2 0 2 2
ANNUAL REPORT
Australia
New Zealand
Singapore
Slovenia
Ireland
Northern Ireland
Malaysia
Croatia
2022 ANNUAL REPORT
Key Dates
Contents
Company Info
17 October 2022
Record Date for Determining
Entitlement to Final 2022
Dividend
14 November 2022
Payment of Final 2022
Dividend
24 November 2022 at 11:00am
Annual General Meeting of
Shareholders
28 February 2023
Announcement of Half-Year
Profit to 31 December 2022 &
Announcement of Interim 2023
Dividend
3 April 2023
Record Date for Determining
Entitlement to Interim Dividend
2 May 2023
Payment of Interim 2023
Dividend
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 (EY)
Securities Exchange Listing
Shares in Harvey Norman Hold-
ings Limited (HVN) are quoted
on the Australian
Securities Exchange Limited
(ASX)
Solicitors
Brown Wright Stein
Company Secretary
Mr. Chris Mentis
2022 Financial Highlights
Chairman and CEO’s
Report
Operating and Financial Review
Directors’ Report
Remuneration Report
Sustainability Report
Auditor’s Independence
Declaration
5
6
8
29
34
61
74
Independent Auditor’s Report
75
Directors’ Declaration
81
Statement of Financial Position
82
Income Statement
Statement of Comprehensive
Income
83
84
Statement of Changes in Equity
85
Statement of Cash Flows
87
Notes to the Financial Statements
88
Shareholder Information
150
2
HOLDINGS LIMITED | ACN 003 237 545
ANNUAL REPORT JUNE 2022
2
OPERATING AND FINANCIAL REVIEW (CONTINUED)
CHAIRMAN AND CEO’S REPORT
HOLDINGS LIMITED | ACN 003 237 545
2022 RESULTS
EBITDA
CHAIRMAN AND CEO’s REPORT
$1.437 billion
Decrease of $20.58 million from FY21
Reported PBT
$1.140 billion
Decrease of $42.09 million from FY21
Income Tax Expense
$323 million
Decrease of $13.12 million from FY21
Net Property Revaluations
$213.68 million through P&L
$41.97 million through equity
vs. $140.37m through P&L & $55.18m through equity in FY21
Total System Sales Revenue
$9.558 billion
Decrease of $163.13 million from FY21
3
ANNUAL REPORT JUNE 2022
ANNUAL REPORT JUNE 2022
3
ARIARNE TITMUS
Australian Olympic Gold Medalist, Tokyo 2020 Olympics
Harvey Norman® is proud to partner with Ariarne Titmus
throughout her Tokyo 2020 journey and now on the path
to Paris 2024 including the recent 2022 Commonwealth
Games in Birmingham, UK.
At her first Olympic outing, Ariarne remarkably took
home two individual gold medals in the 200m and 400m
freestyle, placing her among Australia’s most successful
swimmers. Most recently in Birmingham, Ariarne
achieved a clean sweep with three individual gold
medals in 200m, 400m and 800m freestyle, in addition
to a gold medal for her relay team that won the 4 x 200m
Freestyle relay. Ariarne, at 22 years old, finished all 3
of her individual events with Commonwealth Games
records holding the status of one of the most dominant
freestyle swimmers in the world as well as being the
first athlete in 50 years to take out all 3 gold medals
in the Commonwealth Games woman’s freestyle. In
addition, Ariarne broke Katie Ledecky’s long standing
400m Freestyle World Record at the 2022 Australian
Championships, placing her as one of the all-time
middle distance greats.
Ariarne isn’t shy of a challenge and has become an
inspirational figure, with the highest engagement figures
out of all Australian swimmers. Ariarne has proven to be
an insightful speaker and a humble role model to future
generations quoting in a post-game interview “I’m just
from a small town in Tassie and this goes to show that if
you believe you can do something you can 100% do it if
you work for it”. Ariarne also as gracious in defeat as she
is in victory quoting “If I went to the Olympics and didn’t
win gold in the 400 but I swam the time I did, I would’ve
still been happy because I would have swum the best
that I could, it just hadn’t been enough on that day”.
Ariarne is passionate about health and fitness and is a
self-confessed foodie.
Harvey Norman®
proudly supporting
Ariarne since 2020
4
ANNUAL REPORT JUNE 2022
2022 FINANCIAL HIGHLIGHTS
HARVEY NORMAN HOLDINGS LIMITED (HNHL)
HARVEY NORMAN HOLDINGS LIMITED (HNHL)
EBITDA
$1.437bn
EBITDA
Excluding AASB16 net impact and net property revaluations
$1.044bn
DOWN BY $20.58m or –1.4% FROM $1.457bn IN FY21
UP BY $491.88m or 52.1% FROM $944.67m IN FY20
DOWN BY $102.83m or –9.0% FROM $1.147bn IN FY21
UP BY $301.26m or 40.6% FROM $742.47m IN FY20
EBIT
EBIT
Excluding AASB16 net impact and net property revaluations
$1.193bn
$953.20m
DOWN BY $40.15m or –3.3% FROM $1.233bn IN FY21
UP BY $471.51m or 65.4% FROM $721.08m IN FY20
DOWN BY $105.95m or –10.0% FROM $1.059bn IN FY21
UP BY $298.34m or 45.6% FROM $654.86m IN FY20
REPORTED PBT
$1.140bn
PBT
Excluding AASB16 net impact and net property revaluations
$942.79m
DOWN BY $42.09m or –3.6% FROM $1.183bn IN FY21
UP BY $479.15m or 72.5% FROM $661.29m IN FY20
DOWN BY $107.09m or –10.2% FROM $1.050bn IN FY21
UP BY $307.19m or 48.3% FROM $635.60m IN FY20
REPORTED PROFIT AFTER TAX & NCI
PROFIT AFTER TAX & NCI
Excluding AASB16 net impact and net property revaluations
$811.53m
$673.55m
DOWN BY $29.89m or –3.6% FROM $841.41m IN FY21
UP BY $330.99m or 68.9% FROM $480.54m IN FY20
DOWN BY $75.22m or –10.0% FROM $748.76m IN FY21
UP BY $211.38m or 45.7% FROM $462.16m IN FY20
TOTAL SYSTEM SALES REVENUE
$9.558 billion
AGGREGATED HEADLINE FRANCHISEE SALES REVENUE*…$6.750bn
COMPANY-OPERATED SALES REVENUE……………………....$2.807bn
*Sales made by franchisees in Australia do not form part of the financial results of the consolidated entity.
HNHL CONSOLIDATED REVENUES
$4.506 billion
SALES OF PRODUCTS TO CUSTOMERS………………..……..$2.807bn
REVENUE RECEIVED FROM FRANCHISEES…..……………….$1.301bn
REVENUES AND OTHER INCOME ITEMS…...…………..….... $397.19m
NET DEBT TO EQUITY: 10.31%
NET DEBT OF $450.77m in JUN-22 vs
NET DEBT OF $295.54m in JUN-21
UNUSED, AVAILABLE
FINANCING FACILITIES OF
$189.64m
NET ASSETS
BASIC EARNINGS PER SHARE
$4.29 billion
Up 10.3% from $3.89bn in Jun-21
65.13c
Down from 67.53c in FY21
Up from 39.19c in FY20
DIVIDENDS PER SHARE
(FULLY-FRANKED)
37.5c
Up from 35.0c in FY21
544
FRANCHISEES
IN AUSTRALIA
195
FRANCHISED
COMPLEXES
IN AUSTRALIA
109
OVERSEAS COMPANY
OPERATED STORES
ANNUAL REPORT JUNE 2022
5
OPERATING AND FINANCIAL REVIEW (CONTINUED)
CHAIRMAN AND CEO’S REPORT
Dear Shareholder,
COVID-19 has continued to have a significant impact on the operations and profitability of businesses across the globe. Amid
these ongoing and unprecedented challenges, the 8 countries in which our brands operate have delivered solid results in FY22.
The results achieved this year are a testament to the strength and resilience of our integrated retail, franchise, property and
digital system.
Profit before tax excluding the effects of AASB 16 Leases and net property revaluations for FY22 was $942.79 million, down
–10.2% on FY21. Our PBT for 1H22 was significantly affected by COVID government-mandated lockdowns in Australia, New
Zealand and Malaysia ending the half down –20.1% on 1H21, but increased 3.5% in 2H22.
CHAIRMAN AND CEO’s REPORT
In Australia, our franchisees were negatively affected by the prolonged mandated lockdowns and closures of ‘Delta’ , the
business challenges presented by the emergence of ’Omicron’ prior to the peak Christmas trading period and the ongoing
threat of rising rates of transmission, infection and re-infection presented by its sub-variants. Our franchisees have managed
their businesses well by focusing on the customer journey and overall experience with the Harvey Norman®, Domayne® and
Joyce Mayne® brands, including the continued application of COVID-safe practices to prioritise health and safety.
With 195 franchised complexes located within close proximity of their customers, franchisees have been able to fully embrace
pandemic-inspired construction and renovation activity by offering the best range of technology and home and lifestyle
products in their expansive showrooms. Household savings remain at record highs, growing by over $286 billion or 30% since
the start of the pandemic, primarily skewed towards higher income households. Franchisees are well-placed to benefit from
any unwind in the built-up household savings as they predominantly service the middle-to-upper product markets, and are
expected to benefit from the sustained investment in the home as devices and appliances require replacement and upgrade.
Geographically, approximately 65% of the franchised complexes are located in regional areas. The pandemic has resulted in a
population shift from metropolitan cities to regional areas which is expected to support a base for sustained retail growth for
franchisees.
Overseas, with the exception of our company-operated stores in New Zealand and Malaysia that were subjected to government-
mandated closures during the first half of FY22, our company-operated stores in Singapore, Ireland, Northern Ireland, Slovenia
and Croatia were open and trading throughout 2022. Our offshore company-operated retail segment remains strong
representing 25% of total consolidated PBT (excluding net property revaluations).
Our property portfolio is robust and anchors our balance sheet. Our total freehold property segment assets of over $3.7 billion
continues to deliver stable income streams and capital growth, appreciating in value by over $365 million or +11% this year for
both freehold investment properties and owner-occupied properties.
We are pleased to report another solid net asset base, growing by 10% to $4.29 billion as at 30 June 2022, from $3.89 billion at
the end of the previous financial year. This was achieved by managing a complementary and diverse operating model across all
key home and lifestyle product categories that can be swiftly adapted to capitalise on the changing marketplace and navigate
through headwinds that may arise.
We will continue to support our Australian franchisees and invest in our overseas company-operated stores so that they can
continue to support and service their local communities and give their loyal customers an unparalleled retail experience. It is
with your support and trust that we continue to build our brands to be the strongest home and lifestyle retailer.
Solid Financial Results
• Reported earnings before interest, tax, depreciation & amortisation (EBITDA) of $1.437 billion, down by $20.58
million or —1.4% from $1.457 billion in FY21, and up by $491.88 million or +52.1% from $944.67 million in FY20
► 1H22 down by $25.43 million or –3.3%; 2H22 up by $4.84 million or +0.7%.
• EBITDA (excluding AASB 16 impact and net property revaluations) of $1.044 billion, down by $102.83 million or –9.0% from
$1.147 billion in FY21, and up by $301.26 million or +40.6% from $742.47 million in FY20
► 1H22 down by $121.15 million or –18.4%; 2H22 up by $18.32 million or +3.8%.
• Reported earnings before interest & tax (EBIT) of $1.193 billion, down by $40.15 million or —3.3% from $1.233 billion in
FY21, and up by $471.51 million or +65.4% from $721.08 million in FY20.
• EBIT (excluding AASB 16 impact and net property revaluations) of $953.20 million, down by $105.95 million or —10.0% from
$1.059 billion in FY21, and up by $298.34 million or +45.6% from $654.86 million in FY20
► 1H22 down by $122.34 million or –19.9%; 2H22 up by $16.39 million or +3.7%.
•
Reported profit before tax (PBT) of $1.140 billion, down by $42.09 million or —3.6% from $1.183 billion in FY21, and up by
$479.15 million or +72.5% from $661.29 million in FY20, delivering a robust return on net assets of 26.6% for FY22
compared to 30.4% in FY21 and 19.0% for FY20.
6
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
CHAIRMAN AND CEO’S REPORT (CONTINUED)
Solid Financial Results (continued)
•
PBT (excluding AASB 16 impact and net property revaluations) of $942.79 million, down by $107.09 million or
-10.2% from $1.050 billion in FY21, and up by $307.19 million or +48.3% from $635.60 million in FY20
► 1H22 down by $122.50 million or –20.1%; 2H22 up by $15.40 million or +3.5%.
• Net profit after tax and non-controlling interests (NPAT&NCI) of $811.53 million, down by $29.89 million or —3.6%
from $841.41 million in FY21, and up by $330.99 million or +68.9% from $480.54 million in FY20
► 1H22 down by $31.12 million or –6.7%; 2H22 up by $1.23 million or +0.3%.
• NPAT&NCI (excluding AASB 16 impact and net property revaluations) of $673.55 million, down by $75.22 million or
-10.0% from $748.76 million in FY21, and up by $211.38 million or +45.7% from $462.16 million in FY20
► 1H22 down by $86.58 million or –19.8%; 2H22 up by $11.36 million or +3.7%.
• Overseas company-operated retail profit result of $232.00 million, down by $8.80 million or –3.7%, amid
government imposed lockdowns in 1H22 and the emerging headwinds affecting retail towards the end of FY22
► 1H22 down by $9.67 million or –7.0%; 2H22 up by $0.88 million or +0.9%.
• Earnings per share of 65.13 cents, down by 2.40 cents or —3.6% from 67.53 cents in FY21, and up by 25.94 cents or
+66.2% from 39.19 cents for FY20.
• Very strong balance sheet surpassing the $7 billion milestone for the first time, with total assets of $7.25 billion, up by
$573.47 million or +8.6% primarily driven by organic growth from overseas store expansion and increases in the
tangible freehold property portfolio.
• Net assets of $4.29 billion as 30 June 2022, up by $401.11 million, or +10.3%, from $3.89 billion as at 30 June 2021.
Property
•
•
•
•
30 June 2022: 195 franchised complexes in Australia and 109 company-operated stores overseas.
Strong freehold property portfolio valued at $3.74 billion as at 30 June 2022, up by $367.36 million or +10.9%,
consisting of 95 freehold investment properties in Australia, 26 owner-occupied land and buildings in New
Zealand, Singapore, Slovenia, Ireland and Australia and joint venture assets.
3 new franchised complexes opened in Australia during FY22 located at Murwillumbah, New South Wales
(September 2021), Port Pirie, South Australia (November 2021) and Charters Towers, Queensland (April 2022).
1 new company-operated store opened in Malaysia in December 2021 located at Pavilion Bukit Jalil, Kuala Lumpur
and 1 new commercial outlet opened in Hamilton, New Zealand in March 2022. The new store at Fonthill, Dublin,
Ireland opened shortly after year-end (slightly delayed due to the pandemic). The proposed third Croatian store at
Rijeka has been delayed to calendar 2023.
• During 2H22, the premium refit program, which was hampered by the government mandated closures during 1H22,
was recommenced. Given COVID supply chain issues and labour shortages, we have reassessed expected
completion dates and we now expect to complete up to 25 premium refits over the next 5 years.
We thank our staff for their continued loyalty and commitment to our long-term vision and strategy. Thank you to our
loyal franchisees for successfully running their businesses amid the turbulence of the pandemic and changing retail
environment, and for their continued support of their local communities. We value and appreciate the ongoing support
and confidence of our shareholders in the leadership and future direction of our business.
ANNUAL REPORT JUNE 2022
7
OPERATING AND FINANCIAL REVIEW (CONTINUED)
OPERATING AND FINANCIAL REVIEW
Group Results for 30 June 2022
The directors are pleased to report a solid profit before tax (PBT) result for the year ended 30 June 2022 (FY22) of $1.140 billion, a
decrease of $42.09 million, or –3.6%, from $1.183 billion for the year ended 30 June 2021 (FY21). When compared to a more stable
recent reporting period such as the year ended 30 June 2020 (FY20), the FY22 result increased by $479.15 million or 72.5%.
In the first half of FY22 (1H22), our Australian franchisees were negatively affected by nearly 4-months of government-mandated
lockdowns due to the ‘Delta’ variant and there were protracted mandatory closures in our 2 largest overseas regions with all company-
operated stores in New Zealand and Malaysia closed for varying periods. The second half of FY22 (2H22) saw an acceleration of
consumer and business confidence as COVID restrictions eased, however, business challenges persisted with the emergence of
macroeconomic headwinds affecting discretionary retail, exacerbated by geopolitical tensions, ongoing supply chain disruptions and
labour shortages.
Excluding the effects of AASB 16 Leases and the net property revaluation adjustments in each year, profit before tax was $942.79
million for FY22, a decrease of $107.09 million, or –10.2%, from $1.050 million in FY21. When compared to the pre-pandemic levels
of FY20, the FY22 increase was $307.19 million or up 48.3%. 1H22 resulted in a decline in profitability for the consolidated entity by
$122.50 million or –20.1%, from $610.22 million in 1H21 to $487.73 million in 1H22. We significantly improved in the second half,
with 2H22 generating a record second half with PBT of $455.07 million excluding the AASB 16 and net property revaluation
adjustments, growing by $15.40 million or 3.5%, from $439.66 million in 2H21.
The PBT return on net assets was 26.6% for FY22, compared to a PBT return on net assets of 30.4% for FY21 and 19.0% for FY20.
Reported profit after tax and non-controlling interests was $811.53 million for FY22, a decrease of $29.89 million or –3.6%, from $841.41
million in FY21, and an increase of $330.99 million or 68.9% from FY20. Excluding the after-tax effects of net property revaluation
adjustments and AASB 16 Leases in each year, profit after tax was $673.55 million for FY22, a decrease of $75.22 million or -10.0% from
$748.76 million in FY21, and an increase of $211.38 million or 45.7% from FY20. The effective tax rate for the consolidated entity was
28.28% for FY22 compared to an effective tax rate of 28.39% for FY21. The effective tax rate of the consolidated entity is akin to the 30%
corporate tax rate in Australia, despite the corporate tax rates of the 7 overseas countries where our company-operated retail stores
operate ranging from 12.5% to 28%.
8
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Segment Analysis
An Integrated Retail, Franchise, Property and Digital System
The consolidated entity operates an integrated retail, franchise, property and digital system, comprising three main strategic pillars:
1. Retail - 2. Franchise - 3. Property, complemented by a robust and sustained investment in technology, digital transformation and
IT infrastructure assets.
1
Overseas Company—
Operated Retail Segment
2
Franchising
Operations Segment
3
Property
Segment
$232.00m
Profit Before Tax
Representing 20.3% of PBT
or 25.0% (excluding net property revaluations)
$553.02m
Profit Before Tax
Representing 48.5% of PBT
$366.48m
Profit Before Tax
Representing 32.1% of PBT
Down by $8.80m or –3.7% on FY21
Down by $75.17m or –12.0% on FY21
Up by $74.94m or +25.7% on FY21
Up by $79.92m or +52.6% on FY20
Up by $204.42m or 58.6% on FY20
Up by $193.30m or +111.6% on FY20
Retail revenue for the overseas company-
operated retail segment was $2.63 billion
for FY22, up by $28.14 million or +1.1%
from FY21. Offshore growth moderated
this year due to extensive hard lockdowns
and closures in New Zealand and Malaysia
during 1H22, coupled with supply-chain
disruptions due to COVID-19 and the
emerging headwinds affecting retail
towards the end of FY22.
Profit before tax of the overseas company-
operated retail segment was $232.00
million for FY22, a decrease of $8.80
million or –3.7%. Profitability improved in
the second half, with an aggregate result
of $103.52 million, increasing by $0.88
million, or +0.9%, in 2H22 after declining
by -$9.67 million, or –7.0%, in aggregate
for 1H22.
The retail result for NZ decreased by
$12.53 million or –8.9%, to $129.08 million
in FY22.
The retail result for Singapore and
Malaysia increased by $9.45 million or
+26.3%, to $45.36 million in FY22.
The retail result for Ireland and Northern
Ireland decreased by $5.73 million or
–11.0%, to $46.16 million in FY22.
The retail result for Slovenia and Croatia
remained consistent with the previous year
at $11.40 million.
Profitability of the franchising operations
(FO) segment declined by $75.17 million
or –12.0% to $553.02 million for FY22,
compared to $628.19 million for FY21.
The FO segment improved significantly in
2H22, increasing by $15.94 million, or
+6.5%, to $260.16 million, after being
down by –$91.11 million, or -23.7%, in
1H22. The profitability of this segment was
negatively impacted by approximately four
months of government mandated closures
in NSW, VIC and the ACT in response to
the ‘Delta’ variant in 1H22, the challenges
presented by the ‘Omicron’ variant in 2H22
and the emergence of macroeconomic
headwinds affecting discretionary retail
towards the end of FY22.
This decrease was due to a reduction in
FO segment revenues by $44.54 million or
–3.6%, to $1.19 billion for FY22, primarily
due to a decrease in franchise fees
received from franchisees by $42.59
million or –4.0%, on the back of a 2.9%
decrease in aggregated franchisee sales
revenue to $6.75 billion for FY22,
compared to $6.95 billion for FY21.
Profitability was also impacted by rent
waivers provided by the franchisor to
those franchisees affected by retail
closures in NSW, VIC and ACT and a rise in
brand support advertising costs to
promote and enhance the Harvey
Norman®, Domayne® and Joyce Mayne®
brands.
The FO margin was 8.19% for FY22,
compared to 9.04% for FY21 and 5.66%
for FY20.
ANNUAL REPORT JUNE 2022
The retail property segment delivered a
strong result of $370.10 million in FY22
compared to a result of $291.79 million in
FY21, an increase of $78.31 million or
+26.8%.
