
(93,895)
(125,661)
2,422
(107)
(4,256)
10,436
2,458
(94,882)
(89,366)
(114,752)
28,592
(161)
(8,947)
(6,537)
-
(7,594)
Net Cash Flows Used In Investing Activities
(303,485)
(198,765)
Cash Flows from Financing Activities
Proceeds from shares issued
Proceeds from Syndicated Facility
Dividends paid
Loans (repaid to) / received from related parties
Repayment of other borrowings
2,072
210,000
(267,337)
(6,573)
(6,266)
1,013
70,000
(344,962)
2,075
(15,250)
Net Cash Flows Used In Financing Activities
(68,104)
(287,124)
Net Increase / (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of the Year
Cash and Cash Equivalents at End of the Year
28(a)
82,581
42,882
125,463
(60,749)
103,631
42,882
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
72
72
NOTES TO THE FINANCIAL STATEMENTS
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(a)
Corporate Information
Harvey Norman Holdings Limited (the “Company”) is a for profit company limited by shares incorporated in Australia and operating in
Australia, New Zealand, Ireland, Northern Ireland, Singapore, Malaysia, Slovenia and Croatia whose shares are publicly traded on the
Australian Securities Exchange (“ASX”) trading under the ASX code HVN.
(b)
Basis of Preparation
The financial report has been prepared on a historical cost basis, except for investment properties, land and buildings, derivative financial
instruments, listed shares held for trading and available-for-sale investments, which have been measured at fair value. The carrying values
of recognised assets and liabilities that are designated as hedged items in fair value hedges that would otherwise be carried at amortised
cost are adjusted to record changes in the fair values attributable to the risks that are being hedged in effective hedge relationships.
The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($000) unless otherwise
stated under the option available to the Company under Australian Securities and Investments Commission Corporations (Rounding in
Financial/Directors’ Reports) Instrument 2016/191. The Company is an entity to which this legislative instrument applies.
The consolidated financial statements of the Company and its subsidiaries (the “consolidated entity”) for the year ended 30 June 2018 was
authorised for issue in accordance with a resolution of the directors on 28 September 2018.
(c)
Statement of Compliance
The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations
Act 2001, Australian Accounting Standards and Interpretations, and complies with other requirements of the law. The financial report
complies with Australian Accounting Standards, as issued by the Australian Accounting Standards Board, and International Financial
Reporting Standards (IFRS), as issued by the International Accounting Standards Board.
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been
adopted by the consolidated entity for the annual reporting period ended 30 June 2018. For details on the impact of future accounting
standards, refer to page 84.
(d)
Basis of consolidation
The consolidated financial statements comprise the financial statements of Harvey Norman Holdings Limited and its controlled entities.
Control is achieved when the consolidated entity is exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee. Specifically, the consolidated entity controls an investee if and only if
the consolidated entity has all of the following:
Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)
Exposure, or rights, to variable returns from its involvement with the investee, and
The ability to use its power over the investee to affect its returns
When the consolidated entity has less than a majority of the voting or similar rights of an investee, the consolidated entity considers all
relevant facts and circumstances in assessing whether it has power over an investee, including:
The contractual arrangement with the other vote holders of the investee
Rights arising from other contractual arrangements
The consolidated entity’s voting rights and potential voting rights
The consolidated entity re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one
or more of the three elements of control. Consolidation of a subsidiary begins when the consolidated entity obtains control over the
subsidiary and ceases when the consolidated entity loses control of the subsidiary.
All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full.
Unrealised losses are eliminated unless costs cannot be recovered. Financial statements of foreign controlled entities presented in
accordance with overseas accounting principles are, for consolidation purposes, adjusted to comply with the consolidated entity’s policy and
generally accepted accounting principles in Australia.
Non-controlling interests are allocated their share of net profit after tax in the income statement and are presented within equity in the
consolidated statement of financial position, separately from the equity of the owners of the Parent. Losses are attributed to the non-
controlling interest even if that results in a deficit balance.
A change in the ownership interest of a subsidiary (without a change in control) is to be accounted for as an equity transaction.
(e)
Summary of Significant Accounting Policies
(i) Changes in accounting policy, disclosures, standards and interpretations
The accounting policies adopted are consistent with those of the previous financial year except as discussed below. The consolidated entity
applied for the first time certain standards and amendments, which are effective for annual periods beginning on or after 1 January 2017.
These new pronouncements do not have a material impact on the annual consolidated financial statements of the consolidated entity. The
consolidated entity has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
73
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(ii) Significant accounting judgements, estimates and assumptions
In applying the consolidated entity’s accounting policies, management continually evaluates judgements, estimates and assumptions based
on experience and other factors, including expectations of future events that may have an impact on the consolidated entity. All judgments,
estimates and assumptions made are believed to be reasonable based on the most current set of circumstances available to management.
Actual results may differ from the judgments, estimates and assumptions. Significant judgments, estimates and assumptions made by
management in the preparation of these financial statements are outlined below:
Significant accounting judgements:
(a) Assessment of AASB 10 Consolidated Financial Statements in respect of Harvey Norman®, Domayne® and Joyce Mayne®
Franchisees in Australia
In determining whether the consolidated entity has control over an entity (investee) and should or should not consolidate the results of the
investee, the consolidated entity assesses its exposure to / rights to variable returns from its involvement with the investee and whether it
has the ability to affect those returns through its power over the investee.
The assessment of whether Harvey Norman Holdings Limited (HNHL), or any subsidiary of HNHL, as franchisor, should consolidate or not
consolidate the results of a franchisee or business operations of that franchisee, is determined by whether the franchisor has control over
the franchisee. The assessment of whether a franchisor controls a franchisee or the business operations of that franchisee, involves
significant judgment in assessing whether the franchisor has sufficient power through its rights under arrangements with franchisees and
through the practical application of those arrangements, to direct the relevant activities of the franchisee that most significantly affect the
returns (profits or losses) of the franchisee.
At least on an annual basis, the directors of HNHL will reassess the requirements of control in accordance with AASB 10 Consolidated
Financial Statements. During the 2018 financial year, after considering both the legal arrangements in place between the consolidated entity
and Harvey Norman®, Domayne® and Joyce Mayne® franchisees and the practical application of those arrangements, the directors have
continued to conclude that HNHL, or any subsidiary of HNHL, does not control the business operations of franchisees. In particular, HNHL, or
any subsidiary of HNHL, does not have any existing rights that give the consolidated entity the current ability to direct the relevant activities
that most significantly affect the returns of the franchisee. The ability to direct the relevant activities that most significantly affect the
returns of the franchisee, rest with the franchisee.
HNHL, or any subsidiary of HNHL, does not have any voting rights or legal ownership of any equity interest in any franchisee business. Each
franchise business is operated by a separate legal entity which is independent of HNHL, or any subsidiary of HNHL. The franchisee has the
authority and decision-making responsibility over the day-to-day operation and administration of the franchisee business. The franchisee
has the substantive right to control the decisions regarding sales and pricing, inventory purchasing and inventory management, staff
management (hiring, termination, staff numbers, remuneration, appointment of management) and employment of personnel including key
management.
The above assessment has resulted in the conclusion that the assets, liabilities and the results of franchisees in Australia are not
consolidated by the consolidated entity because the consolidated entity does not control the business operations of Harvey Norman®,
Domayne® and Joyce Mayne® franchisees.
(b) Operating lease commitments – consolidated entity as lessor
The consolidated entity has entered into commercial property leases in respect of its investment property portfolio. The entity has
determined, based on an evaluation of the terms and conditions of the arrangements, that it retains all the significant risks and rewards of
ownership of these properties and has classified the leases as operating leases.
(c) Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences as management considers that it is probable that future taxable
profits will be available to utilise those temporary differences. Deferred tax assets are recognised for unused tax losses to the extent that it
is probable that taxable profit will be available against which the losses can be utilised.
Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely
timing and the level of future taxable profits.
Significant accounting estimates and assumptions:
The key estimates and assumptions at the reporting date that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next annual reporting period, are described below. The consolidated entity based its assumptions
and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions
about future developments, however, may change due to market changes or circumstances arising beyond the control of the consolidated
entity. Such changes are reflected in the assumptions when they occur.
(a) Revaluation of investment properties
The consolidated entity values investment properties at fair value. The valuations are determined by independent external valuers or
reviewed internally by the Property Review Committee and the directors of the Company. Independent valuations are performed by external,
professionally qualified valuers who hold a recognised, relevant professional qualification and have specialised expertise in the properties
valued. The key assumptions used to determine the fair value of the investment properties, and the relevant sensitivity analysis, are
disclosed in Note 15.
74
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(ii) Significant accounting judgements, estimates and assumptions (continued)
(b) Revaluation of property, plant and equipment
The consolidated entity values land and buildings at fair value. The valuations are determined by independent external valuers or reviewed
internally by the Property Review Committee and the directors of the Company. The key assumptions used to determine the fair value of
owner-occupied land and buildings, and the relevant sensitivity analysis, are disclosed in Note 14.
(c) Revaluation of investment properties for development
An investment property for development is valued at fair value if it can be reliably determined. If a fair value cannot be reliably determined,
then the investment property for development is measured at cost. The key assumptions used to determine the fair value of the investment
properties for development and the relevant sensitivity analysis, are disclosed in Note 15.
(d) Impairment of financial assets and trade receivables
The consolidated entity assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial
assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if there is objective evidence of impairment as a
result of one or more events that has occurred after the initial recognition of the asset (an incurred ”loss event”) and that loss event has an
impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of
impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or
delinquency in interest or principal payments or the probability that they will enter bankruptcy.
The carrying amount of the asset is either directly reduced or reduced through the use of an allowance account and the amount of the loss
is recognised in the income statement.
Further details on the significant judgements considered by management relating to impairment of financial assets are disclosed in Note 7.
The impairment loss is disclosed in Notes 4 and 7.
(e) Impairment of equity-accounted investments
The consolidated entity determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If
there is such evidence, the consolidated entity calculates the amount of impairment as the difference between the recoverable amount of
the associate or joint venture and its carrying value.
(f) Share-based payment transactions
The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted.
(g) Make good provisions
Provisions are recognised for the anticipated costs of future restoration of leased premises. The provision includes future cost estimates
associated with dismantling and removing the assets and restoring the leased premises according to contractual arrangements. These
future cost estimates are discounted to their present value. The related carrying amounts are disclosed in Note 20.
(h) Onerous lease provisions
The provision for onerous lease costs represents the present value of the future lease payments that the consolidated entity is presently
obligated to make in respect of onerous lease contracts under non-cancellable operating lease agreements. This obligation may be reduced
by the revenue expected to be earned on the lease including estimated future sub-lease revenue, where applicable. The estimate may vary
as a result of changes in the utilisation of the leased premises and sub-lease arrangements where applicable. The related carrying amounts
are disclosed in Note 20.
(iii) Investment in associates and joint ventures
An associate is an entity over which the consolidated entity has significant influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee, but does not control or have joint control over those policies.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of
the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the
relevant activities require unanimous consent of the parties sharing control.
The considerations made in determining significant influence or joint control are similar to those necessary to determine control over
subsidiaries.
The consolidated entity’s investments in its associate and joint venture are accounted for using the equity method.
Under the equity method, the investment in an associate or joint venture is initially recognised at cost. The carrying amount of the
investment is adjusted to recognise changes in the consolidated entity’s share of net assets of the associate or joint venture since the
acquisition date.
After application of the equity method, the consolidated entity determines whether it is necessary to recognise any impairment loss with
respect to the consolidated entity’s net investment in the associates and joint ventures. At each reporting date, the consolidated entity
determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence,
the consolidated entity calculates the amount of impairment as the difference between the recoverable amount of the associate or joint
venture and its carrying value.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
75
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(iii) Investment in associates and joint ventures (continued)
Joint venture land and building assets, primarily relating to the joint ownership of shopping complexes, resort operations and
residential/convention developments, are directly owned by each joint venture partner as tenants in common in their respective shares.
Joint venture land and buildings assets are classified as joint venture operations and the consolidated entity’s share of land and building
assets are proportionately consolidated in the consolidated financial statements within investment properties.
(iv) Foreign currency translation
Both the functional and presentation currency of Harvey Norman Holdings Limited and its Australian subsidiaries is Australian dollars.
Transactions in foreign currencies are initially recorded in the functional currency at exchange rates prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated at the exchange rate prevailing at balance date.
Differences arising on settlement or translation of monetary items are recognised in profit or loss with the exception of monetary items that
are designated as part of the hedge of the consolidated entity’s net investment in a foreign operation. These are recognised in other
comprehensive income until the net investment is disposed of, at which time, the cumulative amount is reclassified to profit or loss. Tax
charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date
of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the
date when the fair value was determined.
The functional currency of overseas subsidiaries is the currency commonly used in their respective countries. As at the reporting date the
assets and liabilities of these overseas subsidiaries are translated into the presentation currency of the consolidated entity at the rate of
exchange prevailing at the balance date and the income statements are translated at the weighted average exchange rates for the year.
The exchange differences arising on retranslation for consolidation are recognised in other comprehensive income. On disposal of a foreign
entity, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss.
(v) Property, plant and equipment
Plant and equipment assets are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Land,
leasehold land and buildings are measured at fair value less accumulated depreciation and any impairment losses recognised after the date
of the revaluation. Valuations are performed with sufficient frequency to ensure that the carrying amount of an asset does not differ
materially from its fair value.
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
Land – not depreciated
Leasehold land – lease term
Buildings under construction – not depreciated
Buildings – 20 to 40 years
Owned plant and equipment – 3 to 20 years
Plant and equipment under finance lease – 1 to 5 years
The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end.
Revaluation of owner-occupied properties
Following initial recognition at cost, owner-occupied land and buildings (including leasehold land) are carried at fair value less any
subsequent accumulated depreciation and accumulated impairment losses.
Fair value is determined by reference to market-based evidence, which is the amount for which the assets could be exchanged between a
knowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length transaction as at the valuation date. Owner-occupied
properties, upon any revaluation, are valued at fair value, determined by independent licensed valuers, or directors’ valuations where
necessary.
Any revaluation surplus is recorded in other comprehensive income and credited to the asset revaluation reserve in equity. However, to the
extent that it reverses a revaluation decrease of the same asset previously recognised in the income statement, the increase is recognised in
the income statement. Any revaluation deficit is recognised in the income statement, except to the extent that it offsets a previous surplus
of the same asset in the asset revaluation reserve.
Any accumulated depreciation as at revaluation date is eliminated against the gross carrying amount of the asset and the net amount is
restated to the fair value of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to
retained earnings.
Valuations are performed with sufficient regularity to ensure that the carrying amount does not differ materially from the asset’s fair value at
the balance date.
Derecognition and disposal
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or
disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the
carrying amount of the item) is included in the income statement when the asset is derecognised.
76
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(vi) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily
take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the
assets are substantially ready for their intended use or sale. All other borrowing costs are recognised as an expense when incurred.
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
(vii) Investment properties
Investment properties
Investment property, which is property held to earn rentals and / or for capital appreciation are measured initially at cost including
transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the
balance date. Gains or losses arising from changes in the fair values of investment properties are included in the income statement in the
period in which they arise.
Investment property is derecognised when the property has either been disposed of or when the property is permanently withdrawn from
use and no future benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the
asset is recognised in the income statement in the period of derecognition.
Transfers are made to investment property when, and only when, there is a change in use, evidenced by the ending of owner-occupation,
commencement of an operating lease to another party or ending of construction or development. Transfers are made from investment
property when, and only when, there is a change in use, evidenced by commencement of owner-occupation.
Properties located in the Australian Capital Territory (“ACT”) which are held under a 99 year ground crown land sublease from the
Commonwealth Government are not amortised over the remaining life of the lease, as the expectation is that these leases will be renewed at
minimal cost once they expire. Properties located in the ACT have been accounted for as investment properties as they are primarily held to
earn rental income.
Each investment property is valued at fair value. Each investment property is the subject of a lease or licence in favour of independent third
parties, including Harvey Norman®, Domayne® and Joyce Mayne® franchisees (“Franchisees”). Franchisees occupy properties pursuant to a
licence, terminable upon reasonable notice. The fair value in respect of each investment property has been calculated primarily using the
income capitalisation valuation method, against current market rental value, and having regard to, in respect of each property:
the highest and best use
quality of construction
age and condition of improvements
recent market sales data in respect of comparable properties
current market rental value, being the amount that could be exchanged between knowledgeable, willing parties in an arm’s length
transaction
tenure of franchisees and external tenants
adaptive reuse of buildings
non-reliance on turnover rent
the specific circumstances of the property not included in any of the above points
The income capitalisation valuation method is the primary method used for valuations. A discounted cash flow valuation or a direct sale
comparison valuation is undertaken as a secondary method, excluding investment property for development.
Investment property for development
Investment property for development are valued at fair value if fair value can be reliably determined. The direct sale comparison method is
used for the valuation of investment property for development.
(viii) Intangible assets
Intangible assets, consisting of capitalised computer software assets, capitalised development expenditures and licence property, are carried
at cost less any accumulated amortisation and accumulated impairment losses. Intangible assets are amortised on a straight line basis over
their estimated useful lives but not greater than a period of eight and a half (8.5) years.
Intangible assets are tested for impairment where an indicator of impairment exists, either individually or at the cash generating unit level.
Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis. The amortisation
expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the
intangible asset.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the
carrying amount of the intangible asset and are recognised in the income statement when the intangible asset is derecognised.
Development expenditures on an individual project are recognised as an intangible asset when the consolidated entity can demonstrate:
the technical feasibility of completing the intangible asset so that the asset will be available for use or sale
its intention to complete and its ability and intention to use or sell the asset
how the asset will generate future economic benefits
the availability of resources to complete the asset
the ability to measure reliably the expenditure during development
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and
accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is
amortised over the period of expected future benefit. During the period of development, the asset is tested for impairment annually.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
77
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(ix) Impairment of non-financial assets
The consolidated entity assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication
exists, or when annual impairment testing for an asset is required, the consolidated entity estimates the asset’s recoverable amount. An
asset’s recoverable amount is the higher of an asset’s or cash generating unit’s (CGUs) fair value less costs to sell and its value in use.
Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of
those from other assets or groups of assets, in which case, the recoverable amount is determined for the CGU to which the asset belongs.
When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its
recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset.
In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be
identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples for publicly traded subsidiaries
or other available fair value indicators.
The consolidated entity bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for
each of the consolidated entity’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover
a period of five (5) years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth
year.
Impairment losses of continuing operations, including impairment on inventories, are recognised in the income statement in expense
categories consistent with the function of the impaired assets, except for a property previously revalued and the revaluation was taken to
other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any
previous revaluation.
An assessment is made at each reporting date to determine whether there is any indication that previously recognised impairment losses
may no longer exist or may have decreased. If such indication exists, the consolidated entity estimates the asset’s or CGU’s recoverable
amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the
asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset
does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no
impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement unless the asset is carried
at a revalued amount, in which case, the reversal is treated as a revaluation increase.
(x) Financial assets
Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and receivables, held-to-
maturity investments, available-for-sale financial assets or as derivatives designated as hedging instruments in an effective hedge, as
appropriate.
All financial assets are recognised initially at fair value plus transaction costs, except in the case of financial assets recorded at fair value
through profit or loss.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the
market place (regular way trades) are recognised on the trade date, i.e. the date that the consolidated entity commits to purchase or sell the
asset.
The consolidated entity’s financial assets include cash and short-term deposits, trade and other receivables, quoted financial instruments
and derivative financial instruments.
For purposes of subsequent measurement, financial assets are classified in four categories:
Financial assets at fair value through profit or loss
Held-to-maturity investments
Loans and receivables
Available-for-sale financial assets
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial
recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling
in the near term with the intention of making a profit. Derivatives are also classified as held for trading unless they are designated as
effective hedging instruments as defined by AASB 139 Financial Instruments: Recognition and Measurement (AASB 139).
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value
presented as finance costs (negative net changes in fair value) or finance income (positive net changes in fair value) in the income
statement.
Held-to-maturity investments
Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the
consolidated entity has the positive intention and ability to hold to maturity. After initial measurement, held-to-maturity investments are
measured at amortised cost using the effective interest rate (EIR), less impairment. Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance income
in the income statement. The losses arising from impairment are recognised in the income statement as finance costs.
78
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(x) Financial assets (continued)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After
initial measurement, such financial assets are subsequently measured at amortised cost using the EIR method, less impairment. Amortised
cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The
EIR amortisation is included as finance income in the income statement. The losses arising from impairment are recognised in the income
statement as administrative expenses for loans and in other operating expenses for receivables.
Available-for-sale financial assets
Available-for-sale financial assets include equity investments. Equity investments classified as available-for-sale are those that are neither
classified as held for trading nor designated at fair value though profit or loss. After initial recognition, available-for-sale financial assets are
measured at fair value with gains or losses recognised as other comprehensive income in the available-for-sale reserve until the investment
is derecognised, at which time the cumulative gain or loss is recognised in other operating income, or the investment is determined to be
impaired, when the cumulative loss is reclassified from the available-for-sale reserve to the income statement in finance costs. The fair
values of investments that are actively traded in organised financial markets are determined by reference to quoted market bid prices at the
close of business at balance date. For investments with no active market, fair values are determined using valuation techniques. Dividends
on available-for-sale equity instruments are recognised in the income statement when the consolidated entity’s right to receive the
dividends is established.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:
The rights to receive cash flows from the asset have expired.
The consolidated entity has transferred its rights to receive cash flows from the asset or has transferred substantially all the risks and
rewards of the asset.
Impairment of financial assets
The consolidated entity assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial
assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of
impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ”loss event”) and that
loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably
estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial
difficulty, default or delinquency in interest or principal payments or the probability that they will enter bankruptcy.
The carrying amount of the asset is either directly reduced or reduced through the use of an allowance account and the amount of the loss
is recognised in the income statement. Loans together with the associated allowance are written off when there is no realistic prospect of
future recovery and all collateral has been realised or has been transferred to the consolidated entity. If, in a subsequent year, the amount of
the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously
recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery
is credited in the income statement.
For available-for-sale financial investments, the consolidated entity assesses at each reporting date whether there is objective evidence that
an investment or a group of investments is impaired. In the case of equity investments classified as available-for-sale, objective evidence
would include a significant or prolonged decline in the fair value of the investment below its cost. ”Significant” is evaluated against the
original cost of the investment and ”prolonged” against the period in which the fair value has been below its original cost. When there is
evidence of impairment, the cumulative loss, measured as the difference between the acquisition cost and the current fair value, less any
impairment loss on that investment previously recognised in the income statement, is removed from other comprehensive income and
recognised in the income statement. Impairment losses on equity investments are not reversed through the income statement; increases in
their fair value after impairment are recognised directly in other comprehensive income.
(xi) Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables,
or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable
transaction costs. The consolidated entity’s financial liabilities include trade and other payables, interest-bearing loans and borrowings and
derivative financial instruments.
The measurement of financial liabilities depends on their classification, described as follows:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial
recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are acquired for the purpose of
selling in the near term. Gains or losses on liabilities held for trading are recognised in the income statement. Financial liabilities designated
upon initial recognition at fair value through profit and loss only if the criteria of AASB 139 are satisfied.
Loans and borrowings
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains
and losses are recognised in the income statement when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the
EIR. The EIR amortisation is included in finance costs in the income statement.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. When an existing financial
liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
79
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(xi) Financial liabilities (continued)
modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The
difference in the respective carrying amounts is recognised in the income statement.
(xii) Derivative financial instruments and hedge accounting
The consolidated entity uses derivative financial instruments such as forward currency contracts to hedge its risks associated with foreign
currency fluctuations. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is
entered into and are subsequently remeasured at fair value. The fair value of forward currency contracts is calculated by reference to
current forward exchange rates for contracts with similar maturity profiles.
Derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative. Any gains or losses arising
from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is
recognised in other comprehensive income and later reclassified to profit or loss when the hedge item affects profit or loss.
For the purposes of hedge accounting, hedges are classified as either fair value hedges when they hedge the exposure to changes in the fair
value of a recognised asset or liability or an unrecognised firm commitment; or cash flow hedges where they hedge exposure to variability in
cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast
transaction.
At the inception of a hedge relationship, the consolidated entity formally designates and documents the hedge relationship to which the
consolidated entity wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The
documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and
how the entity will assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the
hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving
offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly
effective throughout the financial reporting periods for which they were designated.
Fair value hedges
The change in the fair value of a hedging instrument is recognised in profit or loss. The change in the fair value of the hedged item
attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in profit or loss. For fair
value hedges relating to items carried at amortised cost, any adjustment to carrying value is amortised through profit or loss over the
remaining term of the hedge using the EIR method. EIR amortisation may begin as soon as an adjustment exists and no later than when the
hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. If the hedged item is derecognised, the
unamortised fair value is recognised immediately in profit or loss. When an unrecognised firm commitment is designated as a hedged item,
the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognised as an asset or
liability with a corresponding gain or loss recognised in profit and loss. The consolidated entity uses forward currency contracts to manage
the exposure of changes in the fair value of its receivables or payables that are denominated in foreign currencies.
Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income in the cash flow hedge
reserve, while any ineffective portion is recognised immediately in the income statement. The consolidated entity uses forward currency
contracts as hedges of its exposure to foreign currency risk in forecast transactions and firm commitments. The ineffective portion relating
to forward currency contracts is recognised in other operating income or expenses.
Amounts recognised as other comprehensive income are transferred to profit or loss when the hedged transaction affects profit or loss.
When the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognised as other comprehensive income
are transferred to the initial carrying amount of the non-financial asset or liability.
If the hedge instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its
designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss
previously recognised in other comprehensive income remains separately in other comprehensive income until the forecast transaction
occurs or the foreign currency firm commitment is met.
(xiii) Inventories
Inventories are valued at the lower of cost and net realisable value and are recorded net of all volume rebates, marketing and business
development contributions and settlement discounts. Costs are on a weighted average basis and include the acquisition cost, freight, duty
and other inward charges. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs
necessary to make the sale.
(xiv) Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash at bank and on hand and short-term deposits with an original
maturity of three months or less. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash
equivalents as defined above, net of outstanding bank overdrafts. Bank overdrafts are included within interest-bearing loans and
borrowings in current liabilities on the statement of financial position.
(xv) Provisions
Provisions are recognised when the consolidated entity has a present obligation (legal or constructive) as a result of a past event, it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be
made of the amount of the obligation.
80
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(xv) Provisions (continued)
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the
risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance
cost, in the income statement.
The consolidated entity recognises a liability to pay a dividend when the distribution is authorised and the distribution is no longer at the
discretion of the consolidated entity. As per the corporate laws of Australia, a distribution is authorised when it is approved by the
shareholders. A corresponding amount is recognised directly in other comprehensive income.
Provisions are made for benefits accruing to employees in respect of annual leave and long service leave when it is probable that settlement
will be required and they are capable of being measured reliably.
Provisions made in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the
remuneration rate expected to apply at the time of settlement. Provisions made in respect of employee benefits which are not expected to
be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the consolidated entity
in respect of services provided by employees up to reporting date. Consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting
date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash
outflows.
Expenses for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.
(xvi) Share-based payment transactions
The consolidated entity provides benefits to certain employees (including executive directors) of the consolidated entity in the form of
share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (“equity-settled
transactions”).
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation
model.
That cost is recognised in employee benefits expense, together with a corresponding increase in other comprehensive income (employee
equity benefits reserve), over the period in which the service and, where applicable, the performance conditions are fulfilled (the vesting
period). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent
to which the vesting period has expired and the consolidated entity’s best estimate of the number of equity instruments that will ultimately
vest. The expense or credit in the income statement for a period represents the movement in cumulative expense recognised as at the
beginning and end of that period.
Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the
likelihood of the conditions being met is assessed as part of the consolidated entity’s best estimate of the number of equity instruments that
will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award,
but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair
value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions.
No expense is recognised for awards that do not ultimately vest because non-market performance and/or service conditions have not been
met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or
non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognised is the grant date fair value of the unmodified
award, provided the original terms of the award are met. An additional expense, measured as at the date of modification, is recognised for
any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee.
Where an award is cancelled by the entity or by the counterparty, any remaining element of the fair value of the award is expensed
immediately through profit or loss.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
(xvii) Leases
Consolidated entity as lessor
Amounts due from lessees under finance leases are recorded as receivables. Finance lease receivables are initially recognised at amounts
equal to the present value of the minimum lease payments receivable plus the present value of any unguaranteed residual value expected to
accrue at the end of the lease term. Finance lease payments are allocated between interest revenue and reduction of the lease receivable
over the term of the lease in order to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.
Leases in which the consolidated entity does not transfer substantially all the risks and benefits of ownership of an asset are classified as
operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and
recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they
are earned.
Consolidated entity as lessee
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and
rewards incidental to ownership to the consolidated entity is classified as a finance lease.
Finance leases are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the
minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
81
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(xvii) Leases (continued)
a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the income
statement. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.
An operating lease is a lease other than a finance lease. Operating lease payments are recognised as an expense in the income statement
on a straight-line basis over the lease term.
Financial incentive contributions received from lessors are recognised at their fair value on receipt as a liability in the financial statements.
The liability is reduced and recognised as income, by offsetting against occupancy expenses in the income statement over the period the
consolidated entity expects to derive a benefit from the incentive contribution. Lease incentives are normally amortised to the income
statement on a straight-line basis over the term of the lease.
(xviii) Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the consolidated entity and the revenue can be
reliably measured regardless of when the payment is received. Revenue is measured at the fair value of the consideration received or
receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The following specific recognition
criteria must also be met before revenue is recognised:
Sale of goods
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the
goods. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and
allowances, trade discounts and volume rebates.
Franchise fee income
Revenue attributable to franchise fees is recognised in the income statement only when the franchise fees have been earned.
Rental income
Rental income arising on investment properties is accounted for on a straight-line basis over the lease terms and is included in revenue due
to its operating nature. Contingent rental income is recognised as income in the periods in which it is earned.
Interest income
For all financial instruments measured at amortised cost and interest-bearing financial assets, interest income is recorded using the
effective interest rate (EIR). The EIR is the rate that exactly discounts the estimated future cash receipts over the expected life of the
financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset. Interest income is included in
finance income in the income statement.
Dividends
Revenue is recognised when the shareholders’ right to receive the payment is established, which is generally when shareholders approve the
dividend.
(xix) Taxes
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The
tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the
countries where the consolidated entity operates and generates taxable income.
Current income tax relating to items recognised directly in equity is recognised in equity and not in the income statement. Management
periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to
interpretation and establishes provisions where appropriate.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes at the reporting date.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and unused tax losses, to
the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of
unused tax credits and unused tax losses can be utilised, except:
when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in
a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable
profit or loss; and
in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures,
deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable
future and taxable profit will be available against which the temporary differences can be utilised in respect of taxable temporary
differences associated with investments in subsidiaries, associates and interests in joint ventures, except where the timing of the
reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the
foreseeable future.
Deferred tax liabilities are recognised for all taxable temporary differences except:
when the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
the carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable
that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.
82
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(xix) Taxes (continued)
Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that
future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the
liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. Deferred tax
assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities
and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in
correlation to the underlying transaction either in other comprehensive income or directly in equity.
Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except:
when the GST incurred on a sale or purchase of assets and services is not payable or recoverable from the taxation authority, in which
case the GST is recognised as part of the revenue or expense item or as part of the cost of acquisition of the asset as applicable.
when receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement
of financial position. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation
authority.
Cash flows are included in the statement of cash flows on a gross basis. The GST component of cash flows arising from operating, investing
and financing activities, which is recoverable from, or payable to, the taxation authority, is classified as operating cash flows.
Tax consolidation
Harvey Norman Holdings Limited (HNHL) and its 100% owned Australian resident subsidiaries are members of a tax consolidated group.
HNHL is the head entity of the tax consolidated group. Members of the group have entered into a tax sharing agreement which provides for
the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. At the balance date,
the possibility of default is remote.
Wholly owned companies of the tax consolidated group have entered into a tax funding agreement. The funding agreement provides for the
allocation of current and deferred taxes on a modified standalone basis in accordance with the principles as outlined in UIG Interpretation
1052 Tax Consolidation Accounting. The allocation of taxes under the tax funding agreement is recognised as an increase/decrease in the
subsidiaries’ inter-company accounts with the tax consolidated entity head entity HNHL.
(xx) Earnings per share (EPS)
Basic EPS is calculated as net profit attributable to members, adjusted to exclude costs of servicing equity (other than dividends), divided by
the weighted average number of ordinary shares, adjusted for any bonus elements.
Diluted EPS is calculated as net profit attributable to members, adjusted for:
costs of servicing equity (other than dividends);
the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses;
and
other non-discretionary changes in revenues or expenses during the year that would result from the dilution of potential shares,
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.
(xxi) Contributed Equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
reduction, net of tax, from the proceeds.
(xxii) Operating segments
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses
(including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly
reviewed by the entity's chief operating decision makers to make decisions about resources to be allocated to the segment and assess its
performance and for which discrete financial information is available. This includes start up operations which are yet to earn revenues.
Management will also consider other factors in determining operating segments such as the existence of a line manager and the level of
segment information presented to the Board of directors.