This was primarily achieved by a $73.31
million increase in the net property
revaluation increment to $213.68 million
for FY22, up from a net revaluation
increment of $140.37 million for FY21.
Excluding net property revaluations, the
retail property segment grew by $9.11
million, or +11.6%, to $87.63 million in
2H22, after being down by –$4.11 million,
or –5.6% in 1H22.
Strong freehold property portfolio valued
at $3.74 billion as at 30 June 2022, up by
$367.36 million or +10.9%.
Leasehold property portfolio valued at
$1.15 billion as at 30 June 2022, $675.60
million relating to leases of investment
properties sub-leased to external parties
and $472.51 million relating to leases of
owner-occupied properties and plant and
equipment assets.
9
OPERATING AND FINANCIAL REVIEW (CONTINUED)
OPERATING AND FINANCIAL REVIEW (CONTINUED)
The Franchising Operations Segment in Australia
The Franchised Operating Model in Australia
Harvey Norman Holdings Limited (HNHL) and subsidiaries of HNHL
own valuable intellectual property rights, including the
trademarks Harvey Norman®, Domayne® and Joyce Mayne®,
so(cid:332)ware and other confiden(cid:415)al informa(cid:415)on 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 par(cid:415)cular branded
complex, pursuant to the terms of a franchise
agreement. Each franchisee owns and controls
the franchisee business of that franchisee.
Each franchisee has control over the day-to-day
opera(cid:415)ons of the franchisee business and has the
discre(cid:415)on and power to make the decisions necessary
to drive sales, control floor margins and contain
opera(cid:415)ng costs to maximise the 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 opera(cid:415)ons segment in Australia captures and records the
franchise fees received from franchisees including gross franchise fees, rent
and outgoings for the use of a branded complex and interest on the
financial accommoda(cid:415)on facility that is made available to each franchisee.
The franchising opera(cid:415)ons segment also includes the costs of opera(cid:415)ng the
franchised system and monitoring and evalua(cid:415)ng the performance and
compliance of franchisees with their franchise agreements.
With an unrivalled na(cid:415)onal store and click & collect network, the
Harvey Norman®, Domayne® and Joyce Mayne® franchised complexes
are an easy drive for the vast majority of the Australian popula(cid:415)on,
with further growth planned in the coming years.
169 19
Franchised Complexes
Franchised Complexes
Franchised Complexes
7 544 195
Independent franchisees
carrying on their business
under Harvey Norman®,
Domayne® and Joyce Mayne®
brands.
Franchised complexes in
Australia trading under the
Harvey Norman®, Domayne®
and Joyce Mayne® brand
names.
As planned, the consolidated en(cid:415)ty opened three Harvey Norman® franchised complexes in Australia during FY22 located at Murwillumbah, New South
Wales (September 2021), Port Pirie, South Australia (November 2021) and Charters Towers, Queensland (April 2022), bringing the total number of franchised
complexes in Australia to 195 as at 30 June 2022.
10
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
OPERATING AND FINANCIAL REVIEW (CONTINUED)
The Franchising Operations Segment in Australia (continued)
1H22 delivered a franchising operations (FO) segment PBT result of $292.85 million, a decrease of $91.11 million or –23.7%, from
$383.96 million in 1H21, and a franchising operations margin of 8.53% for 1H22 compared to 10.22% in 1H21. When compared to a
more stable recent retail period in 1H20 which generated an FO segment PBT of $123.86 million, the 1H22 result was up by 136.4%. The
FO segment outperformed in 2H22, generating an FO segment PBT result of $260.16 million, an increase of $15.94 million or 6.5%, from
the record FO segment PBT result in 2H21 of $244.23 million, and an increase of $35.43 million or 15.8%, from the FO segment PBT
result in 2H20 of $224.73 million. The FO margin was 7.84% for 2H22 compared to 7.65% in 2H21. The strong second half placed us in
good stead to close out FY22 with an FO segment PBT result of $553.02 million, a decrease of $75.17 million or –12.0%, from $628.19
million in FY21, and an FO margin of 8.19% for FY22 compared to 9.04% in FY21. When compared to FY20, the increase in the FY22 FO
segment PBT result was $204.42 million or 58.6%.
The reduction in the FO segment PBT result is primarily due to the decrease in FO segment revenues by $44.54 million or –3.6%, from a
record $1.24 billion in FY21 to $1.19 billion in FY22. Gross franchise fees received from Harvey Norman®, Domayne® and Joyce Mayne®
franchisees declined by $42.59 million, directly attributable to the 2.9% reduction in aggregate franchisee sales revenue which underpins
the FO segment from $6.95 billion in FY21 to $6.75 billion in FY22. The majority of this reduction was in 1Q22 where franchisee sales
decreased by –16.5% compared to 1Q21 due to the government-mandated retail closures in franchised complexes in NSW, VIC and the
ACT for the majority of the quarter. FO revenue improved in 2Q22 as the ‘Delta’ restrictions progressively lifted from mid October 2021,
with the pent-up demand resulting in an acceleration in franchisee sales post lockdown to close out 2Q22 only 1.7% down on 2Q21,
which was a record sales quarter for franchisees. Despite the ‘Omicron’ challenges in 2H22, both 3Q22 and 4Q22 saw growth in franchi-
see sales by 2.8% and 4.9% respectively compared to 3Q21 and 4Q21.
In addition, FO segment revenues were impacted by a reduction in rent and outgoings received from franchisees during FY22 as full or
partial rent waivers were provided to external tenants and Harvey Norman®, Domayne® and Joyce Mayne® franchisees affected by the
retail closures in NSW, VIC and ACT for approximately a 4-month period from July 2021 to mid-October 2021 in order to protect and
enhance the brands. These rent waivers amounted to $19.58 million, of which $10.76 million related to properties owned by the
consolidated entity (and recorded in the Property Segment) and $8.82 million related to properties leased by the consolidated entity
(and recorded in the Franchising Operations Segment). During FY21, $9.85 million of rent waivers were provided to external tenants and
franchisees affected by the 11-week government-mandated Stage 4 lockdown in greater Melbourne, Victoria, of which $5.78 million
related to owned properties and $4.07 million related to leased properties.
The FO segment PBT result was also affected by a rise in brand advertising costs to promote and enhance the Harvey Norman®,
Domayne® and Joyce Mayne® brands.
FRANCHISING OPERATIONS SEGMENT
Franchising Operations Segment PBT ($m)
Franchisee Aggregated Sales Revenue*
($bn)
Franchising Operations Margin (%)
1H
2H
FY
FY22 $292.85m $260.16m $553.02m
$628.19m
FY21 $383.96m $244.23m
FY20 $123.86m $224.73m
$348.59m
FY22 $3.433bn
$6.95bn
FY21 $3.758bn $3.19bn
FY20 $2.953bn $3.21bn
$6.16bn
FY22
FY21 10.22% 7.65%
4.19% 7.00%
FY20
9.04%
5.66%
$3.32bn
$6.75bn
7.84%
8.19%
8.53%
ANNUAL REPORT JUNE 2022
*Sales made by franchisees in
Australia do not form part of the
financial results of the
consolidated entity.
11
OPERATING AND FINANCIAL REVIEW (CONTINUED)
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Australian Franchisee Sales Revenue Underpins the Franchising
Operations Segment
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 provided to the market as it is a key indicator of the performance of the franchising operations segment.
The COVID-19 ‘Delta’ variant , identified in Australia in mid-
June 2021, kickstarted nearly 4-months of protracted rolling
lockdowns across most states and territories across Australia
from July 2021 affecting over 15 million people, or 58% of the
Australian population. Australian franchisees were adversely
affected with hard lockdowns throughout most cities and
regions in NSW, VIC and the ACT, representing retail closures
of nearly 60% of the total number of Australian Harvey
Norman®, Domayne® and Joyce Mayne® franchised
complexes for the majority of 1Q22. These closures resulted
in a reduction in franchisee sales by –16.5% in 1Q22
compared to 1Q21. By comparison, retail closures last year
were not as widespread, limited to franchised complexes
located in greater Melbourne, VIC for an 11-week period,
representing less than 10% of the total number of Australian
franchised complexes.
Franchisee sales rebounded during 2Q22 as the ‘Delta’
restrictions progressively lifted from mid-October 2021, with
the pent-up demand resulting in an acceleration in franchisee
sales post lockdown. This momentum continued into the
Christmas trading period despite the looming threat of
‘Omicron’ to close out 2Q22 only 1.7% down on the record
2Q21 last year.
During the second half of FY22, franchisee sales improved
considerably with record 3Q22 franchisee sales, up 2.8%
relative to 3Q21, and 4Q22 franchisee sales increasing by
4.9% compared to 4Q21. The second half growth saw
franchisee sales close out at $6.75 billion this year to be only
down 2.9% from $6.95 billion in FY21 (1H22 was down 8.7%
compared to 1H21).
When compared to a more stable, comparable recent retail
period in FY20 which generated aggregated franchisee sales
of $6.16 billion, franchisee sales for FY22 grew by 9.5%.
The demand for home, lifestyle and technology products has
continued with strong sales in whitegoods, televisions and
small appliances throughout the year. Large screen and
smart TV’s designed to deliver an outstanding gaming, movie
and sports viewing experience have continued to be a growth
category for franchisees.
Within the family kitchen, cooking appliances and everyday
small kitchen essentials that deliver innovation, efficiency as
well as cutting-edge style have also stood out and an
increasingly health aware consumer has also led to growth in
the expanding category of air purification.
The technology franchisees have continued to perform well in
the high demand category of personal computers, as
consumers continue to expand their hybrid work
environments, using more technology more often. This led to
strong growth in computer monitors, along with the required
peripherals to achieve full functionality. As consumers looked
to outdoor activities, the franchisees saw solid demand for
drones and scooters. For indoor activities, solid demand was
experienced for gaming and crafting.
The smart phone category continues to show solid growth, as
consumers upgrade to the latest mobile phones, supported
by increasing demand for accessories to suit. With the
connected home category starting to mature, franchisees saw
more consumers being comfortable to expand the number of
devices they have connected at home, such as security
cameras, lighting and higher performing Wi-Fi connectivity.
The government-mandated retail closures in NSW, VIC and
the ACT adversely affected the sales of furniture and bedding
franchisees in 1H22 resulting in consumers deferring home
furnishing purchases until the restrictions lifted. However,
franchisees have seen furniture and bedding sales stabilise
post lockdown throughout the second half of the financial
year.
Proactive planning by franchisees throughout 2022, in
managing a balanced and appropriate inventory level to
satisfy consumer demand, has been important to mitigate
persistent supply chain disruptions. As the uncertainty within
supply chains eased within the second half of FY22,
franchisees are well positioned to take advantage of new
inventory ranges into the first half of FY23.
12
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
A ‘Customer-Centric’ Strategy
The consolidated entity has continued
to build on investments in technology,
digital transformation and infrastructure
to further enhance the capabilities of
Harvey Norman®, Domayne® and Joyce
Mayne® franchisees in Australia and
company-operated stores overseas.
Specific focus has been placed on
allowing them to deliver Shop-Safe
experiences for customers, improving
COVID-Safe practices and executing a
customer-centric strategy.
During FY22, the consolidated entity
completed its finance transformation
project in Australia with the
implementation of a new financial
general ledger system in April 2022.
The consolidated entity also improved
and enhanced our digital offering,
including the implementation of a
new digital gift card system.
New Customer First System
The Customer First system is central to the
customer-centric strategy. It has been designed
to support customer service for Harvey
Norman®, Domayne® and Joyce Mayne®
franchisees in Australia and company-operated
stores overseas. The new and improved system
allows customers to be supported wherever
they are, on whichever device and messaging
platform they use every day.
Personalised Experience
Customers are now enjoying the same
personalised experience online that they
receive inside franchised complexes with the
implementation of the Swogo personalisation
solution. This presents customers with
personalised, complementary products to help
enhance their product experience at the click of
a button. This solution continually adapts and
evolves, improving over time to ensure Harvey
Norman® customers are always given the best
possible experience.
New Help and Support Page
The new Help and Support page enables
customers to quickly get the information they
need or to connect with a Product or Support
expert in one of our 195 franchised complexes.
Customers can connect to support via all
popular messaging services, including LiveChat
and even good old-fashioned email.
13
OPERATING AND FINANCIAL REVIEW (CONTINUED)
A ‘Customer-Centric’ Strategy (continued)
Click & Collect Improvements
Click & Collect has never been faster or
more convenient. With over 80% of orders
ready within one hour, Harvey Norman®
customers continue to enjoy great
speed and customer service, utilising the
Microsoft Teams based system. Improved
communications have gone live, providing
customers with more accurate pickup
location information inside franchised
complexes and franchisee warehouses in
Australia, as well as company-operated
stores overseas.
Work has continued to improve and
enhance the Microsoft Teams based
system and to be able to push updates to
Click & Collect customers, acknowledging
the status of their orders. Through
integrated notifications, the customer
can, at the press of an “On My Way” or
“Arrived” button on their device, advise
the store that they are on their way to
collect their order either in-store or to
have it delivered direct to their car. This
assists the franchisee to be fully prepared
for their customer when they arrive. Stores
have dedicated Click & Collect parking
bays and in-store desks to ensure pickup
is a frictionless experience. In the last year,
customers using this system rated Harvey
Norman at a CSAT (Customer Satisfaction)
score of over 90%.
LiveChat – Via Web and Messaging
Services
Harvey Norman® pioneered LiveChat
and Messaging in Australia to help
answer online customer questions.
Over the last year, Harvey Norman® has
continued to improve the AI-powered
chatbots within a multitude of the online
messaging channels.
Harvey Norman® wants to make life
easier for customers, wherever they are,
by fitting into their schedule and being
on the messaging platforms they prefer.
Scalable messaging is available on Apple
Business Chat, WhatsApp, Facebook
Messenger, and SMS.
Chatbots continue to help automate
the customer service, so customers can
connect with Harvey Norman 24/7. As an
example. Chatbots can help customers
wanting order updates and store trading
hours, allowing LiveChat and Messaging
agents to focus more on specific
consumer needs and products.
PHONE YOUR
LOCAL STORE
Store Finder
14
OPERATING AND FINANCIAL REVIEW (CONTINUED)
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Overseas Company-Operated Retail Segment
Overseas, the 109 Harvey Norman® branded stores are company
-owned and company-operated.
Outside of Australia, we trade in seven offshore countries: New
Zealand (44 stores); Singapore (14 stores); Slovenia (5 stores);
Ireland (15 stores); Malaysia (27 stores); Northern Ireland (2
stores); and Croatia (2 stores).
Our ‘Flagship Strategy’ was completed in 2018, where each
country redeveloped and launched their flagship store, setting a
course for excellence and an unrivalled, aspirational shopping
experience in each country. Each flagship store paved the way
for the Harvey Norman® brand overseas, with our overseas
company-operated retail segment now representing 25% of total
consolidated PBT excluding net property revaluations. The
objective is to build on this growth and expand our international
footprint, particularly in the emerging economies of Southeast
Asia and Eastern Europe.
Our overseas businesses employ over 5,000 full-time and part-
time staff and we continue to prioritise the safety and livelihoods
of our employees to ensure that they are not disadvantaged by
government-mandated closures and can continue to work in a
COVID-safe manner.
Total overseas retail revenue has grown to $2.63 billion for FY22, an increase of $28.14 million or +1.1% from FY21. Overseas growth has
moderated from previous levels due to extensive government mandated lockdowns in New Zealand and Malaysia in the first half of FY22.
In New Zealand, 1H22 saw the closure of all 11 stores and 2 outlets in Auckland for 12-weeks and the 30 stores outside of Auckland were
closed for 3-weeks. In Malaysia, all stores were closed to the public for a 7-week period in 1H22. Whilst sales recovered quickly after
restrictions lifted, supply-chain disruptions due to COVID-19 continued to curtail sales, particularly in the furniture and bedding
categories. 2H22 brought in new challenges including the emergence of geopolitical factors, rising cost-of-living pressures and the
softening of previously buoyant macroeconomic conditions, amid the ongoing presence of the pandemic from the ‘Omicron’ variant.
The Harvey Norman® brand is strong overseas and continues to be the preferred Home and Lifestyle retailer across key product
categories overseas. The sustained investment in the brand, coupled with a sound offshore expansion strategy, has continued to
underpin a solid offshore result this year. Total overseas retail PBT was $232.00 million for FY22.
ANNUAL REPORT JUNE 2022
15
OPERATING AND FINANCIAL REVIEW (CONTINUED)
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Overseas Company-Operated Retail Segment (continued)
New Zealand
44 Harvey Norman® Company-Operated Stores
In New Zealand, sales and profitability were adversely impacted
in 1H22 by the nationwide imposition of Alert Level 3 & 4 lock-
downs from 18 August 2021, closing all 11 retail stores and 2
outlets in Auckland for a 12-week period up to 10 November
2021 (closure of 84 days), and closing all 30 retail stores outside
of Auckland for a 3-week period, with limited re-opening to
customers commencing from 7 September 2021 (closure of 21
days). Online trade during 1H22 was also restricted to essential
goods only for a limited period, and with no store click & collect
permitted for Auckland stores up to 21 September 2021.
Lockdowns in 1H21 were not as widespread or prolonged, with
Alert Level 3 Restrictions in the Auckland region only, requiring
the closure of retail stores in Auckland for a 19-day period from
12 August 2020 to 30 August 2020.
Sales rebounded as the restrictions lifted as the pent-up
demand, especially for premium electrical appliances and
televisions which were deferred during the extended hard
lockdowns, buoyed retail sales into the peak Christmas trading
period. In local currency, sales were NZ$614.93 million for
1H22, decreasing by NZ$22.72 million or –3.6% from
NZ$637.66 million in 1H21. When translated to Australian
dollars, sales were $586.43 million for 1H22, down by $7.95
million or –1.3% from $594.39 million in 1H21, assisted by a
2.31% appreciation of the NZ dollar relative to the AUD on
translation. However, when compared against the pre-
pandemic sales of $503.90 million for 1H20, sales increased by
$82.53 million, or +16.4%.
The 2nd half of FY22 (2H22) was marred by the challenges of
the ‘Omicron’ variant, falling residential property prices and a
swift reversal of previously strong macroeconomic conditions,
resulting in a decline in consumer and business confidence.
Foot traffic at our NZ stores decreased towards the end of FY22,
as consumers tightened their household budgets due to cost of
living pressures. The sales decline was exacerbated by the
ongoing supply chain issues, including import and delivery
delays due to port congestion and global logistical constraints
from COVID-19. This was partially offset by the opening of the
commercial outlet in Hamilton, New Zealand on 1 March 2022.
In local currency, sales were NZ$578.69 million for 2H22,
decreasing by NZ$17.00 million or –2.9% from NZ$595.69
million in 2H21. When translated to Australian dollars, sales
were $532.66 million for 2H22, down by $21.11 million or –3.8%
from $553.76 million in 2H21. However, when compared
against 2H20, sales increased by $76.37 million, or +16.7%.
In light of the persistent challenges of the pandemic and
the headwinds affecting retail this year, the NZ business is
pleased to report solid sales in local currency of NZ$1.19
billion for FY22, a decrease of NZ$39.72 million or –3.2%,
from $1.23 billion in FY21. In Australian dollars, sales for
FY22 have surpassed the billion dollar milestone for a
second year in a row, at $1.12 billion for FY22, down by
$29.06 million or –2.5% from $1.15 billion in FY21. When
compared to FY20, the sales increase was $158.90 million
or +16.6%.
The Harvey Norman® brand remains strong in NZ, with our
NZ business continuing to be the market leader across key
Home and Lifestyle categories. The electrical and small
appliances categories continue to grow market share in a
difficult retail period. The furniture and bedding categories
were affected by the prolonged closures and reduction in
foot traffic, coupled with supply chain issues constraining
stock and delivery lead times.
In local currency, the retail profit for FY22 was NZ$137.67
million, a decrease of NZ$14.44 million or –9.5%. When
translated to Australian dollars, the retail result was $129.08
million for FY22, down by $12.53 million or –8.9% from
$141.61 million in FY21. Compared to FY20, the increase
in retail profit was $29.92 million or +30.2%.
The impact of the nationwide lockdown during 1H22 and
the emergence of retail headwinds during 2H22, were
partially moderated by a full year’s contribution from the 3
stores that opened during FY21, coupled with sound
inventory management and effective cost control to
preserve cashflow.
In line with the directive of the consolidated entity, the NZ
business continued to prioritise the health, safety and
well-being of their staff and customers. The NZ business
employs approximately 2,000 full-time and part-time
employees across 44 Harvey Norman® stores and, despite
the restrictions to trade and closures and the tight labour
market in NZ, the consolidated entity ensured that the
livelihoods of their employees were protected and
maintained throughout FY22.
16
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Overseas Company-Operated Retail Segment (continued)
Singapore and Malaysia
This segment is comprised of 14 Harvey Norman® stores in Singapore,
27 Harvey Norman® stores in Malaysia and the Space Furniture®
branded lifestyle stores in Singapore and Malaysia.
Malaysia | Sales Revenue
27 Harvey Norman® Company-Operated Stores
In Malaysia, sales and profitability for the 27 Harvey Norman®
company-operated stores were negatively impacted in 1H22 by the
re-imposition of the Full Movement Control Order on 28 May 2021,
leading to extensive lockdowns from 1 June 2021. During 1H22,
there was a full closure of all Malaysian stores (online trade permitted)
for a 7-week period (closure of 51 days), with a limited opening to
customers commencing from 21 August 2021. This is in contrast to a
period of growth and expansion in 1H21, surging sales on the back of
pent-up demand from closures in the early months of the pandemic
and no physical retail closures in 1H21.
In Australian dollars, sales were $261.37 million for FY22, up by
$19.73 million or +8.2%, from $241.64 million in FY21, assisted by
a 1.9% appreciation in the Singaporean dollar relative to the AUD.
Malaysia continues to be our platform for organic growth in Asia
and we are on track with the further 3 planned store openings by
the end of FY23.
Singapore | Sales Revenue
14 Harvey Norman® Company-Operated Stores
In Singapore, there were no COVID-related closures during FY22,
as the local population transitioned back to pre-COVID
activity attributable to the high level of vaccination in the country
and a proportionate response to any spike in COVID cases. How-
ever, a Heightened Alert Announcement between 22 July 2021
and 18 August 2021 resulted in lower footfall curtailing retail trade
during that period.
Sales were solid when the stores re-opened to the public and, from
October 2021 as most regions entered into Phase 4 of the National
Recovery Plan, the high vaccination rates across the country allowed
sales to return largely to pre-lockdown levels for key product
categories. Unfortunately, the flagship store at Ikano, Kuala Lumpur
was adversely impacted by the severe floods in the Klang Valley in
mid-December 2021 causing damage and disruption to the main
warehouse and delaying sales to the new year.
Despite the full 6-month’s contribution of the 3 Malaysian stores that
opened in FY21, 1H22 sales were S$112.10 million, a decrease of
S$14.29 million, or –11.3%, from S$126.40 million in 1H21. When
translated to Australian dollars, sales were $113.05 million, a
reduction of $15.50 million, or –12.1%.
As planned, we have continued with our expansion plans in Malaysia
and opened the new store at Pavilion Bukit Jalil on 3 December 2021.
Sales rebounded strongly in 2H22, increasing by S$29.32 million or
+25.2% to S$145.84 million, from S$116.52 million in 2H21. When
translated to Australian dollars, 2H22 sales were $148.31 million, up
by $35.23 million or +31.2%, from $113.08 million in 2H21. Sales
were robust in the second half due to the uptick in trade for the flag-
ship store following the pre-Christmas flood, the restoration of con-
sumer and business confidence after a prolonged lockdown period
and the solid sales contribution of the new Pavilion Bukit Jalil store
and the 3 stores that were opened last year. On 1 April 2022,
Malaysia entered the ‘Transition to Endemic’ phase of COVID-19, with
all remaining restrictions on business operating hours removed,
buoying sales through to the end of FY22.
Despite the persistent supply-chain challenges and the threat of
macroeconomic pressures in the last couple of months of 2022, full-
year Malaysian sales for FY22 were S$257.94 million, an increase of
$15.03 million or +6.2%, from S$242.92 million in FY21
Sales for the 14 Harvey Norman® company-operated stores for
FY22 were S$337.96 million, an increase of S$13.77 million, or
+4.3%, from S$324.19 million in FY21. When translated to Austral-
ian dollars, sales were $342.44 million, an increase of $19.96
million, or +6.2%. FY22 benefitted from a full year’s contribution of
the 3 stores that opened in Singapore in the first half of FY21.
As the country gradually returned to normality, new housing
projects commenced or were completed during FY22 after
significant delays due to the pandemic. This underpinned the
growth in furniture and bedding sales as more customers shopped
in-store to invest in their new homes. This also led to solid growth
in the electrical category, particularly in premium home appliances
and audio visual upgrades. The resumption of international travel,
and the addition of more countries on the ‘Active Vaccinated Trav-
el Lane’ is expected to continue to stimulate the local economy
and underpin retail trade in Singapore as more people are
permitted to enter and work in the country.
Retail – Singapore and Malaysia: Sales & Segment Result
Aggregated sales revenue for the Harvey Norman® and Space
Furniture® brands in Asia totalled S$613.09 million in local
currency for FY22, an increase of S$32.55 million, or +5.6%, from
S$580.54 million in FY21. On translation to Australian dollars,
aggregated sales revenue for Asia was $621.23 million, an
increase of $43.75 million or +7.6%, from $577.48 million in FY21.
The segment profit result of the Harvey Norman® and Space
Furniture® brands in Asia was $45.36 million for FY22, a solid
increase of $9.45 million, or +26.3%, from $35.92 million in FY21.
After closing 1H22 slightly down on 1H21, profitability in 2H22
increased by $9.59 million or up +63.3% to $24.75 million, com-
pared to a segment profit for Asia of $15.16 million in 2H21.
ANNUAL REPORT JUNE 2022
17
OPERATING AND FINANCIAL REVIEW (CONTINUED)
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Overseas Company-Operated Retail Segment (continued)
Ireland
15 Harvey Norman® Company-Operated Stores
In Ireland, sales in local currency increased to €399.98 million
for FY22, up by €8.10 million or +2.1%, from €391.89 million in
FY21. 1H22 sales were strong, growing by €12.96 million or
+5.9% to €233.71 million, from €220.75 million in 1H21. Irish
sales moderated to €166.28 million in 2H22, decreasing by
€4.86 million or –2.8%, from €171.14 million in 2H21.
When translated to Australian dollars, sales were $621.09
million for FY22, declining by $4.93 million or –0.8%, from
$626.02 million in FY21. The decrease in full-year sales was
due to a 2.8% devaluation in the Euro relative to the Australian
dollar for the year, particularly during the last few months of
FY22. When compared against FY20, the FY22 increase was
$198.03 million or +46.8%.
FY22 has benefitted from the easing of COVID-19 restrictions,
increasing consumer confidence and in-store foot traffic,
coupled with heightened demand from the prolonged 20-
week closure of the furniture and bedding categories in the
second half of the 2021 financial year. The rise in FY22 sales
can also be attributed to a full year’s uninterrupted
contributions from the Galway and Sligo stores that opened in
July 2020 and November 2020 respectively, and the re-
opening of construction in May 2021 propelling home
renovations and upgrades this year.
Sales were more subdued in the second half following the
lifting of travel restrictions and the recommencement of travel
outside Ireland. Supply-chain constraints persisted, affecting
furniture and bedding sales of imported goods and local
suppliers were also hampered by lack of components and the
tight local labour market.
We are pleased to report the 5th straight year of profitability in
Ireland with the Irish business delivering a solid retail result of
$44.83 million for FY22. This was a reduction of $4.81 million
or –9.7% from the record retail result of $49.63 million in FY21.
The Harvey Norman® brand remains strong in Ireland and we
continue to invest in the development of the brand and in the
expansion of the Irish business. On 30 June 2022, the
consolidated entity acquired the Eastgate Retail Park in Little
Island, Cork, a 175,000 sq. ft. retail precinct housing eight
tenancies, including the Harvey Norman® store at Cork.
Subsequent to year-end, the 16th company-operated store in
Ireland was opened, with the Fonthill store in Dublin
commencing trade on 22nd July 2022 (slightly delayed due to
the pandemic).
Northern Ireland
2 Harvey Norman® Company-Operated Stores
There were no COVID-lockdowns during FY22, allowing
uninterrupted trade across the two Harvey Norman® stores in
Northern Ireland. The flagship store at Boucher Road, South
Belfast continues to perform well, being the primary premium
shopping destination for furniture and bedding products in the
country.
Sales in local currency were £13.20 million for FY22, an increase
of £1.06 million, or +8.7%, from £12.14 million in FY21, and up
by £3.90 million or +41.9% when compared to FY20.
Translated into Australian dollars, sales revenue was $24.19
million for FY22 compared to $21.88 million in FY21, an
increase of $2.31 million or +10.6%, assisted by a 1.7%
appreciation in the GBP relative to the AUD for translation
purposes.
The result for FY22 was a profit of $1.33 million, a decrease of
$0.92 million or –40.7% from a profit of $2.25 million in FY21.
The Harvey Norman® brand continues to grow in Northern
Ireland.
18
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Overseas Company-Operated Retail Segment (continued)
Slovenia
5 Harvey Norman® Company-Operated Stores
Croatia
2 Harvey Norman® Company-Operated Stores
In Slovenia, there were no COVID related closures in FY22
compared to closures between October 2020 and February
2021 last year. This allowed our 5 Slovenian stores to build on
the solid, double-digit sales growth delivered in FY21.
Slovenian retail sales in local currency increased to €91.67
million for FY22, up by €9.27 million or +11.3%, from €82.40
million in FY21. 1H22 sales were solid, growing by €4.95 million
or +11.2% to €48.98 million, from €44.04 million in 1H21. This
trend continued into 2H22 with sales increasing to €42.68
million, up by €4.32 million or +11.3%, from €38.36 million in
2H21.
When translated to Australian dollars, sales were $142.34
million for FY22, growing by $10.71 million or +8.1%, from
$131.63 million in FY21. When compared against FY20, the
FY22 increase was $21.99 million or +18.3%.
Our Slovenian stores, including our flagship at Ljubljana, have
delivered another period of double-digit sales growth across all
key product categories for FY22. Consumers trust the Harvey
Norman® brand in Slovenia to provide a safe shopping
experience. Despite the requirement to show proof of
vaccinations, proof of a previous COVID-recovery or a negative
COVID test not older than 24 hours to shop in-store for a large
part of the year, consumers continued to show their loyalty to the
brand, increasing patronage and market share across all stores.
With the easing of the remaining COVID restrictions towards the
end of FY22, the Slovenian stores are well-placed to further
benefit from strengthening consumer and business confidence
into FY23.
Throughout FY22, the Slovenian business intentionally increased
inventory to mitigate supply chain disruptions. This proved
successful as the business had ample stock to sell during the
peak Christmas trading period through to the end of the financial
year.
The sustained increase in sales delivered a retail profit of $12.43
million for FY22, representing a $1.16 million increase or
+10.3%, from $11.27 million in FY21.
In Croatia, both stores were open for all of FY22, following a
year of unrestricted trade in FY21.
Sales for FY22 were €30.26 million, a modest increase of
€0.46 million or +1.5%, from €29.80 million in FY21. When
compared to FY20, the increase was €9.61 million or +46.6%.
1H22 sales were strong, growing by €2.59 million or +19.8%
to €15.67 million, from €13.07 million in 1H21. Sales were
subdued in 2H22, declining by €2.13 million or –12.8% to
€14.59 million, from €16.72 million in 2H21.
In Australian Dollars, sales were $46.98 million for FY22,
decreasing by $0.62 million or –1.3%, from $47.60 million in
FY21. The decrease in full-year sales was due to a 2.8%
devaluation in the Euro relative to the Australian dollar for the
year, particularly during the last few months of FY22.
The Croatian business has benefitted from a full year’s trade
of their second store at Pula, which opened on 26 November
2020. However, the sales performance of the flagship store at
Zagreb was adversely affected by the high number of COVID
cases in the Croatian capital city reducing foot traffic in-store
and the ongoing supply-chain challenges. Geopolitical
factors in Europe have exacerbated the mounting retail
pressures towards the end of FY22, curtailing sales and
profitability in the second half of the year.
Croatia reported a loss of $1.03 million for FY22 compared to
a modest profit of $0.11 million for FY21, mainly due softer
sales, costs to ramp-up the new Pula store and additional
warehouse costs to accommodate the growth in inventory
required by the business.
In FY21, we reported our intention to open 2 new stores in
Croatia. Presently, the intention is to open the new store at
Rijeka during calendar 2023, and open the second store in
Zagreb in FY24.
ANNUAL REPORT JUNE 2022
19
OPERATING AND FINANCIAL REVIEW (CONTINUED)
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Review of the Property Segment
Strategic ‘Large-Format’ Retail Property Portfolio
Property ownership is a core pillar underpinning our successful integrated retail, franchise, property and digital system.
Our consolidated balance sheet is anchored by a robust and resilient freehold property portfolio totalling $3.74 billion as at 30 June
2022. This is primarily comprised of tangible, freehold investment properties in Australia of $3.19 billion and New Zealand of
$10.90 million; and freehold owner-occupied properties in New Zealand, Singapore, Slovenia, Australia and Ireland of $494.12
million in aggregate. On 30 June 2022, the consolidated entity acquired the Eastgate Retail Park in Little Island, Cork, Ireland for
$40 million, of which $29 million has been recognised in freehold investment properties and $11 million has been recognised in
owner-occupied properties as it relates to the Harvey Norman store at Cork, Dublin. Our property segment assets also include a
property held for sale in Singapore of $12.10 million, and joint venture assets of $1.50 million. The freehold property segment
comprises 52% of our total $7.25 billion total asset base.
The Australian Large-Format Retail (LFR) Market
The Australian freehold investment property portfolio has
grown from strength-to-strength this year, rising to $3.19
billion as at 30 June 2022, surpassing the $3 billion milestone
for the first time during FY22 and firmly positioning the
consolidated entity as the largest single owner of Large Format
Retail (LFR) real estate in the Australian market.
The LFR property market has performed strongly throughout
FY22, experiencing robust sales volumes and historically low
yields. Reported recent sales transactions highlight continued
solid investor demand and scarcity of high quality LFR
properties in the market. This has largely been driven by the
low interest rate environment over the last few years,
confidence in the financial and operational performance of LFR
centres and their resilience throughout the pandemic, as well as
providing an attractive return on investment relative to
alternative asset classes.
We have 195 Australian franchised complexes geographically
spread throughout the country, with a local Harvey Norman®,
Domayne® and Joyce Mayne® branded store located within
close proximity to customers. 95 franchised complexes (49% of
total), and their associated warehouses, are owned by the
consolidated entity, which are then leased to external parties,
including Harvey Norman®, Domayne® and Joyce Mayne®
franchisees.
Generally, our LFR centres have expansive footprints facilitating
the efficient execution of COVID-Safe practices, easy and direct
access points enabling franchisees to improve their ‘1-Hour
Click & Collect’ and ‘Contactless Click & Collect’ capabilities
and open-air carparks for ease of in-store shopping or swift
collection of goods. Occupants of our LFR centres, including
Harvey Norman®, Domayne® and Joyce Mayne® franchisees,
have thrived from the uplift in trading performance across the
home building and improvements sector.
Our LFR centres accommodate a complimentary mix of over
450 third-party tenants that are diversified across a variety of
different categories including Hardware, Medical, Chemists,
Pets and Auto related products. A large proportion of these
third-party tenants are ASX-listed and are national retailers that
support the underlying value of our properties.
Leasing demand has remained buoyant and this is expected
to continue into FY23 on the back of forecasted increases in
population growth, strong employment figures and the
elevated levels of dwelling commencements, alterations and
additions activity propelled by the solid uptake of the
government’s HomeBuilder Program and the pandemic-
induced housing shifts from metropolitan cities to the
regions. In addition, the significant recent rise in construction
costs is further constraining supply of LFR properties. This
leasing demand has resulted in achieving high occupancy
levels in the portfolio which will likely provide growth in rental
income streams received.
Harvey Norman® Auburn, NSW Flagship Franchised Complex
20
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Review of the Property Segment (continued)
Strategic ‘Large-Format’ Retail Property Portfolio (continued)
The investment market for LFR property has seen material gains
in FY22 based on strong demand from property syndicates and
institutional investors, resulting in competition for quality
assets and the volume of capital seeking placement
outstripping the supply of LFR centres available. Buyers have
been attracted to LFR properties with large land holdings
providing further development scope and centres that are
anchored by strong performing national retailers and a diverse
tenancy mix. The strong sustained demand and resilience of
the LFR market has resulted in a record increase in the value of
our Australian investment property portfolio this year, growing
by $296.13 million or +10.2% in FY22 to $3.19 billion, from
$2.89 billion in FY21. $213.68 million of this increase is
represented by capital appreciation in property fair values
during FY22 and $82.45 million relates to capital additions and
refurbishments during the year.
If you add on the large increases recognised last year to June
2021, the value of the Australian investment property portfolio
has risen by $606.72 million or +23.5% – an increase of well
over half a billion dollars over a 2-year period. $352.37 million
(58%) of the increase relates to fair value appreciation and
$254.35 million (42%) relates to acquisitions, renovations and
refurbishments, including the premium re-fit program.
Overseas Property Portfolio
Globally, we have 109 company-operated stores across 7
countries. 26 of the stores located overseas (24% of total) are
owned by the consolidated entity. The aggregate value of the
overseas owner-occupied and investment property portfolio is
$520.49 million, increasing in value by $68.48 million during
the year primarily due to the acquisition of the Eastgate Retail
Park in Ireland and capital appreciation since the end of FY21.
On 30 June 2022, the consolidated entity acquired the
Eastgate Retail Park in Little Island, Cork, a 175,000 sq. ft. retail
precinct housing eight tenancies, including the Harvey
Norman® store at Cork.
Total Property Portfolio and the Performance of the Retail
Property Segment
Retail property segment revenue has grown to $494.39 million
for FY22, up by $85.19 million from $409.20 million in FY21.
This was primarily due to the recognition of $213.68 million in
net property revaluation increments for FY22 compared to
$140.37 million in net increments for FY21, an increase of
$73.31 million.
The retail property result was $366.48 million for FY22, an
increase of $74.94 million or +25.7% from $291.54 million in
FY21. Excluding net property revaluations for both periods, the
retail property result would have been consistent with the prior
year, being $152.80 million for FY22 compared to $151.16
million for FY21.
Rent and outgoings received from freehold properties were
reduced during 1H22 as full or partial rent waivers were given
to external tenants and Harvey Norman®, Domayne® and Joyce
Mayne® franchisees affected by the retail closures in NSW, VIC
and ACT for approximately a 4-month period from July 2021 to
early to mid-October 2021 in order to protect and enhance the
brands. These temporary hard lockdowns in Australia during
1H22 had no impact on LFR property fair values.
These rent waivers amounted to $19.58 million, of which
$10.76 million related to properties owned by the consolidated
entity (and recorded in the Property Segment) and $8.82
million related to properties leased by the consolidated entity
(and recorded in the Franchising Operations Segment). During
FY21, $9.85 million of rent waivers were provided to
franchisees affected by the 11-week government-mandated
Stage 4 lockdown in greater Melbourne, Victoria, of which
$5.78 million related to owned properties and $4.07 million
related to leased properties.
Harvey Norman® and Domayne® Penrith, NSW Franchised Complexes | Penrith Homemaker Centre
ANNUAL REPORT JUNE 2022
21
OPERATING AND FINANCIAL REVIEW (CONTINUED)
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Review of the Property Segment (continued)
The below table shows the composition of freehold property segment assets as at 30 June 2022, the number of owned property
assets and the increase in fair value recognised in each country.
COMPOSITION OF FREEHOLD
PROPERTY SEGMENT ASSETS
June 2022
# of Owned
Retail
Property
Assets
# of Owned
Other
Property
Assets
Net Increase
in Fair Value
(Income
Statement)
Net Increase /
(Decrease)
in Fair Value
(Equity)
(1) Investment Properties (Freehold) and Assets Held for Sale
- Australia
- New Zealand
- Ireland
- Singapore (Property asset held for sale)
$3,190.34m
$10.90m
$28.97m
$12.10m
Total Investment Properties (Freehold) and Assets Held for Sale $3,242.32m
(2) Owner—Occupied Land & Buildings
- Australia
- New Zealand
- Singapore
- Slovenia
- Ireland
Total Owner—Occupied Land & Buildings
(3) Joint Venture Assets
$13.50m
$361.71m
$13.30m
$80.01m
$25.60m
$494.12m
$1.50m
95
-
-
-
95
-
19
-
5
2
26
-
41
$213.68m
2
1
1
-
-
-
-
-
-
($1.25m)
45
$213.68m
($1.25m)
1
1
1
-
-
3
7
-
-
-
-
-
-
-
$3.26m
$27.30m
$5.26m
$7.40m
-
$43.22m
-
Total Freehold Property Segment Assets
$3,737.94m
121
55
$213.68m
$41.97m
Net Property Revaluation Adjustments
For the year ended 30 June 2022, the freehold investment property portfolio has recorded $213.68 million in capital
appreciation to fair value, which was the net property revaluation increment for investment properties recognised in the income
statement. LFR properties appreciated in value this year on the back of the solid financial performance of the Home and
Lifestyle categories resulting in historically low yields and firmer capitalisation rates for high quality LFR centres and LFR
properties supported by strong recent sales evidence in the LFR market.
At each balance date, the directors make an assessment of the fair value of each freehold investment property.
This assessment is informed by:
•
•
the information and advice contained in the last independent external valuation report for that property prepared by an
external, professionally qualified valuer who holds a recognised relevant professional qualification and has specialised
expertise in the property being valued (Independent Valuer);
the information and advice contained in the last internal valuation report for that property (which was informed by the
immediately preceding independent external valuation report for that property);
the last management review for that property; and
•
• other information and professional or expert advice given or prepared by reliable and competent persons in relation to that
property.
Each freehold investment property in Australia is independently valued by an Independent Valuer at least once every 2 years on
a rotational basis.
For FY22, there were 68 valuations of freehold investment properties in Australia representing a total of 52.2% of the value of
freehold investment properties independently externally valued this year, and 49.6% in terms of the number of total
freehold investment properties in Australia.
Freehold investment properties not independently externally valued as at balance date are subject to an internal valuation or a
management review, performed by persons qualified by relevant education, training or experience. Each internal valuation and
management review is informed by the last independent external valuation and reliable market evidence. For the 2022
financial year, 13 freehold investment properties had been affected by the same factors as the properties which had been
independently externally valued. As a consequence, internal valuations for these 13 properties were undertaken to determine
the effect of these factors.
22
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Leasehold Property Portfolio | AASB 16 Leases
Right-of-Use Assets: Leasehold Investment Properties (Sub-Leased to External Parties):
The consolidated entity has a portfolio of property leases primarily for the purposes of being sub-leased to Harvey Norman®,
Domayne® and Joyce Mayne® franchisees in Australia. For these properties, the consolidated entity enters into property leasing
arrangements with external landlords and then subsequently subleases these sites to franchisees pursuant to a licence,
terminable upon reasonable notice. Leasehold investment property: right-of-use asset meets the definition of an investment
property and are measured at fair value.
As at 30 June 2022, there were 183 leasehold investment properties. 100 leasehold investment properties (55% of total) were
occupied by Harvey Norman®, Domayne® and Joyce Mayne® franchisees in Australia for retail purposes. The remaining 83
leasehold investment properties (45% of total) were primarily used by franchisees for warehousing.