Operating segments have been identified based on the information provided to the chief operating decision makers – being the executive
management team. The consolidated entity aggregates two or more operating segments when they have similar economic characteristics,
and the segments are similar in each of the following respects:
methods used to distribute the products or provide the services; and, if applicable
nature of the products and services;
nature of the production processes;
type or class of customer for the products and services;
nature of the regulatory environment.
Operating segments that meet the quantitative criteria as prescribed by AASB 8 Operating Segments are reported separately. However, an
operating segment that does not meet the quantitative criteria is still reported separately where information about the segment would be
useful to users of the financial statements. Information about other business activities and operating segments that are below the
quantitative criteria are combined and disclosed in a separate category as “other segments”.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
83
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(f)
Future Accounting Standards
Certain Australian Accounting Standards have recently been issued or amended but are not yet effective and have not been adopted by the
consolidated entity for the year ended 30 June 2018.
AASB 9 Financial Instruments
AASB 9 replaces AASB 139 Financial Instruments: Recognition and Measurement. The standard includes a single approach for the
classification and measurement of financial assets, based on cash flow characteristics and the business model used for the management of
the financial instruments. For financial liabilities designated as fair value through profit or loss, the amount of change in the fair value of
such financial liabilities that is attributable to changes in credit risk must be presented in other comprehensive income, and the remaining
change is presented in profit or loss. The incurred loss model used in AASB 139 has been replaced by the expected credit loss model in
AASB 9 for impairment of financial assets. The requirements of hedge accounting have been amended to more closely align hedge
accounting with risk management and establish a more principles-based approach to hedge accounting.
The consolidated entity will first apply AASB 9 in the financial year beginning 1 July 2018. The consolidated entity is in the process of
finalising its assessment of the requirements of the new standard and its impact on the consolidated entity’s financial assets or financial
liabilities for the year ended 30 June 2019.
AASB 15 Revenue from Contracts with Customers
AASB 15 provides a single, principles-based, five-step model to recognise and measure revenues arising from contracts with customers. The
core principle of AASB 15 is that an entity recognises revenue related to the transfer of promised goods or services when control of the
goods or services passes to customers. The amount of revenue recognised should reflect the consideration to which the entity expects to
be entitled in exchange for those goods or services.
The consolidated entity has identified the significant performance obligations and revenue streams across the business as part of their
detailed assessment of the impact of AASB 15 on the financial statements and related note disclosures of the consolidated entity. Based on
the work performed to date, the consolidated entity expects that there would be no material impact on the financial statements of the
consolidated entity upon implementation of the new standard for the year ended 30 June 2019. The consolidated entity will first apply AASB
15 in the financial year beginning 1 July 2018 and is expected to apply the standard retrospectively only to the contracts that are not
completed at the date of initial application. The impact of the application of the standard is being monitored by the consolidated entity, and
the consolidated entity expects to conclude on the impact in due course.
AASB 16 Leases
From the effective date of the new standard, AASB 16 will replace the existing accounting requirements for leases under AASB 117 Leases
and the related interpretations of the current standard. Lessees will no longer distinguish between finance lease contracts and operating
lease contracts. From a balance sheet perspective, right-of-use (ROU) assets and the associated lease liabilities, representing the present
value of future lease payments, will be recognised on the consolidated Statement of Financial Position for all lease contracts, with the
exception of short term (less than 12 months) and low-value leases. From a profit and loss perspective, lease expenses recognised under
the current standard will be replaced by the depreciation charge on the ROU assets and the interest expense recognised in respect of the
lease liabilities. From a cash flow presentation perspective, lease payments are required to be separated into a principal portion (presented
within financing activities) and an interest portion (presented within operating activities, consistent with the consolidated entity’s accounting
policy).
The consolidated entity will first apply AASB 16 in the financial year beginning 1 July 2019 and is expected to apply the modified retrospective
approach. Therefore the cumulative effect of adopting AASB 16 will be recognised as an adjustment to the opening balance of retained
earnings at 1 July 2019, with no restatement of comparative information.
The consolidated entity is in the process of completing an assessment of the impact of implementing the requirements of AASB 16. The
primary impact of AASB 16 will relate to the accounting treatment, presentation and disclosures of rental lease contracts relating to the
property leases of externally-leased franchised complexes in Australia and the leased company-operated stores in overseas regions – that
is, where the consolidated entity is the named lessee in the lease contract. Where the consolidated entity is a lessor, the application of AASB
16 remains largely unchanged relative to the current accounting treatment.
As at 30 June 2018, 100 franchised complexes out of a total 195 franchised complexes in Australia (representing 51.3% of the total) are
leased from external landlords and are subject to retail-use property leases. In overseas regions, 65 company-operated stores out of a total
89 company-operated stores (representing 73.0% of the total) are leased from external landlords and are subject to retail-use property
leases. Upon adoption of the standard, the consolidated entity will be required to calculate the ROU assets and the lease liabilities in respect
of these leased sites, and will recognise these amounts as part of total assets and total liabilities within the consolidated Statement of
Financial Position. Upon implementation, these leased sites will be subject to the new accounting treatment, presentation and disclosure
requirements as described above.
Based on the detailed analysis performed to date, the consolidated entity expects there to be a material increase in total assets and total
liabilities on the consolidated Statement of Financial Position. The impact on the net asset position of the consolidated entity and the impact
on the Income Statement from transition date will depend on future economic conditions, including the consolidated entity’s borrowing rate
at 1 July 2019 and the composition of the consolidated entity’s lease portfolio, including tenure of the lease and the decisions regarding the
estimated lease-term for those property leases containing renewal options.
84
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2. OPERATING SEGMENTS
Operating Segment Revenue:
30 June 2018
Sales to
Customers
Outside the
Consolidated
Entity
June 2018 $000
Other Revenues
from Outside the
Consolidated
Entity
Segment Revenue
FRANCHISING OPERATIONS
-
932,669
932,669
Retail – New Zealand
Retail – Singapore & Malaysia
Retail – Slovenia & Croatia
Retail – Ireland & Northern Ireland
Other Non-Franchised Retail
TOTAL RETAIL
Retail Property
TOTAL PROPERTY
EQUITY INVESTMENTS
OTHER
909,524
478,401
133,752
313,325
155,340
1,990,342
99
99
-
20,376
10,687
2,048
5,636
4,480
43,227
304,516
304,516
929,900
489,088
135,800
318,961
159,820
2,033,569
304,615
304,615
6,154
6,154
3,319
14,766
18,085
INTER-COMPANY ELIMINATIONS
-
(60,629)
(60,629)
TOTAL SEGMENT REVENUE
1,993,760
1,240,703
3,234,463
Operating Segment Revenue:
30 June 2017
Sales to Customers
Outside the
Consolidated Entity
June 2017 $000
Other Revenues
from Outside the
Consolidated
Entity
Segment Revenue
FRANCHISING OPERATIONS
-
940,311
940,311
Retail – New Zealand
Retail – Singapore & Malaysia
Retail – Slovenia & Croatia
Retail – Ireland & Northern Ireland
Other Non-Franchised Retail
TOTAL RETAIL
Retail Property
Property Developments for Resale
TOTAL PROPERTY
EQUITY INVESTMENTS
OTHER
INTER-COMPANY ELIMINATIONS
888,537
415,693
107,997
263,763
156,632
1,832,622
125
-
125
-
376
-
20,429
7,912
2,456
8,200
3,425
42,422
352,905
4,578
357,483
6,370
16,769
908,966
423,605
110,453
271,963
160,057
1,875,044
353,030
4,578
357,608
6,370
17,145
(58,011)
(58,011)
TOTAL SEGMENT REVENUE
1,833,123
1,305,344
3,138,467
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
85
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2. OPERATING SEGMENTS (continued)
Operating Segment Result:
30 June 2018
Segment
Result Before
Interest,
Taxation,
Depreciation,
Impairment &
Amortisation
June 2018 $000
Interest
Expense
Depreciation
Expense
Impairment &
Amortisation
Expense
Segment Result
Before Tax
FRANCHISING OPERATIONS
329,617
(2,471)
(27,300)
(17,306)
282,540
Retail – New Zealand
Retail – Singapore & Malaysia
Retail – Slovenia & Croatia
Retail – Ireland & Northern Ireland
Other Non-Franchised Retail
TOTAL RETAIL
Retail Property
Property Developments for Resale
TOTAL PROPERTY
89,926
32,043
9,841
8,499
9,287
149,596
-
(116)
(392)
(2,419)
(1,643)
(4,570)
(7,312)
(5,975)
(1,862)
(4,585)
(1,590)
(21,324)
218,261
(17,545)
(11,758)
(73)
(12)
-
218,188
(17,557)
(11,758)
(309)
(940)
(187)
(83)
(17,223)
(18,742)
(305)
-
(305)
82,305
25,012
7,400
1,412
(11,169)
104,960
188,653
(85)
188,568
EQUITY INVESTMENTS
6,084
(200)
-
-
5,884
OTHER
4,464
(1,823)
(4,977)
(49,444)
(51,780)
INTER-COMPANY ELIMINATIONS
(277)
277
-
-
-
TOTAL SEGMENT RESULT BEFORE TAX
707,672
(26,344)
(65,359)
(85,797)
530,172
Operating Segment Result:
30 June 2017
Segment
Result Before
Interest,
Taxation,
Depreciation,
Impairment &
Amortisation
June 2017 $000
Interest
Expense
Depreciation
Expense
Impairment &
Amortisation
Expense
Segment Result
Before Tax
FRANCHISING OPERATIONS
348,251
(2,555)
(25,873)
(15,290)
304,533
Retail – New Zealand
Retail – Singapore & Malaysia
Retail – Slovenia & Croatia
Retail – Ireland & Northern Ireland
Other Non-Franchised Retail
TOTAL RETAIL
Retail Property
Retail Property Under Construction
Property Developments for Resale
87,509
26,024
6,724
3,083
11,687
135,027
(40)
(17)
(365)
(1,902)
(1,656)
(3,980)
(7,744)
(5,784)
(1,585)
(3,672)
(1,443)
(20,228)
(295)
(924)
(148)
-
(18,606)
(19,973)
79,430
19,299
4,626
(2,491)
(10,018)
90,846
272,856
(12,900)
(9,696)
(6,476)
243,784
(15)
3,717
-
(16)
-
-
-
-
(15)
3,701
TOTAL PROPERTY
276,558
(12,916)
(9,696)
(6,476)
247,470
EQUITY INVESTMENTS
6,270
(192)
-
-
6,078
OTHER
(2,741)
(1,036)
(4,913)
(431)
(9,121)
INTER-COMPANY ELIMINATIONS
(607)
607
-
-
-
TOTAL SEGMENT RESULT BEFORE TAX
762,758
(20,072)
(60,710)
(42,170)
639,806
86
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2.
OPERATING SEGMENTS (continued)
Operating Segment Assets and
Liabilities: 30 June 2018
Segment
Assets
Inter-
company
Eliminations
Segment
Assets After
Eliminations
Segment
Liabilities
Inter-
company
Eliminations
Segment
Liabilities
After
Eliminations
Segment Assets
Segment Liabilities
June 2018 $000
FRANCHISING OPERATIONS
3,353,891
(2,460,089)
893,802
545,493
(216,841)
328,652
Retail – New Zealand
Retail – Singapore & Malaysia
Retail – Slovenia & Croatia
Retail – Ireland & Northern Ireland
Other Non-Franchised Retail
TOTAL RETAIL
Retail Property
242,137
173,902
51,776
191,452
123,969
783,236
-
(1,287)
(2,288)
(103,605)
(30,495)
(137,675)
242,137
172,615
49,488
87,847
93,474
645,561
97,514
111,897
44,931
(3,683)
(39,177)
(526)
406,360
(262,017)
167,439
828,141
(76,104)
(381,507)
93,831
72,720
44,405
144,343
91,335
446,634
2,887,036
(24,493)
2,862,543
2,332,929
(1,830,386)
502,543
Property Developments for Resale
1,850
-
1,850
3,023
(2,628)
395
TOTAL PROPERTY
2,888,886
(24,493)
2,864,393
2,335,952
(1,833,014)
502,938
EQUITY INVESTMENTS
46,848
-
46,848
6,361
-
6,361
OTHER
203,028
(75,990)
127,038
325,667
(266,885)
58,782
TOTAL SEGMENT ASSETS /
LIABILITIES BEFORE TAX
7,275,889
(2,698,247)
4,577,642
4,041,614
(2,698,247)
1,343,367*
Operating Segment Assets and
Liabilities: 30 June 2017
Segment
Assets
Inter-
company
Eliminations
Segment
Assets After
Eliminations
Segment
Liabilities
Inter-
company
Eliminations
Segment
Liabilities
After
Eliminations
Segment Assets
Segment Liabilities
June 2017 $000
FRANCHISING OPERATIONS
3,060,662
(2,267,729)
792,933
501,380
(262,061)
239,319
Retail – New Zealand
Retail – Singapore & Malaysia
Retail – Slovenia & Croatia
Retail – Ireland & Northern Ireland
Other Non-Franchised Retail
TOTAL RETAIL
Retail Property
252,802
136,998
45,696
167,171
113,117
-
(1,103)
(2,540)
(98,164)
(34,535)
715,784
(136,342)
2,704,437
(60,255)
Retail Property Under Construction
Property Developments for Resale
10,420
3,052
-
-
TOTAL PROPERTY
2,717,909
(60,255)
EQUITY INVESTMENTS
56,454
-
OTHER
152,028
(48,767)
252,802
135,895
43,156
69,007
78,582
579,442
2,644,182
10,420
3,052
2,657,654
56,454
103,261
87,717
95,999
41,549
372,464
168,955
766,684
(3,287)
(40,351)
(404)
(262,981)
(94,042)
(401,065)
2,115,984
(1,702,836)
10,420
5,056
-
-
84,430
55,648
41,145
109,483
74,913
365,619
413,148
10,420
5,056
2,131,460
(1,702,836)
428,624
5,796
-
5,796
174,850
(147,131)
27,719
TOTAL SEGMENT ASSETS /
LIABILITIES BEFORE TAX
6,702,837
(2,513,093)
4,189,744
3,580,170
(2,513,093)
1,067,077*
* Segment liabilities are exclusive of income tax payable and deferred income tax liabilities.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
87
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2. OPERATING SEGMENTS (continued)
The consolidated entity operates predominantly in eleven (11) operating segments:
Operating Segment
Description of Segment
Franchising Operations
Consists of the franchisor operations of the consolidated entity, but does not include the results, assets,
liabilities or operations of any Harvey Norman®, Domayne® and Joyce Mayne® franchisees.
Retail – New Zealand
Consists of the wholly-owned operations of the consolidated entity in the retail trading operations in New
Zealand under the Harvey Norman® brand name.
Retail – Singapore &
Malaysia
Consists of the controlling interest of the consolidated entity in the retail trading operations in Singapore and
Malaysia under the Harvey Norman® and Space Furniture® brand names.
Retail – Slovenia & Croatia
Consists of the wholly-owned operations of the consolidated entity in the retail trading operations in Slovenia
and Croatia under the Harvey Norman® brand name.
Retail – Ireland &
Northern Ireland
Consists of the wholly-owned operations of the consolidated entity in the retail trading operations in Ireland
and Northern Ireland under the Harvey Norman® brand name.
Other Non-Franchised Retail
Consists of the retail trading operations in Australia, excluding the operations of the Harvey Norman®,
Domayne® and Joyce Mayne® franchisees.
Retail Property
Consists of land and buildings that are owned by the consolidated entity for each site that are fully operational
or are ready for operations. The revenue and results of this segment consists of rental income, outgoings
recovered and the net property revaluation increments and/or decrements recognised in the Income
Statement. This segment includes the mining camp accommodation joint ventures.
Retail Property Under
Construction
Consists of sites that are currently undergoing construction at balance date intended for retail leasing. It also
includes vacant land that has been purchased for the purposes of generating future investment income.
Property Developments
for Resale
Consists of land and buildings acquired by the consolidated entity, to be developed, or currently under
development, for the sole purpose of resale at a profit.
Equity Investments
This segment refers to the investment in, and trading of, listed securities.
Other
This segment primarily relates to credit facilities provided to related and unrelated parties, other unallocated
income and expense items and the joint venture investment in Coomboona Holdings Pty Limited.
88
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
3. REVENUES
Sales revenue:
Revenue from the sale of products
Revenues and other income items:
GROSS REVENUE FROM FRANCHISEES:
- Franchise fees
- Rent and outgoings received from franchisees
- Interest to implement and administer the financial
accommodation facility
Total revenue received from franchisees
GROSS REVENUE FROM OTHER UNRELATED PARTIES:
- Rent and outgoings received from other tenants
- Interest received from financial institutions and other parties
- Dividends received
Total revenue from other unrelated parties
OTHER INCOME ITEMS:
- Net property revaluation increment on Australian investment
properties
- Property revaluation increment for overseas controlled entity
- Net profit on the revaluation of equity investments to fair value
- Net profit on the sale of investment properties and property, plant
and equipment assets
- Net foreign exchange gains
- Other revenue
Total other income items
CONSOLIDATED
June
2018
$000
June
2017
$000
1,993,760
1,833,123
768,453
241,687
30,310
1,040,450
85,314
7,167
2,747
95,228
51,646
-
3,407
-
496
49,476
105,025
782,858
231,733
28,485
1,043,076
82,604
5,142
2,814
90,560
107,382
669
3,556
3,293
771
56,037
171,708
Total revenues and other income items
1,240,703
1,305,344
4. EXPENSES AND LOSSES
Tactical support
74,978
64,479
Employee benefits expense:
- Wages and salaries
- Workers’ compensation
- Superannuation contributions
- Payroll tax
- Share-based payments
- Other employee benefits
Total employee benefits expense
278,043
1,282
13,904
10,999
761
10,874
315,863
262,059
1,237
13,405
9,644
634
9,980
296,959
Minimum lease payments
171,025
160,487
Finance costs:
- Loans from directors and director-related entities
- Bank interest paid to financial institutions
- Other
Total finance costs
905
23,827
1,612
26,344
992
17,675
1,405
20,072
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
89
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
4. EXPENSES AND LOSSES (continued)
CONSOLIDATED
Depreciation, amortisation and impairment:
Depreciation of:
- Buildings
- Plant and equipment
Amortisation of:
- Computer software
- Net licence property and other intangible assets
Impairment of non-trade debts receivable from related parties (a)
(included in administrative expenses line in the Income Statement)
Impairment of equity-accounted investment (b)
(included in administrative expenses line in the Income Statement)
Impairment loss on repayment of external finance facility (c)
(included in administrative expenses line in the Income Statement)
Total depreciation, amortisation and impairment
June
2018
$000
11,157
54,202
18,339
1,093
45,700
20,665
-
151,156
June
2017
$000
9,066
51,644
16,758
401
18,841
1,148
5,022
102,880
(a) As at 30 June 2018, non-trade debts receivable with a carrying value of $173.57 million (June 2017: $104.75 million) was
assessed for impairment and the consolidated entity recognised an impairment loss of $45.70 million in the Income
Statement (June 2017: $18.84 million). The non-trade debts receivable relate to the Coomboona JV, several mining camp
accommodation joint ventures and other commercial loans in Australia. The impairment loss recognised in the current
year was comprised of the estimated shortfall in the repayment of loans advanced to the Coomboona JV of $28.78 million
(June 2017: nil) and the estimated shortfall on the recovery of the loans advanced to a retail joint venture in Australia of
$16.92 million (June 2017: $18.41 million).
(b) The impairment loss incurred as at 30 June 2018 included a write-down of the carrying amount of the equity-accounted
investment in the Coomboona JV to its estimated recoverable amount totalling $20.67 million (June 2017: Nil). Refer to
further information provided on Page 21 regarding the Other Segment. The impairment loss incurred as at 30 June 2017 of
$1.15 million related to write-down of the equity accounted investments in mining camp accommodation joint ventures.
(c)
The impairment loss of $5.02 million recognised as at 30 June 2017 related to an estimated shortfall in the repayment of
an external finance facility for a mining camp accommodation joint venture.
5.
INCOME TAX
(a)
Income tax recognised in the Income Statement:
The major components of income tax expense are:
Current income tax:
Current income tax charge
Adjustments in respect of current income tax of previous years
Deferred income tax:
Relating to the origination and reversal of temporary differences
Total income tax expense reported in the Income Statement
138,147
(360)
12,335
150,122
148,276
(457)
39,021
186,840
90
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
5.
INCOME TAX (continued)
(b)
Income tax recognised in the Statement of Changes in Equity:
The following deferred amounts were charged directly to equity during
the year:
Deferred income tax:
Net gain on revaluation of cash flow hedges
Net gain on revaluation of land and buildings
Total income tax expense reported in equity
(c)
Reconciliation between income tax expense and prima facie income
tax:
A reconciliation between tax expense and the product of accounting
profit before income tax multiplied by the consolidated entity’s
applicable income tax rate is as follows:
CONSOLIDATED
June
2018
$000
June
2017
$000
4
2,693
2,697
6
5,362
5,368
Accounting profit before tax
530,172
639,806
At the statutory income tax rate of 30% (2017: 30%)
159,052
191,942
Adjustments to arrive at total income tax expense recognised for the
year:
Tax provision on the notional interest charged on the intercompany
receivable from Harvey Norman Holdings (Ireland) Limited as agreed
under the terms of an Advance Pricing Arrangement with the
Australian Taxation Office dated 6 February 2012
Tax provision on the notional interest charged on the intercompany
receivable from Harvey Norman Holdings (Ireland) Limited in respect
of the 2016 financial year
Adjustments in respect of current income tax of previous years
Share-based payment expenses
Expenditure not allowable for income tax purposes
Income not assessable for income tax purposes
Unrecognised tax losses
Utilisation of tax losses
Tax concession for research and development expenses
Difference between tax capital gain and accounting profit on
revaluation of pre-CGT properties
Non-allowable building and motor vehicle depreciation
Receipt of fully franked dividends
Sundry items
Effect of different rates of tax on overseas income and exchange rate
differences
Total adjustments
1,583
1,473
-
360
229
1,090
(4,395)
302
(1,300)
(359)
(371)
(90)
(830)
(1,049)
(4,100)
(8,930)
1,560
(457)
190
731
(4,195)
804
(771)
(229)
365
212
(889)
(646)
(3,250)
(5,102)
Total income tax expense reported in the Income Statement
150,122
186,840
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
91
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
5.
INCOME TAX (continued)
STATEMENT OF FINANCIAL
POSITION
INCOME STATEMENT
June
2018
$000
June
2017
$000
June
2018
$000
June
2017
$000
(d)
Deferred income tax assets and liabilities:
Deferred income tax at 30 June relates to the following:
Deferred tax liabilities:
Revaluations of investment properties to fair value
(164,227)
(147,054)
16,549
30,665
Revaluations of owner-occupied land and buildings to fair value
(36,501)
(35,288)
-
-
Non-allowable building depreciation in respect of properties in New
Zealand
Reversal of building depreciation expense for investment properties
Differences between accounting carrying amount and tax cost base of
computer software assets
Research and development
Other items
(13,683)
(92,370)
(16,202)
(78,863)
(2,040)
12,234
(1,676)
10,215
(479)
(479)
(16,807)
(16,466)
(5,487)
(4,284)
-
178
2,487
-
(91)
1,023
Total deferred tax liabilities
(329,554)
(298,636)
Deferred tax assets:
Employee provisions
Unused tax losses and tax credits
Unrealised losses on investments
Other provisions
Provision for lease makegood
Provision for deferred lease expenses
Lease incentives
Provision for executive remuneration
Revaluations of owner-occupied land and buildings to fair value
Finance leases
Discount interest-free receivables
Equity-accounted investments
Provisions for onerous leases
Revaluation of forward currency contracts to fair value
Lease surrender
9,196
219
6,199
26,771
266
1,201
1,341
1,870
1,388
163
15
83
4
5
98
8,347
372
-
15,008
17
1,400
1,362
2,606
1,388
389
15
84
161
2
266
(935)
154
(6,199)
(11,396)
(241)
199
69
736
-
221
-
1
157
(30)
191
(603)
1,561
-
(2,695)
1
290
121
(781)
-
686
-
-
20
48
237
Total deferred tax assets
48,819
31,417
Total deferred tax
(280,735)
(267,219)
12,335
39,021
The consolidated entity has not recognised deferred tax assets relating to tax losses of $205.56 million (2017: $210.68 million)
which are available for offset against taxable profits of the companies in which the losses arose.
At 30 June 2018, no deferred tax liability has been recognised (2017: nil) in respect of the unremitted earnings of certain
subsidiaries, associates or joint ventures.
92
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED
June
2018
$000
6. EARNINGS PER SHARE
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
The following reflects the income and share data used in the calculations of
basic and diluted earnings per share:
Profit after tax
Less: Profit after tax attributable to non-controlling interests
Profit after tax attributable to owners of the parent
33.71c
33.67c
380,050
(4,672)
375,378
NUMBER OF SHARES
June
2018
June
2017
$000
40.35c
40.30c
452,966
(3,990)
448,976
June
2017
Weighted average number of ordinary shares used in calculating basic
earnings per share (a)
Effect of dilutive securities (b)
Adjusted weighted average number of ordinary shares used in
calculating diluted earnings per share
1,113,699,590
1,032,320
1,112,704,211
1,329,312
1,114,731,910
1,114,033,523
(a) Weighted Average number of Ordinary Shares
The weighted average number of ordinary shares used in calculating basic earnings per share is inclusive of the new shares
totalling 1,134,000 ordinary shares in the company issued during the year pursuant to the options issued to certain executive
directors under the Executive Option Plan granted on 29 November 2012 (the Third Tranche), weighted on a pro-rata basis from
issue date to 30 June 2018.
(b)
Effect of Dilutive Securities
On 29 November 2012, the consolidated entity issued 3,000,000 unlisted options to certain executive directors (the “Third
Tranche”). These options are capable of exercise from 1 January 2016 to 30 June 2018 at an exercise price of $1.83 per option
and a fair value of $0.282 per option at grant date. On 14 November 2013, the consolidated entity announced that a total of
1,299,000 options over 1,299,000 shares in respect of the Third Tranche had lapsed and will never be exercisable by the
participants. On 14 March 2016, a total of 567,000 options over 567,000 shares in respect of the Third Tranche were exercised
reducing the unexercised portion to 1,134,000 options. On 4 September 2017, a total of 567,000 options over 567,000 shares in
respect of the Third Tranche were exercised reducing the unexercised portion to 567,000 options. On 3 March 2018, the
remaining 567,000 options over 567,000 shares were exercised.
On 30 November 2015, the consolidated entity issued a total of 400,000 performance rights under Tranche 1 of the 2016 LTI Plan
to the executive directors. A performance right is the right to acquire one ordinary share in the Company at nil exercise price. If
exercised, each performance right will be converted into one ordinary share in the Company. These performance rights are
capable of exercise from 1 January 2019 to 30 June 2021. The performance rights were valued at grant date at $3.52 per
entitlement share using a discounted cash flow technique. Subject to the satisfaction of the financial performance condition
(calculated exclusively based on RONA) and service conditions of the 2016 LTI Plan, the total fair value of Tranche 1 performance
rights amounted to $1,408,000 in aggregate.
On 28 November 2016, the consolidated entity issued a total of 400,000 performance rights under Tranche 2 of the 2016 LTI Plan
to the executive directors. These performance rights are capable of exercise from 1 January 2020 to 30 June 2022. The
performance rights were valued at grant date at $3.87 per entitlement share using a discounted cash flow technique. Subject to
the satisfaction of the financial performance condition (calculated exclusively based on RONA) and service conditions of the 2016
LTI Plan, the total fair value of Tranche 2 performance rights amounted to $1,548,000 in aggregate.
On 1 December 2017, the consolidated entity issued a total of 400,000 performance rights under Tranche 3 of the 2016 LTI Plan to
the executive directors. These performance rights are capable of exercise from 1 January 2021 to 30 June 2023. The
performance rights were valued at grant date at $3.34 per entitlement share using a discounted cash flow technique. Subject to
the satisfaction of the financial performance condition (calculated exclusively based on RONA) and service conditions of the 2016
LTI Plan, the total fair value of Tranche 3 performance rights amounted to $1,336,000 in aggregate.
Performance rights issued under Tranche 1, Tranche 2 and Tranche 3 of the 2016 LTI Plan have been included in the calculation of
diluted earnings per share. They are considered to be dilutive as their conversion to ordinary shares would decrease the net profit
per share. There have been no conversions to, calls of, or subscriptions for ordinary shares or issues of potential ordinary shares
since the reporting date.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
93
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
7.
TRADE AND OTHER RECEIVABLES (CURRENT)
Receivables from franchisees (a)
Trade receivables (b)
Consumer finance loans (c)
Provision for doubtful debts (b) (c)
Receivables from franchisees and trade receivables, net
Amounts receivable in respect of finance leases (d)
Provision for doubtful debts (d)
Finance leases, net
Non-trade debts receivable from: (e)
- Related entities (including joint ventures and joint venture partners)
- Unrelated entities
Provision for doubtful debts (e)
Non-trade debts receivable, net
CONSOLIDATED
June
2018
$000
544,003
102,782
2,900
(777)
648,908
3,400
-
3,400
94,721
6,627
(28,966)
72,382
June
2017
$000
535,448
81,667
2,435
(1,195)
618,355
5,548
(2,458)
3,090
15,678
3,714
(151)
19,241
Total trade and other receivables (current)
724,690
640,686
(a) Receivables from franchisees
Derni Pty Limited (Derni), a wholly-owned subsidiary of Harvey Norman Holdings Limited (HNHL), may, at the request of a franchisee,
provide financial accommodation in the form of a revolving line of credit, to that franchisee. The repayment of the indebtedness of
that franchisee to Derni is secured by a security interest over all present and after-acquired property of that franchisee, pursuant to
a General Security Deed (GSD).
The receivables from franchisees balance of $544 million as at 30 June 2018 comprises the aggregate of the balances due from each
franchisee to Derni and is net of uncollectible amounts. The indebtedness of each franchisee to Derni is reduced on a daily basis by
an electronic funds transfer process. Each franchisee directs the financial institution of that franchisee to transfer the net cash
receipts in the bank account of the franchisee to Derni, in reduction of outstanding indebtedness.
At each reporting date, Derni, as a secured creditor of the franchisee, conducts an assessment of recoverability in respect of each
individual franchisee financial accommodation facility. This involves an objective appraisal of the franchisee’s capacity to repay
amounts owing to Derni, after taking into account all the assets of the franchisee held as security pursuant to the GSD.
Receivables from franchisees are current and neither past due nor impaired as at 30 June 2018.
(b)
Trade receivables and provisions for doubtful debts
Trade receivables are non-interest bearing and are generally on 30 day terms. A provision has been made for estimated
unrecoverable trade receivable amounts arising from the past sale of goods and rendering of services when there is objective
evidence that an individual trade receivable is impaired. An impairment loss of $0.17 million (2017: $0.76 million) has been recognised
by the consolidated entity in the current year for trade receivables. This amount has been included in the other expenses line item
in the Income Statement.
The ageing analysis of current and non-current trade receivables is as follows:
$89.38 million of the trade receivables balance as at 30 June 2018 (2017: $69.71 million) are neither past due nor impaired. It
is expected that these balances will be collected by the consolidated entity on, or prior to, the due date.
$13.19 million of the trade receivables balance as at 30 June 2018 (2017: $11.29 million) are past due but not impaired as there
has not been a significant change in credit quality and the consolidated entity believes that the amounts are still considered
recoverable. The consolidated entity does not hold any collateral over these balances as at 30 June 2018 (2017: nil).
$0.75 million of the trade receivables balance as at 30 June 2018 (2017: $1.17 million) are past due and impaired which have
been fully provided.
es.
Past due but not impaired
Past due and impaired
Neither past due
nor impaired
31-60
Days
61-90
Days
2018 ($000)
2017 ($000)
89,376
69,708
5,250
5,758
2,776
1,771
+90
Days
5,162
3,756
31-60
Days
61-90
Days
52
-
26
13
+90
Days
673
1,160
Total
103,315
82,166
94
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
7.
TRADE AND OTHER RECEIVABLES (CURRENT) (continued)
(b)
Trade receivables and provisions for doubtful debts (continued)
Reconciled to:
Trade receivables (Current)
Trade receivables (Non-current – Note 12)
Total trade receivables
Movements in the provision for doubtful debts for trade receivables were as
follows:
At 1 July
Charge for the year
Foreign exchange translation
Amounts written off
At 30 June
(c) Consumer finance loans and provision for doubtful debts
CONSOLIDATED
June
2018
$000
102,782
533
103,315
1,173
174
24
(620)
751
June
2017
$000
81,667
499
82,166
842
762
(8)
(423)
1,173
The consumer finance loans are non-interest bearing and are generally on 6 to 48 months interest-free terms. The ageing analysis
of current and non-current consumer finance loans is as follows:
$3.16 million of the consumer finance loans at 30 June 2018 (2017: $2.59 million) are neither past due nor impaired. It is
expected that these balances will be collected by the consolidated entity on, or prior to, the due date.
If a customer has missed a repayment in a consumer finance loan, the remaining balance of the consumer finance loan is
treated as past due. $0.33 million of the consumer finance loans balance as at 30 June 2018 (2017: $0.33 million) are past
due but not impaired. The consolidated entity does not hold any collateral over these balances and believes that these
amounts will be recovered.
$0.03 million of the consumer finance loans at 30 June 2018 (2017: $0.03 million) are past due and impaired which have been
fully provided.