Right-of-Use Assets: Leasehold Owner-Occupied Properties & Plant and Equipment Assets:
Leasehold properties occupied by the consolidated entity primarily include company-operated stores, warehouses and offices
that are leased from external landlords. Unlike the leasehold investment properties: right-of-use assets which are measured at
fair value, the leasehold owner-occupied properties and plant and equipment assets: right-of-use assets are measured at cost,
less any accumulated depreciation and impairment losses.
Composition of Leasehold Property Segment Assets:
The table below shows the composition of right-of-use assets and lease liabilities within our leasehold property portfolio as at
balance date, and the number of leased retail properties and other properties leased by the consolidated entity.
COMPOSITION OF LEASEHOLD
PROPERTY SEGMENT ASSETS
Right -of-Use
Asset
June 2022
Lease
Liabilities
June 2022
# of Leased
Retail
Property
Assets
# of Leased
Other
Property
Assets
(1) Leases of Properties Sub-Leased to External Parties
$675.60m
$719.02m
100
170
- Australia
(2) Leases of Owner-Occupied Properties and Plant and
Equipment Assets
- Australia
- New Zealand
- Singapore & Malaysia
- Slovenia & Croatia
- Ireland & Northern Ireland
Total Owner—Occupied Properties and Plant
and Equipment Assets
$25.79m
$118.49m
$218.39m
$14.95m
$94.90m
$41.11m
$136.18m
$164.23m
$16.87m
$127.22m
$472.51m
$485.60m
-
25
41
2
15
83
16
36
15
6
17
90
Total Leasehold Property Segment Assets
$1,148.11m
$1,204.63m
183
260
Financial Impact of AASB 16 Leases on the Consolidated Income Statement:
The table below shows the financial impact of AASB 16 Leases on the consolidated income statement for the year ended
30 June 2022.
Financial Impact of AASB 16 Leases:
Property, plant and equipment: Right-of-use asset
- Depreciation expense
Investment properties (leasehold): Right-of-use asset
- Fair value re-measurement
Finance costs: Interest on lease liabilities
Total AASB 16 Expenses Recognised
Less: Lease payments made during FY22 (excluding variable
lease payments (short-term, low-value leases)
Other adjustments
AASB 16 Incremental (Increase )/ Decrease in PBT for FY22
Leases of Owner-
Occupied Properties
$000
$65,870
Leases of Properties
Total Leases
Sub-Leased to
External Parties
$000
-
$000
$65,870
-
$87,558
$87,558
$16,713
$82,583
$25,025
$112,583
$41,738
$195,166
($82,921)
($94,938)
($177,859)
($1,280)
($1,618)
-
$17,645
($1,280)
$16,027
ANNUAL REPORT JUNE 2022
23
OPERATING AND FINANCIAL REVIEW (CONTINUED)
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Review of the Financial Position of the Consolidated Entity
Net Debt to Equity Ratio
The overall debt levels of the consolidated entity remain low,
with a conservative net debt to equity ratio of 10.31% as at 30
June 2022, increased by 2.84% compared to a ratio of 7.47% as
at 30 June 2021.
Across the consolidated entity, the total available facilities
globally amounted to $884.81 million (Jun-21: $749.52 million),
of which the utilised portion was $695.16 million (Jun-21:
$555.56 million), leaving $189.64 million (Jun-21: $193.96
million) accessible financing facilities available.
customers of company-operated stores by $15.81 million.
Despite a reduction in gross revenue received from franchisees
by $44.64 million, the movement in the aggregate amount of
financial accommodation provided to franchisees decreased
compared to the movement in FY21. Franchisees continued to
maintain appropriate inventory reserves to meet the demand
for home, lifestyle and technology products. The amount of
funding advanced to franchisees to fund their FY22 inventory
purchases decreased compared to funding advanced for
franchisee inventory purchases for FY21.
In FY22, the utilised facilities increased by $139.61 million
compared to FY21 as the consolidated entity continued its
conservative, sustainable expansion strategy and upgrades of
existing franchised complexes and company-operated stores.
Income tax paid increased by $129.63 million primarily due to
the higher final tax payment made in FY22 attributable to FY21
taxable profits and the higher income tax instalment rate
applied in Australia for FY22.
Solid Cash Flows
Payments to suppliers and employees increased by $113.06
million due to higher inventory purchases overseas to ramp-up
stock and higher operating costs due to new store openings.
Cash and cash equivalents, net of bank overdraft, as disclosed in
the Statement of Cash Flows, decreased by $14.37 million to
$234.36 million as at 30 June 2022, compared to $248.73
million in the prior year.
Net cash investing outflows decreased by $75.32 million
during FY22 primarily due to a decrease in payments for the
purchase and refurbishments of freehold investment properties
by $92.67 million.
Cash flows from operating activities increased by $53.43 million
to $597.30 million for FY22, from $543.87 million in FY21. This
was primarily attributable to an increase in net receipts from
franchisees by $301.08 million, from $886.34 million in FY21 to
$1,187.42 million in FY22, offset by an increase in income taxes
paid by $129.63 million, higher payments to suppliers and
employees by $113.06 million and a reduction in receipts from
Net cash financing outflows decreased by $97.40 million
during FY22 mainly attributable to a reduction in in the
proceeds received from the drawdown of the Syndicated
Facility in FY22 relative to FY21 by $175 million. This was offset
by a reduction in dividends paid by $37.38 million and the net
proceeds from other borrowings in FY22 of $20.84m compared
to repayments of other borrowings in FY21 of $26.14 million.
24
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Review of the Financial Position of the Consolidated Entity (continued)
In the December 2021 half year report, the consolidated entity reported net assets of $4.16 billion, surpassing $4 billion of net
assets for the first time. As at 30 June 2022, net assets have grown to $4.29 billion, an increase of $401.11 million or 10.3%, from
$3.89 billion as at 30 June 2021.
Total assets increased by 8.6%, or $573.47 million, to $7.25 billion as at 30 June 2022, from $6.67 billion as at 30 June 2021.
The value of the freehold investment property portfolio increased by $324.70 million, or +11.2%, to $3.23 billion as at 30 June
2022 primarily due to $213.68 million net property revaluation increments over the past 12 months, acquisition of new
freehold investment properties and the refurbishments of freehold investment property assets in Australia and the purchase of
the Eastgate Retail Park in Cork, Ireland.
Receivables from franchisees increased by $99.69 million to $892.92 million as at 30 June 2022. Repayments of indebtedness by
franchisees decreased in FY22 on the back of the $202.13 million or -2.9% reduction in aggregate franchisee sales revenue. This
was offset by a reduction in the amount of funding advanced to franchisees to fund their FY22 inventory purchases relative to
funding advanced for FY21 inventory purchases. Franchisees continued to maintain appropriate inventory reserves to meet the
demand for home, lifestyle and technology products.
Inventories of company-operated stores increased by $45.18 million mainly due to their concerted efforts to increase inventory
to mitigate the ongoing global supply chain constraints and to satisfy solid sales growth.
Property, plant and equipment assets increased by $49.37 million mainly due to the acquisition of the Eastgate Retail Park in
Ireland, fit-out of the new Pavilion Bukit Jalil company-operated store in Malaysia, the fit-out for the 3 new Harvey Norman®
franchised complexes opened during the year and net property revaluation increments for the owner-occupied freehold
properties over the past 12 months.
Total liabilities increased by $172.36 million, or 6.2%, to $2.95 billion as at 30 June 2022 from $2.78 billion as at 30 June 2021.
Interest-bearing loans and borrowings increased by $139.61 million mainly due to the higher utilisation of the Syndicated
Facility by $120 million, from $490 million utilised as at 30 June 2021 to $610 million utilised as at 30 June 2022 to fund our
conservative, sustainable expansion strategy.
Deferred tax liabilities increased by $65.88 million mainly due to $213.68 million of net property revaluation increments relating
to freehold investment properties and $43.22 million of net property revaluation increments for owner-occupied properties over
the past 12 months.
The above increases were offset by a $80.20 million decrease in income tax payable driven by lower profit generated by the
consolidated entity during the current year.
ANNUAL REPORT JUNE 2022
25
OPERATING AND FINANCIAL REVIEW (CONTINUED)
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Outlook
During the second half of the financial year, the premium refit program, which was hampered by the government mandated closures
during 1H22, was recommenced. Given COVID supply chain issues and labour shortages, we have reassessed expected completion
dates and we now expect to complete up to 25 premium refits over the next 5 years.
As planned, we opened three Harvey Norman® franchised complexes in Australia located at Murwillumbah, NSW (Sep 2021), Port Pirie,
South Australia (Nov 2021), and Charters Towers, QLD (Apr 2022). In December 2021, we opened a company-operated store in
Malaysia located at Pavilion Bukit Jalil, Kuala Lumpur, and a company-operated commercial outlet in Hamilton, New Zealand in March
2022.
In the 2023 financial year, we intend to open up to 2 franchised complexes in Australia and relocate 1 franchised complex from a leased
site to a freehold property. Overseas, we opened our 16th company-operated store in Ireland at Fonthill, Dublin on 22nd July 2022,
and we expect to ramp-up our offshore expansion plans with the anticipated opening of a further 4 company-operated stores
during FY23: 1 in New Zealand, 2 in Malaysia and 1 in Croatia (expect to open by the end of calendar 2023).
Beyond FY23, we anticipate opening a further 2 franchised complexes in Australia and intend to relocate 3 franchised complexes from
leased sites to freehold properties during the 2024 financial year. Overseas, we expect to open up to 6 company-operated stores in
FY24: 2 in New Zealand, 2 in Malaysia and our first 2 company-operated stores in Budapest, Hungary that were announced last year.
RETAIL TRADING UPDATE: 1 July 2022 to 29 August 2022 vs 1 July 2021 to 29 August 2021
Aggregated Sales increase / (decrease) from 1 July 2022 to 29 August 2022 vs 1 July 2021 to 29 August 20211
(% increases have been calculated in local currencies)
1 comparable sales growth has not been adjusted for the temporary closures mandated by each local government as a result of their COVID-19 Response
COUNTRY
(% increase calculated
in local currencies)
1 July 2022 to 29 August 2022 vs
1 July 2021 to 29 August 2021
Total
Comparable
Australian Franchisees
$A
New Zealand
Slovenia & Croatia
Ireland
Northern Ireland
Singapore
Malaysia
$NZD
€Euro
€Euro
£GBP
$SGD
MYR
10.7%
5.0%
12.2%
(-1.0%)
(-10.2%)
1.9%
108.0%
10.3%
4.6%
12.2%
(-3.7%)
(-10.2%)
4.1%
99.0%
The start of FY23 has seen solid sales results. Low unemployment and high net deposit rates continue to underpin growth.
Harvey Norman® is well positioned to continue to maximise the opportunities in Home and Lifestyle categories via the home renovation
market and new home builds.
26
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Summary of Key Business Risks
The Board remains optimistic about the consolidated entity’s future trading performance and acknowledges that there are several factors
that may pose risk to the achievement of the business strategies and future financial performance of the consolidated entity.
Every business is exposed to 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 mitigate those risks.
Changes to macroeconomic conditions and government policy:
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, CPI inflation, geopolitical tensions, overall levels of demand,
housing market dynamics, wage growth, employment, economic and political instability and government fiscal, trade, monetary and
regulatory policies, that can impact the level of consumer confidence and discretionary retail spending. These conditions may affect
revenue from sales to customers and franchise fees. The consolidated entity seeks to reduce its exposure to these risks through
appropriate business diversification, and also 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.
With a property portfolio of over $3.7 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.
Trading conditions due to COVID-19:
The risk of government-mandated retail closures, while diminishing may still occur, changing consumer behaviour and the ability of the
supply-chains to meet demand. This may continue to impact the sales revenue generated by franchisees in Australia and company-
operated stores – thereby impacting the profitability and cash flow of the consolidated entity. This risk is mitigated by the consolidated
entity’s robust balance sheet, stringent measures to preserve cash and enhance liquidity, coupled with the continuous monitoring of any
changes in COVID-19 regulation and policy as announced. The consolidated entity has a strong asset base totalling $7.25 billion and net
assets of $4.29 billion as at 30 June 2022.
From the commencement of the pandemic, the consolidated entity has demonstrated its ability to swiftly respond to COVID-19
challenges, while prioritising the safety of their staff, their customers and their local communities. The consolidated entity remains
confident in its ability to appropriately respond to COVID-19 challenges in the future, as they arise.
Cyber security risk:
Cyber security attacks can take many forms including:
i)
ii)
Attacks on technology infrastructure which generates revenue and threaten to perpetually block access to data unless a ransom is
paid (Ransomware); and
Attacks to gain unauthorised access to data or records that can be used alone or with other information to identify, contact or
locate a single person, including a customer or employee (Personal Identifiable Information or PII).
The Company has implemented and continues to improve and enhance, a cyber security risk management framework and security
controls to protect against any cyber security risks, including Ransomware and PII attacks. The Company has implemented business
continuity plans and disaster recovery plans to respond to cyber security incidents, and mitigate financial and reputational damage from
any such incidents.
Compliance by franchisees with franchise agreements:
This 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 and other sanctions from regulators, and 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®,
Domayne® and Joyce Mayne® brands and intellectual property of the franchisor.
ANNUAL REPORT JUNE 2022
27
OPERATING AND FINANCIAL REVIEW (CONTINUED)
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Summary of Key Business Risks (continued)
Increased competition resulting in a decline of retail margin or 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 retail margins and
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 of category and the ability to identify growth opportunities locally and
overseas, mitigates the risk from existing and potential 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.
The Harvey Norman® Omni Channel Strategy sets the Harvey Norman® brand apart from other online and digital competitors. Harvey
Norman® customers have 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.
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.
28
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT
A core philosophy we have maintained throughout the years is the significance and focus on the longevity of the
Board of Directors with ‘skin in the game’ with a vast, complementary array of skills, experience and talent coupled
with the exceptional skills and experience of our seasoned business leaders and their deep understanding and
expert-execution of the complex franchised operating model in Australia and the company-operated stores across
seven overseas countries.
The ongoing COVID-19 pandemic throughout FY22 has enabled the consolidated entity to refine and upgrade its
COVID-Safe framework and COVID-Safe Plans and Practices to respond to emerging new variants and changes in
consumer sentiment and shopping trends. The successful strategies that we enhanced and delivered this year
could have only been achieved with formidable leadership with the intimate knowledge of the intricacies of our
business - leaders that can be trusted to protect our brands and navigate us through these challenges as they arise.
Our Board
Unless otherwise indicated, all directors (collectively termed ‘the Board’), held their position as director
throughout the entire 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. Ms. Page became the Chief Executive Officer
of the Company in February 1999 and has overall executive responsibility for the
consolidated entity.
Directors
On 21 October 2020, Ms. Page was appointed as a Member of the Tourism
Australia Board of Directors.
Chris Mentis
B.Bus., FCA, FGIA, Grad Dip
App Fin
Executive Director, CFO &
Company Secretary
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 the Chief Financial Officer and
Company Secretary.
Mr. Mentis is a Fellow of the Chartered Accountants Australia & New Zealand
(CA ANZ) 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.
John Evyn Slack-Smith
Executive Director and COO
Mr. Slack-Smith was a Harvey Norman® computer franchisee between 1993 and
1999. Mr. Slack-Smith was appointed a director of the Company on 5 February
2001. Mr. Slack-Smith has overall executive responsibility for the operations of
the consolidated entity.
Mr. Slack-Smith is the Chair of the Barker College Foundation Limited and a
Member of Council at Barker College.
David Matthew Ackery
Executive Director
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.
ANNUAL REPORT JUNE 2022
29
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT (CONTINUED)
Michael John Harvey
B.Com.
Non-Executive Director
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.
Christopher Herbert Brown
OAM, LL.M., FAICD, CTA
Non-Executive Director
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 & Risk, Remuneration and Nomination Committees.
Kenneth William
Gunderson-Briggs
B.Bus., FCA, MAICD
Non-Executive Director
(Independent)
Directors
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 CA ANZ. Mr. Gunderson-Briggs was appointed Chairman of
the Remuneration Committee on 16 December 2015 and was appointed Chairman of
the Audit & Risk Committee and Nomination Committee on 25 November 2020.
Mr. Gunderson-Briggs was an independent Non-Executive Director of Australian
Pharmaceutical Industries Limited (API), a company listed on the ASX, from May 2014.
On 4 December 2020, he was appointed Chair of the API Board, having previously
been the Chair of the Audit & Risk Committee of API. As Chair, Mr. Gunderson-Briggs
guided API through the control transaction with Wesfarmers Limited (WES) culminating
in the takeover of API by WES with effect from 31 March 2022.
Maurice John Craven
B.Sc., FAICD
Non-Executive Director
(Independent)
Mr. Craven was appointed a director of Harvey Norman Holdings Limited on 27 March
2019 and became a member of the Nomination Committee of the Company on 24
June 2021. Mr. Craven holds a Bachelor of Science degree from the University of
Melbourne and is a Fellow of the Australian Institute of Company Directors.
Mr. Craven has been actively involved with innovation and growth in technology
empowered industries for the past 24 years and prior to that was a partner for 25 years
with Andersen Consulting. Mr. Craven is Chair of Specialisterne Australia and a Non-
Executive Director of Cenitex.
Luisa Catanzaro
B.Com., FCA, GAICD
Non-Executive Director
(Independent)
Ms. Catanzaro was appointed a Non-Executive Director of Harvey Norman Holdings
Limited on 25 November 2020, and became a member of the Audit & Risk Committee
on 25 November 2020 and a member of the Remuneration Committee of the Company
on 24 June 2021.
Ms. Catanzaro has a Bachelor of Commerce from the University of NSW, is a Fellow of
the CA ANZ and is also a Graduate of the Australian Institute of Company Directors.
Ms. Catanzaro has more than 30 years of professional experience in senior finance
executive roles across a range of industries including FMCG and agriculture sectors,
and with ASX listed companies. Ms. Catanzaro is currently a Non-Executive Director of
ASX listed company, Ricegrowers Limited, from September 2018, where Ms. Catanzaro
is Chair of the Finance, Risk and Audit Committee and a member of the Remuneration,
Nomination and Independent Committees.
30
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT (CONTINUED)
Directors’ Meetings
DIRECTOR
Number of Meetings:
Attendance
Full Board
8
Audit & Risk
15
Remuneration
7
Nomination
3
G. Harvey
K.L. Page
J.E. Slack-Smith
D.M. Ackery
C. Mentis
M.J. Harvey
C.H. Brown
K.W. Gunderson-Briggs
M.J. Craven
L. Catanzaro
100%
100%
100%
100%
100%
100%
94%
100%
100%
97%
8 [8]
8 [8]
8 [8]
8 [8]
8 [8]
8 [8]
7 [8]
8 [8]
8 [8]
8 [8]
n/a
n/a
n/a
n/a
n/a
n/a
14 [15]
15 [15]
n/a
14 [15]
n/a
n/a
n/a
n/a
n/a
n/a
7 [7]
7 [7]
n/a
7 [7]
n/a
n/a
n/a
n/a
n/a
n/a
3 [3]
3 [3]
3 [3]
n/a
The above table represents the directors’ attendance at meetings of the Board, Audit & Risk 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.
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
M.J. Craven
L. Catanzaro
TOTAL
Ordinary Shares Performance Rights
393,787,754
20,039,315
1,252,893
792,471
1,244,297
-
205,525,565
10,059
40,473
-
276,000
772,000
339,000
339,000
287,000
-
-
-
-
-
622,692,827
2,013,000
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.
Performance Rights
At the date of this report, there were 2,013,000 performance rights (2021: 1,648,500), being a right to
acquire ordinary shares in the Company at nil exercise price.
• On 4 December 2018, a total of 549,500 performance rights under Tranche FY19 of the 2016 LTI Plan
were granted to the Executive Directors in accordance with the terms and conditions of the LTI Plan.
On 7 January 2022, 440,500 performance rights under Tranche FY19 of the 2016 LTI Plan were
purchased on market, reducing the vested but unexercised performance rights under Tranche FY19 of
the 2016 LTI Plan to 109,000. On 22 July 2022, 109,000 performance rights under Tranche FY19 were
purchased on market, reducing the number of performance rights in this Tranche to nil.
• On 2 December 2019, a total of 549,500 performance rights under Tranche FY20 of the 2016 LTI Plan
were granted to the Executive Directors in accordance with the terms and conditions of the LTI Plan.
• On 4 December 2020, a total of 549,500 performance rights under Tranche FY21 of the 2016 LTI Plan
were granted to the Executive Directors in accordance with the terms and conditions of the LTI Plan.
• On 30 November 2021, a total of 914,000 performance rights under Tranche FY22 of the 2016 LTI Plan
were granted to the Executive Directors in accordance with the terms and conditions of the LTI Plan.
ANNUAL REPORT JUNE 2022
31
CEO and CFO
Certification
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT (CONTINUED)
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 2022, that:
•
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
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 questionnaires 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.
Committee
Membership
As at the date of this report, the Company had an Audit & Risk Committee, a Remuneration Committee and a
Nomination Committee. Members acting on the committees of the board during the year were:
NON-EXECUTIVE DIRECTOR
Audit & Risk
Remuneration
Nomination
C.H. Brown
√
√
√
K.W. Gunderson-Briggs
√ (Chairman)
√ (Chairman)
√ (Chairman)
L. Catanzaro
M.J. Craven
√
n/a
√
n/a
n/a
√
Corporate
Governance
The board of directors (Board) of Harvey Norman Holdings Limited (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 CGC published guidelines and the CGC corporate
governance principles and recommendations (February 2019 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.
The Corporate Governance Statement summarises the corporate governance practices of the Company,
including the practices that are in alignment with the Principles for the year ended 30 June 2022. The
Corporate Governance Statement has been approved by the Board. The full Corporate Governance
Statement and 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.
Dividends
The directors recommend a fully franked final dividend of 17.5 cents per share to be paid on 14 November
2022 to shareholders registered on 17 October 2022 (total dividend, fully franked, $218,051,164 ).
The following fully franked dividends of the Company have also been paid, declared or recommended since
the end of the preceding financial year:
2021 final fully-franked dividend
15 November 2021
2022 interim fully-franked dividend
2 May 2022
Payment Date
Amount
$186,900,998
$249,201,331
The total dividend in respect of the year ended 30 June 2022 of 37.5 cents per share (2021: 35.0 cents per
share) represents 57.58% (2021: 51.83%) of profit after tax and non-controlling interests, as set out on page
83 of the financial statements.
Excluding the non-cash net property revaluation increments, the total dividend in respect of the year ended
30 June 2022 of 37.5 cents per share represents 70.59% (2021: 58.69%) of profit after tax and non-controlling
interests, as set out on page 83 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.
32
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT (CONTINUED)
Indemnification of
Officers
During the financial year, 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 Compa-
ny 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.
No indemnity payments have been made under the Indemnity Agreement referred to above during, or
since, the end of the financial year.
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 2022.
Significant Events
After Balance Date
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.
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 and the amended Instrument 2022/519. The Company is an
entity to which this legislative instrument applies.
Capital
Management Policy
The consolidated entity’s capital management policy objectives are to: create long-term sustainable value for
shareholders; maintain optimal returns to shareholders and benefits to other stakeholders; source the lowest
cost 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%. In this report, the calculation of the net debt to equity ratio excludes the right-of-use assets and lease
liabilities recognised under AASB 16 in order to be comparable with ratios calculated in previous years.
As at 30 June 2022, the consolidated entity had unused, available financing facilities of $189.64 million out of
total approved financing facilities of $884.81 million. This has resulted in a net debt to equity ratio of 10.31%
as at 30 June 2022, compared to a net debt to equity ratio of 7.47% as at 30 June 2021.
The capital structure of the consolidated entity consists of: debt, which includes interest-bearing loans and
borrowings as disclosed in Note 17. Interest-Bearing Loans and Borrowings of this report; cash and cash
equivalents; and, equity attributable to equity holders of the parent, comprising ordinary shares, retained
profits and reserves as disclosed in Notes 22, 23 and 25 respectively.
The consolidated entity’s borrowings consist primarily of bank debt provided by a syndicate of ten banks
(including 3 of the “Big 4” Australian Banks). Concentration risk is minimised by staggering facility renewals
and utilising a range of maturities of up to 5 years.
ANNUAL REPORT JUNE 2022
33
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT
Letter from the Chair of the Remuneration Committee
Dear Shareholders
Remuneration Highlights at a Glance
► Results very strong and maintained after the FY21 record year
CHAIRMAN AND CEO’s REPORT
► High correlation (upward from 85%) of Director KMP remuneration outcomes with Company performance
► Risk managed in line with the risk management framework and risk appetite of the Company
► No windfall gains effect due to COVID
► Independent expert continues to find that the combination of remuneration level, mix and structure are reasonable
► Changes implemented as flagged in FY21 for the STI Plan with higher non-financial weighting
► STI Financial targets set with reference to analyst consensus forecasts
Outcomes
► Executive Directors achieved 87.5% of their 2022 STI targets compared to 94.05% for FY21 (down –6.8%)
► RONA of 24.24% for the year resulted in Tranche FY20 of the 2016 LTI Plan to vest at 100%
► The total compensation across all Executive Directors was lower by $38,125, or -0.3%, than the previous year
► The actual ‘take-home’ pay across all Executive Directors was higher by $671,019, or 6.4%, than FY21 due to timing of
remuneration receipts between the financial years
► The total ‘at risk’ compensation expense for Executive Directors was lower by $37,984, or –0.7%, than the ‘at risk’
expense in FY21
► Each of the Executive Directors have a significant shareholding in the Company, more than exceeding their respective
total fixed remuneration, providing alignment between Executive Directors with shareholders
The Board continues to be confident that the remuneration policies support the financial and strategic goals of the consolidated entity.
The directors and other members of the key management personnel (KMP) team continue to be committed to protecting and growing
a sustainable business and creating long-term sustainable value for all stakeholders of the consolidated entity.
The Design of Executive Director Remuneration for a Year of Continued Uncertainty
At the beginning of the 2022 year, there was continued uncertainty as to the expectation of outcomes.
The Remuneration Committee (Committee) continue to apply the following settings to the remuneration framework for the Executive
Directors:
•
•
•
•
•
► CONCLUSION: High correlation of remuneration outcomes with Company performance.
Assessment of Conduct
Each participating Executive Director is subject to the performance condition that the Executive Directors of the Company managed
risk in accordance with the risk management framework and risk appetite of the Company. The Company recognises the critical
connection between conduct and reward. The assessment of conduct is informed by the fundamental principles of:
• obeying the law
34
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (CONTINUED)
Letter from the Chair of the Remuneration Committee (continued)
Assessment of Conduct (continued)
•
•
• provide goods and services that are fit for purpose
• delivery of goods and services with reasonable care and skill
acting fairly
not to mislead or deceive
► CONCLUSION: Risk was managed in accordance with the risk management framework and risk appetite of the Company
Evaluation of Performance of Executive Directors to Consider Any Windfall Gain Effect
CHAIRMAN AND CEO’s REPORT
An appraisal of the performance of each Executive Director and the Executive Director team was undertaken following the end of the 2022
year as part of the annual Participant Performance Review by the Remuneration Committee.
In this year, the appraisal focused on ensuring that executive remuneration for 2022 was fair and reasonable, was in line with performance,
and did not result in unintended windfall gains in remuneration returns for the Executive Directors.
The evaluation of the performance of Executive Directors linked with the design of the remuneration framework has led the Committee to
the conclusion that the Executive Directors did not receive any windfall gains in their respective remuneration returns.
The Committee views the outcome of the 2022 STI Plan and the LTI Plan as appropriate recognition of the performance of the Executive
Directors in dealing with the multi-faceted challenges imposed during the year, demonstrating resilience in management of the integrated
retail, franchise, property and digital business through much uncertainty.
In line with a similar resolution made last year, the Committee resolved to exclude from remuneration outcomes the effect of COVID-19
support and assistance received by the consolidated entity in each of the countries in which it operates.
► CONCLUSION: No windfall gains effect due to COVID
Benchmarking for Reasonableness
The Company commissioned an independent remuneration expert to review the level and reasonableness of remuneration of the
Executive Directors of the Company during 2022. This included analyses and comparison of alternate peer groups, such as those used by
the Company and proxy advisors in their prior assessments of executive remuneration, the remuneration structure and components
including the level of ‘at risk’ remuneration, performance sustainability and Executive Director experience and tenure.
•
•
•
•
•
•
•
•
The level of fixed remuneration was reasonable. There were no increases in FY22 and there have been no increases since FY14.
The level of target and maximum remuneration from the short-term incentive (STI) was reasonable.
The level of target and maximum remuneration from the long-term incentive (LTI) was reasonable.
► CONCLUSION: The level, mix and structure is reasonable
Improving the Framework for Remuneration in 2022
► ACTION: Changes implemented as flagged in FY21
The remuneration framework for Executive Directors, as informed by the independent remuneration expert report, was improved to
change the
ANNUAL REPORT JUNE 2022
35
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (CONTINUED)
Letter from the Chair of the Remuneration Committee (continued)
Financial Settings for the 2022 STI Plan
► ACTION: Financial targets set based on analyst consensus forecasts
CHAIRMAN AND CEO’s REPORT
Remuneration Outcomes
The financial achievements of the Company for 2022 financial year were reflected in the remuneration outcomes.
On behalf of the Board, I invite you to review the full report and thank you for your continued interest.
Yours sincerely
KEN GUNDERSON-BRIGGS
Remuneration Committee Chairman
36
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED)
Contents of the 2022 Remuneration Report
This remuneration report for the year ended 30 June 2022 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.
Introduction
CHAIRMAN AND CEO’s REPORT
The remuneration report is presented under the following sections:
1)
2) Remuneration principles and strategy
3) Remuneration governance
4) Remuneration mix - target
5) Details of the short-term incentive plan
6) Details of the long-term incentive plans
7) Performance and executive remuneration outcomes in FY22
8) Executive contractual arrangements
9) Non-Executive Director remuneration arrangements
10) Relationship between remuneration and the performance of the Company
11) Compensation of key management personnel
12) Additional disclosures relating to options, performance rights and shares
13) ‘Take-Home Pay’ for KMP Directors of the Company
14) Other matters for disclosure
15) Loans to key management personnel and their related parties
16) Other transactions and balances with key management personnel and their related parties
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 2022 financial year are set out below. 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 (KMP)
Position
Term as KMP
Executive Directors
Gerald Harvey
Kay Lesley Page
Executive Chairman
Executive Director & Chief Executive Officer
John Evyn Slack-Smith
Executive Director & Chief Operating Officer
David Matthew Ackery
Executive Director
Chris Mentis
Executive Director, Chief Financial Officer & Company Secretary
Non-Executive Directors
Christopher Herbert Brown OAM
Non-Executive Director
Michael John Harvey
Non-Executive Director
Kenneth William Gunderson-Briggs
Non-Executive Director (independent)
Maurice John Craven
Non-Executive Director (independent)
Luisa Catanzaro
Senior Executives
Non-Executive Director (independent)
Thomas James Scott
General Manager—Property
Gordon Ian Dingwall
Chief Information Officer
Lachlan Roach
General Manager—Home Appliances
Emmanuel Hohlastos
Glen Gregory
Richard Beaini
Carene Myers
General Manager—Audio Visual
General Manager—Home Appliances
General Manager—Technology & Entertainment
General Manager—Audio Visual
General Manager—Small Appliances
Full financial year
Full financial year
Full financial year
Full financial year
Full financial year
Full financial year
Full financial year
Full financial year
Full financial year
Full financial year
Full financial year
Full financial year
Resigned 19 November 2021
Resigned 30 November 2021
Appointed 1 December 2021
Full financial year
Appointed 8 April 2022
KMP from 1 July 2021
ANNUAL REPORT JUNE 2022
37
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
2. Remuneration Principles and Strategy
The executive remuneration strategy of the consolidated entity in 2022 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)
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.
Business savvy requires a deep understanding of one or more of the sectors of retail, property, franchising and digital.
An owner orientation or perspective of an owner requires the individual to either have:
i.
CHAIRMAN AND CEO’s REPORT
b)
c)
"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.
ii.
d)
e)
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.
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 2022 aligns with the strategic direction and links
remuneration outcomes to performance.
Objective of the consolidated entity in 2022
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 2022
Align the interests of
executives with
shareholders
The remuneration framework
incorporates “at risk” components,
through STI and LTI plans
Short-term performance is assessed against a
suite of financial and non-financial measures
relevant to the success of the consolidated entity
in 2022 and generating returns for shareholders
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
The remuneration offering is competitive for
companies of a similar sector, size and
complexity
Component
Vehicle
Purpose
Link to Performance
Fixed remuneration
Short-term incentive (STI)
Comprises base sala-
ry, superannuation
contributions and
other benefits
Paid as cash as a
performance cash
incentive (PCI),
subject to minimum
shareholding of
individual Executive
Directors
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
Rewards executives for their
contribution to achievement of
consolidated entity
outcomes
a.
There is no STI award for an Executive
Director unless the Executive Director
satisfies the Participant
Performance Review in terms of the
Individual Executive Director Assessment
Report.
b.
There is no STI award unless the Entry
Level financial condition is achieved.
38
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
2. Remuneration Principles and Strategy (continued)
Component
Vehicle
Purpose
Link to Performance
CHAIRMAN AND CEO’s REPORT
Short-term incentive (STI)
(continued)
c.
The STI pool in respect of 100% achievement level is
subject to performance criteria as to:
70% subject to financial conditions;
i.
ii. 30% subject to business critical non-financial
conditions; and
iii. Malus reductions of up to 30% of the pool for non-
achievement of further non-financial performance
conditions.
d.
e.
f.
Financial achievement calculated over the 100%
achievement level is subject to financial conditions only.
Executive Directors are to hold shares to the value
equating to the level of fixed remuneration for that
Executive Director at the end of the given financial year.
If shares held are less than the benchmark, benefits are
to be provided in the form of shares.
Where Annual Profit After
Tax is calculated as follows:
Annual Net Profit After Tax (APAT), excluding the after-tax effect of property revaluation increments
or decrements, the after-tax effect of the net impact of AASB 16 Leases and the after-tax effect of
COVID-19 support and assistance received
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
Vesting of LTI performance rights is conditional upon
achievement, in aggregate, of minimum RONA over the 2022,
2023 and 2024 financial years of 16% (for 50% vesting) with full
vesting (i.e. 100%) achieved at 21% RONA.
If an amount of 16% RONA is achieved, 50% of the Performance
Rights will vest, with a proportionate or partial vesting of the
remaining 50% of the Performance Rights upon the achieve-
ment of RONA in the range of 16% to 21%.
Where Return on Net
Assets (RONA) means the
fraction:
APBT (annual net profit before income tax excluding property revaluation increments or decrements, the net
impact of AASB 16 Leases and any COVID-19 support and assistance received)
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 2022, independent remuneration experts provided
remuneration benchmark information for consideration and analysis in respect of the level of Executive Director remuneration, including fixed
remuneration, the short-term incentives framework and the long-term incentives framework, and the reasonableness of the
framework.
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.
Remuneration Approval Process
The Board approves the remuneration arrangements of the 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 of the NED remuneration cap.
The Remuneration Committee approves, having regard to the recommendations made by the CEO, the level of the STI pool for Executive
Directors.
ANNUAL REPORT JUNE 2022
39
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
3. Remuneration Governance (continued)
Remuneration Approval Process (continued)
No Director participates 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 short-term incentive plan or long-term incentive plan
of the Company, and no Executive Director voted on those matters.
The Design of Executive Director Remuneration for a Year of Continued Uncertainty
CHAIRMAN AND CEO’s REPORT
At the beginning of FY22, there continued to be uncertainty as to the expectation of outcomes. The Remuneration Committee continued
to apply the following settings to the remuneration framework for the Executive Directors:
• Consensus forecasts of market analysts were used to establish the entry point, the full achievement and the over-achievement levels
for the Short-Term Incentive (STI) Plan.
The maximum outcomes for the STI Plan were capped and did not provide awards on a proportionate basis to the near record results.
The performance conditions for the STI Plan were not exclusively based on financial outcomes, with both non-financial performance
conditions and malus penalty reductions included in the assessment of achievement.
The outcomes for the Long-Term Incentive (LTI) Plan were subject to achievement over a 3-year period, and not specifically weighted
in respect of any year.
The maximum outcomes for the LTI Plan were capped and did not provide awards on a proportionate basis to the near record results.
•
•
•
•
Evaluation of Performance of Executive Directors to consider any Windfall Gain Effect
An appraisal of the performance of each Executive Director and the Executive Director team was undertaken following the end of the 2022
year as part of the annual Participant Performance Review by the Remuneration Committee. This year, consistent with last year, the
appraisal focused on ensuring that executive remuneration in respect of the FY22 financial result was fair and reasonable, was in line with
performance, and did not result in unintended windfall gains in remuneration returns for the Executive Directors.
The appraisal considered matters in respect of performance during the COVID-19 period, including:
•
•
•
The evaluation of the performance of Executive Directors linked with the design of the remuneration framework has led the Remuneration
Committee to the conclusion that the Executive Directors did not receive unintended windfall gains in their respective remuneration
returns.
The Remuneration Committee views the outcome of the 2022 STI Plan and the LTI Plan as appropriate recognition of the performance of
the Executive Directors in dealing with the multi-faceted challenges imposed during the year, demonstrating resilience in management of
the integrated retail, franchise, property and digital business through much uncertainty.
In line with a similar resolution made last year, the Remuneration Committee resolved that in making its decisions and recommendations
in respect of remuneration outcomes for the Executive Directors for 2022, it would exclude the effect of COVID-19 support and assistance
received by the consolidated entity in each of the countries in which it operates, from remuneration outcomes.
No Unfair Benefit
Both the annual STI Plan and the ongoing 2016 LTI Plan have provisions to prevent an ‘unfair benefit’ being obtained by any participant in
respect of fraud or breach of obligation.
40
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
4. Remuneration Mix—Target
For the 2022 financial year, the executive remuneration framework comprised fixed remuneration, STI and LTI.
The consolidated entity aims to reward executives with a level and mix of remuneration appropriate to their position and responsibilities,
while being market competitive.
During FY22, a review by an independent remuneration expert was undertaken in respect of the remuneration
benchmarking used by the Company, with reference to both sector peers and comparator groups comprising companies of
comparable financial size and operations. Informed by this independent review, the policy of the Company continued to position fixed
remuneration against the level that reflects the financial accountability and operational scope of the position relative to peer group posi-
tions.
CHAIRMAN AND CEO’s REPORT
The determination of fixed remuneration of Executive Directors was subject to the following principles:
a)
The performance of the Company, the longevity of the Executive Directors in their respective roles and the assessment of
opportunity costs in respect of replacement;
Be in line with the remuneration policies of the Company for Executive Directors so as to position fixed remuneration reflective size
relative to peers (i.e.
Target total remuneration to provide the opportunity for Executive Directors to earn top quartile rewards for outstanding
performance.
of the peer group size); and
b)
c)
Remuneration levels are considered annually, with consideration of market data and the performance of the consolidated entity and
individual. The remuneration mix is considered against the maximum total remuneration for each Executive Director compared to the size
percentile relative to the benchmark (currently the
) advised by the independent remuneration expert.
The following chart summarises the target remuneration mix of the Executive Directors.
Relationship to Benchmark
Peer Group:
Within Target Range
Within Target Range
Within Maximum Range
The remuneration expert was commissioned to review the level and reasonableness of the remuneration set for Executive Directors.
The independent remuneration expert found the level of the remuneration and the remuneration mix to be reasonable.
5. Details of the Short-Term Incentive (STI) Plan
The extent to which the financial conditions and non-financial conditions have been satisfied are 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 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.
2022 STI Plan
The consolidated entity operates an annual STI program available to Executive Directors and awards a performance cash incentive (PCI), or
equity, subject to the achievement of clearly defined measures, targets, initiatives and conditions.
Who participates?
Executive Directors
STI awards, in the form of a cash bonus as a performance cash incentive (PCI) or equity, have been made 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.
How is the STI
delivered?
Executive directors are to hold shares in the Company to the value of fixed remuneration for that Executive Director at the
end of the given financial year (the Benchmark Shareholding Level), with any STI paid in equity or cash subject to the
following:
a.
b.
If the Executive Director is under the Benchmark Shareholding Level, the STI reward will be paid in equity, subject to
shareholder approval and compliance with the ASX Listing Rules, to the value that increases the holding of the
Executive Director to the Benchmark Shareholding Level, with any remaining balance of the STI reward paid in cash.
If the Executive Director is over the Benchmark Shareholding Level, the STI reward will be paid in cash.
ANNUAL REPORT JUNE 2022
41
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
5. Details of the Short-Term Incentive (STI) Plan (continued)
2022 STI Plan (continued)
When is the STI
paid?
The payment of the 2022 STI Plan PCI to an Executive Director under the 2022 STI Plan is to be made on 30 September
2022, or as soon as reasonably practicable after that date, subject to the satisfaction of 2022 STI Plan Performance
Conditions and 2022 STI Plan Service Conditions.
Executive Directors, excluding the Executive Chairman, have a target STI opportunity of between 44% to 72% 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 2022, the 100% STI Pool for the 2022 STI Plan PCI was $3,250,000 allocated as follows:
CHAIRMAN AND CEO’s REPORT
What is the 2022
STI opportunity?
Kay Lesley Page $942,500;
John Evyn Slack-Smith $812,500;
1.
2.
3.
4.
David Matthew Ackery $812,500; and
Chris Mentis $682,500.
The maximum over-achievement pool for allocation was $750,000, with the maximum STI pool being $4,000,000.
The over-achievement pool was allocated in proportion to the 100% STI Pool.
Actual STI payments awarded to each Executive Director depend on the extent to which specific measures, targets,
initiatives and conditions for the 2022 financial year (STI Targets) were met. STI Targets cover financial and non-financial
measures of performance. There is no STI award for an Executive Director unless the Executive Director satisfies the
Participant Performance Review in terms of the Individual Executive Director Assessment Report. There is no STI award
unless the Entry Level financial condition is achieved.
The primary weighting of the 2022 STI Plan Performance Conditions are as follows:
a.
b.
c.
d.
Financial Condition as to 70% entitlement to the 100% STI Pool;
Non-Financial Conditions as to 30% entitlement to the 100% STI Pool;
Malus reductions of up to 30% for non-achievement of certain other non-financial performance conditions; and
Financial Condition as to the Over-Achievement Pool.
What are the STI
performance
conditions for
FY22?
(a) STI 70% Financial Condition
(b) STI 30% Non-Financial Conditions
APAT was selected as the STI performance measure as it indicates the level
of after-tax profit generated adjusted for the after-tax effects of net
property revaluation adjustments, the net impact of AASB 16 Leases and
any COVID-19 support and assistance received, and provides a basis for
comparing growth in profitability year-on-year.
The Financial Condition is calculated in respect of the year ended 30 June
2022 and will be achieved at the following levels:
•
Entry Level at APAT of $429 million, equating to 50%
entitlement of the STI subject to the financial condition
(i.e., 35% entitlement to the 100% STI pool = $1.138 million);
•
•
•
•
100% Level at APAT of $536 million, equating to 100%
entitlement of the STI subject to the financial condition
(i.e., 70% entitlement to the 100% STI pool = $2.275 million);
Straight-line sliding scale between Entry Level and 100% Level;
Over-Achievement Level at APAT of $595 million, equating to
100% entitlement of the 100% STI Pool subject to the financial
condition (i.e., 70% entitlement to the 100% STI pool = $2.275
million) and 100% entitlement to the Over-Achievement Pool
Amount of $0.75 million, resulting in a total Over-Achievement
entitlement of $3.025 million;
Straight-line sliding scale for achievement between 100% and the
Over-Achievement Level.