Past due but not impaired
Past due and impaired
Neither past due
nor impaired
31-60
Days
61-90
Days
2018 ($000)
2017 ($000)
3,156
2,590
113
82
48
60
+90
Days
165
189
31-60
Days
61-90
Days
+90
Days
-
-
-
-
32
27
Reconciled to:
Consumer finance loans (current)
Consumer finance loans (non-current – Note 12)
Total consumer finance loans
Movements in the provision for doubtful debts for consumer finance loans were
as follows:
At 1 July
Charge for the year
At 30 June
CONSOLIDATED
June
2018
$000
$000
2,900
614
3,514
27
5
32
Total
3,514
2,948
June
2017
$000
$000
2,435
513
2,948
24
3
27
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
95
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
7. TRADE AND OTHER RECEIVABLES (CURRENT) (continued)
(d) Finance lease receivables and provision for doubtful debts
Finance lease receivables are reconciled to amounts receivable in respect of
finance leases as follows:
Aggregate of minimum lease payments and guaranteed residual values:
Not later than one year
Later than one year but not later than five years
Future finance revenue:
Not later than one year
Later than one year but not later than five years
Net finance lease receivables
Reconciled to:
Amounts receivable in respect of finance leases (current)
Amounts receivable in respect of finance leases (non-current – Note 12)
Total finance lease receivables
Movements in the provision for doubtful debts for finance lease receivables were
as follows:
At 1 July
Amounts written off
At 30 June
CONSOLIDATED
June
2018
$000
$000
3,515
816
4,331
(115)
(84)
4,132
3,400
732
4,132
June
2017
$000
$000
5,701
970
6,671
(153)
(86)
6,432
5,548
884
6,432
2,458
(2,458)
-
5,897
(3,439)
2,458
The consolidated entity offers finance lease arrangements as part of the consumer finance business. Finance leases are offered in
respect of motor vehicles and livestock with lease terms not exceeding 4 years. All finance leases are at fixed rates for the term of
the lease. A provision is made for estimated unrecoverable finance lease receivable amounts when there is objective evidence that a
finance lease receivable is impaired. No impairment loss has been recognised in the current year (2017: nil).
The ageing analysis of current and non-current finance lease receivables is as follows:
$1.41 million of the finance lease receivable balance as at 30 June 2018 (2017: $1.83 million) are neither past due nor impaired.
$2.73 million of the finance lease receivable balance as at 30 June 2018 (2017: $2.15 million) are past due but not impaired.
These receivables are subject to regular monitoring to ensure that they are recoverable. As at balance date, there were no
events that required the consolidated entity to sell or re-pledge the secured leased assets.
No finance lease receivable balance as at 30 June 2018 is past due and impaired (2017: $2.46 million).
(e) Non-trade debts receivable and provision for doubtful debts
Non-trade debts receivable are generally interest-bearing and are normally payable at call. The aggregate balance of current and non-
current non-trade debts receivable as at 30 June 2018 was $211.96 million (2017: $144.43 million) as follows:
$43.16 million of the non-trade debts receivable balance as at 30 June 2018 (2017: $38.76 million) are neither past due nor
impaired. It is expected that these balances will be collected by the consolidated entity on, or prior to, the due date.
$105.79 million of the non-trade debts receivable balance as at 30 June 2018 (2017: $57.37 million) are past due but not impaired.
These receivables are subject to regular monitoring and periodic impairment testing to ensure that they are recoverable.
$63.01 million of the non-trade debts receivable balance as at 30 June 2018 (2017: $48.31 million) are past due and impaired and a
provision for doubtful debts has been raised in full.
At 30 June, the ageing analysis of non-trade debts receivable is as follows:
Neither past due
nor impaired
31-60
Days
61-90
Days
+90
Days
Past due but not impaired
Past due and impaired
61-90
Days
31-60
Days
+90
Days
2018 ($000)
2017 ($000)
43,158
38,759
-
-
-
-
105,794
57,368
-
-
-
-
63,008
48,305
96
Total
211,960
144,432
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
7.
TRADE AND OTHER RECEIVABLES (CURRENT) (continued)
(e) Non-trade debts receivable and provision for doubtful debts (continued)
Reconciled to:
Non-trade debts receivable (current)
Non-trade debts receivable (non-current – Note 12)
Total non-trade debts receivables
Movements in the provision for doubtful debts for non-trade debts receivable
were as follows:
At 1 July
Charge for the year (i) (ii) (iii)
Amounts written off
At 30 June
(i)
Impairment of non-trade receivables from the KEH Partnership retail joint venture:
CONSOLIDATED
June
2018
$000
$000
101,348
110,612
211,960
48,305
45,885
(31,182)
63,008
June
2017
$000
$000
19,392
125,040
144,432
30,300
21,099
(3,094)
48,305
The consolidated entity, through a wholly-owned subsidiary, has a 50% interest in KEH Partnership Pty Limited, a retail joint venture
in Australia. The primary business of the KEH Partnership retail joint venture is the retail sale of school apparel and educational
goods through the brand name of The School Locker. The ‘Big Buys by Harvey Norman®‘ division of the KEH Partnership was closed
during the second half of the 2018 financial year.
As at 30 June 2018, the consolidated entity had a commercial loan receivable from the KEH Partnership retail joint venture totalling
$60.96 million in respect of the amounts advanced to The School Locker business to assist with working capital requirements (2017:
$38.68 million). The amounts previously advanced to the Big Buys by Harvey Norman® business were either repaid or written off in
full upon closure of that business and was nil as at 30 June 2018 (2017: $34.92 million). As at 30 June 2018, the total balance of the
provision for doubtful debts relating to the non-trade receivable from The School Locker business of the KEH Partnership joint
venture was $20.82 million (2017: $9.96 million). The provision for doubtful debts previously raised for The Big Buys business was
fully utilised upon closure (2017: $24.97 million).
During the 2018 financial year, an impairment assessment was conducted resulting in the recognition of an expense of $16.92
million (2017: $18.41 million), with $6.06 million relating to the Big Buys by Harvey Norman® business and $10.86 million relating to
The School Locker business.
As at 30 June 2018, the present value of future cash flows of The School Locker business was assessed for a five-year period,
based on financial budgets and assets held as security. The effective interest rate of 7.5% was applied to the cash flow
projections. Cash flow projections were limited to five years. Each of the key assumptions in the impairment assessment were
subject to significant accounting estimates and assumptions including the future trading performance of the retail joint
venture. Judgement was made based on these accounting estimates and assumptions to assess the recoverable amount of the
non-trade receivables as at balance date.
(ii)
Impairment of the non-trade receivables from mining camp joint ventures:
The consolidated entity has made commercial advances to the mining camp joint ventures totalling $37.63 million (2017: $31.15
million) in aggregate as at 30 June 2018. The recoverable amount of non-trade receivables advanced to the mining camp joint
ventures was assessed during the year. No impairment loss was recognised in the current year (2017: $0.43 million) to reduce the
carrying amount of the non-trade receivable to recoverable amount. The total balance of the provision for doubtful debts as at 30
June 2018 relating to non-trade receivables from the mining camp joint ventures was $13.23 million (2017: $13.23 million).
The recoverable amount for these non-trade receivables have been determined based on the present value of estimated cash flow
projections as at 30 June 2018 for a five-year period, based on financial budgets and the assets held as security. The effective
interest rate applied to the cash flow projections was 7.5%. Cash flow projections were limited to five years due to the inherent risks
associated with the mining industry.
Each of the key assumptions in the impairment assessment were subject to significant accounting estimates and assumptions
about future economic conditions and its impact on the ongoing trading performance of the mining camp joint ventures and the
possible commencement of future projects which are currently out to tender. Judgement has been made, based on available
information and these accounting estimates and assumptions, to each of these variables to assess the recoverable amount of the
non-trade receivables as at balance date.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
97
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
7. TRADE AND OTHER RECEIVABLES (CURRENT) (continued)
(e) Non-trade debts receivable and provision for doubtful debts (continued)
(iii)
Impairment of non-trade receivables from the Coomboona joint venture:
The total indebtedness of the Coomboona joint venture to the consolidated entity amounted to $74.99 million as at 30 June 2018
(2017: $9.86 million). An impairment assessment was conducted resulting in the recognition of an impairment expense of $28.78
million (2017: nil) to reduce the carrying amount of the Coomboona joint venture non-trade receivable to its recoverable amount.
The recoverable amount has been determined based on the estimated fair value of the securities granted by Coomboona
Holdings Pty Limited (CHPL) and subsidiaries of CHPL.
Each of the key assumptions in the impairment assessment was subject to significant accounting estimates and assumptions
regarding the estimated shortfall in the repayment of the loans advanced by the consolidated entity to the Coomboona joint
venture. Refer to further information provided on Page 21 regarding the Other Segment.
8. OTHER FINANCIAL ASSETS (CURRENT)
Listed shares held for trading at fair value
Derivatives receivable
Other current financial assets
Total other financial assets (current)
9.
INVENTORIES (CURRENT)
Finished goods at cost
Provision for obsolescence
Total inventories (current)
10. OTHER ASSETS (CURRENT)
Prepayments
Other current assets
Total other assets (current)
11.
INTANGIBLE ASSETS (CURRENT)
CONSOLIDATED
June
2018
$000
29,754
5
1,704
31,463
350,880
(5,593)
345,287
39,220
5,924
45,144
June
2017
$000
27,474
25
1,692
29,191
321,142
(5,174)
315,968
28,383
17,495
45,878
Net licence property
490
486
12. TRADE AND OTHER RECEIVABLES (NON-CURRENT)
Trade receivables (a)
Consumer finance loans (b)
Provision for doubtful debts (b)
Trade receivables, net
Amounts receivable in respect of finance leases (c)
Non-trade debts receivable from: (d)
- Related entities (including joint ventures)
- Unrelated entities
Provision for doubtful debts (d)
Non-trade debts receivable, net
533
614
(6)
1,141
732
98,588
12,024
(34,042)
76,570
499
513
(5)
1,007
884
114,605
10,435
(48,154)
76,886
Total trade and other receivables (non-current)
78,443
78,777
98
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
12. TRADE AND OTHER RECEIVABLES (NON-CURRENT) (continued)
(a)
Trade receivables
For terms and conditions and provision for doubtful debts for trade receivables refer to Note 7 (b).
(b) Consumer finance loans
For terms and conditions and provision for doubtful debts for consumer finance loans refer to Note 7 (c).
Finance lease receivables
(c)
For terms and conditions and provision for doubtful debts for finance lease receivables refer to Note 7 (d).
(d) Non-trade debts receivable
For terms and conditions and provision for doubtful debts for non-trade debts receivable refer to Note 7 (e).
13. OTHER FINANCIAL ASSETS (NON-CURRENT)
Listed shares held for trading at fair value
Listed shares held as available for sale at fair value
Units in unit trust
Other current financial assets
Total other financial assets (non-current)
14. PROPERTY, PLANT AND EQUIPMENT
Land at fair value
Buildings at fair value
Net land and buildings at fair value (a)
Plant and equipment:
At cost
Accumulated depreciation
Net plant and equipment
Lease make good asset:
At cost
Accumulated depreciation
Net lease make good asset
Total plant and equipment
Total property, plant and equipment:
Land and buildings at fair value
Plant and equipment at cost
Total property, plant and equipment
Accumulated depreciation
Total written down amount
CONSOLIDATED
June
2018
$000
-
17,094
204
985
18,283
195,490
236,971
432,461
802,107
(576,963)
225,144
6,257
(3,525)
2,732
June
2017
$000
9,331
19,650
219
876
30,076
182,529
231,320
413,849
779,989
(570,902)
209,087
5,083
(2,907)
2,176
227,876
211,263
432,461
808,364
1,240,825
(580,488)
660,337
413,849
785,072
1,198,921
(573,809)
625,112
(a) The net book value of land and buildings (other than land and buildings classified as investment properties) was $237.42
million (2017: $232.49 million) as measured on a historical cost basis.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
99
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
14. PROPERTY, PLANT AND EQUIPMENT (continued)
CONSOLIDATED
June
2018
$000
June
2017
$000
Reconciliation of the carrying amounts of property, plant and equipment were as follows:
Land at fair value:
Opening balance
Additions
Increase resulting from revaluation
Depreciation of leasehold land (b)
Reclassification from buildings at fair value
Reclassification from plant and equipment
Net foreign currency differences arising from foreign operations
Closing balance
(b) The depreciation charge relates to leasehold land located in Singapore
Buildings at fair value:
Opening balance
Additions
Disposals
Increase resulting from revaluation
Depreciation for the year
Reclassification from plant and equipment
Reclassification to land at fair value
Net foreign currency differences arising from foreign operations
Closing balance
Plant and equipment at cost:
Opening balance
Additions
Disposals
Reclassification to land at fair value
Reclassification to buildings at fair value
Reclassification to investment property
Net foreign currency differences arising from foreign operations
Closing balance
Plant and equipment accumulated depreciation:
Opening balance
Depreciation for the year
Disposals
Reclassification to buildings at fair value
Reclassification to investment property
Net foreign currency differences arising from foreign operations
Closing balance
Net book value
182,529
95
11,959
(1,074)
-
-
1,981
195,490
231,320
10,301
(23)
3,592
(10,013)
2,777
-
(983)
236,971
773,676
76,682
(48,749)
-
(11,032)
(55)
5,110
795,632
570,055
52,278
(43,624)
(8,255)
(20)
4,409
574,843
166,399
5,478
7,423
(998)
6,886
861
(3,520)
182,529
223,401
6,212
-
18,732
(8,037)
-
(6,886)
(2,102)
231,320
770,712
75,672
(67,194)
(861)
-
-
(4,653)
773,676
583,745
50,265
(60,912)
-
-
(3,043)
570,055
220,789
203,621
100
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
14. PROPERTY, PLANT AND EQUIPMENT (continued)
CONSOLIDATED
Reconciliation of the carrying amounts of property, plant and equipment (continued)
Leased plant and equipment at cost:
Opening balance
Additions
Disposals
Closing balance
Leased plant and equipment accumulated depreciation:
Opening balance
Depreciation for the year
Disposals
Closing balance
Net book value
Lease make good asset at cost:
Opening balance
Additions
Disposals
Net foreign currency differences arising from foreign operations
Closing balance
Lease make good asset accumulated depreciation:
Opening balance
Depreciation for the year
Disposals
Net foreign currency differences arising from foreign operations
Closing balance
Net book value
June
2018
$000
6,313
195
(33)
6,475
847
1,280
(7)
2,120
4,355
5,083
1,094
(289)
369
6,257
2,907
644
(289)
263
3,525
2,732
June
2017
$000
1,467
4,872
(26)
6,313
72
776
(1)
847
5,466
5,526
288
(343)
(388)
5,083
2,883
603
(343)
(236)
2,907
2,176
Total plant and equipment
227,876
211,263
Total property, plant and equipment
660,337
625,112
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
101
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
14.
(a)
PROPERTY, PLANT AND EQUIPMENT (continued)
Reconciliation of owner occupied properties – land and buildings at fair value
New Zealand
Slovenia
Retail
$000
Retail
$000
Warehouse
$000
Retail
$000
233,460
72,327
3,185
60,367
5,851
(23)
11,077
(7,100)
5,884
-
-
-
(1,679)
-
-
-
-
(57)
-
447
-
2,565
(972)
-
Singapore
Warehouse
$000
18,255
-
-
(1,589)
(1,005)
-
Office
$000
8,184
-
-
(618)
(20)
-
(8,598)
4,359
192
3,083
909
422
Opening balance
Additions
Disposals
Fair value adjustments
Depreciation for the year
Transfer from / (to) plant and
equipment
Net foreign currency differences
Australia
Ireland
T
Total
Retail
$000
7,651
50
-
-
(67)
-
-
Retail
$000
10,420
4,048
-
4,116
(187)
(3,107)
2018
$000
413,849
10,396
(23)
15,551
(11,087)
2,777
2017
$000
389,800
11,690
-
26,155
(9,035)
861
631
998
(5,622)
Closing balance
240,551
75,007
3,320
65,490
16,570
7,968
7,634
15,921
432,461
413,849
(b)
Fair value measurement, valuation techniques and inputs
Class of property
Retail
Fair value
hierarchy
Level 3
Fair value
30 June 2018 $000
Valuation technique
Key unobservable inputs
Range of unobservable inputs
404,603
Discounted cash flow
Income capitalisation
Terminal yield
Discount rate
Net market rent per sqm p.a.
Capitalisation rate
4.20% - 8.25%
4.50% - 9.25%
$113 - $705 per sqm p.a.
4.20% - 8.88%
Direct sale comparison
Price per sqm of lettable area
$5,800 - $16,895 per sqm
Warehouse
Level 3
19,890
Discounted cash flow
Income capitalisation
Terminal yield
Discount rate
Net market rent per sqm p.a.
Capitalisation rate
Office
Level 3
7,968
Discounted cash flow
Income capitalisation
Terminal yield
Discount rate
Net market rent per sqm p.a.
Capitalisation rate
Direct sale comparison
Price per sqm of lettable area
Direct sale comparison
Price per sqm of lettable area
8.00%
7.25%
$87 - $105 per sqm p.a.
6.50% - 7.67%
$1,100 per sqm
3.75%
4.00%
$248 - $298 per sqm p.a.
3.20% - 3.50%
$7,493 - $9,424 per sqm
Total
432,461
102
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
14. PROPERTY, PLANT AND EQUIPMENT (continued)
(b)
Fair value measurement, valuation techniques and inputs (continued)
The income capitalisation method of valuation was used for the valuation of retail properties in New Zealand. A discounted cash flow
method was undertaken in respect of the same properties as a secondary method. There were no material differences between the
income capitalisation method result and the discounted cash flow method result.
The income capitalisation method of valuation was used for the valuation of one (1) retail owner-occupied property in Australia. A
direct sale comparison method was used for the same property as a secondary method. There were no material differences between
the income capitalisation method result and the direct sale comparison method result.
The income capitalisation method of valuation was used for the valuation of retail and warehouse properties in Slovenia. The income
capitalisation method of valuation was used for the valuation of retail property in Ireland. The income capitalisation method, the direct
sale comparison method and the discounted cash flow method were used for all properties in Singapore.
The table on the previous page includes the following descriptions and definitions relating to valuation techniques and key
unobservable inputs used in determining the fair value:
Income capitalisation method
Under the income capitalisation method, a property’s fair value is estimated based on either net market rent or the normalised net
operating income generated by the property, which is divided by the appropriate market capitalisation rate.
Discounted cash flow (“DCF”) method
Under the DCF method, a property’s fair value is estimated using explicit assumptions about the benefits and liabilities of ownership
over the asset’s life, including terminal value. This involves the projection of a series of cash flows and the application of an
appropriate market-derived discount rate to establish the present value of the income stream.
Direct sale comparison method
Under the direct sale comparison method, a property’s fair value is estimated based on comparable transactions. The unit of
comparison applied by the consolidated entity is the price per square metre.
Net market rent
Net market rent is the estimated amount for which a property or space within a property could lease between a willing lessor and a
willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing and wherein the parties have each
acted knowledgeably, prudently and without compulsion. In addition, an allowance for recoveries of lease outgoings from tenants is
made on a pro-rata basis (where applicable).
Capitalisation rate
The rate at which net market income is capitalised to determine the value of a property. The rate is determined by reference to
market evidence and independent external valuations received.
Terminal yield
The capitalisation rate used to convert income into an indication of the anticipated value of the property at the end of a given period
when carrying out a discounted cash flow calculation. The rate is determined by reference to market evidence and independent
external valuations received.
Discount rate
Rate used to discount the net cash flows generated from rental activities during the period of analysis. The rate is determined by
reference to market evidence and independent external valuations received.
Price per square metre
Price per square metre is obtained based on recent transactions of similar properties around the vicinity. Appropriate adjustments are
made between the comparables and the property to reflect the differences in size, tenure, location, condition and prevailing market
conditions and all other relevant factors affecting its value.
(c)
Valuation process
The local management team in each geographic location makes recommendations to the Property Review Committee and the
directors of the Company for the results of the semi-annual property valuation review. All owner-occupied properties are subject to
independent valuation at least every three (3) years unless there is an indication that the carrying amount of the property differs
materially from the fair value at balance date. The aim of the valuation process is to ensure that properties held by the consolidated
entity are compliant with applicable regulations and the consolidated entity’s valuation policy for owner occupied properties.
Independent valuations are performed by external, professionally qualified valuers who hold a recognised, relevant professional
qualification and have specialised expertise in the properties valued. The balance of the properties are reviewed internally by the
Property Review Committee and the directors of the Company, resulting in internal valuations where necessary.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
103
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
14. PROPERTY, PLANT AND EQUIPMENT (continued)
(d)
Sensitivity information
Key unobservable inputs
Impact on fair value for
significant increase in input
Impact on fair value for
significant decrease in input
Net market rent
Increase
Capitalisation rate
Terminal yield
Discount rate
Decrease
Decrease
Decrease
Price per square metre
Increase
Decrease
Increase
Increase
Increase
Decrease
The net market rent of a property and the capitalisation rate are key inputs of the income capitalisation valuation method. The income
capitalisation valuation method incorporates a direct interrelationship between the net market rent of a property and its capitalisation
rate. This methodology involves assessing the total net market income generated by the property and capitalising this in perpetuity to
derive a capital value. Significant increases (or decreases) in rental returns and rent growth per annum in isolation would result in a
significantly higher (or lower) fair value of the properties. There is an inverse relationship between the capitalisation rate and the fair
value of properties. Significant increases (or decreases) in the capitalisation rate in isolation would result in a significantly lower (or
higher) fair value of the properties.
The discount rate and terminal yield are key inputs of the discounted cash flow method. The discounted cash flow method
incorporates a direct interrelationship between the discount rate and the terminal yield as the discount rate applied will determine the
rate in which the terminal value is discounted to present value. Significant increases (or decreases) in the discount rate in isolation
would result in a significantly lower (or higher) fair value. Similarly, significant increases (or decreases) in the terminal yield in isolation
would result in a significantly lower (or higher) fair value. In general, an increase in the discount rate and a decrease in the terminal
yield could potentially offset the impact on the fair value of the properties.
(e) Highest and best use
For all owner occupied property that is measured at fair value, the current use of the property is considered the highest and best use.
15.
INVESTMENT PROPERTIES
(a) Reconciliation
New Zealand
Australia
Retail
Warehouse
Retail
Warehouse
Office
Property for
$000
$000
$000
$000
$000
development
Opening balance
Additions
Transfers from property,
plant and equipment
Change in class of property
Fair value adjustments*
Disposals
Depreciation for the year
Net foreign currency
differences
1,302
5,139
28
(178)
-
-
(68)
(47)
2,431
2,036,449
162,719
35,500
-
7
178
-
-
(2)
(90)
128,741
3,524
-
(14,858)
39,976
(590)
-
-
-
15,227
12,160
(1)
-
-
-
-
-
-
-
-
-
$000
3,353
557
-
(369)
(490)
(1,201)
-
-
TOTAL
June
2018
$000
June
2017
$000
2,241,754
2,046,295
137,961
115,189
35
-
51,646
(1,792)
(70)
(137)
-
-
107,382
(27,077)
(31)
(4)
Closing balance
6,176
2,524
2,189,718
193,629
35,500
1,850
2,429,397
2,241,754
* Fair value adjustments totalling $51.65 million in aggregate for the year ended 30 June 2018 are included in other income (2017: $107.38
million).
104
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
15.
INVESTMENT PROPERTIES (continued)
(b)
Fair value measurement, valuation techniques and inputs
Class of
property
Fair value
hierarchy
Fair value
Valuation technique
Key unobservable inputs
Range of unobservable
June
2018
$000
inputs
Retail
Level 3
2,195,894
Income capitalisation
Net market rent per sqm p.a.
$68 - $277 per sqm p.a.
Discounted cash flow
Capitalisation rate
Terminal yield
Discount rate
6.5% - 10.0%
6.0% - 10.0%
6.8% - 10.5%
Direct sale comparison
Price per sqm of lettable area
$715 - $3,533 per sqm
Warehouse
Level 3
196,153
Income capitalisation
Net market rent per sqm p.a.
$19 - $189 per sqm p.a.
Discounted cash flow
Capitalisation rate
Terminal yield
Discount rate
7.0% - 10.0%
6.8% - 9.3%
7.0% -10.3%
Direct sale comparison
Price per sqm of lettable area
$645 - $2,208 per sqm
Office
Level 3
35,500
Income capitalisation
Net market rent per sqm p.a.
$158 - $391 per sqm p.a.
Discounted cash flow
Direct sale comparison
Direct sale comparison
Capitalisation rate
Terminal yield
Discount rate
7.2% - 7.8%
6.3% - 7.8%
6.3% - 8.3%
Price per sqm of lettable area
$2,151 - $5,216 per sqm
Price per sqm of lettable area
$180 per sqm
Property for
development
Level 3
1,850
Total
2,429,397
Each investment property is valued at fair value. Each investment property is the subject of a lease or licence in favour of
independent third parties, including a Harvey Norman®, Domayne® and Joyce Mayne® franchisee. A franchisee occupies properties
pursuant to a licence, terminable upon reasonable notice. The fair value in respect of each investment property has been calculated
primarily using the income capitalisation method of valuation, using the current market rental value, and having regard to, in respect
of each property:
the highest and best use
quality of construction
age and condition of improvements
recent market sales data in respect of comparable properties
current market rental value, being the amount that could be exchanged between knowledgeable, willing parties in an arm’s
length transaction
tenure of the franchisee and other tenants
adaptive reuse of buildings
non-reliance on turnover rent
the specific circumstances of the property not included in any of the above points
The income capitalisation method of valuation was primarily used for the valuation of all Retail, Warehouse and Office properties in
Australia and the investment properties in New Zealand. A discounted cash flow valuation or a direct sale comparison valuation was
undertaken, excluding property for development in Australia, as a secondary method. There were no material differences between
the income capitalisation method result, the discounted cash flow method result and the direct sale comparison method result. The
direct sale comparison method was used for all properties classified as property for development.
The descriptions and definitions relating to valuation techniques and key unobservable inputs used in determining the fair value of
investment properties are the same as those for owner-occupied properties detailed in Note 14(b).
(c) Valuation process
All investment properties are subject to a semi-annual review to fair market value at each reporting period by the Property Review
Committee, subject to review and final determination by the directors of the Company. The aim of the valuation process is to ensure
that investment properties are held at fair value and the consolidated entity is compliant with applicable regulations and the
consolidated entity’s investment property valuation policy.
At each reporting period, approximately one-sixth of the portfolio is independently valued by external valuers with the remaining five-
sixths of the portfolio reviewed for fair value by Directors. The whole portfolio is independently valued every three years. The
independent valuations are performed by external, professionally qualified valuers who hold a recognised relevant professional
qualification and have specialised expertise in the properties valued. The balance of the property portfolio is reviewed internally by
the Property Review Committee and the directors of the Company, which may result in internal valuations where necessary.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
105
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
15.
INVESTMENT PROPERTIES (continued)
(c) Valuation process (continued)
The selection of sites to be independently valued is based on a pre-determined, fixed schedule that is generally geographically
representative of the entire portfolio, where possible. If the results of any of the independently valued sites during the period give rise
to indicators of potential fair value issues or inconsistencies with the broader property portfolio, then the revaluation review is
extended to include those other potentially affected sites. For those similarly affected sites, a director’s valuation is prepared for
review by the Property Review Committee. In addition, the consolidated entity gives consideration to issues that may cause other
sites to have varied significantly from the previously recorded fair value. For sites where variations exist, a director’s valuation is
performed and adjustment made to the value accordingly.
The consolidated entity obtained independent valuations in respect of thirty seven (37) sites within the investment property portfolio
during the year ended 30 June 2018. Based on the results of the independent valuations and a consideration of other internal and
external factors that may impact the fair value of the overall investment property portfolio, a further twenty-one (21) sites within the
investment property portfolio were identified for further review by management. The twenty-one (21) sites had generally been
similarly affected by the same factors or characteristics of the properties which had been independently valued, particularly in relation
to yields and market rentals.
Additionally, the Property Review Committee undertakes a revaluation review of investment properties under construction that are
greater than 75% complete. The methodology to value a completed investment property also applies to the investment property
under construction. The fair value of the investment property under construction is determined under the income capitalisation
valuation method by estimating the fair value of the property at completion date less the remaining costs to complete and allowances
for associated risk. As a secondary method, a discounted cash flow valuation is undertaken. The Property Review Committee also
performs a valuation for any property less than 75% complete where there is an indication of a substantial change in the risks or
benefits to warrant an earlier assessment. In general, direct sale comparison method of valuation is used for properties for future
development.
(d) Sensitivity information
Refer to Note 14(d) for the sensitivity information provided in respect of owner-occupied properties.
(e) Rent and outgoings received and operating expenses of investment properties
Included in rent and outgoings received from franchisees and rent and outgoings received from other tenants other than franchisees
as disclosed in Note 3 is rent and outgoings received from investment properties of $211.48 million for the year ended 30 June 2018
(2017: $202.45 million). Operating expenses, including rates and taxes and repairs and maintenance, recognised in the income
statement in relation to investment properties amounted $47.97 million for the year ended 30 June 2018 (2017: $43.75 million).
16.
INTANGIBLE ASSETS (NON-CURRENT)
Computer software (summary)
- At cost
- Accumulated amortisation and impairment
Net computer software
Computer Software (net of accumulated amortisation and impairment) (a):
Opening balance
Additions
Disposals
Amortisation
Net foreign currency differences arising from foreign operations
Net book value
Net licence property
Other intangible assets
CONSOLIDATED
June
2018
$000
June
2017
$000
193,529
(127,922)
65,607
71,354
12,685
(143)
(18,339)
50
65,607
3,096
364
181,188
(109,834)
71,354
76,812
11,578
(54)
(16,758)
(224)
71,354
3,549
334
Net intangible assets (non-current)
69,067
75,237
(a) Computer Software
Computer software assets are carried at cost less accumulated amortisation and accumulated impairment losses. The intangible
assets have been assessed as having a finite life and is amortised using the straight-line method over a period of no greater than
eight and a half (8.5) years. If impairment indicators are present, the recoverable amount is estimated and an impairment loss is
recognised to the extent that the recoverable amount is lower than the carrying amount.
106
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
17. TRADE AND OTHER PAYABLES (CURRENT)
Trade and other creditors
Accruals
Total trade and other payables (current)
18.
INTEREST-BEARING LOANS AND BORROWINGS (CURRENT)
Secured:
Bank overdraft (a)
Commercial bills payable (b)
Syndicated Facility Agreement (c)
Other short-term borrowings (d)
Lease liabilities
Unsecured:
Derivatives payable
Non-trade amounts owing to:
- Directors (e)
- Other related parties (e)
- Unrelated parties
CONSOLIDATED
June
2018
$000
229,267
60,719
289,986
45,081
9,750
240,000
82,190
1,062
52
33,160
10,644
252
June
2017
$000
182,917
55,711
238,628
37,342
9,750
200,000
87,576
1,327
68
36,341
14,036
211
Total interest-bearing loans and borrowings (current)
422,191
386,651
(a) Bank Overdraft
Of the total bank overdraft of $45.08 million as at 30 June 2018:
a total of $44.86 million relates to a bank overdraft due by Harvey Norman Trading (Ireland) Limited to Bank of Ireland (“BOI”) (the “BOI
Overdraft Facility”). Australia and New Zealand Banking Group Limited (“ANZ”) has provided an Indemnity/Guarantee/Stand-by Letter
of Credit Facility in favour of BOI in support of the BOI Overdraft Facility, at the request of the Company (“ANZ-BOI Facility”). The ANZ-
BOI Facility is further secured by the Syndicated Facility Agreement described in Note 18(c).
a total of $0.22 million relates to a bank overdraft facility with AmBank (M) Berhad in Malaysia which is subject to periodic review. The
Company has granted a guarantee to AmBank (M) Berhad in Malaysia in respect of the obligations of Space Furniture Collection Sdn
Bhd.
(b) Commercial Bills Payable
The commercial bills payable form part of facilities granted by ANZ. The payment of each commercial bill is secured by the securities given
pursuant to the Syndicated Facility Agreement (as defined in Note 18(c)), and subject to annual review by ANZ. Each commercial bill has a
tenure not exceeding 180 days but is repayable on demand by ANZ, upon the occurrence of any event of default or Relevant Event (as
defined in Note 18(c)) under the Syndicated Facility Agreement, or after any annual review date.
(c) Syndicated Facility Agreement
On 2 December 2009, the Company, a subsidiary of the Company (“Borrower”) and certain other subsidiaries of the Company (“Guarantors”)
entered into a Syndicated Facility Agreement with certain banks (“Financiers” and each a “Financier”). On 1 December 2017, the Amending
Deed (No. 5) to the Syndicated Facility Agreement was executed with the effect of extending the repayment date of Tranche A2 of the
Facility totalling $200 million to 4 December 2019 and providing an additional Tranche A3 of the Facility totalling $200 million with a
repayment date of 4 December 2020.
The aggregate available facility of the Syndicated Facility Agreement increased from $610 million to $810 million. The utilised amount of the
Syndicated Facility Agreement as at 30 June 2018 was $740 million, repayable as set out below, $240 million of which was classified as
current interest-bearing loans and borrowings and $500 million classified as non-current interest-bearing loans and borrowings. This
Facility is secured by:
fixed and floating charge granted by the Company and each of the Guarantors in favour of a security trustee for the Financiers;
real estate mortgages granted by certain Guarantors in favour of the security trustee for the Financiers over various real properties
owned by those Guarantors.
Under the terms of the Syndicated Facility Agreement, the Facility is repayable:
in respect of Tranche A1 totalling $170 million, on 4 December 2019 ($170 million utilised at 30 June 2018);
in respect of Tranche A2 totalling $200 million, on 4 December 2019 ($200 million utilised at 30 June 2018);
in respect of Tranche A3 totalling $200 million, on 4 December 2020 ($130 million utilised at 30 June 2018);
in respect of Tranche B totalling $240 million, on 4 December 2018 ($240 million utilised at 30 June 2018); and
otherwise on demand by or on behalf of the Financiers upon the occurrence of any one of a number of events (each a “Relevant
Event”), including events which are not within the control of the Company, the Borrower or the Guarantors. Each of the following is a
Relevant Event:
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
107
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
INTEREST-BEARING LOANS AND BORROWINGS (CURRENT) (continued)
18.
(c) Syndicated Facility Agreement (continued)
(i)
(ii)
an event occurs which has or is reasonably likely to have a material adverse effect on the business, operation, property,
condition (financial or otherwise) or prospects of the Borrower or the Company and the subsidiaries of the Company;
if any change in law or other event makes it illegal or impractical for a Financier to perform its obligations under the
Syndicated Facility Agreement or fund or maintain the amount committed by that Financier to the provision of the Increased
Facility ("Commitment"), the Financier may by notice to the Borrower, require the Borrower to repay the secured moneys in
respect of the Commitment of that Financier, in full on the date which is forty (40) business days after the date of that notice.
(d) Other Short-Term Borrowings
Of the total other short-term borrowings of $82.19 million:
a total of $46.36 million is secured by the securities given pursuant to the Syndicated Facility Agreement. The facilities are utilised in
Slovenia and Croatia and have a maturity date of 4 December 2018.
a total of $28.68 million is secured by the securities given pursuant to the Syndicated Facility Agreement. The facility is utilised in
Singapore and has a maturity date of 4 December 2018.
a total of $2.48 million relates to a revolving credit facility with ANZ in Singapore. This facility is subject to periodic review and
otherwise repayable on demand. The revolving credit facility is secured by the securities given pursuant to the Syndicated Facility
Agreement.
a total of $1.17 million relates to a revolving credit facility with AmBank (M) Berhad in Malaysia which is subject to periodic review and
otherwise repayable on demand. The Company has granted a guarantee to AmBank (M) Berhad in Malaysia in respect of the
obligations of Space Furniture Collection Sdn Bhd.
a total of $3.50 million relates to a revolving credit facility with ANZ in Australia which is subject to periodic review and otherwise
repayable on demand. The Company has granted a guarantee to ANZ in respect of the obligations of the Lighting Partners Australia
partnership.
(e) Directors and Other Related Parties
Interest is payable at a rate equivalent to the 30 day bank bill swap reference rate (BBSY) plus a margin. The total interest rate paid is at all
times lower than the consolidated entity’s weighted average cost of debt. The loans are unsecured and repayable at call.
(f) Defaults and Breaches
The Company has not received notice of the occurrence of any Relevant Event from any Financier. During the 2018 and 2017 financial years,
there were no defaults or breaches on any of the interest-bearing loans and borrowings referred to in this note and in Note 21. Interest-
Bearing Loans and Borrowings (Non-Current).
CONSOLIDATED
June
2018
$000
4,037
62,788
66,825
34,096
473
785
-
35,354
1,994
5,785
3,866
11,645
June
2017
$000
3,598
37,973
41,571
31,513
792
1,200
529
34,034
4,768
4,293
3,991
13,052
19. OTHER LIABILITIES (CURRENT)
Lease incentives
Unearned revenue
Total other liabilities (current)
20. PROVISIONS
Current:
Employee entitlements (Note 29)
Lease make good
Deferred lease expenses
Onerous lease costs
Total provisions (current)
Non-Current:
Employee entitlements (Note 29)
Lease make good
Deferred lease expenses
Total provisions (non-current)
108
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
20.
PROVISIONS (continued)
CONSOLIDATED
At 1 July 2017
Arising during the year
Utilised
Exchange rate variance
At 30 June 2018
Current 2018
Non-current 2018
Total provisions 2018
Current 2017
Non-current 2017
Total provisions 2017
Make Good
Provision
$000
Deferred Lease
Expenses
$000
Onerous Lease
Costs
$000
5,085
1,058
(286)
401
6,258
473
5,785
6,258
792
4,293
5,085
5,191
784
(1,358)
34
4,651
785
3,866
4,651
1,200
3,991
5,191
529
22
(551)
-
-
-
-
-
529
-
529
Total
$000
10,805
1,864
(2,195)
435
10,909
1,258
9,651
10,909
2,521
8,284
10,805
Make good provision
In accordance with certain lease agreements, the consolidated entity is obligated to restore certain leased premises to a specified
condition at the end of the lease term. The make good provision represents the expected costs to be incurred in restoring the leased
premises to the condition specified in the lease.
Deferred lease expenses
Deferred lease expenses represent the present value of the future lease payments that the consolidated entity is presently obligated
to make under non-cancellable operating lease agreements to enable the even recognition of lease payments as an expense on a
straight-line basis over the lease term.
Onerous lease costs
The provision for onerous lease costs represents the present value of the future lease payments that the consolidated entity is
presently obligated to make in respect of onerous lease contracts under non-cancellable operating lease agreements. This obligation
may be reduced by the revenue expected to be earned on the lease including estimated future sub-lease revenue, where applicable.
The estimate may vary as a result of changes in the utilisation of the leased premises and sub-lease arrangements where applicable.
21.
INTEREST-BEARING LOANS AND BORROWINGS (NON-CURRENT)
Secured:
Syndicated Facility Agreement (Refer to Note 18(c) and (f))
Lease liabilities
Total interest-bearing loans and borrowings (non-current)
CONSOLIDATED
June
2018
$000
June
2017
$000
500,000
3,203
503,203
330,000
3,858
333,858
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
109
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
22. FINANCING FACILITIES AVAILABLE
At balance date, the following financing facilities had been negotiated and were available:
Total facilities:
- Bank overdraft
- Other borrowings
- Commercial bank bills
- Syndicated Facility Agreement
Total Available Facilities
Facilities used at reporting date:
- Bank overdraft
- Other borrowings (current)
- Commercial bank bills (current)
- Syndicated Facility Agreement (current)
- Syndicated Facility Agreement (non-current)
Total Used Facilities
Facilities unused at reporting date:
- Bank overdraft
- Other borrowings
- Syndicated Facility Agreement
Total Unused Facilities
CONSOLIDATED
June
2018
$000
June
2017
$000
48,887
112,819
9,750
810,000
981,456
45,081
82,190
9,750
240,000
500,000
877,021
3,806
30,629
70,000
104,435
44,449
114,866
9,750
610,000
779,065
37,342
87,576
9,750
200,000
330,000
664,668
7,107
27,290
80,000
114,397
Refer to Note 18 Interest-Bearing Loans and Borrowings (Current) and Note 21 Interest-Bearing Loans and Borrowings (Non-
Current) for details regarding the security provided by the consolidated entity over each of the financing facilities disclosed above.
23. OTHER LIABILITIES (NON-CURRENT)
Lease incentives
Unearned revenue
Total other liabilities (non-current)
24. CONTRIBUTED EQUITY
Ordinary shares
Total contributed equity
13,625
538
14,163
16,061
3,222
19,283
388,381
388,381
June 2018
Number
386,309
386,309
June 2017
Number
Ordinary shares issued and fully paid
1,114,188,911
1,113,054,911
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Movements in ordinary shares on issue
At 1 July 2017
Issue of shares under executive share option plan
At 30 June 2018
Ordinary Shares – Terms and Conditions
June 2018
Number
June 2018
$000
1,113,054,911
1,134,000
1,114,188,911
386,309
2,072
388,381
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in any
surplus on winding up in proportion to the number of and amounts paid up on shares held. Each ordinary share entitles the holder
to one vote, either in person or by proxy, at a meeting of the Company.
110
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
25. RESERVES
CONSOLIDATED $000
At 1 July 2016
Revaluation of land and buildings
Tax effect of revaluation of land
and buildings
Unrealised gain on available-
for-sale investments
Reverse expired or realised
cash flow hedge reserves
Net loss on forward foreign
exchange contracts
Tax effect of net loss on forward
foreign exchange contracts
Currency translation differences
Share based payment
At 30 June 2017
At 1 July 2017
Revaluation of land and buildings
Tax effect of revaluation of land
and buildings
Unrealised loss on available-
for-sale investments
Reverse expired or realised
cash flow hedge reserves
Net loss on forward foreign
exchange contracts
Tax effect of net loss on forward
foreign exchange contracts
Currency translation differences
Share based payment
Tax effect of share based payment
Asset
revaluation
reserve
Foreign
currency
translation
reserve
Available for
sale reserve
Cash flow
hedge
reserve
Employee
equity
benefits
reserve
Acquisition
reserve
Total
48,021
9,682
(32)
8,995
(22,051)
111,199
25,467
(5,362)
-
-
-
-
-
-
131,304
131,304
15,915
(2,693)
-
-
-
-
-
-
-
-
-
4,050
-
-
-
-
-
-
-
-
32
(28)
8
-
-
-
-
-
-
-
-
-
616
-
-
-
-
-
-
-
-
155,814
25,467
(5,362)
4,050
32
(28)
8
(5,647)
616
-
-
-
-
-
-
(5,647)
-
42,374
13,732
(20)
9,611
(22,051)
174,950
42,374
13,732
(20)
9,611
(22,051)
174,950
-
-
-
-
-
-
(1,715)
-
-
-
-
(1,830)
-
-
-
-
-
-
-
-
-
20
(12)
4
-
-
-
-
-
-
-
-
-
-
741
4
-
-
-
-
-
-
-
-
-
15,915
(2,693)
(1,830)
20
(12)
4
(1,715)
741
4
At 30 June 2018
144,526
40,659
11,902
(8)
10,356
(22,051)
185,384
NATURE AND PURPOSE OF RESERVES:
Asset Revaluation Reserve
This reserve is used to record increases in the fair value of “owner occupied” land and buildings and decreases to the extent that such
decreases relate to an increase of the same asset previously recognised in equity.
Foreign Currency Translation Reserve
This reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.
Available For Sale Reserve
This reserve is used to record fair value changes on available-for-sale investments.
Cash Flow Hedge Reserve
This reserve is used to record the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an
effective hedge.
Employee Equity Benefits Reserve
This reserve is used to record the value of equity benefits provided to executive directors as part of their remuneration.
Acquisition Reserve
This reserve is used to record the consideration paid in excess of carrying value of non-controlling interests.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
111
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
26. RETAINED PROFITS AND DIVIDENDS
Movements in retained profits were as follows:
Balance at beginning of the year
Profit for the year
Dividends paid
Balance at end of the year
Dividends declared and paid:
Dividends on ordinary shares:
Final fully-franked dividend for 2017: 12.0 cents (2016: 17.0 cents)
Interim fully-franked dividend for 2018: 12.0 cents (2017: 14.0 cents )
Total dividends paid
CONSOLIDATED
June
2018
$000
June
2017
$000
2,229,200
375,378
(267,337)
2,337,241
133,635
133,702
267,337
2,125,186
448,976
(344,962)
2,229,200
189,134
155,828
344,962
The final dividend of $133.64 million, fully-franked, for the year ended 30 June 2017 was paid on 1 December 2017.
The interim dividend of 12.00 cents per share, totalling $133.70 million fully-franked, for the year ended 30 June 2018 was paid on 1
May 2018.
T
The final dividend of 18.0 cents per share totalling $200.55 million fully-franked, for the year ended 30 June 2018 will be paid on 2
November 2018. No provision has been made in the Statement of Financial Position for the payment of this final dividend.
Franking Account Balance:
The amount of franking credits available for the subsequent financial years are:
- franking account balance as at the end of the financial year at 30%
590,529
564,369
- franking credits that will arise from the payment of income tax payable as at
the end of the financial year
- franking credits that will be utilised in the payment of proposed final dividend
The amount of franking credits available for future reporting years
4,900
(85,952)
509,477
36,008
(57,243)
543,134
27. NON-CONTROLLING INTERESTS
Interest in:
- Ordinary shares
- Reserves
- Retained earnings
Total non-controlling interests
2,691
13,848
10,387
26,926
2,691
12,716
7,041
22,448
112
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
28. CASH AND CASH EQUIVALENTS
(a)
Reconciliation to Cash Flow Statement
Cash and cash equivalents comprise the following at end of the year:
Cash at bank and on hand
Short term money market deposits
Bank overdraft (Note 18)
CONSOLIDATED
June
2018
$000
June
2017
$000
124,458
46,086
170,544
65,969
14,255
80,224
(45,081)
(37,342)
Cash and cash equivalents at end of the year
125,463
42,882
(b) Reconciliation of Profit After Income Tax to Net Operating Cash Flows
Profit after tax
Adjustments for:
Net foreign exchange gains
Bad and doubtful debts
Share of net profit from joint venture entities
Depreciation of property, plant and equipment
Amortisation
Impairment of equity-accounted investments
Impairment loss on repayment of external finance facility
Revaluation of investment properties
Property revaluation increment for overseas controlled entity
Deferred lease expenses
Provision for onerous leases
Executive remuneration expenses
Profit on disposal and sale of property, plant and equipment,
and the revaluation of listed securities
Movements in provisions
Changes in assets and liabilities:
(Increase)/decrease in assets:
Receivables
Inventory
Other current assets
Increase/(decrease) in liabilities:
Payables and other current liabilities
Income tax payable
Net cash flows from operating activities
380,050
452,966
(496)
46,064
(5,792)
65,359
19,432
20,665
-
(51,646)
-
(663)
-
4,173
(771)
21,864
(5,200)
60,710
17,159
1,148
5,022
(107,382)
(669)
(962)
643
4,992
(2,329)
(6,849)
(766)
2,229
(29,595)
(29,738)
10,303
56,082
(26,933)
454,170
(72,818)
165
(19,175)
72,238
(170)
425,140
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
113
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
29. EMPLOYEE BENEFITS
The number of full-time equivalent employees employed as at 30 June were:
The aggregate employee benefit liability was comprised of:
Accrued wages, salaries and on-costs
Provisions (Current – Note 20)
Provisions (Non-current – Note 20)
Total employee benefit provisions
CONSOLIDATED
June
2018
Number
5,420
June
2018
$000
16,822
34,096
1,994
52,912
June
2017
Number
5,200
June
2017
$000
17,132
31,513
4,768
53,413
The consolidated entity makes contributions to complying superannuation funds for the purpose of provision of superannuation
benefits for eligible employees of the consolidated entity. The amount of contribution in respect of each eligible employee is not
less than the prescribed minimum level of superannuation support in respect of that eligible employee. The complying
superannuation funds are independent and not administered by the consolidated entity.
Share Options
At balance date, the following options over unissued ordinary shares were outstanding and vested (or able to be exercised) by, or
for the benefit of, directors of Harvey Norman Holdings Limited:
Grant Date
Expiry Date
Exercise Price
29/12/2012
30/06/2018
$1.83
Number of Options
Outstanding
2018
2017
-
-
-
-
Number of Options Vested
2018
2017
-
-
1,134,000
1,134,000
Refer to Tables 3 and 4 of this report on page 50 for further information.
Performance Rights
At balance date, the following performance rights over unissued ordinary shares were outstanding and vested (or able to be
exercised) by, or for the benefit of, directors of Harvey Norman Holdings Limited:
Grant Date
Expiry Date
Exercise Price
Number of Performance
Number of Performance
30/11/2015
28/11/2016
01/12/2017
30/06/2021
30/06/2022
30/06/2023
Rights Outstanding
Rights Vested
2018
2017
2018
2017
-
-
-
400,000
400,000
400,000
400,000
400,000
-
1,200,000
800,000
-
-
-
-
-
-
-
-
Refer to Tables 5 and 6 of this report on pages 51 and 52 for further information.
30. REMUNERATION OF AUDITORS
Amounts received or due and receivable by Ernst & Young for:
-
-
-
an audit or review of the financial report of the entity and any other entity in
the consolidated entity
tax services in relation to the entity and any other entity in the consolidated
entity
other services in relation to the entity and any other entity in the
consolidated entity
CONSOLIDATED
June
2018
$
June
2017
$
1,926,351
1,955,946
234,984
205,823
42,769
71,756
Total received or due and receivable by Ernst & Young
2,204,104
2,233,525
114
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
31. KEY MANAGEMENT PERSONNEL
(a)
Details of Key Management Personnel
Directors
Gerald Harvey
Kay Lesley Page
John Evyn Slack-Smith
Title
Senior Executives
Title
Executive Chairman
Martin Anderson
General Manager –
Advertising
Executive Director and
Chief Executive Officer
Executive Director and
Chief Operating Officer
Thomas James Scott
General Manager – Property
Gordon Ian Dingwall
Chief Information Officer
David Matthew Ackery
Executive Director
Robert Nelson
General Manager – Audio
Chris Mentis
Christopher Herbert Brown OAM
Executive Director, Chief
Financial Officer and
Company Secretary
Non-Executive Director
[resigned 31 July 2017]
Visual
Haydon Ian Myers
General Manager – Home
[resigned 31 July 2017]
Appliances
Ajay Calpakam
General Manager – Audio
[commenced 1 August
2017]
Visual
Michael John Harvey
Non-Executive Director
Lachlan Roach
[commenced 1 October
2017]
General Manager – Home
Appliances
Kenneth William Gunderson-Briggs
Non-Executive Director
(Independent)
Geoff Van Der Vegt
[resigned 31 May 2017]
General Manager –
Technology & Entertainment
Graham Charles Paton AM
Non-Executive Director
Frank Robinson
(Independent)
[commenced 1 August
2017]
General Manager –
Technology & Entertainment
(b)
Compensation of Key Management Personnel
The total remuneration paid or payable to Key Management Personnel of the consolidated entity was as follows:
Short-term
Post employment
Long-term (performance cash incentives)
Long-term (share-based payments)
Other – long service leave accrual
Other – termination benefits
CONSOLIDATED
June
2018
$
11,506,845
266,098
863,359
615,206
96,558
144,065
June
2017
$
11,500,990
262,382
1,762,854
562,619
90,268
11,292
13,492,131
14,190,405
Refer to Tables 1 and 2 of this report on pages 48 and 49 for further information.
32. RELATED PARTY TRANSACTIONS
(a)
Ultimate Controlling Entity
The ultimate controlling entity of the consolidated entity is Harvey Norman Holdings Limited, a company incorporated in Australia.
(b)
Transactions with Other Related Parties
(i)
(ii)
Several controlled entities of Harvey Norman Holdings Limited operate loan
accounts with other related parties, mainly consisting of joint ventures and the
other joint venture partner of the joint ventures. Refer to Notes 7 and 12.
The amount of receivables from related parties at balance date was:
The consolidated entity has a payable to other related parties (excluding
transactions with KMPs and their related parties) at arm’s length terms and
conditions. The amount owing to other related parties at balance date was:
193,309,626
130,283,866
4,237,364
4,237,364
Refer to information provided in Section 14. Other Transactions and Balances with Key Management Personnel and their Related
Parties in this report on pages 55 and 56 for further information.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
115
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
33. COMMITMENTS
(a)
Capital expenditure contracted but not provided is payable as follows:
Not later than one year
Later than one year but not later than five years
Total capital expenditure commitments
CONSOLIDATED
June
2018
$000
June
2017
$000
13,587
16,509
30,096
109,254
1,356
110,610
The consolidated entity had contractual obligations to purchase property, plant and equipment and investment properties of $30.10
million (2017: $110.61 million). The contractual obligations are mainly for acquisition of new properties in New Zealand and
refurbishment of existing franchised complexes in Australia. There were no contractual obligations relating to joint venture entities
for the year ended 30 June 2018 (2017: $4.55 million).
(b)
(i)
Lease expenditure commitments [the consolidated entity as lessee]:
Operating lease expenditure contracted for is payable as follows:
Not later than one year
Later than one year but not later than five years
Later than five years
Total operating lease liabilities
155,280
386,573
147,366
689,219
147,862
360,923
134,812
643,597
Operating leases are entered into as a means of acquiring access to retail property and warehouse facilities. Rental payments are
adjusted annually in line with rental agreements.
(ii)
Geographic representation of operating lease expenditure:
30 June 2018
Australia
New
Zealand
$000
$000
Singapore
and
Malaysia
$000
Ireland and
Northern
Ireland
$000
Slovenia
and
Croatia
$000
Total
$000
Not later than one year
95,332
12,336
26,954
18,538
2,120
155,280
Later than one year but not later
than five years
Later than five years
247,129
89,751
26,072
5,660
49,812
-
59,410
51,816
4,150
139
386,573
147,366
Total operating lease liabilities
432,212
44,068
76,766
129,764
6,409
689,219
30 June 2017
Australia
New
Zealand
$000
$000
Singapore
and
Malaysia
$000
Ireland and
Northern
Ireland
$000
Slovenia
and
Croatia
$000
Total
$000
Not later than one year
88,656
13,030
26,930
17,373
1,873
147,862
Later than one year but not later
than five years
Later than five years
211,973
70,285
34,271
9,362
50,713
217
58,342
54,704
5,624
360,923
244
134,812
Total operating lease liabilities
370,914
56,663
77,860
130,419
7,741
643,597
Several lease agreements contain provisions that permit the tenant to exit, or break, the lease prior to the lease expiry date, subject to
the adherence of the strict terms and conditions stipulated in the lease agreement that gives a tenant the right to terminate the
agreement at an earlier date. The operating lease expenditure commitments disclosed in the tables above have been calculated up to
exit or break dates.
116
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
33. COMMITMENTS (continued)
(c)
Lease commitments [the consolidated entity as lessor]:
Future minimum amounts receivable under non-cancellable operating leases are
as follows:
Not later than one year
Later than one year but not later than five years
Later than five years
Minimum lease receivable
CONSOLIDATED
June
2018
$000
June
2017
$000
102,626
191,232
43,483
337,341
82,982
153,998
33,159
270,139
The consolidated entity has entered into commercial leases in respect of its property portfolio and motor vehicles. All leases in the
consolidated entity’s property portfolio include a clause to enable upward revision of the rental charge on an annual basis according
to prevailing market conditions.
CONSOLIDATED
2018
2017
Minimum
Payments
Present value
of payments
Minimum
Payments
Present value
of payments
$000
$000
$000
$000
1,283
3,490
4,773
(508)
4,265
1,062
3,203
4,265
-
4,265
1,595
4,204
5,799
(614)
5,185
1,327
3,858
5,185
-
5,185
(d)
Finance lease commitments
[the consolidated entity as lessee]:
Not later than one year
Later than one year but not later than five years
Total minimum lease payments
Less: amounts representing finance charges
Present value of minimum lease payments
34. CONTINGENT LIABILITIES
As at 30 June 2018, Harvey Norman Holdings Limited (the Company) has entered into the following guarantees, however the
probability of having to make a payment under these guarantees is considered remote:
(a) Guarantees in the normal course of business relating to the payment of lease obligations under an operating lease
contract for certain leased franchised complexes in Australia and certain leased company-operated stores in overseas
regions.
(b) Guarantees in the normal course of business relating to lease makegood obligations under certain operating lease
contracts (with the exclusion of those lease makegood payments that are considered to be probable and recognised as a
provision in Note 20).
Indemnities to financial institutions to support bank guarantees in respect of the performance of contracts.
(c)
(d) Financial performance guarantees in respect of obligations of certain third parties up to the amount necessary to enable
those entities to meet their obligations as and when they fall due, subject to certain conditions.
No provision has been made in the financial statements in respect of these contingencies as the possibility of a probable outflow
under these guarantees is considered remote.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
117
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
35.
(a)
FINANCIAL RISK MANAGEMENT
Financial Risk Management Objectives and Policies
The consolidated entity’s principal financial liabilities, other than derivatives, comprise of trade and other payables and interest-
bearing loans and borrowings. The consolidated entity’s principal financial assets, other than derivatives, include cash and cash
equivalents, trade and other receivables, shares held for trading and listed shares available for sale.
The consolidated entity manages its exposure to key financial risks, such as interest rate and currency risk in accordance with the
consolidated entity’s financial risk management policy, as outlined in the Treasury Policy. The objective of the policy is to support the
delivery of the consolidated entity’s financial targets whilst protecting future financial security.
The consolidated entity enters into derivative transactions, principally forward currency contracts. The purpose is to manage the
currency risks arising from the consolidated entity’s operations and its sources of finance.
The main risks arising from the consolidated entity’s financial assets and financial liabilities are:
foreign currency risk
interest rate risk
equity price risk
credit risk; and
liquidity risk
The consolidated entity uses different methods to measure and manage different types of risks to which it is exposed. These include:
monitoring levels of exposure to interest rate and foreign exchange risk;
monitoring assessments of market forecasts for interest rate and foreign exchange;
monitoring liquidity risk through the future rolling cash flow forecasts.
ageing analyses and monitoring of specific credit allowances to manage credit risk; and
The Board reviews and endorses policies for managing each of these risks as summarised below:
the setting of limits for trading in derivatives; and
hedging cover of foreign currency risk, credit allowances, and future cash flow forecast projections.
(b) Market Risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
prices. Components of market risk to which the consolidated entity are exposed are discussed below.
(i)
Foreign Currency Risk Management
Foreign currency risk refers to the risk that the value of financial instruments, recognised asset or liability will fluctuate due to changes
in foreign currency rates. The consolidated entity undertakes certain transactions denominated in foreign currencies, hence
exposures to exchange rate fluctuations arise.
The consolidated entity’s foreign currency exchange risk arises primarily from:
receivables or payables denominated in foreign currencies; and
firm commitments or highly probable forecast transactions for payments settled in foreign currencies.
The consolidated entity is exposed to foreign exchange risk from various currency exposures, primarily with respect to:
United States dollars;
New Zealand dollars;
Euro;
British pound;
Singapore dollars;
Malaysian ringgit; and
The consolidated entity minimises its exposure to foreign currency risk by initially seeking contracts effectively denominated in the
consolidated entity’s functional currency where possible and economically favourable to do so. Foreign exchange risk that arises from
firm commitments or highly probable transactions is managed principally through the use of forward currency contracts. The
consolidated entity hedges a proportion of these transactions in each currency in accordance with the Treasury Policy.
Croatian kuna
CONSOLIDATED
Financial assets
Cash and cash equivalents
Trade and other receivables
Derivatives receivable
Financial liabilities
Trade and other payables
Interest-bearing loans and borrowings
Derivatives payable
Net exposure
118
June
2018
$000
29,682
5,378
5
35,065
28,012
11,481
52
39,545
(4,480)
June
2017
$000
17,686
2,579
25
20,290
20,409
10,731
68
31,208
(10,918)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
35.
(b)
(i)
FINANCIAL RISK MANAGEMENT (continued)
Market Risk (continued)
Foreign Currency Risk Management (continued)
Sensitivity Analysis
The following sensitivity analysis is calculated based on the foreign currency risk exposures that are not denominated in the
functional currency of the relevant subsidiary at balance date. At 30 June 2018, if foreign exchange rates were 5% higher or 5%
lower (2017: 5% higher or 5% lower), as illustrated in the table below, with all other variables held constant, post tax profit and other
comprehensive income would have been affected as follows:
Post tax profit
increase/(decrease)
Other comprehensive income
increase/(decrease)
Consolidated
Australian subsidiaries
AUD/EURO + 5%
AUD/EURO - 5%
AUD/USD + 5%
AUD/USD - 5%
Slovenia and Ireland subsidiaries
EURO/USD + 5%
EURO/USD - 5%
EURO/GBP + 5%
EURO/GBP - 5%
EURO/HRK + 5%
EURO/HRK - 5%
Croatia subsidiaries
HRK/EURO + 5%
HRK/EURO - 5%
HRK/USD + 5%
HRK/USD - 5%
Singapore and Malaysia subsidiaries
SGD/USD + 5%
SGD/USD - 5%
SGD/EURO + 5%
SGD/EURO - 5%
SGD/MYR + 5%
SGD/MYR - 5%
SGD/AUD + 5%
SGD/AUD - 5%
New Zealand subsidiaries/branches
NZD/EURO + 5%
NZD/EURO - 5%
NZD/USD + 5%
NZD/USD - 5%
June
2018
$000
June
2017
$000
(34)
38
4
(4)
(3)
3
-
-
1
(1)
636
(703)
-
-
17
(19)
32
(35)
(683)
755
(2)
2
(5)
6
(3)
3
(10)
11
1
(1)
(146)
161
1
(1)
-
-
595
(658)
(1)
1
5
(5)
4
(5)
(283)
313
2
(2)
(3)
4
(1)
1
June
2018
$000
(82)
91
(17)
18
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
June
2017
$000
(76)
84
(22)
24
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The sensitivities of post-tax profit and other comprehensive income in the current year are comparable to the prior year.
The movements in post-tax profit are due to changes in the fair value of monetary assets and liabilities including non-designated
foreign currency derivatives. The movements in other comprehensive income are due to changes in the fair value of forward
exchange contracts designated as cash flow hedges.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
119
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
35. FINANCIAL RISK MANAGEMENT (continued)
(b) Market Risk (continued)
(ii)
Interest Rate Risk Management
Interest rate risk is the risk that the fair value on future cash flows of a financial instrument will fluctuate because of changes in
market interest rates.
The consolidated entity’s exposure to market interest rates relates primarily to:
Cash and cash equivalents;
Non-trade debts receivable from related entities and unrelated entities;
Bank overdraft;
Non-trade amounts owing to directors and other related parties;
Syndicated Facility;
Commercial bills; and
Other short-term borrowings
The consolidated entity manages the interest rate exposure by adjusting the ratio of fixed interest debt to variable interest debt to a
desired level based on current market conditions. Where the actual interest rate profile on the physical debt profile differs
substantially from the desired target, the consolidated entity uses interest rate swap contracts to adjust towards the target net debt
profile. Under the interest rate swap contracts, the consolidated entity agrees with other parties to exchange, at specified intervals,
the difference between fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional principal
amounts.
30 June 2018
Principal
subject to
floating
interest rate
Fixed interest rate maturing in
Over
1 to 5 years
More than
5 years
Non-
interest
bearing
1 year
or less
Total Average interest rate
$000
$000
$000
$000
$000
$000
Floating
Fixed
154,350
6,232
-
-
-
-
-
-
673
-
-
-
-
-
732
-
-
-
-
-
-
-
-
-
9,962
170,544
0.01% - 4.10%
0.01% - 2.19%
3,514
3,514
2,727
4,132
544,003
103,315
544,003
103,315
49,746
49,746
-
-
-
-
-
-
10.5% - 12.5%
-
-
-
49,648
81,409
6,839
5,185
68,879
211,960
3.89% - 6.07% 5.00% - 9.50%
203,998
88,314
7,571
5,185
782,146
1,087,214
822,190
-
43,804
45,081
9,750
-
-
-
-
-
-
-
-
-
-
-
-
1,062
3,203
-
-
-
-
-
-
-
-
-
-
289,986
252
-
-
822,190
289,986
44,056
45,081
9,750
0.85% - 6.12%
-
2.44% - 3.17%
1.70% - 6.26%
1.64% - 1.91%
-
-
-
-
-
-
4,265
52
52
-
-
5.92%
-
920,825
1,062
3,203
-
290,290
1,215,380
Financial assets
Cash
Consumer finance
loans
Finance lease
receivables
Receivables from
franchisees
Trade receivables
Other financial
assets
Non-trade
debts receivables &
loans
Financial liabilities
Syndicated Facility
and other short-
term borrowings
Trade creditors
Other loans
Bank overdraft
Bills payable
Finance lease
liabilities
Other financial
liabilities
120
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
35. FINANCIAL RISK MANAGEMENT (continued)
(b) Market Risk (continued)
(ii)
Interest Rate Risk Management (continued)
30 June 2017
Principal
subject to
floating
interest rate
Fixed interest rate maturing in
1 year
or less
Over
1 to 5 years
More than
5 years
Non-
interest
bearing
Total Average interest rate
$000
$000
$000
$000
$000
$000
Floating
Fixed
Financial assets
Cash
Consumer finance
loans
Finance lease
receivables
Receivables from
franchisees
Trade receivables
Other financial
assets
Non-trade
debts receivables &
loans
Financial liabilities
Syndicated Facility
and other short-
term borrowings
Trade creditors
Other loans
Bank overdraft
Bills payable
Finance lease
liabilities
Other financial
liabilities
Sensitivity analysis
59,593
3,242
-
-
-
-
-
-
926
-
-
-
-
-
884
-
-
-
-
17,389
80,224
0.01% - 3.70%
0.01%
-
-
-
-
-
2,948
2,948
-
-
4,622
6,432
-
10.50% - 12.50%
535,448
82,166
535,448
82,166
59,267
59,267
-
-
-
-
-
-
43,433
3,389
14,497
4,938
78,175
144,432
3.92%-5.07%
7.75% - 12.00%
103,026
7,557
15,381
4,938
780,015
910,917
617,576
-
50,377
37,342
9,750
-
-
-
-
-
-
-
-
-
-
-
-
1,327
3,858
-
-
-
-
-
-
-
-
-
-
238,628
211
-
-
617,576
238,628
50,588
37,342
9,750
0.53% - 5.78%
-
2.47% - 3.02%
1.70% - 6.50%
1.67% - 1.90%
-
-
-
-
-
-
68
5,185
68
959,137
-
5.92% - 9.50%
-
-
715,045
1,327
3,858
-
238,907
The following sensitivity is based on interest rate risk exposures in existence at balance date.