The Non-Financial Conditions were assessed in respect of the following:
•
Productivity improvements equating to 33.33% entitlement of
the STI subject to the non-financial conditions
(i.e., 10% entitlement to the STI pool = $0.325 million); and
•
Digital innovations equating to 66.67% entitlement of the STI
subject to the non-financial conditions
(i.e., 20% entitlement to the STI pool = $0.650 million).
Full achievement of the non-financial conditions will equate to 30%
entitlement to the STI pool i.e., a total of $0.975 million.
(c) Malus adjustments of up to 30% for non-achievement
The malus (financial penalty) provisions could reduce the overall
achievement of the STI award by 30%. The malus provisions were made
up of the following items:
•
•
•
Compliance risk management framework = 12% of the 30%
Sustainability = 10% of the 30%
Franchised complex and company-operated store expansion
strategy = 4% of the 30%
Cyber security governance = 2% of the 30%
Customer experience = 2% of the 30%
•
•
The malus provisions could potentially reduce the overall achievement
of the STI award by up to 30% of the 100% STI Pool i.e., a reduction of up
to $0.975 million.
42
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
5. Details of the Short-Term Incentive (STI) Plan (continued)
2022 STI Plan (continued)
In respect of the 2022 STI, each participating Executive Director will be subject to an additional non-financial performance
condition in the form of a Participant Performance Review which is to:
•
Measure the extent of the proper performance and discharge of the executive responsibilities and accountabilities
of that Individual Participant Executive Director; and
Measure the extent of the proper performance and discharge of the duties of that Individual Participant Executive
Director, as an officer and director of the Company.
•
CHAIRMAN AND CEO’s REPORT
To determine whether an individual is eligible for the 2022 STI, in terms of performance, the following process is
undertaken:
•
A report by the CEO in respect to which each Individual Participant Executive Director has satisfied the Participant
Performance Review in the form of an Individual Executive Director Assessment Report. In respect of the
assessment of the CEO, the Chairman of the Remuneration Committee shall undertake the report and assessment
in respect of the CEO.
An objective appraisal by the Internal Auditor of the process and conclusions reached in the Individual Executive
Director Assessment Reports, to be provided to the Remuneration Committee promptly after 30 June 2022.
How is performance
assessed?
•
Subject to a satisfactory Participant Performance Review, and 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 conditions and non-financial conditions have been 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 2022 STI Plan.
The Remuneration Committee (acting on behalf of the Company) may at any time, in its absolute discretion, decrease the
amount of the STI which is, or may become, payable to an executive under the 2022 STI Plan by serving a written notice to
the relevant executive at any time before the payment date.
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.
6. Details of the Long-Term Incentive (LTI) Plan
There were four (4) active tranches of the 2016 LTI Plan operating in respect of the 2022 financial year. The FY19 Tranche was issued in
FY19 and is measured over 2019, 2020, and 2021. The FY20 Tranche was issued in FY20 and is measured over 2020, 2021 and 2022.
The FY21 Tranche was issued in FY21 and is measured over 2021, 2022 and 2023.
The FY22 Tranche was issued in FY22 as follows:
Tranche FY22 of the 2016 LTI Plan
Tranche FY22 of the
2016 LTI Plan
Who participates?
LTI grants are made annually to Executive Directors in order to align remuneration with the creation of sustainable
shareholder value over the long-term.
Executive Directors which have an impact on the performance of the consolidated entity against the relevant long-term
performance measures.
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 in three separate tranches in the 2016, 2017 and 2018
financial years.
Shareholders at the AGM held on 27 November 2018 permitted the grant of a further three separate tranches of
performance rights to Executive Directors in the 2019, 2020 and 2021 financial years. Shareholders at the AGM held on
24 November 2021 permitted the grant of a further tranche of performance rights to Executive Directors in the 2022
financial year, subject to the terms and conditions of the 2016 LTI Plan.
How is the LTI
delivered?
Executive
G. Harvey
K.L Page
J.E. Slack-Smith
D.M. Ackery
C. Mentis
Total
Tranche FY22
Exercisable between
1 January 2025 and
31 October 2026
145,000
406,000
121,000
121,000
121,000
914,000
ANNUAL REPORT JUNE 2022
43
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
6. Details of the Long-Term Incentive (LTI) Plan (continued)
Tranche FY22 of the 2016 LTI Plan (continued)
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 39% and 80% of fixed remuneration.
What is the LTI
opportunity issued
in FY22?
CHAIRMAN AND CEO’s REPORT
A total of 914,000 performance rights under Tranche FY22 of the 2016 LTI Plan were granted to Executive Directors on 30
November 2021.
The performance rights were independently valued by Mercer Consulting (Australia) Pty Limited at grant date, with a fair
value of $4.12 per entitlement share based on a share price of $5.07.
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 and service
conditions of the 2016 LTI Plan, the total fair value of Tranche FY22 performance rights amounted to $3,765,680 in
aggregate.
Tranche FY22
Grant date
Vesting date
First exercise date
Last exercise date
Key Dates
30 November 2021
31 December 2024
1 January 2025
31 October 2026
What are the
performance
conditions for
Tranche FY22 of the
2016 LTI Plan
Performance conditions are deemed to be an essential component of all variable reward entitlements. 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
The financial condition in respect of the achievement of Tranche FY22 of the 2016 LTI Plan is based on RONA, where
Tranche FY22 RONA means the fraction:
Tranche FY22 Aggregate APBT ÷ Tranche FY22 Aggregate Net Assets, expressed as a percentage.
Where:
Tranche FY22 Financial Years means the financial years ending 30 June 2022, 2023 and 2024;
Tranche FY22 Aggregate APBT means the aggregate amounts of the annual net profit before income tax of the
consolidated entity for each of the Tranche FY22 Financial Years, but excluding amounts accounted for in the financial
statements of the consolidated entity for increments or decrements arising from the revaluation of land or buildings, the
net impact of AASB 16 Leases and any COVID-19 support and assistance received in the Tranche FY22 Financial Years;
Tranche FY22 Aggregate Net Assets means the aggregate amounts of the net assets of the consolidated entity, excluding
non-controlling interests, as at each of 30 June 2021, 2022 and 2023 as described in the annual report of the
consolidated entity in respect of each of the Tranche FY22 Financial Years.
Full vesting of the Tranche FY22 performance rights is conditional upon achievement of Tranche FY22 RONA of 21%,
with a lesser vesting as set out in the table below:
Tranche FY22 RONA Achieved
Tranche FY22 % of Performance Rights that
will become exercisable
Less than 16%
16%
21%
NIL
50%
100%
The level of LTI achievement for the determination of vesting will be based on a straight-line basis between 16% RONA as
to 50% achievement and 21% RONA as to 100% achievement.
44
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
6. Details of the Long-Term Incentive (LTI) Plan (continued)
Tranche FY22 of the 2016 LTI Plan (continued)
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 FY22 of the 2016 LTI
Plan measured over the period for financial years ending 30 June 2022, 30 June 2023 and 30 June 2024.
When does the LTI
vest?
CHAIRMAN AND CEO’s REPORT
Performance rights granted under Tranche FY22 of the 2016 LTI Plan will vest on 31 December 2024, subject to meeting
the financial performance conditions and service conditions, and will be capable of exercise between 1 January 2025 and
31 October 2026.
Subject to the rules of the 2016 LTI Plan at a relevant time, 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).
How are potential
LTI awards treated
on termination?
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.
How are potential
LTI awards treated if
a change of control
occurs?
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.
7. Performance and Executive Remuneration Outcomes in FY22
7A. Actual Remuneration Earned by Key Management Personnel (KMP) in FY22
The compensation expensed in respect of KMP in FY22 is set out in Table 1 (for Directors) and Table 2 (for Senior Executives) on pages 55
and 56 of this report. This provides shareholders with a view of the remuneration earned by KMP for performance in the 2022 financial
year and the value of any LTIs expensed during the financial year.
The ‘take-home pay’ for KMP Directors of the Company, representing the benefits paid to each Director during the year ended 30 June
2022, or as soon as practicable after that date, is set out in Section 13 of the Remuneration Report on page 59.
7B. 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.
In line with the independent review undertaken during the 2022 financial year by an independent remuneration expert, the determination
of fixed remuneration of Executive Directors was subject to the following principles:
a)
The performance of the Company, the longevity of the Executive Directors in their respective roles and the assessment of
opportunity costs in respect of replacement;
Be in line with the remuneration policies of the Company for Executive Directors so as to position fixed remuneration reflecting
size relative to peers (i.e. the
Target total remuneration to provide the opportunity for Executive Directors to earn top quartile rewards for outstanding
performance.
b)
c)
; and
Remuneration levels are considered annually, with consideration of market data and the benchmark peer group. The process undertaken
by the Remuneration Committee consisted of a review of Company, business unit and individual performance, relevant comparative
remuneration, and external advice independent of management as to the reasonableness of the fixed remuneration of the Executive
Directors.
For FY2022, there was no increase in the level of fixed remuneration for the Executive Directors. The fixed remuneration of the Executive
Directors has not increased since the fixed remuneration was re-set in FY2014 following the Global Financial Crisis (GFC).
The fixed component of the remuneration of Executive Directors is disclosed in Table 1 on page 55 of this report.
ANNUAL REPORT JUNE 2022
45
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
7. Performance and Executive Remuneration Outcomes in FY22 (continued)
7C. Actual Performance Against Short Term Incentive (STI) Measures
A combination of financial and non-financial measures are used to measure performance for STI awards. The STI 100% opportunity pool
was $3,250,000 (2021: $3,250,000). The pool for over-achievement was $750,000 (2021: $750,000). The maximum aggregate pool for
allocation was $4,000,000 (2021: $4,000,000).
70% of the STI is dependent on the satisfaction of financial performance conditions (based on APAT) and 30% is measured against the
achievement of non-financial measures.
Actual performance against those measures is as follows for the 2022 financial year:
a)
CHAIRMAN AND CEO’s REPORT
b)
c)
d)
100% achievement of the 70% Financial Condition (score of 70 out of 70) of the 100% STI pool = $2,275,000
100% achievement of the Over-Achievement Pool subject to the Financial Condition (score of 20 out of 20) = $750,000
50% achievement of the 30% Non-Financial Conditions (score of 15 out of 30) = $487,500
0% reduction for malus penalties of up to 30% of the STI Pool (score of 0 out of 30) = reduction of $0
The total 2022 STI Plan payable in respect of the 2022 financial year is $3,512,500 (2021: $3,767,952). This represented a total
achievement of 105 points out of 120 points (87.50%), as shown in the tables below, compared to achievement of 112.86 points out of 120
points (94.05%) in FY21.
Financial Conditions of the 2022 STI Plan
Achievement of 70% Financial Condition
Calculation of FY2022 APAT
Annual Net Profit After Tax (APAT) excluding the
after-tax effects of property revaluation
increments or decrements, the net impact of
AASB 16 Leases and any COVID-19 support
and assistance received
= $668.79 million
for FY22
Achievement =
120% Over-
Achievement
100% Level
2022 STI PCI
% Financial
Conditions
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
$942,500
$812,500
$812,500
$682,500
$3,250,000
70%
70%
70%
70%
Achievement of Over-Achievement Pool
120% Over-
Achievement Pool
% Financial
Conditions
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
$217,500
$187,500
$187,500
$157,500
$750,000
100%
100%
100%
100%
2022 STI PCI
Financial
Condition
$659,750
$568,750
$568,750
$477,750
$2,275,000
2022 STI PCI
Financial
Condition
$217,500
$187,500
$187,500
$157,500
$750,000
% Financial Condition Satisfied
100% (70 out of 70)
100% (70 out of 70)
100% (70 out of 70)
100% (70 out of 70)
% Financial Condition Satisfied
100% (20 out of 20)
100% (20 out of 20)
100% (20 out of 20)
100% (20 out of 20)
2022 STI PCI
Payable
$659,750
$568,750
$568,750
$477,750
$2,275,000
2022 STI PCI
Payable
$217,500
$187,500
$187,500
$157,500
$750,000
APAT for the 2022 financial year was $668.79 million (2021: $738.44 million) resulting in the full achievement of the financial conditions
for the STI 100% Pool (level required $536 million), and full achievement of the financial conditions in respect of the Over-Achievement
Pool (level required $595 million).
46
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
7. Performance and Executive Remuneration Outcomes in FY22 (continued)
7C. Actual Performance Against Short Term Incentive (STI) Measures (continued)
Non-Financial Conditions of the 2022 STI Plan
Achievement of 30% Non-
Financial Conditions
For 2022, 30% of the 100% opportunity pool i.e., $975,000 was subject to non-financial performance measures
as to:
•
•
Productivity improvements equating to 33.33% (10% entitlement to the STI pool = $325,000); and
Digital innovations equating to 66.67% (20% entitlement to the STI pool = $650,000)
100% Level
2022 STI PCI
% Non-Financial
Conditions
2022 STI PCI Non-
Financial
% Non-Financial
Condition Satisfied
2022 STI PCI
Payable
CHAIRMAN AND CEO’s REPORT
Kay Lesley Page
$942,500
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
$812,500
$812,500
$682,500
$3,250,000
30%
30%
30%
30%
$282,750
$243,750
$243,750
$204,750
$975,000
50% (15 out of 30)
50% (15 out of 30)
50% (15 out of 30)
50% (15 out of 30)
$141,375
$121,875
$121,875
$102,375
$487,500
The Remuneration Committee had regard to certificates and reports from officers of the Company, other Board committees and
management, including the Individual Director Assessment Reports and Internal Audit Reports, and noted that 50% of the non-financial
performance hurdles for the 2022 STI Plan were achieved, equating to a score of 15 points out of 30 points.
Achievement of the Non-Financial Performance Conditions for the 2022 STI Plan are set out in the following table:
Assessment of Non-Financial Conditions of the 2022 STI Plan
Measure
Initiative
Primary
Weighting
Achievement
Commentary
Score
Productivity
Improvements
Commence and implement the finance
transformation project in Australia
and New Zealand.
10%
50%
Delays in execution due to
Covid-19 lockdown
5.0%
Digital
Innovations
Total
Implement innovation and improvement
initiatives to enhance digital operations
including gift card and operating platforms.
20%
50%
Delays in execution due to
resourcing availability
through Covid-19
30%
10.0%
15.0%
ANNUAL REPORT JUNE 2022
47
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
7. Performance and Executive Remuneration Outcomes in FY22 (continued)
7C. Actual Performance Against Short Term Incentive (STI) Measures (continued)
Malus Reduction in Respect of 2022 STI Plan
Malus Reductions of up to
30% of the 2022 STI
Malus (financial penalty) provisions to reduce the overall achievement of the 100% STI pool by up to 30%
i.e., $975,000, in respect of:
•
•
•
•
•
Compliance risk management framework = 12% of the 30%
Sustainability = 10% of the 30%
Franchised complex and company-operated store expansion strategy = 4% of the 30%
Cyber security governance = 2% of the 30%
Customer experience = 2% of the 30%
CHAIRMAN AND CEO’s REPORT
100% Level
2022 STI PCI
Maximum % Malus
Reductions
2022 STI PCI Malus
Reductions
% Malus Reductions
(Score)
Reduction in 2022
STI PCI Payable
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
$942,500
$812,500
$812,500
$682,500
$3,250,000
-30%
-30%
-30%
-30%
($282,750)
($243,750)
-0% (30 out of 30)
-0% (30 out of 30)
($243,750)
-0% (30 out of 30)
($204,750)
-0% (30 out of 30)
($975,000)
$0
$0
$0
$0
$0
There was no malus reduction for FY22 in accordance with the below table outlining the results of the assessment of the malus provisions:
Assessment of the Malus Provisions
Measure
Initiative
Primary
Weighting
Achievement /
Score
Commentary
Malus Reduction
Compliance
Compliance risk
management framework
Sustainability
Governance framework for
sustainability
-12%
-10%
100%
(Score 12%)
Strategic plan set across the
organisation.
100%
(Score 10%)
Charter, scope, framework and
project plan set.
Expansion Strategy
Franchised complexes and
company-operated stores
-4%
100%
(Score 4%)
Two (2) new franchised complexes
in Australia.
Premium refit of franchised complex
at Aspley, QLD.
One (1) new store opened at
Pavilion Bukit Jalil, Malaysia.
Cyber Security
Cyber security governance
structure
-2%
100%
(Score 2%)
Continuing the phases of the Global
Security Improvement Program.
Customer
Experience
Total
Franchisee tools for customer
communication and complaints
management
-2%
-30%
100%
(Score 2%)
Point of sale functionality and
complaints reduction
0%
0%
0%
0%
0%
0%
48
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
7. Performance and Executive Remuneration Outcomes in FY22 (continued)
7C. Actual Performance Against Short Term Incentive (STI) Measures (continued)
SUMMARY OF TOTAL
ACHIEVEMENT OF 2022 STI
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
100% Pool Amount
Over-Achievement
Pool
TOTAL 2022 STI
Financial
Non-Financial
Malus
Financial
$659,750
$568,750
$568,750
$141,375
$121,875
$121,875
$102,375
$487,500
-
-
-
-
-
$217,500
$187,500
$187,500
$157,500
$750,000
$1,018,625
$878,125
$878,125
$737,625
$3,512,500
Chris Mentis
CHAIRMAN AND CEO’s REPORT
Total
$2,275,000
$477,750
Service Conditions of the 2022 STI Plan
The 2022 STI Plan Service Conditions will be deemed to be satisfied, if and only if, as at the relevant payment date (30 September 2022):
•
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.
•
•
Shareholding Benchmark of the 2022 STI Plan
Executive Directors are to hold shares in the Company to the value equating to the level of fixed remuneration for that Executive Director at
the end of the financial year (the Benchmark Shareholding Level). If shares held by the Executive Director are less than the Benchmark
Shareholding Level, the STI benefit is to be provided in the form of shares, subject to shareholder approval and compliance with ASX
Listing Rules, to the value that increases the holding of the Executive Director to the Benchmark Shareholding Level.
Each of the Executive Directors that participated in the 2022 STI Plan held shares in the Company of a value that was in excess of the
Benchmark Shareholding Level. The STI benefit under the 2022 STI Plan is to be paid in cash.
7D. Actual Performance Against Long Term Incentive (LTI) Measures for Tranche FY22 of the 2016 LTI Plan
A total of 914,000 performance rights were granted to Executive Directors on 30 November 2021. The Remuneration Committee had
regard to certificates and reports from officers of the Company, other Board committees and management and Internal Audit Reports, and
has estimated, based on the available evidence, that the financial performance condition for Tranche FY22 of the 2016 LTI Plan will be 100%
achieved by the end of the vesting period and it is probable that 100% of the estimated fair value of the performance rights will meet the
performance condition.
The Remuneration Committee resolved in making its decisions and recommendations in respect of remuneration outcomes for the
Executive Directors of the Company, it will exclude the effect of COVID-19 support and assistance in respect of remuneration outcomes, so
as to eliminate unintended windfall gains in “at risk” remuneration returns for the Executive Directors in respect of COVID-19 support and
assistance. The probability of 100% vesting has been estimated based on the calculation of Tranche FY22 RONA for the 2022 financial year
of 24.24%. A 24.24% RONA for FY22 would result in a 100% vesting for year 1 of the three-year measurement period. A 100% vesting
probability will result in a cumulative Tranche FY22 fair value of $3,765,680 over the vesting period based on a fair value of $4.12 per
entitlement. An amount of $710,962 has been recognised as remuneration to Executive Directors and expensed in the income statement on
a straight-line basis for FY22.
Achievement of 100% Financial Condition for Tranche FY22 of 2016 LTI
Calculation of FY22 RONA:
FY22 APBT (net profit excluding property
revaluations, the net impact of AASB 16 Leases
and any COVID-19 support and
assistance received)
FY21 Net Assets (excluding non-controlling interests)
$936.80 million
$3,864.83 million
= 24.24% RONA
Number of
Performance
Rights
Fair Value
Per Right
145,000
406,000
121,000
121,000
121,000
914,000
$4.12
$4.12
$4.12
$4.12
$4.12
Fair Value of
Performance
Rights
$597,400
$1,672,720
$498,520
$498,520
$498,520
$3,765,680
Probability of
Vesting %
Estimated Value of
Tranche FY22 2016
LTI Plan to Vest
Tranche FY22
LTI Plan Expense
in FY22
100%
100%
100%
100%
100%
$597,400
$1,672,720
$498,520
$498,520
$498,520
$112,789
$315,810
$94,121
$94,121
$94,121
$3,765,680
$710,962
Gerald Harvey
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
ANNUAL REPORT JUNE 2022
49
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
7. Performance and Executive Remuneration Outcomes in FY22 (continued)
7D. Actual Performance Against Long Term Incentive (LTI) Measures for Tranche FY22 of the 2016 LTI Plan (continued)
Subject to the satisfaction of the financial performance condition and service conditions of the 2016 LTI Plan, Tranche FY22 will vest on 31
December 2024. 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 the performance rights have become
exercisable on 1 November 2026 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.
CHAIRMAN AND CEO’s REPORT
7E. Reassessment of Tranche FY21 of the 2016 LTI Plan Performance Conditions and Expense Recognised in FY22
•
In the 2021 financial year, a total of 549,500 performance rights were granted to Executive Directors on 4 December 2020 under Tranche
FY21 of the 2016 LTI Plan. The performance rights were independently valued by Mercer Consulting (Australia) Pty Limited at a fair value of
$3.85 per entitlement share, based on a share price of $4.66 as at grant date, resulting in a total fair value of Tranche FY21 of $2,115,575.