At 30 June 2018, if interest rates were 50 basis points higher or 50 basis points lower, with all other variables held constant, post tax profit
and other comprehensive income would have been affected as follows:
If there was 50 (2017: 50) basis points higher in interest rates
with all other variables held constant
If there was 50 (2017: 50) basis points lower in interest rates
with all other variables held constant
CONSOLIDATED
Post tax profit
Other comprehensive income
Increase/(decrease)
Increase/(decrease)
June
2018
$000
June
2017
$000
(2,642)
(2,267)
2,642
2,267
June
2018
$000
-
-
June
2017
$000
-
-
The movements in post tax profit are due to higher or lower interest costs from variable rate bank debt, other loans and cash
balances.
The movements in post tax profit in the current year are comparable to the prior year.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
121
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
35.
FINANCIAL RISK MANAGEMENT (continued)
(iii)
Equity Price Risk Management
The consolidated entity is exposed to equity price risk arising from equity investments. Equity investments are held for strategic
rather than trading purposes. The exposure to the risk of a general decline in equity market values is not hedged as the consolidated
entity believes such a strategy is not cost effective. The fair value of the equity investments publicly traded on the ASX was $29.75
million as at 30 June 2018 (2017: $36.81 million). The fair value of the equity investments publicly traded on the NZX was $17.09
million as at 30 June 2018 (2017: $19.65 million).
Sensitivity Analysis
As at 30 June 2018, if equity prices had been 10% higher or 10% lower, with all other variables held constant, post tax profit and other
comprehensive income would have been affected as follows:
CONSOLIDATED
Post tax profit
Other comprehensive income
Increase/(decrease)
Increase/(decrease)
June
2018
$000
June
2017
$000
June
2018
$000
June
2017
$000
If there was 10% (2017: 10%) increase movement in equity
prices with all other variables held constant
If there was 10% (2017: 10%) decrease movement in equity
prices with all other variables held constant
2,136
2,606
1,709
1,965
(2,136)
(2,606)
(1,709)
(1,965)
The movements in post tax profit are due to changes in the fair value of listed shares held for trading. The movements in other
comprehensive income are due to changes in the fair value of listed shares available for sale.
(c) Credit Risk
Credit risk refers to the loss that the consolidated entity would incur if a debtor or other counterparty fails to perform under its
contractual obligations.
Credit risk arises from the financial assets of the consolidated entity, which comprise receivables from franchisees, trade and non-
trade debts receivables, consumer finance loans and finance lease receivables. The consolidated entity’s exposure to credit risk arises
from potential default of the counter party, with a maximum exposure equal to the carrying amount of these financial assets.
The consolidated entity’s policies to limit its exposure to credit risks are as follows:
The Franchisor constantly monitors and evaluates the financial position of each franchisee;
Conducting appropriate due diligence on counterparties before entering into an arrangement with them. It is the consolidated
entity’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures including an
assessment of their independent credit rating, financial position, past experience and industry reputation. Risk limits are set for
each individual customer in accordance with parameters set by the Board. These risk limits are regularly monitored; and
Non-trade debts receivable are subject to regular monitoring and/or periodic impairment testing to ensure that they are
recoverable.
Finance lease receivables are secured by assets with a value equal to, or in excess of, the counterparties’ obligation to the
consolidated entity.
The consolidated entity minimises concentrations of credit risk by undertaking transactions with a large number of debtors in various
countries and industries. In addition, receivable balances are monitored on an ongoing basis.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-
ratings assigned by international credit-rating agencies.
The table below represents the financial assets of the consolidated entity by geographic location displaying the concentration of
credit risk for each location as at balance date:
Location of credit risk
Australia
New Zealand
Singapore and Malaysia
Slovenia and Croatia
Ireland and Northern Ireland
Total
122
CONSOLIDATED
June
2018
$000
749,121
28,189
15,973
6,147
3,703
803,133
June
2017
$000
667,695
29,369
14,215
5,232
2,952
719,463
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
35. FINANCIAL RISK MANAGEMENT (continued)
(d)
Liquidity Risk
Liquidity risk includes the risk that, as a result of the consolidated entity’s operational liquidity requirements:
the consolidated entity will not have sufficient funds to settle a transaction on the due date;
the consolidated entity will be forced to sell financial assets at a value which is less than what they are worth; or
the consolidated entity may be unable to settle or recover a financial asset at all.
To help reduce these risks, the consolidated entity:
maintains instruments that are tradeable in highly liquid markets.
has readily accessible standby facilities and other funding arrangements in place; and
The Board reviews this exposure on a monthly basis from a projected 12-month cash flow forecast, listing of banking facilities,
explanations of variances from the prior month reports and current funding positions of the overseas controlled entities provided by
finance personnel.
The following table details the consolidated entity’s remaining contractual maturity for its financial assets and financial liabilities.
The financial assets have been disclosed based on the undiscounted contractual maturities of the financial assets including interest
that will be earned on those assets. The financial liabilities have been disclosed based on the undiscounted cash flows of the
financial liabilities based on the earliest date on which the consolidated entity can be required to pay.
Year ended 30 June 2018
CONSOLIDATED
Non derivative financial assets
Cash and cash equivalents
Receivables from franchisees
Trade and other receivables
Other financial assets
Derivative financial assets
Forward currency contracts
Less than
1 year
$000
1 to 2
years
$000
2 to 5
years
$000
Over 5
years
$000
Total
$000
170,544
544,003
184,915
31,458
5
-
-
-
-
5,354
79,990
-
-
-
-
-
-
6,014
18,283
170,544
544,003
276,273
49,741
-
5
Total financial assets
930,925
5,354
79,990
24,297
1,040,566
Non derivative financial liabilities
Trade and other payables
Interest bearing loans and borrowings
Derivative financial liabilities
Forward currency contracts
289,986
444,808
-
-
380,675
134,138
52
-
-
Total financial liabilities
734,846
380,675
134,138
-
-
-
-
289,986
959,621
52
1,249,659
Net maturity
196,079
(375,321)
(54,148)
24,297
(209,093)
Year ended 30 June 2017
CONSOLIDATED
Non derivative financial assets
Cash and cash equivalents
Receivables from franchisees
Trade and other receivables
Other financial assets
Derivative financial assets
Forward currency contracts
Less than
1 year
$000
1 to 2
years
$000
2 to 5
years
$000
Over 5
years
$000
Total
$000
80,224
535,448
109,358
29,166
25
-
-
-
-
5,501
81,767
-
-
-
-
-
-
5,742
30,076
80,224
535,448
202,368
59,242
-
25
Total financial assets
754,221
5,501
81,767
35,818
877,307
Non derivative financial liabilities
Trade and other payables
Interest bearing loans and borrowings
Derivative financial liabilities
Forward currency contracts
238,628
401,409
-
-
246,994
93,869
68
-
-
Total financial liabilities
640,105
246,994
93,869
-
-
-
-
238,628
742,272
68
980,968
Net maturity
114,116
(241,493)
(12,102)
35,818
(103,661)
For detailed information on financing facilities available as at 30 June 2018 refer to Note 22.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
123
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
35. FINANCIAL RISK MANAGEMENT (continued)
(e)
Fair Value of Financial Assets and Financial Liabilities
The fair value of financial assets and financial liabilities are determined as follows:
The carrying amounts of cash and cash equivalents, receivables from franchisees, trade and other receivables, other financial
assets, trade and other payables and interest-bearing loans and borrowings are reasonable approximations of fair value.
The fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid
markets are determined with reference to quoted market prices.
The fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance
with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market
transactions.
The consolidated entity enters into derivative financial instruments with various counterparties, particularly financial
institutions with investment grade credit ratings. Forward currency contracts are valued using valuation techniques which
employs the use of market observable inputs.
The consolidated entity uses various methods in estimating the fair value of financial instruments. The methods comprise:
Level 1 – the fair value is calculated using quoted prices in active markets.
Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices).
Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data.
The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised in the table below.
Quoted market
Valuation technique –
market observable
inputs (Level 2) $000
Year ended 30 June 2018
CONSOLIDATED
price
(Level 1) $000
Financial Assets
Listed investments
Forward currency contracts
Total Financial Assets
Financial Liabilities
Forward currency contracts
Total Financial Liabilities
46,848
-
46,848
-
-
Year ended 30 June 2017
CONSOLIDATED
price
(Level 1) $000
Financial Assets
Listed investments
Forward currency contracts
Total Financial Assets
Financial Liabilities
Forward currency contracts
Total Financial Liabilities
56,455
-
56,455
-
-
Quoted market
Valuation technique –
market observable
inputs (Level 2) $000
-
5
5
52
-
Valuation technique –
non market observable
inputs (Level 3) $000
-
-
-
-
-
Valuation technique –
non market observable
inputs (Level 3) $000
-
25
25
68
68
-
-
-
-
-
Total
$000
46,848
5
46,853
52
52
Total
$000
56,455
25
56,480
68
68
Quoted market price represents the fair value determined based on quoted prices on active markets as at the reporting date without
any deduction for transaction costs. The fair value of the listed equity investments are based on quoted market prices and are
included in level 1.
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. Forward
currency contracts are measured using quoted forward exchange rates. These instruments are included in level 2.
124
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
35. FINANCIAL RISK MANAGEMENT (continued)
(f)
Capital Risk Management Policy
When managing capital, the objective is to create long-term sustainable value for shareholders and avoid adverse short-term
decision making, whilst maintaining optimal returns to shareholders and benefits to other stakeholders. The aim is to maintain a
capital structure utilising the lowest cost of capital available to the entity.
The consolidated entity is constantly adjusting the capital structure to take advantage of favourable costs of capital or high returns
on assets. As the market is constantly changing, the consolidated entity may change the amount of dividends to be paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The capital structure of the consolidated entity consists of debt, which includes the interest-bearing loans and borrowings disclosed
in Note 18 and 21, cash and cash equivalents disclosed in Note 28(a) and equity attributable to equity holders of the parent,
comprising ordinary shares, reserves and retained profits as disclosed in Notes 24, 25 and 26 respectively. None of the consolidated
entity’s entities are subject to externally imposed capital requirements.
Capital management is monitored through the net debt to equity ratio. The target for the consolidated entity’s net debt to equity
ratio is a tolerance level of up to 50%. The net debt to equity ratio as at 30 June 2018 and 30 June 2017 were as follows:
Borrowings (a)
Less: Cash and cash equivalents
Net Debt (c)
Total equity (b)
CONSOLIDATED
June
2018
$000
925,394
(170,544)
754,850
June
2017
$000
720,509
(80,224)
640,285
2,959,980
2,834,957
Debt to equity ratio [(a)/(b)]
31.26%
25.42%
Net debt to equity ratio [(c)/(b)]
25.50%
22.59%
(a) Borrowings for the purpose of calculating the debt to equity ratio consists of:
Bank overdraft;
Other short-term borrowings;
Syndicated facility agreement (current and non-current);
Commercial bills payable;
Lease liabilities (current and non-current);
Derivatives payable; and
Non trade amounts owing to directors, other related parties and unrelated parties.
(b)
For the purpose of calculating the net debt to equity ratio, total equity excludes the negative acquisition reserve of $22.05 million
(2017: $22.05 million).
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
125
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
36. DERIVATIVE FINANCIAL INSTRUMENTS
Hedging Instruments
The following table details the derivative hedging instruments as at balance date. The fair value of a hedging derivative is classified
as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months and as a current asset or
liability if the remaining maturity of the hedged item is less than 12 months.
Current Assets
Forward currency contracts – held for trading
Forward currency contracts – cash flow hedges
Current liabilities
Forward currency contracts – held for trading
Forward currency contracts – cash flow hedges
(a)
Forward currency contracts – held for trading
CONSOLIDATED
June
2018
$000
-
5
35
17
The consolidated entity has entered into forward currency contracts which are economic hedges but do not satisfy the
requirements of hedge accounting.
Currency
Average Exchange Rate
2018
2017
Euro (0-12 months)
US Dollar (0-12 months)
62.77
75.85
67.64
76.03
Total
CONSOLIDATED
2018
2017
Buy
$000
7,816
1,814
9,630
Sell
$000
-
-
-
Buy
$000
5,610
3,628
9,238
June
2017
$000
25
-
40
28
Sell
$000
-
-
-
These contracts are fair valued by comparing the contracted rate to the market rates at balance date. All movements in fair value
are recognised in profit or loss in the period they occur. The net fair value losses on forward currency contracts during the year
ended 30 June 2018 was $0.04 million for the consolidated entity (2017: $0.01 million).
(b)
Forward currency contracts – cash flow hedges
The consolidated entity purchases inventories from various overseas countries. As such, the consolidated entity is exposed to
foreign exchange risk from various currency exposures, primarily with respect to:
United States dollars; and
Euro.
In order to protect against exchange rate movements and to manage the inventory costing process, the consolidated entity has
entered into forward currency contracts to purchase US dollars and Euro. These contracts are hedging highly probable forecasted
purchases and they are timed to mature when payments are scheduled to be made. The following table details the forward
currency contracts outstanding as at reporting date:
Currency
Average Exchange Rate
2017
2018
Euro (0-12 months)
US Dollar (0-12 months)
62.99
74.65
66.93
75.11
Total
CONSOLIDATED
2018
2017
Buy
$000
2,416
483
2,899
Sell
$000
-
-
-
Buy
$000
2,271
666
2,937
Sell
$000
-
-
-
126
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
36. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
Forward currency contracts – cash flow hedges (continued)
(b)
The forward currency contracts are considered to be highly effective hedges as they are matched against forecast
inventory purchases and firm committed invoice payments for inventory purchases. During the year ended 30 June 2018, the
hedges were 100% effective (2017: 100% effective), therefore the gain or loss on the contracts attributable to the hedged risk is
taken directly to other comprehensive income. When the inventory is delivered the amount recognised in equity is adjusted to the
inventory account in the statement of financial position.
Movement in the forward currency contract cash flow hedge reserve:
Opening balance
Transferred to inventory
Charged to other comprehensive income
Closing balance
CONSOLIDATED
June
2018
$000
Increase/(Decrease)
(20)
20
(8)
(8)
June
2017
$000
(32)
32
(20)
(20)
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
127
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
37.
INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
CONSOLIDATED
Investment
June
2018
$000
Share of Profit Before Tax
June
2017
$000
June
2018
$000
June
2017
$000
Total joint venture entities accounted for using equity method
4,497
26,355
5,792
5,200
Name and Principal Activities
Ownership Interest
Contribution to Profit /
(Loss) Before Tax
Noarlunga (Shopping complex)
Perth City West (Shopping complex)
June
2018
%
50%
50%
June
2017
%
50%
50%
Warrawong King St (a) (Shopping complex)
62.5%
62.5%
Byron Bay (Residential/convention development)
Byron Bay – 2 (Resort operations)
Dubbo (Shopping complex)
Bundaberg (Land held for investment)
Gepps Cross (Shopping complex)
QCV (b) (Miners residential complex)
KEH Partnership (Retailer) (c)
Coomboona Dairy (d) (Dairy farming)
Other
50%
50%
50%
50%
50%
50%
50%
49.9%
50%
50%
50%
50%
50%
50%
50%
50%
49.9%
-
June
2018
$000
1,573
3,806
1,100
(741)
246
631
(234)
3,075
10
-
June
2017
$000
1,591
4,023
1,081
(734)
467
651
(3)
3,101
(114)
-
(4,565)
(5,945)
891
5,792
1,082
5,200
(a) This joint venture has not been consolidated as the consolidated entity does not have control over operating and financing
decisions and all joint venture parties participate equally in decision making.
(b) A number of wholly-owned subsidiaries of Harvey Norman Holdings Limited (“HNHL”) have entered into joint ventures with an
unrelated party to provide mining camp accommodation. The respective joint ventures have been granted finance facilities as
follows:
(i)
(ii)
a finance facility from ANZ for the amount of $5.15 million plus interest and costs, with a maturity date of 14 June 2019.
finance facilities from Network Consumer Finance Pty Limited (“NCF”), a wholly-owned subsidiary of HNHL, for the amount
of $35.05 million plus interest and costs, subject to bi-annual review.
(c) The consolidated entity, through a wholly-owned subsidiary, has a 50% interest in KEH Partnership Pty Limited, a retail joint
venture in Australia. The primary business of the KEH Partnership retail joint venture is the retail sale of school apparel and
educational goods through the brand name The School Locker. The ‘Big Buys by Harvey Norman®‘ business was closed during
the second half of the 2018 financial year.
The consolidated entity has a commercial loan receivable from the KEH Partnership retail joint venture totalling $60.96 million as
at 30 June 2018 (Jun 2017: $73.60 million). The commercial loan was used to assist with the working capital of the retail joint
venture. An impairment assessment was conducted resulting in the recognition of an expense of $16.92 million (June 2017:
$18.41 million) in the 2018 financial year as disclosed in Note 4. Expenses.
The present value of future cash flows as at 30 June 2018 was assessed for a five-year period, based on financial budgets and
assets held as security for the loan. The effective interest rate of 7.5% was applied to the cash flow projections. Cash flow
projections were limited to five years. Each of the key assumptions in the impairment assessment is subject to judgement
including the future trading performance of the retail joint venture. Judgement has been applied based on available information
to assess the recoverable amount of the non-trade receivables as at balance date.
(d) HNM Galaxy Pty Limited, acting in its capacity as trustee of the HNM Galaxy Unit Trust (HN JV Entity), holds 49.9% of the issued
shares in Coomboona Holdings Pty Limited. Eternal Sound Limited, acting in its capacity as trustee for the AAA Settlement Trust
(Eternal Sound JV Entity), holds 50.1% of the issued shares in Coomboona Holdings Pty Limited. Coomboona Holdings Pty
Limited holds all of the issued shares in companies which carry on the business of dairy farm operations, land ownership and a
pedigree breeding and genetics division in Northern Victoria (Coomboona JV). The 49.9% interest of the consolidated entity in
the Coomboona JV is equity-accounted. The Coomboona JV commenced trading in September 2015 and the equity-accounted
trading losses were $4.57 million for the 2018 financial year compared to equity-accounted trading losses of $5.95 million for the
previous corresponding year. Refer to further information provided on Page 21 regarding the Other Segment.
128
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
38. CONTROLLED ENTITIES AND UNIT TRUSTS
Shares held by Harvey Norman Holdings Limited
The following companies are 100% owned by Harvey Norman Holdings Limited and incorporated in Australia unless marked otherwise. The
financial year of all controlled entities are the same as that of the Parent Company.
A.C.N. 098 004 570 Pty Limited
Aloku Pty Limited
Anwarah Pty Limited
Arisit Pty Limited1, 2
Arlenu Pty Limited
Arpayo Pty Limited
Australian Business Skills Centre Pty Limited22
Balwondu Pty Limited
Barrayork Pty Limited
Becto Pty Limited
Bellevue Hill Pty Limited
Bencoolen Properties Pte Limited 11,16
Bestest Pty Limited
Bradiz Pty Limited
Braxpine Pty Limited
Byron Bay Facilities Pty Limited23
Byron Bay Management Pty Limited24
Caesar Mosaics Pty Limited
Calardu Albany Pty Limited
Calardu Albury Pty Limited
Calardu Alexandria DM Pty Limited
Calardu Alexandria WH Pty Limited
Calardu Alice Springs Pty Limited
Calardu Armadale WA Pty Limited
Calardu Armidale Pty Limited
Calardu Auburn Pty Limited
Calardu Ballarat Pty Limited
Calardu Ballina No. 1 Pty Limited
Calardu Ballina Pty Limited
Calardu Bathurst Pty Limited
Calardu Belrose DM Pty Limited
Calardu Bendigo Pty Ltd
Calardu Berri (SA) Pty Limited
Calardu Berrimah Pty Limited
Calardu Berrimah WH Pty Limited26
Calardu Broadmeadow Pty Limited
Calardu Broadmeadows VIC Pty Limited
Calardu Browns Plains No. 1 Pty Limited
Calardu Browns Plains Pty Limited
Calardu Bunbury (WA) Pty Limited
Calardu Bundaberg Pty Limited
Calardu Bundaberg WH Pty Limited
Calardu Bundall Pty Limited
Calardu Burnie Pty Limited
Calardu Cairns Pty Limited
Calardu Cambridge Pty Limited
Calardu Campbelltown Pty Limited
Calardu Cannington Pty Limited
Calardu Caringbah (Taren Point) Pty Limited
Calardu Caringbah Pty Limited
Calardu Chatswood Pty Limited
Calardu Crows Nest Pty Limited
Calardu Cubitt Pty Limited
Calardu Darwin Pty Limited
Calardu Devonport Pty Limited
Calardu Dubbo Pty Limited
Calardu Emerald Pty Limited
Calardu Frankston Pty Limited
Calardu Frankston WH Pty Limited
Calardu Fyshwick DM Pty Limited
Calardu Gepps Cross Pty Limited
Calardu Gladstone Pty Limited
Calardu Gordon Pty Limited
Calardu Guildford Pty Limited
Calardu Gympie Pty Limited
Calardu Helensvale Pty Limited7
Calardu Hervey Bay Pty Limited
Calardu Hobart Pty Limited
Calardu Hoppers Crossing Pty Limited
Calardu Horsham Pty Limited
Calardu Innisfail Pty Limited
Calardu Ipswich Pty Limited
Calardu Jandakot Pty Limited
Calardu Joondalup Pty Limited
Calardu Kalgoorlie Oswald St Pty Limited
Calardu Kalgoorlie Pty Limited
Calardu Karana Downs Pty Limited
Calardu Karratha Pty Limited
Calardu Kemblawarra Pty Limited
Calardu Kingaroy Pty Limited
Calardu Kotara Pty Limited
Calardu Launceston Pty Limited
Calardu Lismore Pty Limited
Calardu Loganholme Pty Limited
Calardu Macgregor Pty Ltd
Calardu Mackay No. 1 Pty Limited
Calardu Mackay No. 2 Pty Limited
Calardu Maitland Pty Limited
Calardu Malaga Pty Limited
Calardu Mandurah Pty Limited
Calardu Maribyrnong Pty Limited
Calardu Marion Pty Limited
Calardu Maroochydore Pty Limited
Calardu Maroochydore Warehouse Pty Limited
Calardu Marsden Park Pty Limited
Calardu Maryborough Pty Limited
Calardu Melville Pty Limited
Calardu Mentone Pty Limited
Calardu Midland Pty Limited
Calardu Milton Pty Limited
Calardu Morayfield Pty Limited
Calardu Morwell Pty Limited
Calardu Moss Vale Pty Limited
Calardu Mount Isa Pty Limited
Calardu Mt Gambier Pty Limited
Calardu Mudgee Pty Limited
Calardu Munno Para Pty Limited
Calardu Noarlunga Pty Limited
Calardu Noble Park WH Pty Limited
Calardu Noosa Pty Limited
Calardu North Ryde No. 1 Pty Limited
Calardu North Ryde Pty Limited
Calardu Northbridge Pty Limited
Calardu Nowra Pty Limited
Calardu Penrith Pty Limited
Calardu Perth City West Pty Limited
Calardu Port Macquarie Pty Limited
Calardu Preston Pty Limited
Calardu Pty Limited
Calardu Queensland Pty Limited
Calardu Raine Square Pty Limited
Calardu Richmond Pty Limited
Calardu Rockhampton Pty Limited
Calardu Rockingham Pty Limited
Calardu Roselands Pty Limited
Calardu Rothwell Pty Limited
Calardu Rutherford Pty Limited
Calardu Rutherford Warehouse Pty Limited
Calardu Sale Pty Limited
Calardu Silverwater Pty Limited
Calardu South Australia Pty Limited
Calardu Springvale Pty Limited
Calardu Surry Hills Pty Limited
Calardu Swan Hill Pty Limited
Calardu Taree Pty Limited
Calardu Taren Point Pty Limited
Calardu Thebarton Pty Limited
Calardu Toorak Pty Limited
Calardu Toowoomba WH Pty Limited
Calardu Townsville Pty Limited
Calardu Tweed Heads Pty Limited
Calardu Tweed Heads Traders Way Pty Limited
Calardu Vicfurn Pty Limited
Calardu Victoria Pty Limited
Calardu Wangaratta Pty Ltd
Calardu Warrawong (Homestarters) Pty Limited
Calardu Warrawong Pty Limited
Calardu Warrnambool Pty Limited
Calardu Warwick Pty Limited
Calardu West Gosford Pty Limited
Calardu Whyalla Pty Limited
Calardu Wivenhoe Pty Limited
Calardu Wodonga Pty Limited
Cannonel Recovery Pty Limited
Carlando Pty Limited
Cascade Consolidated Sdn. Bhd. 13,27
Charmela Pty Limited
Clambruno Pty Limited
Consolidated Design Group Pty Ltd
Contemporary Design Group Pty Limited 1,2
CP Aspley Pty Limited
CP Belmont Pty Limited
CP Bendigo Pty Limited
CP Braybrook Pty Limited
CP Bundaberg Leasing Pty Limited
CP Bundaberg Pty Limited
CP Burleigh Waters Pty Limited
CP Coburg Pty Limited
CP Dandenong Pty Limited
CP Joondalup Pty Limited
CP Loganholme Pty Limited
CP Macgregor Pty Limited
CP Mackay Pty Limited
CP Malvern Pty Limited
CP Mandurah Pty Limited
CP Maroochydoore Pty Limited
CP Maryborough Leasing Pty Limited
CP Maryborough Pty Limited
CP Midland Pty Limited
CP Moonah Pty Limited
CP Moorabbin Pty Limited
CP Morayfield Pty Limited
CP Mornington Pty Limited
CP Mt Druitt Leasing Pty Limited
CP Mt Druitt Pty Limited
CP O'Connor Pty Limited
CP Osborne Park CL Pty Limited
CP Osborne Park Pty Limited
CP Richmond Pty Limited
CP Ringwood Pty Limited
CP Thomastown Pty Limited
CP Victoria Park Pty Limited
CP Welshpool DC Pty Limited
Cropp Pty Limited
D.M. Alexandria Franchisor Pty Limited
D.M. Alexandria Leasing Pty Limited
D.M. Alexandria Licencing Pty Limited
D.M. Auburn Franchisor Pty Limited
D.M. Auburn Leasing Pty Limited
D.M. Belrose Franchisor Pty Limited
D.M. Belrose Leasing Pty Limited
D.M. Bundall Franchisor Pty Limited
D.M. Bundall Leasing Pty Limited
D.M. Castle Hill Franchisor Pty Limited
D.M. Castle Hill Leasing Pty Limited
D.M. Fyshwick Franchisor Pty Limited
D.M. Fyshwick Leasing Pty Limited
D.M. Kotara Franchisor Pty Limited
D.M. Kotara Leasing Pty Limited
D.M. Liverpool Franchisor Pty Limited
D.M. Liverpool Leasing Pty Limited
D.M. Marion Franchisor Pty Ltd
D.M. Marion Leasing Pty Ltd
D.M. Maroochydore Franchisor Pty Limited
D.M. Maroochydore Leasing Pty Limited
D.M. North Ryde Franchisor Pty Limited
D.M. North Ryde Leasing Pty Limited
D.M. Obsorne Park Leasing Pty Ltd
D.M. Osborne Park Franchisor Pty Ltd
D.M. Penrith Franchisor Pty Limited
D.M. Penrith Leasing Pty Limited
D.M. QVH Franchisor Pty Limited
D.M. QVH Leasing Pty Limited
D.M. Springvale Franchisor Pty Limited
D.M. Springvale Leasing Pty Limited
D.M. Warrawong Franchisor Pty Limited
D.M. Warrawong Leasing Pty Limited
D.M. West Gosford Franchisor Pty Ltd
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
129
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
38. CONTROLLED ENTITIES AND UNIT TRUSTS (continued)
Shares held by Harvey Norman Holdings Limited (continued)
D.M. West Gosford Leasing Pty Ltd
Daldere Pty Limited
Dandolena Pty Limited
Derni Pty Limited1,2
Divonda Pty Limited
DM Online Franchisor Pty Limited
DM Online Leasing Pty Limited
Domain Holdings Pty Limited
Domayne Furnishing Pty Limited
Domayne Holdings Limited9, 10
Domayne Online.com Pty Limited
Domayne Pty Limited
Dubbo JV Pty Limited
Durslee Pty Limited
Eastern Audio Pte Ltd 11,27
E-Creation Sdn. Bhd. 13,27
Edbrook Everton Park Pty Limited
Edbrook Pty Limited6
Elitetrax Marketing Sdn Bhd13,28
Energy Incentive Team Pty Limited29
Farane Pty Limited
Flormonda Pty Limited
Ganoru Pty Limited
Generic Publications Pty Limited
Gestco Pty Limited
Glo Light Pty Limited21
H.N. Adelaide CK Franchisor Pty Limited
H.N. Adelaide CK Leasing Pty Limited
H.N. Albany Creek Franchisor Pty Limited
H.N. Albany Creek Leasing Pty Limited
H.N. Albany Franchisor Pty Limited
H.N. Albany Leasing Pty Limited
H.N. Albury Franchisor Pty Limited
H.N. Albury Leasing Pty Limited
H.N. Alexandria Franchisor Pty Limited
H.N. Alexandria Leasing Pty Limited
H.N. Alice Springs Franchisor Pty Limited
H.N. Alice Springs Leasing Pty Limited
H.N. Ararat Franchsor Pty Limited
H.N. Ararat Leasing Pty Limited
H.N. Armadale WA Franchisor Pty Limited
H.N. Armadale WA Leasing Pty Limited
H.N. Armidale Franchisor Pty Limited
H.N. Armidale Leasing Pty Limited
H.N. Aspley Franchisor Pty Limited
H.N. Aspley Leasing Pty Limited
H.N. Atherton Franchisor Pty Limited
H.N. Atherton Leasing Pty Limited
H.N. Auburn Franchisor Pty Limited
H.N. Auburn Leasing Pty Limited
H.N. Ayr Franchisor Pty Limited
H.N. Ayr Leasing Pty Limited
H.N. Bairnsdale Franchisor Pty Limited
H.N. Bairnsdale Leasing Pty Limited
H.N. Balgowlah Franchisor Pty Limited
H.N. Balgowlah Leasing Pty Limited
H.N. Ballarat Franchisor Pty Limited
H.N. Ballarat Leasing Pty Limited
H.N. Ballina Franchisor Pty Limited
H.N. Ballina Leasing Pty Limited
H.N. Batemans Bay Franchisor Pty Limited
H.N. Batemans Bay Leasing Pty Limited
H.N. Bathurst Franchisor Pty Limited
H.N. Bathurst Leasing Pty Limited
H.N. Belmont Franchisor Pty Limited
H.N. Belmont Leasing Pty Limited
H.N. Belmont North Franchisor Pty Limited
H.N. Belmont North Leasing Pty Limited
H.N. Bendigo Franchisor Pty Limited
H.N. Bendigo Leasing Pty Limited
H.N. Bernoth Franchisor Pty Limited
H.N. Bernoth Leasing Pty Limited
H.N. Bernoth Plant & Equipment Pty Limited
H.N. Blacktown Franchisor Pty Limited
H.N. Blacktown Leasing Pty Limited
H.N. Bondi Junction Franchisor Pty Limited
H.N. Bondi Junction Leasing Pty Limited
130
H.N. Braybrook Franchisor Pty Limited
H.N. Braybrook Leasing Pty Limited
H.N. Broadmeadow (VIC) Franchisor Pty Limited
H.N. Broadmeadow (VIC) Leasing Pty Limited
H.N. Broadway (Sydney) Franchisor Pty Limited
H.N. Broadway (Sydney) Leasing Pty Limited
H.N. Broadway on the Mall Franchisor Pty Limited
H.N. Broadway on the Mall Leasing Pty Limited
H.N. Broken Hill Franchisor Pty Limited
H.N. Broken Hill Leasing Pty Limited
H.N. Brooklyn Franchisor Pty Limited
H.N. Brooklyn Leasing Pty Limited
H.N. Broome Franchisor Pty Ltd
H.N. Broome Leasing Pty Ltd
H.N. Browns Plains Franchisor Pty Limited
H.N. Browns Plains Leasing Pty Limited
H.N. Bunbury Franchisor Pty Limited
H.N. Bunbury Leasing Pty Limited
H.N. Bundaberg Franchisor Pty Limited
H.N. Bundaberg Leasing Pty Limited
H.N. Bundall Franchisor Pty Limited
H.N. Bundall Leasing Pty Limited
H.N. Burleigh Heads Franchisor Pty Limited
H.N. Burleigh Heads Leasing Pty Limited
H.N. Burleigh Waters Franchisor Pty Limited
H.N. Burleigh Waters Leasing Pty Limited
H.N. Busselton Franchisor Pty Limited
H.N. Busselton Leasing Pty Limited
H.N. Cairns Franchisor Pty Limited
H.N. Cairns Leasing Pty Limited
H.N. Cambridge Park Franchisor Pty Limited
H.N. Cambridge Park Leasing Pty Limited
H.N. Campbelltown Franchisor Pty Limited
H.N. Campbelltown Leasing Pty Limited
H.N. Cannington W.A. Franchisor Pty Limited
H.N. Cannington W.A. Leasing Pty Limited
H.N. Canonvale Franchisor Pty Limited
H.N. Canonvale Leasing Pty Limited
H.N. Capalaba Franchisor Pty Limited
H.N. Capalaba Leasing Pty Limited
H.N. Carindale Franchisor Pty Limited
H.N. Carindale Leasing Pty Limited
H.N. Caringbah Franchisor Pty Limited
H.N. Caringbah Leasing Pty Limited
H.N. Castle Hill Franchisor Pty Limited
H.N. Castle Hill Leasing Pty Limited
H.N. Chadstone Franchisor Pty Limited
H.N. Chadstone Leasing Pty Limited
H.N. Chatswood Franchisor Pty Limited
H.N. Chatswood Leasing Pty Limited
H.N. Chirnside Park Franchisor Pty Limited
H.N. Chirnside Park Leasing Pty Limited
H.N. City Cross Franchisor Pty Limited
H.N. City Cross Leasing Pty Limited
H.N. City West Franchisor Pty Limited
H.N. City West Leasing Pty Limited
H.N. Cleveland Franchisor Pty Limited
H.N. Cleveland Leasing Pty Limited
H.N. Cobar Franchisor Pty Limited
H.N. Cobar Leasing Pty Limited
H.N. Coburg Franchisor Pty Limited
H.N. Coburg Leasing Pty Limited
H.N. Coffs Harbour Franchisor Pty Limited
H.N. Coffs Harbour Leasing Pty Limited
H.N. Coorparoo Franchisor Pty Limited
H.N. Coorparoo Leasing Pty Limited
H.N. Cranbourne Franchisor Pty Limited
H.N. Dalby Franchisor Pty Limited
H.N. Dalby Leasing Pty Limited
H.N. Dandenong Franchisor Pty Limited
H.N. Dandenong Leasing Pty Limited
H.N. Darwin Franchisor Pty Limited
H.N. Darwin Leasing Pty Limited
H.N. Deniliquin Franchisor Pty Limited
H.N. Deniliquin Leasing Pty Limited
H.N. Dubbo Franchisor Pty Limited
H.N. Dubbo Leasing Pty Limited
H.N. Edgewater Franchisor Pty Limited
H.N. Edgewater Leasing Pty Limited
H.N. Education Franchisor Pty Limited
H.N. Education Leasing Pty Limited
H.N. Emerald Franchisor Pty Limited
H.N. Emerald Leasing Pty Limited
H.N. Energy IP Licensing Pty Limited
H.N. Enfield Franchisor Pty Limited
H.N. Enfield Leasing Pty Limited
H.N. Everton Park Franchisor Pty Limited
H.N. Everton Park Leasing Pty Limited
H.N. Forster Franchisor Pty Ltd
H.N. Forster Leasing Pty Ltd
H.N. Fortitude Valley Franchisor Pty Limited
H.N. Fortitude Valley Leasing Pty Limited
H.N. Frankston Franchisor Pty Limited
H.N. Frankston Leasing Pty Limited
H.N. Fremantle Franchisor Pty Limited
H.N. Fyshwick Franchisor Pty Limited
H.N. Fyshwick Leasing Pty Limited
H.N. Geelong Franchisor Pty Limited
H.N. Geelong Leasing Pty Limited
H.N. Gepps Cross Franchisor Pty Limited
H.N. Gepps Cross Leasing Pty Limited
H.N. Geraldton Leasing Pty Limited
H.N. Geraldton WA Franchisor Pty Limited
H.N. Gladstone Franchisor Pty Limited
H.N. Gladstone Leasing Pty Limited
H.N. Gordon Franchisor Pty Limited
H.N. Gordon Leasing Pty Limited
H.N. Gosford Leasing Pty Limited
H.N. Goulburn Franchisor Pty Limited
H.N. Goulburn Leasing Pty Limited
H.N. Grafton Franchisor Pty Limited
H.N. Grafton Leasing Pty Limited
H.N. Great Eastern Highway Franchisor Pty Limited
H.N. Great Eastern Highway Leasing Pty Limited
H.N. Greensborough Franchisor Pty Limited
H.N. Greensborough Leasing Pty Limited
H.N. Griffith Franchisor Pty Limited
H.N. Griffith Leasing Pty Limited
H.N. Gunnedah Franchisor Pty Limited
H.N. Gunnedah Leasing Pty Limited
H.N. Guthrie Street Franchisor Pty Limited
H.N. Guthrie Street Leasing Pty Limited
H.N. Gympie Franchisor Pty Limited
H.N. Gympie Leasing Pty Limited
H.N. Hamilton Franchisor Pty Limited
H.N. Hamilton Leasing Pty Limited
H.N. Hervey Bay Franchisor Pty Limited
H.N. Hervey Bay Leasing Pty Limited
H.N. Hoppers Crossing Franchisor Pty Limited
H.N. Hoppers Crossing Leasing Pty Limited
H.N. Horsham Franchisor Pty Limited
H.N. Horsham Leasing Pty Limited
H.N. Hyperdome Franchisor Pty Limited
H.N. Hyperdome Leasing Pty Limited
H.N. Indooroopilly Franchisor Pty Limited
H.N. Indooroopilly Leasing Pty Limited
H.N. Innisfail Franchisor Pty Limited
H.N. Innisfail Leasing Pty Limited
H.N. Inverell Franchisor Pty Limited
H.N. Inverell Leasing Pty Limited
H.N. Ipswich Franchisor Pty Limited
H.N. Ipswich Leasing Pty Limited
H.N. Joondalup Franchisor Pty Limited
H.N. Joondalup Leasing Pty Limited
H.N. Kalgoorlie Franchisor Pty Limited
H.N. Kalgoorlie Leasing Pty Limited
H.N. Karratha Franchisor Pty Limited
H.N. Karratha Leasing Pty Limited
H.N. Kawana Waters Franchisor Pty Limited
H.N. Kawana Waters Leasing Pty Limited
H.N. Kingaroy Franchisor Pty Limited
H.N. Kingaroy Leasing Pty Limited
H.N. Knox Towerpoint Franchisor Pty Limited
H.N. Knox Towerpoint Leasing Pty Limited
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
38. CONTROLLED ENTITIES AND UNIT TRUSTS (continued)
Shares held by Harvey Norman Holdings Limited (continued)
H.N. Lake Haven Franchisor Pty Limited
H.N. Lake Haven Leasing Pty Limited
H.N. Leichhardt Franchisor Pty Limited
H.N. Lismore Franchisor Pty Limited
H.N. Lismore Leasing Pty Limited
H.N. Lithgow Franchisor Pty Limited
H.N. Lithgow Leasing Pty Limited
H.N. Liverpool Franchisor Pty Limited
H.N. Liverpool Leasing Pty Limited
H.N. Loganholme Franchisor Pty Limited
H.N. Loganholme Leasing Pty Limited
H.N. Loughran Contracting Pty Limited
H.N. Mac 1 Leasing Pty Limited
H.N. Mac 1 Pty Limited
H.N. Macgregor Franchisor Pty Limited
H.N. Macgregor Leasing Pty Limited
H.N. Mackay Franchisor Pty Limited
H.N. Mackay Leasing Pty Limited
H.N. Maddington Franchisor Pty Limited
H.N. Maitland Franchisor Pty Limited
H.N. Maitland Leasing Pty Limited
H.N. Malaga Franchisor Pty Limited
H.N. Malaga Leasing Pty Limited
H.N. Mandurah Franchisor Pty Limited
H.N. Mandurah Leasing Pty Limited
H.N. Maribyrnong Franchisor Pty Limited
H.N. Maribyrnong Leasing Pty Limited
H.N. Marion Franchisor Pty Limited
H.N. Marion Leasing Pty Limited
H.N. Maroochydore Franchisor Pty Limited
H.N. Maroochydore Leasing Pty Limited
H.N. Martin Place Sydney Franchisor Pty Limited
H.N. Martin Place Sydney Leasing Pty Limited
H.N. Mentone Franchisor Pty Limited
H.N. Mentone Leasing Pty Limited
H.N. Midland Franchisor Pty Limited
H.N. Midland Leasing Pty Limited
H.N. Mildura Franchisor Pty Limited
H.N. Mildura Leasing Pty Limited
H.N. Mile End Franchisor Pty Limited
H.N. Mile End Leasing Pty Limited
H.N. Moe Franchisor Pty Limited
H.N. Moe Leasing Pty Limited
H.N. Moonah Franchisor Pty Limited
H.N. Moonah Leasing Pty Limited
H.N. Moorabbin Franchisor Pty Limited
H.N. Moorabbin Leasing Pty Limited
H.N. Moorabbin SC Franchisor Pty Limited
H.N. Moorabbin SC Leasing Pty Limited
H.N. Moore Park Franchisor Pty Limited
H.N. Moore Park Leasing Pty Limited
H.N. Morayfield Franchisor Pty Limited
H.N. Morayfield Leasing Pty Limited
H.N. Moree Franchisor Pty Limited
H.N. Moree Leasing Pty Limited
H.N. Morley Franchisor Pty Limited
H.N. Mornington Franchisor Pty Limited
H.N. Mornington Leasing Pty Limited
H.N. Morwell Franchisor Pty Limited
H.N. Morwell Leasing Pty Limited
H.N. Moss Vale Franchisor Pty Limited
H.N. Moss Vale Leasing Pty Limited
H.N. Mt Barker Franchisor Pty Limited
H.N. Mt Barker Leasing Pty Limited
H.N. Mt Gambier Franchisor Pty Limited
H.N. Mt Gambier Leasing Pty Limited
H.N. Mt Gravatt Franchisor Pty Limited
H.N. Mt Gravatt Leasing Pty Limited
H.N. Mt Isa Franchisor Pty Limited
H.N. Mt Isa Leasing Pty Limited
H.N. Mudgee Franchisor Lty Limited
H.N. Mudgee Leasing Pty Limited
H.N. Munno Para Franchisor Pty Limited
H.N. Munno Para Leasing Pty Limited
H.N. Muswellbrook Franchisor Pty Limited
H.N. Muswellbrook Leasing Pty Limited
H.N. Narre Warren Franchisor Pty Limited
H.N. Narre Warren Leasing Pty Limited
H.N. Newcastle Franchisor Pty Limited
H.N. Newcastle Leasing Pty Limited
H.N. Newcastle West Franchisor Pty Limited
H.N. Newcastle West Leasing Pty Limited
H.N. Noarlunga Franchisor Pty Limited
H.N. Noarlunga Leasing Pty Limited
H.N. Noosa Franchisor Pty Limited
H.N. Noosa Leasing Pty Limited
H.N. Norwest Franchisor Pty Limited
H.N. Nowra Franchisor Pty Limited
H.N. Nowra Leasing Pty Limited
H.N. Nunawading Franchisor Pty Limited
H.N. Nunawading Leasing Pty Limited
H.N. O’Connor Franchisor Pty Limited
H.N. O’Connor Leasing Pty Limited
H.N. Oakleigh CK Franchisor Pty Limited
H.N. Oakleigh CK Leasing Pty Limited
H.N. Orange Franchisor Pty Limited
H.N. Orange Leasing Pty Limited
H.N. Osborne Park Franchisor Pty Limited
H.N. Osborne Park Leasing Pty Limited
H.N. Oxley Franchisor Pty Limited
H.N. Oxley Leasing Pty Limited
H.N. Pacific Fair Franchisor Pty Limited
H.N. Pacific Fair Leasing Pty Limited
H.N. Parkes Franchisor Pty Limited
H.N. Parkes Leasing Pty Limited
H.N. Penrith Franchisor Pty Limited
H.N. Penrith Leasing Pty Limited
H.N. Peppermint Grove Franchisor Pty Limited
H.N. Peppermint Grove Leasing Pty Limited
H.N. Port Hedland Franchisor Pty Limited
H.N. Port Hedland Leasing Pty Limited
H.N. Port Kennedy Franchisor Pty Limited
H.N. Port Kennedy Leasing Pty Limited
H.N. Port Lincoln Franchisor Pty Limited
H.N. Port Lincoln Leasing Pty Limited
H.N. Port Macquarie Franchisor Pty Limited
H.N. Port Macquarie Leasing Pty Limited
H.N. Preston Franchisor Pty Limited
H.N. Preston Leasing Pty Limited
H.N. Richmond Franchisor Pty Limited
H.N. Richmond Leasing Pty Limited
H.N. Ringwood Franchisor Pty Limited
H.N. Ringwood Leasing Pty Limited
H.N. Riverwood Franchisor Pty Limited
H.N. Riverwood Leasing Pty Limited
H.N. Rockhampton Franchisor Pty Limited
H.N. Rockhampton Leasing Pty Limited
H.N. Rothwell Franchisor Pty Limited
H.N. Rothwell Leasing Pty Limited
H.N. Salamander Bay Franchisor Pty Limited
H.N. Salamander Bay Leasing Pty Limited
H.N. Sale Franchisor Pty Limited
H.N. Sale Leasing Pty Limited
H.N. Shepparton Franchisor Pty Limited
H.N. Shepparton Leasing Pty Limited
H.N. South Tweed Franchisor Pty Limited
H.N. South Tweed Leasing Pty Limited
H.N. Southland Franchisor Pty Limited
H.N. Southland Leasing Pty Limited
H.N. Springvale Franchisor Pty Limited
H.N. Springvale Leasing Pty Limited
H.N. Sunshine Franchisor Pty Limited
H.N. Sunshine Leasing Pty Limited
H.N. Swan Hill Franchisor Pty Limited
H.N. Swan Hill Leasing Pty Limited
H.N. Tamworth Franchisor Pty Limited
H.N. Tamworth Leasing Pty Limited
H.N. Taree Franchisor Pty Limited
H.N. Taree Leasing Pty Limited
H.N. Thomastown Franchisor Pty Limited
H.N. Thomastown Leasing Pty Limited
H.N. Toowoomba Franchisor Pty Limited
H.N. Toowoomba Leasing Pty Limited
H.N. Townsville Franchisor Pty Limited
H.N. Townsville Leasing Pty Limited
H.N. Traralgon Franchisor Pty Limited
H.N. Traralgon Leasing Pty Limited
H.N. Tura Beach Franchisor Pty Limited
H.N. Tura Beach Leasing Pty Limited
H.N. Vic/Tas Commercial Project Franchisor Pty Limited
H.N. Vic/Tas Commercial Project Leasing Pty Limited
H.N. Victoria Park Franchisor Pty Limited
H.N. Victoria Park Leasing Pty Limited
H.N. Wagga Franchisor Pty Limited
H.N. Wagga Leasing Pty Limited
H.N. Wangaratta Franchisor Pty Limited
H.N. Wangaratta Leasing Pty Limited
H.N. Warragul Franchisor Pty Limited
H.N. Warragul Leasing Pty Limited
H.N. Warrawong Franchisor Pty Limited
H.N. Warrawong Leasing Pty Limited
H.N. Warrnambool Franchisor Pty Limited
H.N. Warrnambool Leasing Pty Limited
H.N. Warwick (WA) Franchisor Pty Limited
H.N. Warwick (WA) Leasing Pty Limited
H.N. Warwick Franchisor Pty Limited
H.N. Warwick Leasing Pty Limited
H.N. Watergardens Franchisor Pty Limited
H.N. Watergardens Leasing Pty Limited
H.N. Waurn Ponds Franchisor Pty Limited
H.N. Waurn Ponds Leasing Pty Limited
H.N. West Gosford Franchisor Pty Limited
H.N. West Wyalong Franchisor Pty Limited
H.N. West Wyalong Leasing Pty Limited
H.N. Whyalla Franchisor Pty Limited
H.N. Whyalla Leasing Pty Limited
H.N. Wiley Park Franchisor Pty Limited
H.N. Wiley Park Leasing Pty Limited
H.N. Windsor Franchisor Pty Limited
H.N. Windsor Leasing Pty Limited
H.N. Woden Franchisor Pty Limited
H.N. Woden Leasing Pty Limited
H.N. Wonthaggi Franchisor Pty Limited
H.N. Wonthaggi Leasing Pty Limited
H.N. Woodville Franchisor Pty Limited
H.N. Woodville Leasing Pty Limited
H.N. Young Franchisor Pty Limited
H.N. Young Leasing Pty Limited
Hardly Normal Discounts Pty Limited
Hardly Normal Limited9,10
Hardly Normal Pty Limited
Harvey Cellars Pty Limited
Harvey Liquor Pty Limited
Harvey Norman (ACT) Pty Limited
Harvey Norman (QLD) Pty Limited6
Harvey Norman 2007 Management Pty Limited
Harvey Norman Big Buys Pty Limited
Harvey Norman Burnie Franchisor Pty Limited
Harvey Norman Burnie Leasing Pty Limited
Harvey Norman CEI d.o.o. 12
Harvey Norman Commercial Your Solution Provider Pty Ltd
Harvey Norman Contracting Pty Limited
Harvey Norman Corporate Air Pty Limited
Harvey Norman CP Pty Limited
Harvey Norman Devonport Franchisor Pty Limited
Harvey Norman Devonport Leasing Pty Limited
Harvey Norman Education and Training Pty Limited
Harvey Norman Europe d.o.o12
Harvey Norman Export Pty Limited
Harvey Norman Furnishing Pty Limited
Harvey Norman Gamezone Pty Limited
Harvey Norman Glenorchy Franchisor Pty Limited
Harvey Norman Global Pty Limited
Harvey Norman Hobart Franchisor Pty Limited
Harvey Norman Hobart Leasing Pty Limited
Harvey Norman Holdings (Ireland) Limited15
Harvey Norman Home Cellars Pty Limited
Harvey Norman Home Loans Pty Limited
Harvey Norman Home Starters Pty Limited
Harvey Norman Homemaker Centre Pty Limited
Harvey Norman Launceston Franchisor Pty Limited
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
131
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
38. CONTROLLED ENTITIES AND UNIT TRUSTS (continued)
Shares held by Harvey Norman Holdings Limited (continued)
Harvey Norman Launceston Leasing Pty Limited
Harvey Norman Leasing (Blanchardstown) Limited15,18
Harvey Norman Leasing (Carrickmines) Limited 15,18
Harvey Norman Leasing (Castlebar) Limited 15,18
Harvey Norman Leasing (Cork) Limited15,18
Harvey Norman Leasing (Drogheda) Limited15,18
Harvey Norman Leasing (Dublin) Limited15,18
Harvey Norman Leasing (Dundalk) Limited15,18
Harvey Norman Leasing (Eastgate) Limited15,18
Harvey Norman Leasing (Limerick) Limited15,18
Harvey Norman Leasing (Mullingar) Limited15,18
Harvey Norman Leasing (N.Z.) Limited9,10
Harvey Norman Leasing (Naas) Limited15,18
Harvey Norman Leasing (NI) Limited15,18
Harvey Norman Leasing (Rathfarnham) Limited15,18
Harvey Norman Leasing (Tralee) Limited15,18
Harvey Norman Leasing (Waterford) Limited15,18
Harvey Norman Leasing Pty Limited
Harvey Norman Limited10
Harvey Norman Mortgage Service Pty Limited
Harvey Norman Net. Works Pty Limited
Harvey Norman OFIS Pty Limited
Harvey Norman Online.com Pty Limited
Harvey Norman Ossia (Asia) Pte Limited11,16,17
Harvey Norman Properties (N.Z.) Limited9,10
Harvey Norman Rental Pty Limited
Harvey Norman Retailing Pty Limited
Harvey Norman Rosney Franchisor Pty Limited
Harvey Norman Security Pty Limited
Harvey Norman Shopfitting Pty Limited
Harvey Norman Singapore Pte Limited11,19,16
Harvey Norman Stores (N.Z.) Pty Limited1,2
Harvey Norman Stores Pty Limited
Harvey Norman Superlink Pty Limited
Harvey Norman Tasmania Pty Limited
Harvey Norman Technology Pty Limited
Harvey Norman The Bedding Specialists Pty Limited
Harvey Norman The Computer Specialists Pty Limited
Harvey Norman The Electrical Specialists Pty Limited
Harvey Norman The Furniture Specialists Pty Limited
Harvey Norman Trading (Ireland) Limited15,18
Harvey Norman Trading d.o.o.12
Harvey Norman Ulverstone Franchisor Pty Limited
Harvey Norman Victoria Pty Limited
Harvey Norman Zagreb d.o.o.14
Havrex Pty Limited6
HN Allens Road Leasing Limited9,10
HN Blenheim Leasing Limited9,10
HN Botany Leasing Limited9,10
HN Botany Outlet Leasing Limited9,10,33
HN Bundaberg Markets Pty Limited30
HN Byron No. 2 Pty Limited
HN Byron No. 3 Pty Limited
HN Commercial Leasing Limited9,10
HN Coomboona Pty Limited
HN Downing Street Leasing Limited9,10
HN Edmonton Road Leasing Limited9,10
HN Hamilton Central Leasing Limited9,10
HN Harris Road Leasing Limited9,10
HN Henderson Leasing Limited9,10
HN Hornby Leasing Limited9,10
HN Licensing Pty Limited
HN Lincoln Centre Leasing Limited9,10
HN Maleme Street Leasing Limited9,10
HN Manukau Leasing Limited9,10
HN Mowbray Street Leasing Limited9,10
HN Mt Roskill Leasing Limited9,10
HN Napier Leasing Limited9,10
HN Online Franchisor Pty Limited
HN Online Leasing Pty Limited
HN Paraparaumu Leasing Limited9,10
HN QCV Benaraby No.1 Pty Limited
HN QCV Benaraby Pty Limited
HN QCV Blackwater Land Pty Limited
HN QCV Bottle Tree Pty Limited
HN QCV Concepts Pty Limited
HN QCV Fairview Pty Limited
HN QCV Injune Pty Limited
HN QCV LOR Pty Limited
HN QCV Pty Limited
HN QCV Sarina Land Pty Limited
HN QCV Sarina Pty Limited
HN QCV Toowoomba Land Pty Limited
HN QCV Toowoomba Pty Limited
HN Queenstown Leasing Limited9,10
HN Rangitikei Street Leasing Limited9,10
HN Tauranga Commercial Leasing Limited9,10
HN Tauranga Leasing Limited9,10
HN Tory Street Leasing Limited9,10
HN Tower Junction Leasing Limited9,10
HN Westgate Leasing Limited9,10
HN Whakatane Leasing Limited,9,10
HN Wingate Leasing Limited9,10
HN Woolston Leasing Limited9,10
HN Zagreb Investment Pty Limited
HNL Pty Limited
HNM Galaxy Pty Limited
HNZ Retailing NZ Limited9,10,31
Hodberg Pty Limited5
Hodvale Pty Limited5
Home Mart Furniture Pty Limited
Home Mart Pty Limited
Hoxco Pty Limited6
J.M. Albury Franchisor Pty Limited
J.M. Albury Leasing Pty Limited
J.M. Alexandria Franchisor Pty Limited
J.M. Alexandria Leasing Pty Limited
J.M. Ballina Franchisor Pty Limited
J.M. Ballina Leasing Pty Limited
J.M. Bennetts Green Franchisor Pty Limited
J.M. Bennetts Green Leasing Pty Limited
J.M. Campbelltown Franchisor Pty Limited
J.M. Campbelltown Leasing Pty Limited
J.M. Caringbah Franchisor Pty Limited
J.M. Caringbah Leasing Pty Limited
J.M. Chancellor Park Franchisor Pty Limited
J.M. Chancellor Park Leasing Pty Limited
J.M. Contracting Services Pty Limited
J.M. Darwin Franchisor Pty Limited7
J.M. Darwin Leasing Pty Limited7
J.M. Dubbo Franchisor Pty Limited
J.M. Dubbo Leasing Pty Limited
J.M. Leasing Pty Limited
J.M. Mackay Franchisor Pty Limited
J.M. Mackay Leasing Pty Limited
J.M. Maitland Franchisor Pty Limited
J.M. Maitland Leasing Pty Limited
J.M. Maroochydore Franchisor Pty Limited
J.M. Maroochydore Leasing Pty Limited
J.M. Marrickville Franchisor Pty Limited
J.M. McGraths Hill Franchisor Pty Limited
J.M. McGraths Hill Leasing Pty Limited
J.M. Morayfield Franchisor Pty Limited
J.M. Morayfield Leasing Pty Limited
J.M. Mudgee Franchisor Pty Limited
J.M. Mudgee Leasing Pty Limited
J.M. Muswellbrook Franchisor Pty Limited
J.M. Muswellbrook Leasing Pty Limited
J.M. Nowra Franchisor Pty Limited
J.M. Nowra Leasing Pty Limited
J.M. Plant & Equipment Hire Pty Limited
J.M. Rockhampton Franchisor Pty Limited
J.M. Rockhampton Leasing Pty Limited
J.M. Share Investment Pty Limited
J.M. Toukley Franchisor Pty Limited
J.M. Toukley Leasing Pty Limited
J.M. Townsville Franchisor Pty Limited
J.M. Townsville Leasing Pty Limited
J.M. Wagga Wagga Franchisor Pty Limited
J.M. Wagga Wagga Leasing Pty Limited
J.M. Wallsend Franchisor Pty Limited
J.M. Wallsend Leasing Pty Limited
J.M. Warners Bay Franchisor Pty Limited
J.M. Warners Bay Leasing Pty Limited
132
J.M. Warrawong Franchisor Pty Limited
J.M. Warrawong Leasing Pty Limited
J.M. West Gosford Franchisor Pty Limited
J.M. West Gosford Leasing Pty Limited
J.M. Young Franchisor Pty Limited
J.M. Young Leasing Pty Limited
Jartoso Pty Limited
JM Online Franchisor Pty Limited
JM Online Leasing Pty Limited
Jondarlo Pty Limited
Joyce Mayne Furnishing Pty Limited
Joyce Mayne Liverpool Leasing Pty Limited
Joyce Mayne Penrith Pty Limited
Joyce Mayne Shopping Complex Pty Limited
Kalinya Development Pty Limited
Kambaldu Pty Limited
Kita Pty Limited
Koodero Pty Limited
Korinti Pty Limited
Lamino Pty Limited
Lesandu Adelaide City Pty Limited
Lesandu Albany Pty Limited
Lesandu Albury Pty Limited
Lesandu Alexandria (JM) Pty Limited
Lesandu Alexandria DM Pty Limited
Lesandu Alexandria Pty Limited
Lesandu Alice Springs Pty Limited
Lesandu Ararat Pty Limited
Lesandu Aspley Pty Limited
Lesandu Atherton Pty Limited
Lesandu Auburn Stone Pty Limited
Lesandu Ayr Pty Limited
Lesandu Bairnsdale Pty Limited
Lesandu Balgowlah Pty Limited
Lesandu Ballina JM Pty Limited
Lesandu Batemans Bay Pty Limited
Lesandu Bathurst Pty Limited
Lesandu Belmont Pty Limited
Lesandu Belrose DM Pty Limited
Lesandu Benalla Pty Limited
Lesandu Bennetts Green JM Pty Limited
Lesandu Bentleigh Pty Limited
Lesandu Berrimah JM Pty Limited7
Lesandu Berrimah Pty Limited
Lesandu Blacktown Pty Limited
Lesandu Bondi Junction Pty Limited
Lesandu Brisbane City Pty Limited
Lesandu Brisbane Pty Limited
Lesandu Broadbeach Pty Limited
Lesandu Broadway Pty Limited
Lesandu Broken Hill Pty Limited
Lesandu Broome Pty Ltd
Lesandu Browns Plains No. 1 Pty Limited
Lesandu Browns Plains Pty Limited
Lesandu Burleigh Heads Flooring Pty Limited
Lesandu Busselton Pty Limited
Lesandu Cambridge Pty Limited
Lesandu Canberra Pty Limited
Lesandu Cannington Pty Limited
Lesandu Cannonvale Pty Limited
Lesandu Capalaba Pty Limited
Lesandu Carindale Pty Limited
Lesandu Castle Hill DM Pty Limited
Lesandu Castle Hill Pty Limited
Lesandu Cessnock (JM) Pty Limited
Lesandu Chadstone Pty Limited
Lesandu Charmhaven Pty Limited
Lesandu Chatswood Express Pty Limited
Lesandu Chatswood Pty Limited
Lesandu Chirnside Park Pty Limited
Lesandu Cleveland Pty Limited
Lesandu Cobar Pty Limited
Lesandu Coffs Harbour Pty Limited
Lesandu Coorparoo Pty Limited
Lesandu CP Belmont Pty Limited
Lesandu CP Burleigh Waters Pty Limited
Lesandu CP Coburg Pty Limited
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
CONTROLLED ENTITIES AND UNIT TRUSTS (continued)
38.
Shares held by Harvey Norman Holdings Limited (continued)
Lesandu CP Joondalup Pty Limited
Lesandu CP Macgregor Pty Limited
Lesandu CP Macgregor WH Pty Limited
Lesandu CP Maryborough Pty Limited
Lesandu CP Moonah Pty Limited
Lesandu CP Mornington Pty Limited
Lesandu CP Osborne Park Pty Limited
Lesandu CP Richmond CL Pty Limited
Lesandu CP Richmond Pty Limited
Lesandu CP Richmond WH Pty Limited
Lesandu Cranbourne Pty Limited
Lesandu Dalby Pty Limited
Lesandu Dandenong Pty Limited
Lesandu Deniliquin Pty Limited
Lesandu Dubbo JM Pty Limited
Lesandu Dubbo Pty Limited
Lesandu Eden Pty Limited
Lesandu Engadine Pty Limited
Lesandu Erina Flooring Pty Limited
Lesandu Forster Pty Limited
Lesandu Fyshwick Pty Limited
Lesandu Gepps Cross Pty Limited
Lesandu Gladstone Pty Limited
Lesandu Gordon Pty Limited
Lesandu Goulburn Pty Limited
Lesandu Grafton Pty Limited
Lesandu Greensborough Pty Limited
Lesandu Griffith Pty Limited
Lesandu Gunnedah Pty Limited
Lesandu Hamilton (VIC) Pty Limited
Lesandu Hamilton Pty Limited
Lesandu Hervey Bay Pty Limited
Lesandu HN Pty Limited
Lesandu Horsham Pty Limited
Lesandu Indooroopilly Pty Limited
Lesandu Ingham Pty Limited
Lesandu Innisfail Pty Limited
Lesandu Inverell Pty Limited
Lesandu Ipswich Pty Limited
Lesandu Jandakot Pty Limited
Lesandu Joondalup Pty Limited
Lesandu Kalgoorlie Pty Limited
Lesandu Karratha Pty Limited
Lesandu Kewdale Pty Limited
Lesandu Knox Towerpoint Pty Limited
Lesandu Kotara DM Pty Limited
Lesandu Launceston Pty Limited
Lesandu Laverton Pty Limited7
Lesandu Light Street DM Pty Limited
Lesandu Lismore Pty Limited
Lesandu Lithgow Pty Limited
Lesandu Loganholme Pty Limited
Lesandu Mackay Pty Limited
Lesandu Maitland JM Pty Limited
Lesandu Maitland Pty Limited
Lesandu Malaga Pty Limited
Lesandu Mandurah Pty Limited
Lesandu Marion Pty Limited
Lesandu Maroochydoore JM Pty Limited
Lesandu Maroochydore Flooring Pty Limited
Lesandu McGraths Hill (JM) Pty Limited
Lesandu Melbourne City DM Pty Limited
Lesandu Mentone Pty Limited
Lesandu Midland Pty Limited
Lesandu Mile End Pty Limited
Lesandu Mitchell Pty Limited
Lesandu Moe Pty Limited
Lesandu Moorabbin Pty Limited
Lesandu Moore Park Pty Limited
Lesandu Moree Pty Limited
Lesandu Mornington Pty Limited
Lesandu Morwell WH Pty Limited
Lesandu Moss Vale Pty Limited
Lesandu Mt Barker Pty Limited
Lesandu Mt Gravatt Pty Limited
Lesandu Mt Isa Pty Limited
Lesandu Munno Para Pty Limited
Lesandu Muswellbrook JM Pty Limited
Lesandu Muswellbrook Pty Limited
Lesandu Narrabri Pty Limited
Lesandu Narre Warren Pty Limited
Lesandu Newcastle West Pty Limited
Lesandu Noarlunga Pty Limited
Lesandu Noosa Pty Limited
Lesandu North Ryde DM Pty Limited
Lesandu Notting Hill Pty Limited
Lesandu Nowra Pty Limited
Lesandu Oakleigh CK Pty Limited
Lesandu O'Connor Pty Limited
Lesandu Orange Pty Limited
Lesandu Osborne Park Pty Limited
Lesandu Oxley Pty Limited
Lesandu Penrith DM Pty Limited
Lesandu Penrith Pty Limited
Lesandu Peppermint Grove Pty Limited
Lesandu Perth City West Pty Limited
Lesandu Port Lincoln Pty Limited
Lesandu Port Macquarie Pty Limited
Lesandu Pty Limited
Lesandu Raymond Terrace Pty Limited
Lesandu Richlands Pty Limited
Lesandu Richmond (VIC) Pty Limited
Lesandu Riverwood Pty Limited
Lesandu Rockhampton Pty Limited
Lesandu Rothwell Pty Limited
Lesandu S.A. Pty Limited
Lesandu Salamander Bay Pty Limited
Lesandu Sale Pty Limited
Lesandu Shepparton Pty Limited
Lesandu Silverwater Pty Limited
Lesandu Sippy Downs JM Pty Limited
Lesandu Southport Pty Limited
Lesandu Stanmore Pty Limited
Lesandu Sunshine Pty Limited
Lesandu Swan Hill Pty Limited
Lesandu Sydenham Pty Limited
Lesandu Sydney City SS Pty Limited
Lesandu Tamworth Pty Limited
Lesandu Taree Home Mart Pty Limited
Lesandu Taree Pty Limited
Lesandu Taren Point Pty Limited
Lesandu Tasmania Pty Limited
Lesandu Temora Pty Limited
Lesandu Thomastown Pty Limited
Lesandu Toukley Pty Limited
Lesandu Townsville Pty Limited
Lesandu Tura Beach Pty Limited
Lesandu Tweed Heads Flooring Pty Limited
Lesandu Tweed Heads Pty Limited
Lesandu Underwood Pty Limited
Lesandu WA Furniture Pty Limited
Lesandu WA Pty Limited
Lesandu Wagga Wagga JM Pty Limited
Lesandu Wagga Wagga Pty Limited
Lesandu Wallsend JM Pty Limited
Lesandu Wangaratta Pty Limited
Lesandu Warana Pty Limited
Lesandu Warners Bay JM Pty Limited
Lesandu Warragul Pty Limited
Lesandu Warrawong Pty Limited
Lesandu Warwick (WA) Pty Limited
Lesandu Warwick Pty Limited
Lesandu Waurn Ponds Pty Limited
Lesandu West Gosford DM Pty Limited
Lesandu West Wyalong Pty Limited
Lesandu Wiley Park Pty Limited
Lesandu Windsor Pty Limited
Lesandu Wollongong Pty Limited
Lesandu Wonthaggi Pty Limited
Lesandu Woodville Pty Limited
Lesandu Young JM Pty Limited
Lexeri Pty Limited
Lightcorp Pty Limited
Lighting Venture International Pty Limited7
Lighting Venture Pty Limited21
Lodare Pty Limited
Loreste Pty Limited
Malvis Pty Limited
Manutu Pty Limited
Maradoni Pty Limited
Marinski Pty Limited
Murray Street Development Pty Limited
Mymasterpiece Pty Limited 5
Nedcroft Pty Limited
Network Consumer Finance (Ireland) Limited15,18
Network Consumer Finance (N.Z.) Limited9,10
Network Consumer Finance Pty Limited1,2,32
Nomadale Pty Limited6
Norman Ross Limited 10,34
Norman Ross Pty Limited
Oldmist Pty Limited
Osraidi Pty Limited
P & E Crows Nest Pty Limited
P & E Homewest Pty Limited
P & E Leichhardt Pty Limited
P & E Maddington Pty Limited
P & E Shopfitters Pty Limited
Packcom Pty Limited
PEM Corporate Pty Limited
Pertama Holdings Pte Limited 11,16,17
Pertama Mechandising Pte Ltd 11,27
Plezero Pty Limited
Poliform Pty Limited25
R.Reynolds Nominees Pty Limited
Sarsha Pty Limited1,2
Setto Pty Limited
Shakespir Pty Limited
Solaro Pty Limited
Space Furniture Pte Limited11,16
Space Furniture Pty Limited3
Spacepol Pty Limited
Steamstyle Venture Pty Limited
Stonetess Pty Limited
Stores (NZ) Limited10
Stores Securitisation Pty Limited
Strathloro Pty Limited
Stupendous Pty Limited20
Swaneto Pty Limited
Swanpark Pty Limited6
Tatroko Pty Limited
Tessera Stones & Tiles Australia Pty Limited
Tessera Stones & Tiles Pty Limited8
The Byron At Byron Pty Limited
Tisira Pty Limited
Valecomp Recovery Pty Limited
Ventama Pty Limited4
Wadins Pty Limited
Wanalti Pty Limited
Warungi Pty Limited
Waytango Pty Limited
Webzone Pty Limited
Wytharra Pty Limited
Yoogalu Pty Limited1,2
Zabella Pty Limited
Zavarte Pty Limited
Zirdano Pty Limited
Zirdanu Pty Limited
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
133
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
38. CONTROLLED ENTITIES AND UNIT TRUSTS (continued)
Shares held by Harvey Norman Holdings Limited (continued)
Company is a member of the “Closed Group”.