Tranche FY21 of the 2016 LTI Plan will be measured over a three-year period for financial years ending 30 June 2021, 30 June 2022 and 30
June 2023.
In the 2021 Remuneration Report, it was reported that the estimated achievement of Tranche FY21 of the 2016 LTI Plan would have been
100% by the end of the vesting period and that 100% of the estimated fair value of the Tranche FY21 performance rights will meet the
performance condition. The probability of 100% vesting had been estimated based on the calculation of Tranche FY21 RONA for the 2021
financial year of 30.09%.
The financial performance condition of Tranche FY21 is subject to reassessment during each of the Tranche FY21 Financial Years being the
financial years ending 30 June 2021, 2022 and 2023. A reassessment of the Tranche FY21 Aggregate APBT and Tranche FY21
Aggregate Net Assets for the 2021 and 2022 financial years has resulted in a revised RONA for the two-year aggregated period of 27.00%.
The revised RONA of 27.00% has resulted in a consistent probability of vesting of 100%, similar to the assessment in the previous year.
The cumulative expense in respect of Tranche FY21 as assessed in the 2022 financial year remains at $2,115,575. The total value of Tranche
FY21 expense recognised in the 2022 financial year was $687,609, relating to the recognition of the Tranche FY21 expense on a straight-line
basis for FY22.
Reassessment of 100% Financial Condition for Tranche FY21 of 2016 LTI Plan
Calculation of Aggregated RONA for Tranche
FY21 Financial Years (FY21 and FY22)
Tranche FY21 Aggregated APBT (net profit excluding
property revaluations, the net impact of AASB 16 Leases
and any COVID-19 support and assistance received)
(2021 + 2022)
Tranche FY21 Aggregated Net Assets (2020 + 2021)
$1,973.71 million
$7,311.17 million
= 27.00%
RONA
Gerald Harvey
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
Probability
Vesting % in
FY21
Tranche FY21
Estimated Fair
Value in FY21
Revised
Probability
Vesting in FY22
Revised Estimated
Tranche FY21 Fair
Value in FY22
Adjustment due to
reassessment
Tranche FY21 LTI
Plan Expense
in FY22
100%
100%
100%
100%
100%
$252,175
$704,550
$419,650
$419,650
$319,550
$2,115,575
100%
100%
100%
100%
100%
$252,175
$704,550
$419,650
$419,650
$319,550
$2,115,575
-
-
-
-
-
-
$81,962
$228,994
$136,396
$136,396
$103,861
$687,609
7F. Reassessment of Tranche FY20 of the 2016 LTI Plan Performance Conditions and Expense Recognised in FY22
In the 2020 financial year, a total of 549,500 performance rights were granted to Executive Directors on 2 December 2019 under Tranche
FY20 of the 2016 LTI Plan. The performance rights were independently valued by Mercer Consulting (Australia) Pty Limited at a fair value
of $3.47 per entitlement share, based on a share price of $4.30 as at grant date, resulting in a total fair value of Tranche FY20 of
$1,906,765. Tranche FY20 of the 2016 LTI Plan was measured over a three-year period for financial years ending 30 June 2020, 30 June
2021 and 30 June 2022.
In the 2021 Remuneration Report, the probability of vesting was reassessed, and it was reported that the estimated achievement of
Tranche FY20 of the 2016 LTI Plan would have been 100% by the end of the vesting period and that 100% of the estimated fair value of the
Tranche FY20 performance rights will meet the performance condition. This reassessment was based on a 2-year aggregated RONA,
being the Tranche FY20 Aggregate APBT and Tranche FY20 Aggregate Net Assets for the 2020 and 2021 financial years.
The reassessment in 2021 resulted in a revised 2-year aggregated RONA of 24.73%.
50
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
7. Performance and Executive Remuneration Outcomes in FY22 (continued)
7F. Reassessment of Tranche FY20 of the 2016 LTI Plan Performance Conditions and Expense Recognised
in FY22 (continued)
The financial performance condition of Tranche FY20 was subject to reassessment during each of the Tranche FY20 Financial Years being
the financial years ending 30 June 2020, 2021 and 2022. A final reassessment of the Tranche FY20 Aggregate APBT and Tranche FY20
Aggregate Net Assets for the 2020, 2021 and 2022 financial years has resulted in a revised RONA for the three-year aggregated period of
24.55%. A revised aggregated RONA of 24.55% for the Tranche FY20 Financial Years has resulted in the actual achievement of 100% of
the Tranche FY20 performance rights. This revised achievement calculation of 100% is consistent with the previous probability of vesting
of 100% as calculated in FY21.
The cumulative expense in respect of Tranche FY20 has been reassessed in FY22 as $1,906,765, consistent with the amount reported in
CHAIRMAN AND CEO’s REPORT
the 2021 Remuneration Report. The total value of Tranche FY20 expense recognised in FY22 was $618,173, relating to the recognition of
the Tranche FY20 expense on a straight-line basis for FY22. FY22 was the final year of measurement for Tranche FY20 with the
performance rights scheduled to vest at 31 December 2022.
Reassessment of 100% Financial Condition for Tranche FY20 of 2016 LTI Plan
Calculation of Aggregated RONA for Tranche
FY20 Financial Years (2020, 2021 and 2022)
Tranche FY20 Aggregated APBT (2020 + 2021 + 2022)
$2,572.64 million
Tranche FY20 Aggregated Net Assets (2019 + 2020 + 2021)
$10,478.59 million
= 24.55%
RONA
Probability
Vesting % in
FY21
Tranche FY20
Estimated Fair
Value in FY21
Revised Probability
Vesting in FY22
Revised Tranche
FY20 Fair Value in
FY22
Adjustment due to
Reassessment
Tranche FY20 LTI
Plan Expense
in FY22
Gerald Harvey
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
100%
100%
100%
100%
100%
$227,285
$635,010
$378,230
$378,230
$288,010
$1,906,765
100%
100%
100%
100%
100%
$227,285
$635,010
$378,230
$378,230
$288,010
$1,906,765
-
-
-
-
-
-
$73,686
$205,870
$122,622
$122,622
$93,373
$618,173
7G. Vesting of Tranche FY19 of the 2016 LTI Plan Performance Conditions and Expense Recognised in FY22
In 2019, a total of 549,500 performance rights were granted to Executive Directors on 4 December 2018 under Tranche FY19 of the 2016
LTI Plan. The performance rights were independently valued by Mercer Consulting (Australia) Pty Limited at a fair value of $2.59 per
share, based on a share price of $3.21 as at grant date, resulting in a total fair value of Tranche FY19 of $1,423,205. Tranche FY19 of the
2016 LTI Plan was measured over a three-year period for financial years ending 30 June 2019, 30 June 2020 and 30 June 2021.
In the 2021 Remuneration Report, it was reported that the estimated achievement of Tranche FY19 of the 2016 LTI Plan would have been
100% by the end of the vesting period and that 100% of the estimated fair value of the performance rights would meet the performance
condition.
The cumulative expense in respect of Tranche FY19 was $1,423,205 as reported in the 2021 Remuneration Report. The 2021 financial
year was the final year of Tranche FY19 measurement. During the 2022 financial year, an expense of $232,979 was recognised in respect
of Tranche FY19 of the 2016 LTI Plan representing the remaining vesting period up to 31 December 2021.
Of the 549,500 performance rights granted to Executive Directors during 2019, a total of 100%, or 549,500 performance rights vested on
31 December 2021 and were exercisable from 1 January 2022. On 7 January 2022, 440,500 performance rights under Tranche FY19 of
the 2016 LTI Plan were exercised and on 22 July 2022, a further 109,000 performance rights under Tranche FY19 were exercised,
reducing the unissued ordinary shares under Tranche FY19 of the 2016 LTI Plan to nil.
Assessment of 100% Financial Condition for Tranche FY19 of 2016 LTI Plan
Calculation of Aggregated RONA for Tranche
FY19 Financial Years (2019, 2020 and 2021)
Tranche FY19 Aggregated APBT (2019 + 2020 + 2021)
$2,140.10 million
Tranche FY19 Aggregated Net Assets (2018 + 2019 + 2020)
$9,524.76 million
= 22.47%
RONA
Gerald Harvey
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
Actual Achievement
in FY21
Actual Tranche
FY19 Fair Value
Tranche FY19 LTI
Plan Expense in
FY22
100%
100%
100%
100%
100%
$169,645
$473,970
$282,310
$282,310
$214,970
$27,771
$77,589
$46,214
$46,214
$35,191
$1,423,205
$232,979
ANNUAL REPORT JUNE 2022
51
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
7. Performance and Executive Remuneration Outcomes in FY22 (continued)
7H. Summary of Performance and Executive Remuneration Outcomes in FY22
Value of STI and LTI Disclosed in 2022 and 2021 Remuneration Reports
Remuneration Component
100%-Level
Achievement
Amount
Achieve-
ment
Score
Amount
Payable
Vesting
Period
2022
Remuneration
Amount
2021
Remuneration
Amount
2022 STI Plan
- Financial conditions (70/100)
CHAIRMAN AND CEO’s REPORT
- Over-achievement pool (20/20)
- Non-financial conditions (30/100)
- Malus Adjustments (up to 30/100)
Total
$2,275,000
$750,000
$975,000
-
$4,000,000
2021 STI Plan
- Financial conditions (80/100)
- Over-achievement pool (20/20)
- Non-financial conditions (20/100)
- Malus Adjustments (up to 30/100)
Total
Total Short-Term Incentive PCI
Tranche FY22 of 2016 LTI Plan
- Financial conditions (100%)
- Non-financial conditions (0%)
Total 100%
Tranche FY21 of 2016 LTI Plan
- Financial conditions (100%)
- Non-financial conditions (0%)
Total 100%
Tranche FY20 of 2016 LTI Plan
- Financial conditions (100%)
- Non-financial conditions (0%)
Total 100%
Tranche FY19 of 2016 LTI Plan
- Financial conditions (100%)
- Non-financial conditions (0%)
Total 100%
Tranche 3 (FY18) of 2016 LTI Plan
- Financial conditions (100%)
- Non-financial conditions (0%)
Total 100%
Total LTI Performance Rights
Total Value of STI and LTI
$2,600,000
$750,000
$650,000
-
$4,000,000
$3,765,680
-
$3,765,680
$2,115,575
-
$2,115,575
$1,906,765
-
$1,906,765
$1,423,205
-
$1,423,205
$1,336,000
-
$1,336,000
100%
100%
50%
0%
100%
100%
87.50%
15.47%
70.00
20.00
15.00
0.00
105.00
80.00
20.00
17.50
(4.64)
112.86
$2,275,000
$750,000
$487,500
-
$3,512,500
$2,600,000
$750,000
$568,752
($150,800)
$3,767,952
1 Year
1 Year
$2,275,000
$750,000
$487,500
-
$3,512,500
-
-
-
-
-
-
-
-
-
-
$2,600,000
$750,000
$568,752
($150,800)
$3,767,952
$3,512,500
$3,767,952
100%
-
100%
-
$3,765,680
-
$3,765,680
3.1 Years
(30/11/21 to
31/12/24)
100%
-
100%
-
$2,115,575
-
$2,115,575
3.1 Years
(04/12/20 to
31/12/23)
100%
-
100%
-
$1,906,765
-
$1,906,765
3.1 Years
(02/12/19 to
31/12/22)
100%
-
100%
-
$1,423,205
-
$1,423,205
3.1 Years
(04/12/18 to
31/12/21)
56.6%
-
56.6%
-
$756,177
-
$756,177
n/a
$710,962
-
$710,962
$687,609
-
$687,609
$618,173
-
$618,173
$232,979
-
$232,979
-
-
-
-
-
-
$393,726
-
$393,726
$761,714
-
$761,714
$753,359
-
$753,359
$123,456
-
$123,456
$2,249,723
$2,032,255
$5,762,223
$5,800,207
The total value of STI and LTI expensed in the Income Statement for the 2022 financial year and disclosed in this remuneration report was $5.76 million
compared to $5.80 million expensed in the 2021 financial year, a decrease of $0.04 million or –0.7%, relative to the previous year.
52
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
8. Executive Contractual Arrangements
Remuneration arrangements for Executive KMPs 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.
Under the terms of the present contract the CEO’s total potential employment cost is $4,932,720 comprised of:
•
•
•
CHAIRMAN AND CEO’s REPORT
The CEO’s termination provisions are as follows:
fixed remuneration of $2,100,000 per annum;
maximum STI opportunity in respect of the year ended 30 June 2022 of $1,160,000 (including the over-achievement level); and
maximum LTI opportunity in respect of the year ended 30 June 2022 of $1,672,720.
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 Unvested awards forfeited*
Minimum Shareholding Requirement
There are no minimum shareholding requirements imposed on the CEO. There is a Benchmark Shareholding Level in respect of the 2022
STI Plan to determine whether the reward is to be paid as cash or in shares. The CEO held 20,039,315 shares in the Company at 30 June
2022 equating to a value of $74.35 million.
Other Executive KMPs
All other Executive 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*
* Subject to the rules of the 2016 LTI Plan at a relevant time.
9. 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. At the 2020 annual general meeting (AGM) held on 25 November 2020, shareholders approved an increase of $500,000 to the
aggregate NED pool from $1,000,000 to $1,500,000.
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 2022 and 30 June 2021 are disclosed in Table 1 on
page 55 of this report.
ANNUAL REPORT JUNE 2022
53
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
10. Relationship between Remuneration and the Performance of
the Company
The graphs below illustrate the performance of the Company for the past five financial years and the high level of correlation between
remuneration and performance. Correlation is a calculation of the degree of relationship between two items with 100% being strongest and
0% being weakest. Correlation between the indicators of performance and remuneration remain strong.
CHAIRMAN AND CEO’s REPORT
54
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
11. Compensation of Key Management Personnel
Table 1: Compensation of Key Management Personnel Expensed for the Year Ended 30 June 2022
Directors of Harvey Norman Holdings Limited:
Short-term benefits
Post Em-
ployment
Long Term
Incentives
Other
Perfor-
CHAIRMAN AND CEO’s REPORT
mance
Cash
Incentive
Salary &
Fees
Other
Short
Term (c)
Non-
Monetary
Benefits (c)
Superan-
nuation
Performance
Rights
Long
Service
Leave (d)
Total
Remuneration
%
earned
at risk
Gerald Harvey
Executive Chairman
2022
2021
716,032
717,906
-
-
10,400
10,400
-
-
23,568
296,208
21,694
246,818
28,342
23,568
828,263
23,675
21,694
670,410
-
-
-
-
1,046,208
28.3%
996,818
24.8%
3,946,888
46.8%
3,863,116
45.6%
-
-
-
-
23,568
399,353
20,441
2,547,919
50.1%
21,694
401,781
20,472
2,614,241
51.4%
23,568
399,353
20,441
2,547,919
50.1%
21,694
401,781
20,472
2,614,241
51.4%
45,078
23,568
326,546
14,689
2,028,860
52.5%
42,213
21,694
311,465
14,768
2,067,503
53.3%
-
-
-
-
-
-
-
-
-
-
-
-
5,455
5,205
14,545
13,881
23,568
19,741
-
5,784
13,182
12,580
14,545
8,263
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
60,000
60,000
160,000
160,000
365,050
280,505
-
66,667
145,000
145,000
160,000
95,238
-
-
-
-
-
-
-
-
-
-
-
-
Kay Lesley Page
Executive Director/CEO
2022
2,048,090
1,018,625
2021
2,054,631
1,092,706
John Evyn Slack-Smith
Executive Director/COO
2022
1,226,432
878,125
2021
1,228,306
941,988
-
-
-
-
David Matthew Ackery
Executive Director
2022
1,208,432
878,125
18,000
2021
1,210,306
941,988
18,000
881,354
737,625
886,093
791,270
54,545
54,795
145,455
146,119
341,482
260,764
-
60,883
131,818
132,420
145,455
86,975
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Chris Mentis
Executive Director/CFO
Michael John Harvey
Non-Executive Director
Christopher Herbert Brown
Non-Executive Director
Kenneth William
Gunderson-Briggs
Non-Executive Director
Graham Charles Paton (a)
Non-Executive Director
Maurice John Craven
Non-Executive Director
Luisa Catanzaro (b)
Non-Executive Director
Total for the 2022
Financial Year
Total for the 2021
Financial Year
6,899,095 3,512,500
28,400
73,420
189,135
2,249,723
55,571
13,007,844 44.3%
6,839,198 3,767,952
28,400
65,888
173,924
2,032,255
55,712
12,963,329 44.7%
The listed Parent Company, Harvey Norman Holdings Limited, does not have any employees.
(a)
(b)
(c)
(d)
Graham Charles Paton retired on 25 November 2020.
Luisa Catanzaro was appointed a Non-Executive Director of Harvey Norman Holdings Limited on 25 November 2020.
Short-term benefits includes car allowances paid (Other Short Term) and the cost of fully-maintained motor vehicles (Non-Monetary
Benefits)
Table 1 includes the accrual for long service leave entitlements in respect of the years ended 30 June 2022 and 30 June 2021.
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.
ANNUAL REPORT JUNE 2022
55
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
11. Compensation of Key Management Personnel (continued)
Table 2: Compensation of Key Management Personnel Expensed for the Year Ended 30 June 2022
Senior Executives of Harvey Norman Holdings Limited:
Short-term benefits
Post Em-
ployment
Other
CHAIRMAN AND CEO’s REPORT
Perfor-
mance
Cash
Incentive
Salary & Fees
Other
Short
Term
Non-
Monetary
Benefits
Superan-
nuation
Termination
Benefits (f)
Long
Service
Leave (g)
Total
Remuneration
%
earned
at risk
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Thomas James Scott
GM — Property
Gordon Ian Dingwall
Chief Information Officer
Lachlan Roach (c)
GM — Home Appliances
Emmanuel Hohlastos (a)
GM — Home Appliances
Glen Gregory
GM — Technology &
Entertainment
Richard Beaini (b)
GM — Audio Visual
Carene Myers (d)
GM — Small Appliances
Martin Anderson (e)
GM – Advertising
Total for the 2022
Financial Year
Total for the 2021
Financial Year
571,285
573,159
530,000
511,181
163,771
409,306
428,764
418,306
463,069
422,806
85,191
-
301,964
-
-
296,281
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,511
9,000
-
-
12,000
12,000
-
-
-
-
-
-
604,374
604,406
562,401
541,395
216,575
446,822
459,478
446,972
506,355
463,547
91,410
-
23,568
21,694
23,568
21,694
-
-
-
-
9,521
9,553
8,833
8,520
11,784
36,447
1,062
-
-
-
-
-
-
-
-
-
-
-
-
21,694
23,568
21,694
23,568
21,694
5,892
-
6,822
7,146
6,972
7,718
7,047
327
-
-
-
-
-
-
-
-
-
-
-
34,189
23,568
-
-
-
-
5,033
364,754
-
-
-
-
27,423
23,422
33,985
4,938
386,049
2,544,044
- 15,511
34,189
135,516
36,447
39,640
2,805,347
2,631,039
- 21,000
27,423
131,892
33,985
43,852
2,889,191
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Resigned as General Manager—Audio Visual on 30 November 2021 and appointed to General Manager—Home Appliances on 1
December 2021
Appointed to General Manager—Audio Visual on 8 April 2022
Resigned as General Manager—Home Appliances on 19 November 2021
General Manager—Small Appliances is a new KMP effective from 1 July 2021
Retired effective 30 June 2021
This amount represents the cash payment of employee leave entitlements upon resignation or retirement
This amount represents the accrual for long service leave entitlements in respect of the years ended 30 June 2022 and 30 June 2021
56
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
12. Additional Disclosures Relating to Options, Performance
Rights and Shares
Options Granted to Executive Directors as Part of Remuneration:
There were no options granted to any Executive Director during the year ended 30 June 2022. There were no movements in option
holdings during the year ended 30 June 2022.
Options Holdings of Key Management Personnel for the Year Ended 30 June 2022:
There were no options held by any director or senior executive during the year ended 30 June 2022.
Table 3: Performance Rights Granted to Executive Directors as Part of Remuneration:
CHAIRMAN AND CEO’s REPORT
The table below discloses the number of performance rights granted to Executive Directors as remuneration during the year ended 30
June 2022 as well as the number of performance rights 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
the Year (a)
Performance Rights
Vested During the Year
(b)
Performance Rights
Lapsed During the
Year (b)
Unvested Performance
Rights at 30 June 2022
(c)
Performance Rights
Exercised During the
Year
Number
Granted
Fair Value
Granted $
Number
Vested
Fair Value
Vested $
Number
Lapsed
Fair Value
Lapsed $
Number
Unvested
Fair Value
Unvested $
Number
Exercised
Fair Value
Exercised $
Gerald Harvey
145,000
$597,400
65,500
$169,645
Kay Lesley Page
406,000
$1,672,720 183,000
$473,970
John Evyn Slack-
Smith
David Matthew
Ackery
121,000
$498,520 109,000
$282,310
121,000
$498,520 109,000
$282,310
Chris Mentis
121,000
$498,520
83,000
$214,970
Total
914,000
$3,765,680 549,500 $1,423,205
-
-
-
-
-
-
$-
$-
276,000
$1,076,860
65,500
$169,645
772,000
$3,012,280
183,000
$473,970
$-
339,000
$1,296,400
109,000
$282,310
$-
339,000
$1,296,400
-
$-
$-
287,000
$1,106,080
83,000
$214,970
$- 2,013,000
$7,788,020
440,500 $1,140,895
(a)
(b)
(c)
A total of 914,000 performance rights under Tranche FY22 of the 2016 LTI Plan were granted to Executive Directors on 30 November
2021. The performance rights were independently valued by Mercer Consulting (Australia) Pty Limited at grant date with a fair value
of $4.12 per entitlement on 30 November 2021, based on a share price of $5.07, resulting in a total fair value of Tranche FY22
performance rights of $3,765,680 in aggregate.