Company is relieved under the Class Order described in Note 39.
Derni Pty Ltd holds 49% and Kita Pty Ltd holds 51% of the shares in Space Furniture Pty Limited.
Shares held by Sarsha Pty Limited.
Shares held by Harvey Norman Retailing Pty Limited.
Shares held by Harvey Norman Stores Pty Limited.
Company incorporated during the year.
Shares held by Stonetess Pty Limited.
Shares held by Harvey Norman Limited.
Company incorporated in New Zealand.
Company incorporated in Singapore.
Company incorporated in Slovenia.
Company incorporated in Malaysia.
Company incorporated in Croatia.
Company incorporated in Ireland.
Harvey Norman Singapore Pte Limited owns 100% of the shares in Bencoolen Properties Pte Limited, 60% of the shares in
Harvey Norman Ossia (Asia) Pte Limited, 100% of the shares in Space Furniture Pte Limited, and 50.62% of the shares in
Pertama Holdings Pte Limited.
Harvey Norman Ossia (Asia) Pte Limited holds 49.38% of the shares in Pertama Holdings Pte Limited.
Shares held by Harvey Norman Holdings (Ireland) Limited.
Shares held by Setto Pty Limited.
Shares held by Calardu Pty Limited.
Lighting Venture Pty Limited holds 65% of shares in Glolight Pty Limited.
Yoogalu Pty Limited holds 50.5% of the shares in Australian Business Skills Centre Pty Limited.
HN Byron No 3 Pty Limited holds 50% of the shares in Byron Bay Facilities Pty Limited.
Yoogalu Pty Limited holds 50% of the shares in Byron Bay Management Pty Limited.
Derni Pty Limited holds 1% and Kita Pty Limited holds 99% of the shares in Poliform Pty Limited.
Former name is Calardu Jandakot No. 1 Pty Limited.
Shares held by Pertama Holdings Pte Limited.
Shares held by Cascade Consolidated Sdn.Bhd.
Shares held by Network Consumer Finance Pty Limited.
HN Bundaberg Markets Pty Limited holds 50% of the shares in Lana's Farmers Markets Pty Limited.
This entity was incorporated in New Zealand on 29 June 2018.
Network Consumer Finance was mistakenly and incorrectly included and described as a Released Group Entity in the
Revocation Deed entered into on or about 29 June 2015. This error was rectified by way of a Rectification Deed entered into
on or about 10 January 2018.
This entity was incorporated in New Zealand on 27 June 2018.
Shares held by Harvey Norman Stores (N.Z.) Pty Limited.
Note:
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
134
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
38. CONTROLLED ENTITIES AND UNIT TRUSTS (continued)
Units in Unit Trusts held by Harvey Norman Holdings Limited
A.C.N. 098 004 570 No. 2 Trust
Calardu A.C.T. No. 2 Trust
Calardu ACT No. 3 Trust
Calardu ACT Trust
Calardu Adderley Street Trust
Calardu Albany Trust
Calardu Albury Trust
Calardu Alexandria DM Trust
Calardu Alexandria WH Trust
Calardu Alice Springs No. 1 Trust
Calardu Alice Springs Trust
Calardu Armadale WA Trust
Calardu Armidale Trust
Calardu Aspley Trust
Calardu Auburn No. 1 Trust
Calardu Auburn No. 2 Trust
Calardu Auburn No. 4 Trust
Calardu Auburn No. 5 Trust
Calardu Auburn No. 6 Trust
Calardu Auburn No. 7 Trust
Calardu Auburn No. 8 Trust
Calardu Auburn No. 9 Trust
Calardu Ballarat Trust
Calardu Ballina No. 1 Trust
Calardu Ballina Trust
Calardu Bathurst Trust
Calardu Beaufort Street Trust
Calardu Bellevue Hill Trust
Calardu Bendigo Trust
Calardu Bennetts Green Trust
Calardu Bennetts Green Warehouse Trust
Calardu Berri Trust
Calardu Berrimah Trust
Calardu Berrimah WH Trust
Calardu Broadmeadow No. 1 Trust
Calardu Broadmeadows VIC Trust
Calardu Brookvale Trust
Calardu Browns Plains No. 1 Trust
Calardu Bunbury Trust
Calardu Bundaberg No. 1 Trust
Calardu Bundaberg Trust
Calardu Bundaberg WH Trust
Calardu Burnie Trust
Calardu Cairns Trust
Calardu Cambridge Trust
Calardu Campbelltown Trust
Calardu Cannington Trust
Calardu Caringbah (Taren Point) Trust
Calardu Caringbah Trust
Calardu Crows Nest Trust
Calardu Darwin Trust
Calardu Devonport Trust
Calardu Dubbo Trust
Calardu Emerald Trust
Calardu Frankston Trust
Calardu Frankston WH Trust
Calardu Fyshwick DM Trust
Calardu Gepps Cross Trust
Calardu Gladstone Trust
Calardu Gympie Trust
Calardu Hervey Bay Trust
Calardu Hobart Trust
Calardu Hoppers Crossing Trust
Calardu Horsham Trust
Calardu Ipswich Trust
Calardu Joondalup Trust
Calardu Kalgoorlie Oswald St Trust
Calardu Kalgoorlie Trust
Calardu Karratha Trust
Calardu Kingaroy Trust
Calardu Launceston Trust
Calardu Lismore Trust
Calardu Loganholme Trust
Calardu Mackay Trust
Calardu Malaga Trust
Calardu Mandurah Trust
Calardu Maribyrnong Trust
Calardu Marion Trust
Calardu Maroochydore Trust
Calardu Maroochydore Warehouse Trust
Calardu Melville Trust
Calardu Mentone Trust
Calardu Midland Trust
Calardu Morayfield Trust
Calardu Moree Trust
Calardu Morwell Trust
Calardu Moss Vale Trust
Calardu Mt. Gambier Trust
Calardu Mudgee Trust
Calardu Munno Para Trust
Calardu No. 1 Trust
Calardu No. 2 Trust
Calardu No. 3 Trust
Calardu Noarlunga Trust
Calardu Noble Park WH Trust
Calardu Noosa Trust
Calardu North Ryde No. 1 Trust
Calardu North Ryde No. 2 Trust
Calardu North Ryde No. 3 Trust
Calardu North Ryde Trust
Calardu Nowra Trust
Calardu Oxley Trust
Calardu Penrith No 2 Trust
Calardu Penrith No. 1 Trust
Calardu Penrith Trust
Calardu Perth City West Trust
Calardu Port Macquarie Trust
Calardu Preston Trust
Calardu Raine Square Trust
Calardu Richmond Trust
Calardu Rockhampton No. 2 Trust
Calardu Rockhampton Trust
Calardu Rockingham Trust
Calardu Rosebery Trust
Calardu Roselands Trust
Calardu Rothwell Trust
Calardu Rutherford Trust
Calardu Rutherford Warehouse Trust
Calardu Sale Trust
Calardu Silverwater Trust
Calardu Springvale Trust
Calardu Stapylton Trust
Calardu Surry Hills Trust
Calardu Swan Hill Trust
Calardu Taree Trust
Calardu Taren Point Trust
Calardu Toowoomba No. 1 Trust
Calardu Toowoomba No. 2 Trust
Calardu Toowoomba Trust
Calardu Toowoomba WH Trust
Calardu Townsville Trust
Calardu Tweed Heads No. 1 Trust
Calardu Tweed Heads Traders Way Trust
Calardu Tweed Heads Trust
Calardu Warrawong (Homestarters) No. 1 Trust
Calardu Warrawong (Homestarters) Trust
Calardu Warrawong No. 1 Trust
Calardu Warrawong No. 2 Trust
Calardu Warrawong Trust
Calardu Warrnambool Trust
Calardu Warwick Trust
Calardu West Gosford No. 1 Trust
Calardu West Gosford Trust
Calardu Whyalla Trust
Calardu Wodonga Trust
Harvey Norman Discounts No. 1 Trust
Harvey Norman No. 1 Trust
HN QCV Blackwater Land Trust
HN QCV Sarina Land Trust
HNM Galaxy Unit Trust
Lamino Investments No. 1 Trust
Lamino Investments No. 2 Trust
Lamino Investments No. 3 Trust
Lamino Investments No. 4 Trust
Lamino Investments No. 5 Trust
Lamino Investments No. 6 Trust
Oslek Developments Trust
The Calardu Trust
39. DEED OF CROSS GUARANTEE
Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, relief has been granted to certain controlled entities of
Harvey Norman Holdings Limited from the Corporations Act 2001 requirements for the preparation, audit and lodgement of their financial
reports. These controlled entities have entered into a Deed of Cross Guarantee with Harvey Norman Holdings Limited (“Closed Group”). The
effect of this Deed of Cross Guarantee is that Harvey Norman Holdings Limited has guaranteed to pay any deficiency in the event of winding
up a controlled entity within the Closed Group or if the controlled entity does not meet its obligations under the terms of overdrafts, loans,
leases or other liabilities subject to the guarantee. The controlled entities within the Closed Group have also given a similar guarantee in the
event that Harvey Norman Holdings Limited is wound up or if it does not meet its obligations under the terms of overdrafts, loans, leases or
other liabilities subject to the guarantee. The parties to the Deed of Cross Guarantee include Harvey Norman Holdings Limited and the
following controlled entities:
Arisit Pty Limited
Contemporary Design Group Pty Limited
Derni Pty Limited
Harvey Norman Stores (N.Z.) Pty Limited
Network Consumer Finance Pty Limited
Sarsha Pty Limited
Yoogalu Pty Limited
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
135
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
39. DEED OF CROSS GUARANTEE (continued)
The Statement of Financial Position and Income Statement for the Harvey Norman Holdings Limited Closed Group are as follows:
Statement of Financial Position
Current Assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Intangible assets
Other assets
Total current assets
Non-Current Assets
Trade and other receivables
Other financial assets
Property, plant and equipment
Intangible assets
Total non-current assets
Total Assets
Current Liabilities
Trade and other payables
Interest-bearing loans and borrowings
Income tax payable
Provisions
Other liabilities
Total current liabilities
Non-Current Liabilities
Interest-bearing loans and borrowings
Provisions
Deferred income tax liabilities
Other liabilities
Total non-current liabilities
Total Liabilities
NET ASSETS
Equity
Contributed equity
Reserves
Retained profits
TOTAL EQUITY
Income Statement
Profit before income tax
Income tax
Profit after tax
Retained Earnings
Retained earnings at the beginning of the year
Profit after tax from continuing operations
Dividends provided for or paid
Retained earnings at the end of the year
136
2018
$000
109,170
696,053
31,457
170,830
459
15,878
1,023,847
1,915,235
111,326
28,684
62,104
2,117,349
2017
$000
39,703
602,819
29,166
164,381
455
16,355
852,879
1,861,481
150,440
12,177
67,450
2,091,548
3,141,196
2,944,427
107,624
289,675
9,484
28,734
25,806
461,323
500,217
1,707
60,370
199
562,493
84,975
265,245
39,680
26,701
8,840
425,441
330,272
4,409
74,386
3,242
412,309
1,023,816
837,750
2,117,380
2,106,677
388,381
10,393
1,718,606
2,117,380
332,084
(55,144)
276,940
1,709,003
276,940
(267,337)
1,718,606
386,309
11,365
1,709,003
2,106,677
408,001
(86,840)
321,161
1,732,804
321,161
(344,962)
1,709,003
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
40.
PARENT ENTITY FINANCIAL INFORMATION
Statement of Financial Position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Contributed equity
Retained profits
Total Equity
Income Statement
Profit for the Year
PARENT ENTITY
June
2018
$000
49
2,263,529
2,263,578
6,286
85,053
91,339
388,381
1,783,858
2,172,239
June
2017
$000
36
2,224,829
2,224,865
37,231
78,166
115,397
386,309
1,723,159
2,109,468
328,036
342,924
Total Comprehensive Income
328,036
342,924
Guarantees
The Parent Company is party to a Deed of Cross Guarantee (“Deed”) with the following controlled entities:
Arisit Pty Limited
Contemporary Design Group Pty Limited
Derni Pty Limited
Harvey Norman Stores (N.Z.) Pty Limited
Network Consumer Finance Pty Limited
Sarsha Pty Limited
Yoogalu Pty Limited
The effect of this Deed is that the Parent Company has guaranteed to pay any deficiency in the event of winding up one of the above
controlled entities or if they do not meet their obligations under the terms of overdrafts, loans, leases or other liabilities subject to the
guarantee. The above controlled entities have also given a similar guarantee in the event that the Parent Company is wound up or if it does
not meet its obligations under the terms of overdrafts, loans, leases or other liabilities subject to the guarantee.
Contingent Liabilities
Refer to information provided in Note 34. Contingent Liabilities for disclosures relating to the Parent Entity.
41. SIGNIFICANT EVENTS AFTER BALANCE DATE
On 31 August 2018, the Company announced a renounceable, pro-rata entitlement offer of new fully-paid ordinary shares in the Company
to raise approximately $163.85 million (before costs) (Entitlement Offer), with an offer price of $2.50 per share. The Entitlement Offer forms
part of the Company’s ongoing capital management program. It is intended that the proceeds of the Entitlement Offer will be used to
reduce the amount of Company consolidated entity debt.
With the exception of the above, there have been no circumstances arising since balance date which have significantly affected or may
significantly affect:
the operations;
the results of those operations; or
the state of affairs of the entity or consolidated entity in future financial years.
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
137
DIRECTORS’ DECLARATION
In accordance with a resolution of the directors of Harvey Norman Holdings Limited, we state that:
In the opinion of the directors:
a)
the financial statements, notes and the additional disclosures included in the Directors’ Report designated as audited, of the
consolidated entity are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2018 and of its performance for the year
ended on that date; and
(ii) complying with Accounting Standards and the Corporations Regulations 2001;
b)
c)
the financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 1; and
there are reasonable grounds to believe that the consolidated entity will be able to pay its debts as and when they become due and
payable.
This declaration has been made after receiving the declarations required to be made to the directors by the Chief Executive Officer and Chief
Financial Officer in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2018.
In the opinion of the directors, as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed
Group identified in Note 39 will be able to meet any obligations or liabilities to which they are or may become subject, by virtue of the Deed of
Cross Guarantee.
On behalf of the Board.
G. HARVEY
Executive Chairman
Sydney
28 September 2018
K.L. PAGE
Executive Director / Chief Executive Officer
Sydney
28 September 2018
138
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Independent Auditor's Report to the Members of Harvey Norman
Holdings Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Harvey Norman Holdings Limited (the Company) and its
subsidiaries (collectively the Group), which comprises the consolidated statement of financial position
as at 30 June 2018, the consolidated income statement, consolidated statement of comprehensive
income, consolidated statement of changes in equity and consolidated statement of cash flows for the
year then ended, notes to the financial statements, including a summary of significant accounting
policies, and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
a)
giving a true and fair view of the consolidated financial position of the Group as at 30 June
2018 and of its consolidated financial performance for the year ended on that date; and
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
139
1. Assessment of control for the purposes of consolidation
Why significant
How our audit addressed the key audit matter
The Group operates a franchise business model
in Australia. There is significant judgement
involved in the Group’s determination as to
whether it has control over the store franchisees
and therefore should consolidate their results.
Our audit procedures included the following:
• Assessed the judgements and conclusions
reached by the Directors that store
franchisees are not controlled.
• In conjunction with our International
Given the significance of the judgment involved
in the assessment and importance of this
conclusion to the presentation of the financial
statements this was considered to be a key audit
matter.
Note 1(d) and Note 1(e)(ii)(a) describes the
accounting policies in relation to the basis of
consolidation and control assessment
considerations.
Financial Reporting Standards specialists, we
considered the application of Australian
Accounting Standard AASB10 Consolidated
Financial Statements, in particular the
criteria relating to control, in the context of
the franchise agreements and how these
arrangements operate in practice. In
particular the following areas were
considered:
-
-
-
termination rights available to the
Group;
Financial assistance provided to
franchisees; and
Inventory purchasing arrangements
available to franchisees.
• Enquired of the Directors and their external
lawyers as to whether any changes were
made during the year to the standard
franchise agreements used by the Group, or
the way in which the franchisees and the
Group interact in practice.
• Confirmed the results of these discussions by
reviewing current agreements between
franchisees and the Group.
• Considered any changes that may impact the
control assessment made by the Directors.
• Considered the legal application of current
franchise agreements with the Group’s
external lawyers.
• Enquired of a sample of franchisees to
confirm our understanding of how the
current franchise agreements operate in
practice.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
140
2. Recoverability of Receivables from Franchisees
Why significant
How our audit addressed the key audit matter
Receivables from franchisees are significant to
the Group, representing 11.9% of total assets at
30 June 2018.
Note 7(a) describes the nature of the balances
receivable from franchisees, while Note 1(x)
outlines the accounting policy in relation to loans
and receivables.
The assessment of the recoverability of
franchisee receivables was a key audit matter
given the value of the balance and the
judgements exercised by the Group in making
this assessment.
Our audit procedures included the following:
• Considered the Group’s assessment of the
recoverability of receivables from individual
franchisees.
• We selected a sample of franchisee loan
receivables and obtained confirmation from
the franchisees that they acknowledge the
amounts owing at year end.
• We reviewed a sample of General Security
Deeds between the franchisees and the
Group that provides the Group with security
over the assets of franchisees.
• We considered the value of assets provided
as security by each of the franchisees against
each franchisee receivable balance.
• Enquired of management and considered any
evidence arising post year end of adverse
performance of the franchisees, which could
impact the recoverability of receivables from
franchisees.
• We considered the adequacy of the
disclosures included in Note 7(a) and Note 1
to the financial statements.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
141
3. Valuation of investment properties and owner-occupied properties
Why significant
How our audit addressed the key audit matter
Our audit procedures included the following:
• We assessed the Group’s accounting policies
with respect to investment properties and
owner-occupied properties for compliance with
the relevant Australian Accounting Standards.
• We assessed whether we could rely on the work
of those responsible for the Directors’
valuations and the work of the independent
valuation experts by considering their
competence, capabilities and objectivity.
• We selected a sample of the property valuations
performed by both independent valuation
experts and the Directors and assessed the
reasonableness of the key assumptions (as
disclosed in Note 14 and Note 15) used in the
valuations with reference to external market
evidence. This work included the involvement of
Ernst & Young real estate valuation specialists in
its execution.
• We considered the adequacy of the disclosures
included in Note 1, Note 14 and Note 15 of the
financial report.
Investment properties and owner occupied
properties (properties) represent 62.5% of the
total assets as at 30 June 2018.
Investment properties are carried at fair value
with changes in fair value recognised in the
income statement. Note 1(vii) and Note 15 of
the financial report, describes the basis upon
which fair value has been determined.
Owner-occupied properties, represented as Land
and Buildings, are carried at fair value, with
changes in fair value recognised in equity. Note
1(v) and Note 14 of the financial report,
describes the basis upon which fair value has
been determined.
The Group engages independent external
valuation experts to conduct valuations of each
property at least once every three years.
Directors’ valuations are performed where the
Group identifies a material change in the fair
value of properties not selected for external
valuation may have occurred during the year.
The valuation of properties was considered a key
audit matter given:
•
the value of the properties relative to total
assets of the Group;
•
•
•
the judgement exercised by the Group in
selecting the sample of properties subject to
internal valuations during the period;
judgements exercised by both independent
valuation specialists and the Directors in
determining fair value; and
by their nature, the use of Directors’
valuations.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
142
4. Recoverability of Non-trade Receivables from Related Entities
Why significant
How our audit addressed the key audit matter
Included in Notes 7 and 12 to the financial
statements are non-trade amounts owing from
related entities (including joint ventures and joint
venture partners) and associated provisions for
doubtful debts.
We considered this to be a key audit matter due
to the judgements involved in considering
recoverability and the adequacy of the
associated provision for doubtful debts at 30
June 2018.
Our audit procedures included the following:
• Considered the Directors’ assessment of the
recoverability of non-trade debts receivable
from related entities.
• Considered the extent to which assets were
provided as security against the carrying
value of receivables.
• Assessed the value of the assets provided as
security against the receivables.
• Considered the adequacy of the recorded
provision for doubtful debts against these
receivables.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
143
Information Other than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the
information included in the Company’s 2018 Annual Report, but does not include the financial report
and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report
and our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
144
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group
to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
145
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 32 to 56 of the directors' report for the
year ended 30 June 2018.
In our opinion, the Remuneration Report of Harvey Norman Holdings Limited for the year ended 30
June 2018, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Ernst & Young
Renay Robinson
Partner
Sydney
28 September 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
146
SHAREHOLDER INFORMATION
DISTRIBUTION OF SHAREHOLDINGS AS AT 26 SEPTEMBER 2018
Size of Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Number of Shareholders with less than a marketable parcel
Ordinary
Shareholders
5,265
6,487
1,900
1,693
146
15,491
697
VOTING RIGHTS
All ordinary shares issued by Harvey Norman Holdings Limited carry one vote per share.
TWENTY LARGEST SHAREHOLDERS AS AT 26 SEPTEMBER 2018
Number of Ordinary
Shares
Shareholder
Percentage of
Ordinary Shares
349,439,179
183,323,726
149,801,940
86,699,760
70,598,386
52,262,874
39,665,050
30,929,047
17,896,300
17,507,642
5,213,182
2,974,897
2,065,000
2,033,120
1,887,127
1,547,248
1,536,834
1,260,000
1,233,049
950,000
1,018,824,361
Mr. Gerald Harvey
Mr. Christopher Herbert Brown
HSBC Custody Nominees Limited
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Limited
Ms. Margaret Lynette Harvey
National Nominees Limited
BNP Paribas Nominees Pty Limited, BNP Paribas Noms Pty Limited & BNP
Paribas Noms (NZ) Limited
Enbeear Pty Limited
Ms. Kay Lesley Page
Argo Investments Limited
Mr. Michael Harvey
BKI Investment Company Limited
Bond Street Custodians Limited
Omnilab Media Investments Pty Limited
AMP Life Limited
Powerwrap Limited
Glenn Hargraves Investments
Mr. Arthur Brew
Peter & Lyndy White
31.36%
16.45%
13.44%
7.78%
6.34%
4.69%
3.56%
2.78%
1.61%
1.57%
0.47%
0.27%
0.19%
0.18%
0.17%
0.14%
0.14%
0.11%
0.11%
0.09%
91.44%
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
147
BLACKTOWN
Unit C5
Cnr Blacktown
& Bungarribee Roads
Blacktown NSW 2148
Phone: (02) 8822 8400
CARINGBAH
41 – 49 Willarong Road
Taren Point NSW 2229
Phone: (02) 9589 8800
MASCOT
494-504 Gardeners Road
Alexandria NSW 2015
Phone: (02) 9693 0666
DIRECTORY OF HARVEY NORMAN®, DOMAYNE® & JOYCE MAYNE® SHOPPING COMPLEXES
AUSTRALIAN CAPITAL TERRITORY
FYSHWICK
Cnr Barrier & Ipswich Streets
Fyshwick ACT 2609
Phone: (02) 6283 1200
NEW SOUTH WALES (SYDNEY SUBURBAN)
ALEXANDRIA
1/84 O’Riordan Street,
Alexandria NSW 2015
Phone: (02) 8339 7000
AUBURN
250 Parramatta Road
Auburn NSW 2144
Phone: (02) 9202 4888
AUBURN RENOVATIONS
Level 1
250 Parramatta Road
Auburn NSW 2144
Phone: (02) 9202 4888
BONDI JUNCTION
Shop 5016,
Westfield Bondi
500 Oxford Street
Bondi Junction NSW 2022
Phone: (02) 8305 8800
BROADWAY
Shop 119
Broadway Shopping Centre
Bay Street
Broadway NSW 2007
Phone: (02) 9219 5200
BALGOWLAH
176 - 190 Condamine Street
Balgowlah NSW 2093
Phone: (02) 9949 0100
CAMPBELLTOWN
22A Blaxland Road
Campbelltown NSW 2560
Phone: (02) 4621 5200
CASTLE HILL
Shop 31 Level 1 North Bldg
Home Hub Castle Hill
18 Victoria Avenue
Castle Hill NSW 2154
Phone: (02) 9840 8800
McGRATHS HILL
McGrath’s Hill Home
Shop 6
264 – 272 Windsor Road
McGraths Hill NSW 2756
Phone: (02) 4587 6800
GORDON
Level 1, Gordon Centre
802 - 808 Pacific Highway
Gordon NSW 2072
Phone: (02) 9496 9200
LIVERPOOL
The Grove Homemaker Centre
2-18 Orange Grove Road
Liverpool NSW 2170
Phone: (02) 9600 3333
MOORE PARK
Supa Centa Moore Park
Cnr South Dowling Street
& Dacey Avenue
Moore Park NSW 2021
Phone: (02) 9662 9888
PENRITH
Penrith Homemaker Centre
Mulgoa Rd & Wolseley St
Penrith NSW 2750
Phone: (02) 4737 5111
WILEY PARK
1018 Canterbury Road
Wiley Park NSW 2195
Phone: (02) 9740 1100
WILEY PARK (BATHROOMS)
1155 Canterbury Road
Wiley Park NSW 2196
Phone: (02) 9784 4400
NEW SOUTH WALES (COUNTRY)
ALBURY
Unit 7/94 Borella Road
East Albury NSW 2640
Phone: (02) 6023 0800
BATHURST
2 Ashworth Drive
Kelso NSW 2795
Phone: (02) 6332 8800
ARMIDALE
Shop 8, Girraween S/Centre
6 Queen Elizabeth Drive
Armidale NSW 2350
Phone: (02) 6771 0800
BROADMEADOW
(CLEARANCE CENTER)
35 Lambton Road
Broadmeadow NSW 2292
Phone: (02) 4028 4100
COFFS HARBOUR
Park Beach Home Base
252 Pacific Highway
Coffs Harbour NSW 2450
Phone: (02) 6653 0300
DENILIQUIN
Cnr. Hardinge &
Harfleur Streets
Deniliquin NSW 2710
Phone: (03) 5881 0700
GOSFORD (ERINA)
Karalta Lane Shopping Complex
Karalta Lane
Erina NSW 2250
Phone: (02) 4365 9500
GOULBURN
Basement Level
180 - 186 Auburn Street
Goulburn NSW 2580
Phone: (02) 4824 3000
GUNNEDAH
82 Conadilly Street
Gunnedah NSW 2380
Phone: (02) 6741 7900
INVERELL
50 Evans Street
Inverell NSW 2360
Phone: (02) 6720 0700
BALLINA
26 Boeing Avenue
Ballina NSW 2478
Phone: (02) 6620 5300
BATEMANS BAY
4 Flora Crescent
Bateman’s Bay NSW 2536
Phone: (02) 4412 3200
BROKEN HILL
329-331 Blende Street
Broken Hill NSW 2880
Phone: (08) 8084 4900
COBAR
27 Marshall Street
Cobar NSW 2835
Phone: (02) 6836 6400
DUBBO
223 Cobra Street
Dubbo NSW 2830
Phone: (02) 6826 8800
FORSTER
29 Breese Parade
Forster NSW 2428
Phone: (02) 6539 9100
GRAFTON
125 Prince Street
Grafton NSW 2460
Phone: (02) 6640 1500
LAKE HAVEN
Homemaker Lake Haven
59 – 83 Pacific Highway
Charmhaven NSW 2263
Phone: (02) 4394 6000
GRIFFITH
Cnr Jondaryan &
Willandra Avenues
Griffith NSW 2680
Phone: (02) 6961 0300
LISMORE
17 Zadoc Street
Lismore NSW 2480
Phone: (02) 6623 1400
148
DIRECTORY OF HARVEY NORMAN®, DOMAYNE® & JOYCE MAYNE® SHOPPING COMPLEXES (CONTINUED)
MOREE
103 Balo Street
Moree NSW 2400
Phone: (02) 6751 2400
NEWCASTLE
(BENNETTS GREEN)
7 Abdon Close
Bennetts Green NSW 2290
Phone: (02) 4944 5000
PORT MACQUARIE
160-174 Hastings River Dr
Port Macquarie NSW 2444
Phone: (02) 6580 0000
TEMORA
102 Hoskins Street
Temora NSW 2666
Phone: (02) 6980 1700
WARRAWONG
157 - 161 King Street
Warrawong NSW 2502
Phone: (02) 4223 8800
NEW SOUTH WALES (COUNTRY) (continued)
LITHGOW
175 Main Street
Lithgow NSW 2790
Phone: (02) 6354 5400
MACLEAN
211 River Street
Maclean NSW 2463
Phone: (02) 6603 5100
MOSS VALE
137 – 157 Lackey Road
Moss Vale NSW 2577
Phone: (02) 4869 6400
MUDGEE
33 Sydney Road
Mudgee NSW 2850
Phone: (02) 6372 8800
NOWRA
193 Princes Highway
South Nowra NSW 2541
Phone: (02) 4421 1300
ORANGE
Unit 1, Orange Grove
Homemakers Centre
Cnr Mitchell Highway &
Lone Pine Avenue
Orange NSW 2800
Phone: (02) 6393 2222
SALAMANDER BAY
270 Sandy Point Road
Salamander Bay NSW 2317
Phone: (02) 4919 3100
TAMWORTH
43 The Ringers Road
Tamworth NSW 2340
Phone: (02) 6765 1100
TURA BEACH
Shop 11, 1 Tura Beach Drive
Tura Beach NSW 2548
Phone: (02) 6497 4100
TWEED HEADS
29 - 41 Greenway Drive
Tweed Heads South NSW 2486
Phone: (07) 5524 0111
WEST WYALONG
114 Main Street
West Wyalong NSW 2671
Phone: (02) 6970 1700
YOUNG
326 Boorowa Street
Young NSW 2594
Phone: (02) 6384 1400
MAITLAND
Unit 1/366 New England
Highway
Rutherford NSW 2320
Phone: (02) 4932 2800
MUSWELLBROOK
19 Rutherford Road
Muswellbrook NSW 2333
Phone: (02) 6541 6800
PARKES
Shop 1
5-11 Saleyards Road
Parkes NSW 2870
Phone: (02) 6862 8900
TAREE
9 Mill Close
Taree NSW 2430
Phone: (02) 6552 8000
WAGGA WAGGA
Homebase Centre
7 - 23 Hammond Avenue
Wagga Wagga NSW 2650
Phone: (02) 6933 7000
NORTHERN TERRITORY
ALICE SPRINGS
Shop 211
1 Colson Street
Alice Springs NT 0870
Phone: (08) 8950 4000
DARWIN
644 Stuart Highway
Berrimah NT 0828
Phone: (08) 8922 4111
QUEENSLAND (BRISBANE SUBURBAN)
CAPALABA
Capalaba Central Centre
Shop 32 - 33
38-62 Moreton Bay Road
Capalaba QLD 4157
Phone: (07) 3362 6200
CARINDALE
Westfield Carindale
Carindale Street and
Old Cleveland Road
Carindale QLD 4152
Phone: (07) 3398 0600
LOGANHOLME
3878 - 3892 Pacific Highway
Loganholme QLD 4129
Phone: (07) 3440 9200
MACGREGOR
555 Kessels Road
Macgregor QLD 4109
Phone: (07) 3849 9500
ASPLEY
1411 - 1419 Gympie Road
Aspley QLD 4034
Phone: (07) 3834 1100
BROWNS PLAINS
18 Commerce Drive
Browns Plains QLD 4118
Phone: (07) 3380 0600
CLEVELAND
Shop 1A
42 Shore Street West and
Wellington Street
Cleveland QLD 4163
Phone: (07) 3488 8900
MT GRAVATT
Westfield Garden City
Shop 2135
2049 Logan Street
Upper Mt Gravatt QLD 4122
Phone: (07) 3347 7000
EVERTON PARK
North-West Homemaker Centre
429 Southpine Road
Everton Park QLD 4053
Phone: (07) 3550 4444
OXLEY
2098 Ipswich Road
Oxley QLD 4075
Phone: (07) 3332 1100
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
149
DIRECTORY OF HARVEY NORMAN®, DOMAYNE® & JOYCE MAYNE® SHOPPING COMPLEXES (CONTINUED)
QUEENSLAND (COUNTRY)
ATHERTON
57 Tolga Road
Atherton QLD 4883
Phone: (07) 4091 0900
BUNDALL
29 - 45 Ashmore Road
Bundall QLD 4217
Phone: (07) 5584 3111
AYR
101 Queen Street
Ayr QLD 4807
Phone: (07) 4790 4600
BURLEIGH WATERS
Burleigh HomeSpace
14/1 Santa Maria Crt
Burleigh Waters QLD 4220
Phone: (07) 5586 2000
DALBY
49 Patrick Street
Dalby QLD 4405
Phone: (07) 4672 4444
EMERALD
21 Ballard Street
Emerald QLD 4720
Phone: (07) 4986 8100
HERVEY BAY
33-45 Maryborough Hervey Bay
Road
Eli Waters QLD 4655
Phone: (07) 4120 1100
INGHAM
Shop 3
57 Herbert Street
Ingham QLD 4850
Phone: (07) 4776 3188
MACKAY
Cnr Heaths Road & Bruce
Highway
Mackay QLD 4740
Phone: (07) 4951 8800
MT ISA
Overlander Shopping Centre
121 Marian Street
Mt Isa City QLD 4825
Phone: (07) 4745 0100
TOOWOOMBA
910 - 932 Ruthven Street
Toowoomba QLD 4350
Phone: (07) 4636 7300
MAROOCHYDORE
Maroochydore Homemaker
Centre
11/55 Maroochy Blvd
Maroochydore QLD 4575
Phone: (07) 5452 1500
NOOSA
7 - 9 Gibson Road
Noosaville QLD 4566
Phone: (07) 5473 1911
TOWNSVILLE
Domain Central Centre
103 - 142 Duckworth Street
Garbutt QLD 4814
Phone: (07) 4775 8800
BOOVAL
214 Brisbane Road
Booval QLD 4304
Phone: (07) 3280 7400
CAIRNS
Cairns Hypermarket
101 - 103 Spence Street
Cairns City QLD 4870
Phone: (07) 4050 0300
GLADSTONE
Shop 1B Centro Centre
220 Dawson Highway
Gladstone QLD 4680
Phone: (07) 4971 5000
INNISFAIL
57 Ernest Street
Innisfail QLD 4860
Phone: (07) 4063 5200
BUNDABERG
125 Takalvan Street
Bundaberg QLD 4670
Phone: (07) 4154 5000
CANNONVALE
Shop B2, Whitsunday Plaza
8 Galbraith Park Drive
Cannonvale QLD 4802
Phone: (07) 4969 8800
GYMPIE
35-37 Edwin Campion Drive
Gympie QLD 4570
Phone: (07) 5480 1500
KINGAROY
18 - 20 Rogers Drive
Kingaroy QLD 4610
Phone: (07) 4160 0400
MARYBOROUGH
72 - 74 Bazaar Street
Maryborough QLD 4650
Phone: (07) 4120 2100
MORAYFIELD
245 Morayfield Road
Morayfield QLD 4510
Phone: (07) 5428 8000
ROCKHAMPTON
Red Hill Homemaker Centre
406-412 Yaamba Road
North Rockhampton QLD 4701
Phone: (07) 4923 5000
ROTHWELL
Unit 1
439 - 443 Anzac Avenue
Rothwell QLD 4022
Phone: (07) 3897 8800
WARWICK
Cnr Victoria St & Palmerin St
Warwick QLD 4370
Phone: (07) 4666 9000
TASMANIA
DEVONPORT
Devonport Homemaker Centre
2 Friend Street
Devonport TAS 7310
Phone: (03) 6420 7600
HOBART CITY
171 Murray Street
Hobart TAS 7000
Phone: (03) 6230 1100
BURNIE
Cnr Marine Terrace &
Edward St
Burnie TAS 7320
Phone: (03) 6436 8800
LAUNCESTON
Cnr William and Charles Streets
Launceston TAS 7250
Phone: (03) 6337 9400
CAMBRIDGE PARK
Cambridge Park Homemaker
Centre
Unit B10
66 - 68 Kennedy Drive
Cambridge Park TAS 7170
Phone: (03) 6248 3300
MOONAH
191-197 Main Rd Cnr, Derwent
Park Rd
Moonah TAS 7009
Phone: (03) 6277 7777
SOUTH AUSTRALIA (ADELAIDE SUBURBAN)
CITY CROSS
Rundle Mall, Shop 50
31-33 Rundle Mall
Adelaide SA 5000
Phone: (08) 8168 8800
GEPPS CROSS
Gepps Cross Home HQ
Unit 1, 760 Main North Road
Gepps Cross SA 5094
Phone: (08) 8342 8888
MT BARKER
Mt Barker Homemaker Centre
6 Dutton Road
Mount Barker SA 5251
Phone: (08) 8393 0800
MUNNO PARA
Munno Para Shopping City
600 Main North Road
Smithfield SA 5114
Phone: (08) 8254 0700
MARION
822 - 826 Marion Road
Marion SA 5043
Phone: (08) 8375 7777
NOARLUNGA
3/2 Seaman Drive
Noarlunga SA 5168
Phone: (08) 8329 5400
MILE END COMMERCIAL
20 William Street
Mile End SA 5031
Phone: (08) 8150 8000
WOODVILLE
853 - 867 Port Road
Woodville SA 5011
Phone: (08) 8406 0100
150
DIRECTORY OF HARVEY NORMAN®, DOMAYNE® & JOYCE MAYNE® SHOPPING COMPLEXES (CONTINUED)
SOUTH AUSTRALIA (COUNTRY)
MT GAMBIER
Cnr Kennedy Avenue &
Jubilee Highway East
Mt Gambier SA 5290
Phone: (08) 8724 6800
PORT LINCOLN
Cnr St Andrews Terrace and
Verran Terrace
Port Lincoln SA 5606
Phone: (08) 8683 7700
WHYALLA
Cnr Jamieson St and Kelly Street
Whyalla SA 5600
Phone: (08) 8645 6100
VICTORIA (MELBOURNE SUBURBAN)
BROADMEADOWS
1185 - 1197 Pascoe Vale Rd
Broadmeadows VIC 3047
Phone: (03) 9621 2800
CHADSTONE
699 Warrigal Road
Chadstone VIC 3148
Phone: (03) 9567 6666
CHIRNSIDE PARK
Chirnside Park Showroom Centre
286 Maroondah Highway
Chirnside Park VIC 3116
Phone: (03) 9722 4400
COBURG
Shop 8, 64 - 74 Gaffney St
Coburg VIC 3058
Phone: (03) 9240 2500
DANDENONG
141 - 165 Frankston -
Dandenong Road
Dandenong VIC 3175
Phone: (03) 8791 3333
FOUNTAIN GATE
Westfield Fountain Gate
8 Overland Drive
Narre Warren VIC 3805
Phone: (03) 8796 6777
HOPPERS CROSSING
Unit 1, 201 - 219 Old
Geelong Road
Hoppers Crossing VIC 3029
Phone: (03) 8734 0000
MARIBYRNONG
Harvey Norman Centre
169 Rosamond Road
Maribyrnong VIC 3032
Phone: (03) 9304 7000
PRESTON
121 Bell Street
Preston VIC 3072
Phone: (03) 9269 3300
MELBOURNE QV (& DM)
Upper Terrace, Level 4,
Shops 9-13,
210 Lonsdale Street
Melbourne VIC 3000
Phone: (03) 8664 4300
RICHMOND
479 Bridge Road
Richmond VIC 3121
Phone: (03) 8416 4100
THOMASTOWN
308-320 Settlement Road
Thomastown VIC 3074
Phone: (03) 9463 4777
VIC / TAS COMMERCIAL
4 Central Blvd
Port Melbourne VIC 3204
Phone: (03) 8530 6300
MOORABBIN
420 South Road
Moorabbin VIC 3189
Phone: (03) 9269 3400
SPRINGVALE
26/917 Princes Highway
Springvale VIC 3171
Phone: (03) 9518 8500
WATERGARDENS
Watergardens Town Centre
450 Melton Highway
Taylors Lakes VIC 3038
Phone: (03) 9449 6300
VICTORIA (COUNTRY)
ARARAT
47-49 Vincent Street
Ararat VIC 3377
Phone: (03) 5352 9100
FRANKSTON
87 Cranbourne Road
Frankston VIC 3199
Phone: (03) 8796 0600
MILDURA
Cnr Fifteenth Street &
Etiwanda Ave
Mildura VIC 3500
Phone: (03) 5051 2200
BAIRNSDALE
294 Main Street
Bairnsdale VIC 3875
Phone: (03) 5153 9700
GEELONG
420 Princes Highway
Corio VIC 3214
Phone: (03) 5272 9900
MOE
19 Moore Street
Moe VIC 3825
Phone: (03) 5127 9500
SALE
363 - 373 Raymond Street
Sale VIC 3850
Phone: (03) 5149 5100
SHEPPARTON
Riverside Plaza
Bldg A, 8025 Goulburn Valley
Hwy
Kialla VIC 3630
Phone: (03) 5820 2900
BALLARAT
1322 Howitt Street
Wendouree VIC 3355
Phone: (03) 5332 5100
HAMILTON
LG2, The Hub
148 Gray Street
Hamilton VIC 3300
Phone: (03) 5551 3500
MORNINGTON
Building C3
Peninsula Lifestyle Centre
Bungower Road
Mornington VIC 3931
Phone: (03) 5970 2500
SWAN HILL
68 Nyah Road
Swan Hill VIC 3585
Phone: (03) 5032 0500
WANGARATTA
8 - 12 Murphy Street
Wangaratta VIC 3677
Phone: (03) 5723 8800
WARRAGUL
33 Victoria Street
Warragul VIC 3820
Phone: (03) 5623 9000
WARRNAMBOOL
84 Raglan Parade
Warrnambool VIC 3280
Phone: (03) 5564 7700
WONTHAGGI
37 McKenzie Street
Wonthaggi VIC 3995
Phone: (03) 5672 0800
KNOX
Shop 3105, Knox City
Shopping Centre,
425 Burwood Highway
Wantirna South VIC 3152
Phone: (03) 9881 3700
NUNAWADING
396-408 Whitehorse Road
Nunawading VIC 3131
Phone: (03) 9837 1200
SUNSHINE
City West Plaza
484 Ballarat Road
Sunshine VIC 3020
Phone: (03) 9334 6000
BENDIGO
Cnr High St and Furness St
Kangaroo Flat VIC 3555
Phone: (03) 5447 6000
HORSHAM
148-150 Firebrace Street
Horsham VIC 3400
Phone: (03) 5381 5000
MORWELL
232 Commercial Road
Morwell VIC 3840
Phone: (03) 5120 0200
TRARALGON
123 Argyle Street
Traralgon VIC 3844
Phone: (03) 5175 6700
WAURN PONDS
Geelong Homemaker Centre
33 Princes Highway
Waurn Ponds VIC 3216
Phone: (03) 5240 6200
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
151
DIRECTORY OF HARVEY NORMAN®, DOMAYNE® & JOYCE MAYNE® SHOPPING COMPLEXES (CONTINUED)
WESTERN AUSTRALIA (PERTH SUBURBAN)
ARMADALE
10 Prospect Road
Armadale WA 6112
Phone: (08) 9498 4400
CANNINGTON
1363 Albany Highway
Cannington WA 6107
Phone: (08) 9311 1100
CITY WEST
City West Centre
City West Shopping Centre
25 Sutherland Street
West Perth WA 6005
Phone: (08) 9215 8600
JOONDALUP
36 Clarke Crescent
Joondalup WA 6027
Phone: (08) 9301 3311
MALAGA
27 Kent Way
Malaga WA 6090
Phone: (08) 9270 6300
PORT KENNEDY
400-402 Saltaire Way
Port Kennedy WA 6172
Phone: (08) 9524 0111
MIDLAND
Cnr Clayton and Lloyd Sts
Midland WA 6056
Phone: (08) 9374 8600
O’CONNOR
133 Garling Street
O’Connor WA 6163
Phone: (08) 9337 0888
OSBORNE PARK
469 - 475 Scarborough Beach
Road
Osborne Park WA 6017
Phone: (08) 9441 1100
WESTERN AUSTRALIA (COUNTRY)
ALBANY
Unit 1 / 5 Brooks Garden Blvd
Albany WA 6330
Phone: (08) 9892 6800
GERALDTON (Furniture &
Bedding)
38 Chapman Road
Geraldton WA 6530
Phone: (08) 9964 0111
MANDURAH
9 Gordon Road
Mandurah WA 6210
Phone: (08) 9582 5800
BUNBURY
Cnr Sandridge and
Denning Road
East Bunbury WA 6230
Phone: (08) 9722 0100
GERALDTON (Computers)
18 Anzac Terrace
Geraldton WA 6530
Phone: (08) 9964 0111
PORT HEDLAND
Boulevard Shopping Centre
Cnr Anderson St & McGregor St
Port Hedland WA 6721
Phone: (08) 9173 8000
BROOME
2 Haynes Street
Broome WA 6725
Phone: (08) 9195 3600
BUSSELTON
24 - 26 Bussell Highway
Busselton WA 6280
Phone: (08) 9781 0700
KALGOORLIE
29 Davidson Street
Kalgoorlie WA 6430
Phone: (08) 9093 5500
KARRATHA
Unit 7,
Lot 25 Balmoral Road
Karratha WA 6174
Phone: (08) 9186 8100
DOMAYNE
ALEXANDRIA
84 O’Riordan Street
Alexandria NSW 2015
Phone: (02) 8339 7000
AUBURN
103 - 123 Parramatta Road
Auburn NSW 2144
Phone: (02) 8748 4200
CARINGBAH
212 Taren Point Road
Taren Point NSW 2229
Phone: (02) 8536 5200
CASTLE HILL
Home Hub C/Hill South Building
Level 1, Shop 82
16 Victoria Avenue
Castle Hill NSW 2154
Phone: (02) 9846 8800
BELROSE
Homemaker Supa Centa
Shop 1, 4 - 6 Niangala Close
Belrose NSW 2085
Phone: (02) 9479 8800
FORTITUDE VALLEY
Homemaker The Valley
Shop 1, 1058 Ann Street
Fortitude Valley QLD 4006
Phone: (07) 3620 6600
BUNDALL
29 - 45 Ashmore Road
Bundall QLD 4217
Phone: (07) 5553 2100
FYSHWICK
80 Collie Street
Fyshwick ACT 2604
Phone: (02) 6126 2500
GOSFORD
400 Manns Road
West Gosford NSW 2250
Phone: (02) 4337 4800
KOTARA
Kotara Home
Unit 1, 1 Kullaiba Rd
Kotara NSW 2289
Phone: (02) 4941 3900
LIVERPOOL
The Grove Homemaker Centre
2-18 Orange Grove Road
Liverpool NSW 2170
Phone: (02) 8778 2222
MAITLAND
Unit 6
366 New England Highway
Rutherford NSW 2320
Phone: (02) 4932 2300
MARION
Unit 2, 919-929 Marion Road
Marion SA 5043
Phone: (08) 8198 2400
MAROOCHYDORE
Maroochydore Homemaker
Centre
Unit 14, 11-55 Maroochy
Boulevard
Maroochydore QLD 4558
Phone: (07) 5452 1400
MELBOURNE QV
Upper Terrace, Level 4 QV
Shops 9-13, 210 Lonsdale St
Melbourne VIC 3000
Phone: (03) 8664 4300
NORTH RYDE
31 - 35 Epping Road
North Ryde NSW 2113
Phone: (02) 9888 8888
152
DIRECTORY OF HARVEY NORMAN®, DOMAYNE® & JOYCE MAYNE® SHOPPING COMPLEXES (CONTINUED)
DOMAYNE (continued)
OSBORNE PARK (& HN)
475 Scarborough Beach Rd
Osborne Park WA 6017
Phone: (08) 9416 9100
PENRITH
Penrith Homemaker Centre
Cnr Wolseley Street and
Mulgoa Road
Penrith NSW 2750
Phone: (02) 4737 5000
SPRINGVALE
10/917 Princes Highway
Springvale VIC 3171
Phone: (03) 9565 8200
WARRAWONG
119 - 121 King Street
Warrawong NSW 2502
Phone: (02) 4255 1800
JOYCE MAYNE
CHANCELLOR PARK
Showroom 2
30 Chancellor Village Blvd
Sippy Downs QLD 4556
Phone: (07) 5477 2200
MAROOCHYDORE
Maroochydore Homemaker Ctr
15/11-55 Maroochy Blvd
Maroochydore QLD 4558
Phone: (07) 5475 1800
NOWRA
Unit 2A, Cnr Central Ave &
Princes Highway
Nowra NSW 2541
Phone: (02) 4448 0000
TOOWOOMBA
675 Ruthven Street
Toowoomba QLD 4350
Phone: (07) 4613 7100
TOWNSVILLE
Domain Central
18/103 Duckworth Street
Garbutt QLD 4814
Phone: (07) 4759 9900
WARRAWONG
113 King Street
Warrawong NSW 2502
Phone: (02) 4276 0000
NEW ZEALAND
ASHBURTON
Cnr West & Moore Streets
Ashburton
Phone: 0011 643 307 5000
BLENHEIM
19 - 21 Maxwell Road
Blenheim
Phone: 0011 643 520 9700
BOTANY DOWNS
500 Ti Rakau Drive
Botany Downs
Phone: 0011 649 272 5700
BOTANY ELECTRICAL OUTLET
Unit F, 451 Ti Rakau Drive
Botany Auckland
Phone: 0011 649 253 9200
CHRISTCHURCH
Cnr Moorhouse Ave
& Colombo Street
Christchurch
Phone: 0011 643 367 7500
HAMILTON ELECTRICAL
OUTLET
Unit 1 - 79 Tristram Street
Hamilton
Phone: 0011 647 848 2700
DUNEDIN
Cnr MacLaggan
& Rattray Streets
Dunedin
Phone: 0011 643 471 6510
GISBORNE
51 Customhouse Street
Gisborne
Phone: 0011 646 869 2900
HAMILTON
10 - 16 The Boulevard
Te Rapa Hamilton
Phone: 0011 647 850 7300
HASTINGS
303 East St Aubyn Street
Hastings
Phone: 0011 646 872 6800
HENDERSON
1 - 12 Ratanui Street
Henderson
Phone: 0011 649 835 5000
HORNBY
10-14 Chappie Place
Hornby Christchurch
Phone: 0011 643 344 8100
INVERCARGILL
245 Tay Street
Invercargill
Phone: 0011 643 219 9100
LINCOLN CENTRE
111 Lincoln Road
Henderson Auckland
Phone: 0011 649 621 1590
LOWER HUTT
28 Rutherford Street
Lower Hutt Wellington
Phone: 0011 644 894 8200
MT MAUNGANUI
10 Owens Place
Mt Maunganui
Phone: 0011 647 572 7200
MT ROSKILL
167-169 Stoddard Road
Mt Roskill Auckland
Phone: 0011 649 621 1500
MT WELLINGTON
20 - 54 Mt Wellington Hwy
Mt Wellington Auckland
Phone: 0011 649 570 3440
NELSON
69 St Vincent Street
Nelson
Phone: 0011 643 539 5000
NEW PLYMOUTH
23 Smart Road
New Plymouth
Phone: 0011 646 759 2900
PARAPARAUMU
Coastlands Shopping Centre
State Highway 1
Paraparaumu
Phone: 0011 644 296 3100
PORIRUA
19 Parumoana Street
Porirua
Wellington
Phone: 0011 644 230 6100
RANGITIKEI STREET
Unit C
210-248 Rangitikei Street
Palmerston North
Phone: 0011 646 953 3500
ROTORUA
35 Victoria Street
Rotorua
Phone: 0011 647 343 9800
NORTHWOOD
Unit 1, 1 Radcliffe Road
Northwood
Christchurch
Phone: 0011 646 375 9800
PUKEKOHE
Pukekohe Mega Centre
182-196 Manukau Road
Pukekohe Auckland
Phone: 0011 649 237 3500
TAURANGA
683-697 Cameron Road
Tauranga
Phone: 0011 647 557 9500
MANUKAU
Manukau Supa Centre
8/72 Cavendish Drive
Manukau City Auckland
Phone: 0011 649 261 4300
NAPIER
Shop 5
20-60 Wellesley Road
Napier
Phone: 0011 646 833 9500
PALMERSTON NORTH
361 - 371 Main Street West
Palmerston North
Phone: 0011 646 355 6500
QUEENSTOWN
2A/12 Hawthorne Drive
Remarkables Park
Queenstown
Phone: 0011 643 901 0900
TIMARU
226 Evans Street
Timaru
Phone: 0011 643 687 7000
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
153
DIRECTORY OF HARVEY NORMAN®, DOMAYNE® & JOYCE MAYNE® SHOPPING COMPLEXES (CONTINUED)
NEW ZEALAND (continued)
TOWER JUNCTION
Clarence Building
66 Clarence Street
Tower Junction
Christchurch
Phone: 0011 643 968 3600
WAIRAU PARK
10 Croftfield Lane
Wairau Park
Glenfield Auckland
Phone: 0011 649 440 6300
WANGANUI
287 Victoria Avenue
Wanganui
Phone: 0011 646 349 6000
WELLINGTON
77-87 Tory Street
Wellington
Phone: 0011 644 381 4250
WESTGATE
Westgate Lifestyle Centre
63 – 65 Maki Street
Westgate Auckland
Phone: 0011 649 822 8200
WHAKATANE
The Hub
State Highway 30
Whakatane
Phone: 0011 647 306 0600
WHANGAREI
5 Gumdigger Place
Whangarei
Phone: 0011 649 470 0300
IRELAND
BLANCHARDSTOWN
Units 421 - 423
Blanchardstown Retail Park
Blanchardstown
Dublin 15
Phone: 0011 353 1 824 7400
CARRICKMINES
Unit 230 Retail
The Park
Carrickmines Dublin 18
Phone: 0011 353 1 299 6900
CASTLEBAR
Units D - F
Castlebar Retail Park
Breaffy Road,
Castlebar
Phone: 0011 353 94 906 3900
CORK
Kinsale Road
Ballycurreen
Cork, Dublin
Phone: 0011 353 21 425 0900
DROGHEDA
Units 8 - 11
Drogheda Retail Park
Donore Road
Drogheda, Co Louth
Phone: 0011 353 41 987 8200
LIMERICK
Units 5 - 7
City East Retail Park
Ballysimon Road
Limerick
Phone: 0011 353 61 422 800
LITTLE ISLAND
Units 9 - 11
Eastgate Retail Park
Little Island
Co Cork
Phone: 0011 353 21 500 1500
NAAS
Unit G - K
New Hall Retail Park
Naas, Co Kildane
Phone: 0011 353 04 590
7700
SWORDS
Units 5 - 7
Airside Retail Park
Crowscastle
Swords, Co Dublin
Phone: 0011 353 1 890 9900
TALLAGHT
Airton Retail Park
Corner Airton & Greenhills
Road
Tallaght, Dublin 22
Phone: 0011 353 01 468 4500
TRALEE
Unit 8A
Manor West Retail Park
Tralee, Co Kerry
Phone: 0011 353 66 716 4900
RATHFARNHAM
Unit 7A-7C
Nutgrove Retail Park
Rathfarnham Dublin 14
Phone: 0011 353 1 491 6300
WATERFORD
Units 5 - 8
Butlerstown Retail Park
Butlerstown Roundabout
Outer Ring Road
Co Waterford
Phone: 0011 353 51 319 900
NORTHERN IRELAND
BOUCHER ROAD
Balmoral Plaza
24 Boucher Road
Belfast BT12 6HR
Phone: 0011 44 28 903 896
00
HOLYWOOD
Units B-D
306 Holywood Exchange
Airport Road W,
Holywood Belfast BT3 9DY
Phone: 0011 44 28 9039 5800
SLOVENIA
CELJE
Kidričeva ulica 26A
3000 Celje
Phone: 0011 386 1585 5000
KOPER
Ankaranska Cesta 3C
6000 Koper
Phone: 0011 386 5610 0100
LJUBLJANA
Letališka Cesta 3D
1000 Ljubljana
Phone: 0011 386 1585 5000
MARIBOR
Bohova 1A
2311 Hoče
Phone: 0011 386 2300 4850
CROATIA
NOVO MESTO
Ljubljanska Cesta 95B
8000 Novo Mesto
Phone: 0011 386 7309 9920
ZAGREB
Kings Cross,
UI. Velimira Škorpika 34,
10090 Zagreb Crotia
Phone: 0011 385 1556 6200
154
DIRECTORY OF HARVEY NORMAN®, DOMAYNE® & JOYCE MAYNE® SHOPPING COMPLEXES (CONTINUED)
SINGAPORE
BEDOK POINT
799 New Upper Changi Road
#B1-01/02, 16/32 and K1/K14
Bedok Point
Singapore 467351
Phone: 0011 65 6446 7218
BUKIT PANJANG
1 Jelebu Road
Bukit Panjang Plaza
#03-06/06A/06B/07A
Singapore 677743
Phone: 0011 65 6767 1500
DJITSUN MALL
5 Ang Mo Kio Central 2
#02-01/02
Singapore 569663
Phone: 0011 65 6554 5630
MILLENIA WALK
No. 9 Raffles Boulevard
#01-59 to 63, #02-37 to 41,
#03-02, Millenia Walk
Singapore 039596
Phone: 0011 65 6311 9988
NORTHPOINT
1 Northpoint Drive
B1-136 to 138 & B2-108 to 112
Northpoint City South Wing
Singapore 768019
Phone: 0011 65 6702 5188
HOUGANG MALL
90 Hougang Avenue 10
#02-13 to 15
Hougang Mall
Singapore 538766
Phone: 0011 65 6488 2305
ONE KM
11 Tanjong Katong Road
#02-41 to 44
Singapore 437157
Phone: 0011 65 6702 5220
SQUARE TWO
#B1-06 to 75
10 Sinaran Drive
Singapore 307506
Phone: 0011 65 6397 6190
SUNTEC CITY
6 Temasek Boulevard
#01-634/640
Suntec City Mall, East Atrium
Tower 3/4,
Singapore 038986
Phone: 0011 65 6332 2312
VIVACITY
750B Chai Chee Road
#01-01 to 06, #01-09 to 12,
#02-02 to 06,
Viva Business Park
Singapore 469000
Phone: 0011 65 6245 1516
JURONG POINT
1 Jurong West Central 2
#03-34 to 39
Jurong Point Shopping
Centre
Singapore 648886
Phone: 0011 65 6795 2135
PARKWAY
80 Marine Parade Road
#01-35/35A/36, #02-
34/34A, 35/36, Parkway
Parade
Singapore 449269
Phone: 0011 65 6346 4705
WESTMALL
No. 1 Bt Batok Central Link
#03-06 to 09 West Mall
Singapore 658713
Phone: 0011 65 6794 2812
MALAYSIA
AMPANG POINT
Lot S01, 2nd Floor
Ampang Shopping Centre
Jalan Mamanda 3,
68000 Ampang,
Selangor Darul Ehsan,
Malaysia
Phone: 0011 603 4260 1020
BUKIT TINGGI
42 1st Floor
AEON Bukit Tinggi Shopping Ctre
No. 1 Persiaran Batu Nilam 1/KS6
Bandar Bukit Tinggi 2
41200 Klang
Selangor Darul Ehsan, Malaysia
Phone: 0011 603 3326 2631
CITTA MALL
Lot S-32 – Lot S-38, Citta Mall
No 1 Jalan PJU 1A/48
PJU 1A, Ara Damansara
47301 Petaling Jaya
Selangor Darul Ehsan,
Malaysia
Phone: 0011 603 7846 1025
GURNEY PARAGON
Lot 163D-4-02,
Gurney Paragon Mall
Persiaran Gurney
10250, Penang, Malaysia
Phone: 0011 604 229 8886
IOI CITY MALL
LG-27B & 28 Lower Ground
Floor, IOI City Mall
IOI Resort, Lebuh IRC
Putrajaya 62502 Sepang
Selangor Darul Ehsan,
Malaysia
Phone: 0011 603 8957 7918
IKANO POWER CENTRE
Unit L1.10 & L2.07,
IPC Shopping Centre
No 2 Jalan PJU 7/2
Mutiara Damansara
47800 Petaling Jaya
Selangor Darul Ehsan, Malaysia
Phone: 0011 603 7732 1688
MID VALLEY
Lot S-066, 2nd Floor (South
Court) Mid Valley Megamall
Mid Valley City
Lingkaran Syed Putra
59100 Kuala Lumpur, Malaysia
Phone: 0011 603 2282 2860
MONT KIARA
Lot L2-07 & L2-08,1 Mont’ Kiara
No 1 Jalan Kiara
50480 Kuala Lumpur, Malaysia
Phone: 0011 603 6203 6380
NU SENTRAL
Unit L3.01, Nu Sentral Mall,
KL Sentral
No. 201, Jalan Tun
Sambathan
50470 Kuala Lumpur,
Malaysia
Phone: 0011 603 2260 7866
PAVILION
Lot 5.24.04 Level 5
Pavilion Kuala Lumpur
No. 168 Jalan Bukit Bintang
55100 Kuala Lumpur, Malaysia
Phone: 0011 603 2142 3735
SETIA CITY MALL
L1-MM03, Setia City Mall
No. 7 Persiaran Setia Dagang
Bandar Setia Alam,
Seksyen U13
40170 Shah Alam,
Selangor Darul Ehsan,
Malaysia
Phone: 0011 603 3345 6085
SUNWAY PYRAMID
LG2.140 Lower Ground Two
Sunway Pyramid Shopping
Centre
No. 3 Jalan PJS 11/15
Bandar Sunway
46150 Petaling Jaya
Selangor Darul Ehsan, Malaysia
Phone: 0011 603 5622 1300
PARADIGM MALL
Lot 1F-01 & 02, 1st Floor
Paradigm Mall
No.1 Jalan SS 7/26A,
Kelana Jaya
47301 Petaling Jaya
Selangor Darul Ehsan,
Malaysia
Phone: 0011 603 7887 3589
SUNWAY VELOCITY
Level 3 & 4, Lot 3-24
Lingkaran SV Sunway Velocity
Sunway Velocity Mall
55100 Kuala Lumpur Malaysia
Phone: 0011 603 9226 6002
QUEENSBAY
Lot 2F-86 South Zone
Queensbay Mall
No 100 Persiaran Bayan Indah
11900 Bayan Lepas
Penang, Malaysia
Phone: 0011 604 630 8210
VIVACITY MEGAMALL
Unit L1-MA01, L1-MA02,
L1-017 & L2-MA02,
L2-019, L2-020
Level 1 & Level 2, Vivacity
Megamall
Jalan Wan Alwi, 93350 Kuching
Sarawak, East Malaysia
Phone: 0011 60 82 263 433
HARVEY NORMAN HOLDINGS LIMITED | ANNUAL REPORT 2018
155