On 1 January 2022, 549,500 performance rights representing 100% of Tranche FY19 of the 2016 LTI Plan vested after all financial
conditions and service conditions were satisfied. On 7 January 2022, 440,500 performance rights under Tranche FY19 of the 2016 LTI
Plan were exercised and on 22 July 2022, a further 109,000 performance rights under Tranche FY19 were exercised, reducing the
unexercised performance rights under Tranche FY19 of the 2016 LTI Plan to nil.
As at 30 June 2022, a total of 2,013,000 performance rights were outstanding, unvested and not capable of exercise comprised of:
i.
ii.
iii.
549,500 performance rights under Tranche FY20 of the 2016 LTI Plan (FY20);
549,500 performance rights under Tranche FY21 of the 2016 LTI Plan (FY21); and
914,000 performance rights under Tranche FY22 of the 2016 LTI Plan (FY22).
Table 4: Performance Rights of Key Management Personnel for the Year Ended 30 June 2022
The table below discloses the number of performance rights granted to Executive Directors as remuneration during the year ended 30
June 2022 as well as the number of performance rights 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.
Vested during the year
ended 30 June 2022
1 July 2021
Balance at begin-
ning of the year
Granted as
Remuneration
Performance
Rights
Exercised
Performance
Rights
Lapsed
30 June 2022
Balance at end
of the year
Total
Exercised
Lapsed
Gerald Harvey
196,500
145,000
(65,500)
Kay Lesley Page
549,000
406,000
(183,000)
John Evyn Slack-Smith
327,000
121,000
(109,000)
David Matthew Ackery
327,000
121,000
-
Chris Mentis
249,000
121,000
(83,000)
Total
1,648,500
914,000
(440,500)
-
-
-
-
-
-
276,000
65,500
65,500
772,000
183,000
183,000
339,000
109,000
109,000
448,000
109,000
-
287,000
83,000
83,000
2,122,000
549,500
440,500
ANNUAL REPORT JUNE 2022
-
-
-
-
-
-
57
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
12. Additional Disclosures Relating to Options, Performance Rights and Shares (continued)
Table 4: Performance Rights of Key Management Personnel for the Year Ended 30 June 2022 (continued)
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 2022.
(b)
The closing balance of the performance rights in the Company of 2,122,000 as at 30 June 2022 is comprised of:
(a)
109,000 performance rights under Tranche FY19 of the 2016 LTI Plan (FY19) at a fair value at grant date of $2.59 that vested on 31
December 2021. The FY19 Tranche is exercisable between 1 January 2022 and 30 June 2024. The residual 109,000 performance
rights under Tranche FY19 were exercised on 22 July 2022 reducing Tranche FY19 to nil.
549,500 performance rights under Tranche FY20 of the 2016 LTI Plan (FY20) at a fair value at grant date of $3.47 to vest on
31 December 2022. The FY20 Tranche is exercisable between 1 January 2023 and 30 June 2025.
549,500 performance rights under Tranche FY21 of the 2016 LTI Plan (FY21) at a fair value at grant date of $3.85 to vest on
31 December 2023. The FY21 Tranche is exercisable between 1 January 2024 and 30 June 2026.
Granted as remuneration during the 2022 financial year: 914,000 performance rights under Tranche FY22 of the 2016 LTI Plan
(FY22) at a fair value at grant date of $4.12 to vest on 31 December 2024. The FY22 Tranche is exercisable between 1 January
2025 and 31 October 2026.
CHAIRMAN AND CEO’s REPORT
(c)
(d)
Table 5: Shareholdings/Relevant Interests of Key Management Personnel for the Year Ended 30 June 2022
1 July 2021
Balance at Beginning
of the Year
On Exercise of
Performance Rights
(a)
Net Change Other (b)
30 June 2022
Balance at End of
the Year
Gerald Harvey
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Michael John Harvey
392,420,640
19,845,750
1,143,893
683,471
1,161,297
3,335,180
Christopher Herbert Brown
205,525,565
Kenneth William Gunderson-Briggs
Maurice John Craven
Luisa Catanzaro
KMP: Senior Executives
Thomas James Scott
Lachlan Roach
10,059
30,673
-
10,000
10,000
65,500
183,000
109,000
-
83,000
-
-
-
-
-
-
-
1,301,614
393,787,754
10,565
20,039,315
-
-
-
(3,335,180)
-
-
9,800
-
-
(10,000) (c)
1,252,893
683,471
1,244,297
-
205,525,565
10,059
40,473
-
10,000
-
Total
(a)
624,176,528
440,500
(2,023,201)
622,593,827
On 7 January 2022, the Company announced that 440,500 performance rights, representing 80.16% of the performance
rights issued in accordance with Tranche FY19 of the 2016 LTI Plan, had vested and was exercisable from 1 January 2022.
The consolidated entity acquired 549,500 shares in the Company via an ‘on-market trade’ at an average price of $5.05 per
share for the purposes of satisfying the entitlements of each Executive Director to the performance rights in respect of Tranche
FY19 of the 2016 LTI Plan.
(b)
The ‘Net Change Other’ column discloses the number of shares acquired or disposed by each Director of the Company via an
‘on-market trade’ in accordance with the prevailing market conditions on the ASX at the time of the transaction. These trades
were on no more favourable terms and conditions than those that would be reasonably expected of an arm’s length
transaction, and have been conducted in accordance with the Company’s Share Trading Policy.
(c)
The “Net Change Other’ amount relating to Lachlan Roach is due to his resignation during the financial year.
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ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
13. ‘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 2022, or as soon as practicable after that date.
Total ‘take-home pay’ for the directors of the Company amounted to $12.10 million for the year ended 30 June 2022. The total value of
remuneration expensed for directors of the Company in respect of the 2022 financial year was $13.01 million (refer to Table 1 on
page 55 of this report).
For the 2022 financial year, total ‘take-home pay’ was $0.91 million lower than the value of remuneration expensed to the income statement.
CHAIRMAN AND CEO’s REPORT
KMP:
Board of Directors
Salary &
Fees
Other
Short
Term
Non-
Monetary
Benefits
Superan-
nuation
Short-term
Performance
Cash
Incentive (a)
Exercise of
Tranche 3
2016 LTI
Plan
Exercise of
Tranche
FY19 2016
LTI Plan (b)
FY2022
Total Take-
Home Pay
FY2021
Total Take-
Home Pay
Gerald Harvey
716,032
10,400
-
23,568
-
Kay Lesley Page
2,048,090
John Evyn Slack-Smith
1,226,432
-
-
David Matthew Ackery
1,208,432
18,000
28,342
23,568
1,092,706
-
-
23,568
941,988
23,568
941,988
45,078
23,568
791,270
-
-
-
-
-
-
5,455
14,545
23,568
-
13,182
14,545
-
-
-
-
-
-
881,354
54,545
145,455
341,482
-
131,818
145,455
-
-
-
-
-
-
-
6,899,095
28,400
73,420
189,135
3,767,952
-
-
-
-
-
-
-
-
-
-
-
-
169,645
919,645
868,153
473,970
3,666,676
3,310,748
282,310
2,474,298
2,262,196
-
2,191,988
2,262,196
214,970
1,956,240
1,834,535
-
-
-
-
-
-
60,000
60,000
160,000
160,000
365,050
280,505
-
66,667
145,000
145,000
160,000
95,238
1,140,895
12,098,897
6,839,198
28,400
65,888
173,924
3,481,651
756,177
-
- 11,345,238
Chris Mentis
Michael John Harvey
Christopher Herbert
Brown
Kenneth William
Gunderson-Briggs
Graham Charles Paton
Maurice John Craven
Luisa Catanzaro
Total Take-Home Pay
2022 Financial Year
Total Take-Home Pay
2021 Financial Year
(a)
(b)
The short-term incentive of $3.77 million represented the payment of the 2021 STI Plan that was earned in respect of the 2021
financial year, and was paid to Executive Directors in September 2021.
The aggregate fair value of the performance rights exercised during the 2022 financial year was $1,140,895, calculated at a fair
value at grant date of $2.59 per right multiplied by 440,500 performance rights exercised.
14. Other Matters for Disclosure
The previous AGM of the Company was held on 24 November 2021. The Company received 341.04 million votes for the adoption of the
2021 Remuneration Report representing 60.63% of the 562.51 million shares that were eligible to vote on that resolution. A total of
683.49 million shares were ineligible to vote on the adoption of the 2021 Remuneration Report as the shares were held by KMPs or their
related parties. The vote against the Remuneration Report represented 1.59% of the eligible votes and 0.72% of the shares on issue.
The remuneration framework for Executive Directors, as informed by the independent remuneration expert report, was improved to
change the
15. Loans to Key Management Personnel and their Related Parties
There were no loans granted to key management personnel and their related parties during the year ended 30 June 2022 (2021: nil).
There were no loans outstanding from key management personnel and their related parties as at 30 June 2022 (2021: nil).
ANNUAL REPORT JUNE 2022
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OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT — REMUNERATION REPORT (AUDITED) (CONTINUED)
16. Other Transactions and Balances with Key Management
Personnel and their Related Parties
(i) Lease of business premises from Ruzden Pty Limited
CHAIRMAN AND CEO’s REPORT
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. Lease payments and outgoings made by the
consolidated entity to Ruzden Pty Limited was:
(ii) Legal fees paid to a director-related entity
CONSOLIDATED
June 2022
$
June 2021
$
5,357,095
5,334,262
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.
2,705,847
2,731,330
(iii) 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:
1,917,960
2,064,758
(iv) Perth City West Complex
Gerald Harvey has a 50% equity interest and a subsidiary of Harvey Norman Holdings Limited has a 50% equity interest in the Perth
City West Property. The property was subject to a lease of part of the property in favour of a subsidiary of Harvey Norman Holdings
Limited (the "P.C.W. Lessee"). Gerald Harvey is entitled to one-half of the lease payments and outgoings paid by the P.C.W. Lessee.
The amount of lease payments and outgoings paid by the P.C.W. Lessee to Gerald Harvey and the subsidiary of Harvey Norman
Holdings Limited for the year ended 30 June 2022 was $1.00 million (2021: $1.01 million). Each of the above transactions were
executed under terms and conditions no more favourable than those which it is reasonable to expect would have applied if the
transactions were at arm’s length.
(v) Gepps Cross Home HQ
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, the 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 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, the 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 tenants 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. 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 27. The Gerald
Harvey Entity is entitled to one-quarter of the lease payments and outgoings paid by the G.C. Lessee. The Michael Harvey Entity is
entitled to one-eighth of the lease payments and outgoings paid by the G.C. Lessee. The application of AASB 16 Leases resulted in
the recognition of a lease liability of $17.80 million by the G.C. Lessee as at 30 June 2022 (2021: $18.42 million). The amount of
lease payments and outgoings paid by the G.C. Lessee to the Gepps Cross Joint Venture for the year ended 30 June 2022 was $3.96
million (2021: $3.48 million).
Each of the above transactions were executed under terms and conditions no more favourable than those which it is reasonable to
expect would have applied if the transactions were at arm’s length.
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ANNUAL REPORT JUNE 2022
DIRECTORS’ REPORT – SUSTAINABILITY REPORT
I N T R O D U C T I O N
Our values
The values set out below embody what Harvey Norman Holdings Limited (‘the consolidated entity’, ‘HNHL’, ‘the
Company’, ‘we’) stands for and are the basis for the behaviour of the Company and its employees. The culture of
any organisation needs to reflect its values and our values underpin the culture of the consolidated entity.
The board of directors (‘the Board’) is responsible for holding the consolidated entity to a high standard with regards
to its values as it is important that our culture in practice reflects the values articulated. These values guide how we
interact with those around us including our staff, customers of company-operated stores, shareholders, suppliers,
independent franchisees and their customers and the community generally.
I N T E G R I T Y
R E S P O N S I B I L I T Y
H U M A N I T Y
O P T I M I S M
A U T H E N T I C I T Y
Integrity
We comply with
the law and develop
systems that make it easy
for our colleagues to comply
with the law. We act honestly,
ethically and with integrity. We do
not mislead or deceive people.
Humanity
We treat all people with respect.
We are tolerant of differences in
ethnicity, religion, gender, sexuality,
physical and intellectual ability.
We are patient when cultural
misunderstandings arise. We are
inclusive and collaborative. We
recognise that sometimes genuine
people make honest mistakes.
We innovate
with product and
technology. We believe
we can all keep learning – and
learn from our failures as well as our
successes.
Responsibility
We are part of a wider community.
We aspire to make a positive
impact within each community
that we conduct business. We
are committed to environmental
responsibility and a sustainable
future. We are proud that we can
create jobs and opportunities for
people in countries in which we
operate.
Authenticity
We are authentic. We stand up for
the things we believe in. We deliver
on our promises. We value honesty,
candour and frankness. We will act
fairly.
Optimism
We are optimistic. We are
passionate about what we do.
We search for opportunity and
manage risk. We recognise that our
environment is constantly evolving.
ANNUAL REPORT JUNE 2022
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DIRECTORS’ REPORT – SUSTAINABILITY REPORT (CONTINUED)
O U R A P P R O A C H T O S U S TA I N A B I L I T Y
The Harvey Norman® brand is an international business with 195 franchised complexes in Australia, 544 independent franchisees in
Australia and 109 company-operated stores in 7 countries across the globe. We have always had, and continue to have, strong ties with
the local community and take pride in fostering a culture of diversity and inclusion. We acknowledge our environmental responsibility
and are committed to creating a sustainable future. This commitment, in line with the values of the consolidated entity, has helped us to
outline our first Sustainability framework.
In FY22, the Board established the Executive Sustainability Committee to provide oversight of the framework and to ensure
obligations and commitments are met. The Executive Sustainability Committee has developed the framework through the assessment
of Sustainability risks and opportunities and is responsible for rolling it out and monitoring performance across global operations.
This framework compliments our broader business strategy, developed by our Board, outlining our commitment to honest, fair and
transparent business practices which is reinforced by our Code of Conduct.
Our framework focuses on three pillars and accompanying key areas most relevant to the Company and our value chain. We will
continue to build our reporting capabilities going forward.
S U S TA I N A B I L I T Y F R A M E W O R K
Our Sustainability framework is underpinned by three pillars: People, Places and Products. Each pillar is reinforced by key focus areas
which help our business manage our approach and is accompanied by three enablers: Governance, Partnership and Transparency.
This framework was determined through a detailed materiality assessment completed to determine which sustainability topics matter
most to us and our stakeholders. The materiality assessment was a consultative process which involved interviews with key stakeholders
across the business and an assessment of peer, media and industry non-governmental organization (NGO) standards and reporting
priorities.
Based on this assessment, a common purpose was determined as well as an overarching goal for each pillar.
Our Sustainability purpose is:
“to create long term sustainable value for shareholders, taking account of the interests of
relevant stakeholders, informed by the Statement of Values of the Company.”
Our Three Sustainability Pillars
People
Places
Products
We empower our people through
a fair and inclusive culture and
support our local community.
1 Employee culture and wellbeing
2 Data privacy and security
3 Socio-economic contribution
s
a
e
r
A
s
u
c
o
F
l
a
o
G
We operate our places to enhance
customer experience, awareness
and engagement while minimising
our environmental impact.
We deliver quality products
encompassed by ethical supply
chains and consideration of natural
resource use.
1 Waste and circular economy
1 Product safety and sustainability
2 Climate change impact
2 Supply chain sustainability
and resilience
3 Customer engagement
3 Human rights
Our Three Sustainability Enablers
Our enablers have been established as cross-disciplinary functions to aid the delivery of our Sustainability framework. These enablers
will be a core focus of the Executive Sustainability Committee to ensure they are upheld in order to deliver the framework effectively.
They have been defined as:
Governance: Acting ethically and responsibly for employees, customers and communities by establishing robust structures, policies and
frameworks.
Partnership: Collaborating with internal and external partners to adopt a multidisciplinary approach to sustainability and drive holistic
social and environmental impact.
Transparency: Articulating and communicating sustainability initiatives, goals, targets and progress against them to increase
accountability and achieve tangible outcomes.
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DIRECTORS’ REPORT – SUSTAINABILITY REPORT (CONTINUED)
Governance
Our governance structures are key to unlocking the potential of our framework and driving meaningful and enduring outcomes. The
Board is responsible for establishing, monitoring and maintaining the framework for the consolidated entity, supported by the Executive
Sustainability Committee. We are continuing to build on our existing governance structure to define and assign responsibility across
our Sustainability framework and expand capabilities and capacity. We will continue in the coming year to outline key performance
indicators which we will adopt to track performance.
The evolving nature of Sustainability in business presents an opportunity for us to use our governance structures to build a unique
narrative to inspire investors, customers and employees to collaborate and contribute to this important sustainability endeavour. Our
governance structure is a key enabler for our Sustainability framework.
Partnerships
We will continue to take a functional approach to delivering our Sustainability framework by collaborating with third parties to establish
meaningful partnerships. We will focus on collaboration with stakeholders, engaging in partnerships to enable our Sustainability
framework. Throughout the report we have outlined initiatives across FY22 where we leveraged partnerships to deliver meaningful
outcomes.
Transparency
We will focus on improving transparency to increase our accountability to internal and external stakeholders in relation to Sustainability
endeavours. In particular, we will build on internal and external reporting and increase our accountability and communication within our
Sustainability framework.
P E O P L E
Our greatest asset is our people, who are central to the success of our business and the realisation of our purpose and therefore one
of three pillars in our Sustainability framework. We empower our people through a fair and inclusive culture, ensuring the wellbeing of
our people is emphasised, providing an engaged, invested and productive workforce. We employ over 6,000 individuals in our global
workforce and prioritise a strong family culture, innovative development opportunities and good, honest and knowledgeable people.
We are continuously looking for ways to improve our business by focusing on employee engagement, learning and workplace health
and safety. We also focus on providing a diverse and inclusive work environment and growing female representation in our workforce.
Our business is strong because our people are strong. We will continue to strive to attract talented people to work within our business,
encourage innovation and entrepreneurship, supporting the success of our individual company team members.
Our community is also a focus within our People pillar. Strong data security and privacy as well as socio-economic contribution are key
areas of importance as outlined in our Sustainability framework.
1. Employee culture and wellbeing
To us, employee culture and wellbeing includes the activities, structures and policies that are in place to ensure various outcomes such
as ethical business conduct, health, safety and wellbeing and diversity, equity & inclusion in the workplace. This area also includes
learning and development and employee engagement.
(a) Employee engagement and learning and development
The ongoing learning and development of our people is a priority. It is one of the ways we seek to empower our people. We continue
to innovate and invest in training and development initiatives, to be completed by team members either in person or online. Our
employees have the opportunity to complete a range of courses, including compliance-based training, leadership, management and
mental health training and technical and professional training in roles such as IT, digital, accounting and HR.
Employee engagement is important to our success as a business. This year our New Zealand employees completed an employee
engagement survey with overall positive results. This feedback is important to our business as it allows us a deeper insight into how we
can improve what we are doing and ensure that our employees continue to feel engaged, valued and included.
(b) Diversity, equity and inclusion
We continue to focus on creating a diverse and inclusive place to work for all our employees, empowering our people through a fair
and inclusive culture. We continue to provide a working environment representative of the customers and communities where we, and
our franchisees, carry on business. We promote inclusiveness through our global operations to help our employees feel valued for their
contribution and can be themselves at work. We will continue to focus on providing a diverse and inclusive workplace and improving
ANNUAL REPORT JUNE 2022
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DIRECTORS’ REPORT – SUSTAINABILITY REPORT (CONTINUED)
our practices by consulting best practice resources such as the Diversity Council of Australia. For example, we have reviewed the global
employee age range of our employees as shown in the table below.
Global employee age range
25 & under
26-35
36-45
46-55
Over 55
Total
Senior
Executives
All other
employees
Totals
Percentage
19.5%
3
64
122
1,288
1,291
2,060
1,489
2,124
32.1%
1,611
24.3%
98
904
1,002
15.1%
38
561
599
9%
325
6,302
6,627
100%
Over the past 12 months we have focused on several activities to enhance diversity and inclusion. We have continued to develop our
discrimination, harassment and workplace bullying prevention policy and completed the Life @ Work Engagement Survey at Harvey
Norman® New Zealand to gain better insight into employee views. We also refined employee feedback mechanisms in Australia though
both informal and formal channels. In our FY21 report, we outlined the following diversity and inclusion initiatives to focus on:
• Proactively monitor gender balance within the business, including in senior executive positions
• Proactively engage with team members to increase knowledge of diversity and inclusion in our workplace through webinars,
events, and videos from business leaders
• Review and consider our Flexible Work Policy and Parental Leave Policy
We actioned the above by forming a Diversity Working Group to review our current strategies and inform the development of new
ones.
From this, we aim to develop a diversity strategy which will inform actions for FY23 and beyond. We proactively monitor gender balance
– in FY22 we had 40% female senior executives, consistent with prior year.
The Parental Leave Policy was also reviewed, and regular discussions have occurred on the Flexible Work Arrangements Policy.
The consolidated entity is focused on initiatives to help build the representation of women in our workforce, both across the
consolidated entity and in leadership positions. We have always been focused on supporting women in our workforce, both now and in
the future, along with women in sports and in the community. We seek to attract strong female talent for our business, which is led by
Katie Page, our Chief Executive Officer for the past 22 years, who is one of only 14 female CEOs in ASX 200 companies.
We have maintained our female representation in our Senior Executive roles and across our workforce in FY22, with women continuing
to make up 40% of our Global Senior Executives and 45% of all employees (consistent with FY21). The breakdown of the HNHL Board
and the Group as a whole by gender as at the end of FY22 is as below:
30 JUNE 2022
Percentage
YoY Change
Male
Female
Male
Female
Chair
CEO
Board
Senior Executives
All employees
100%
-
-
100%
80%
60%
55%
20%
40%
45%
-
-
-
-
-
-
-
-
-
-
We are proud to have a diverse, talented employee population from which to draw from and develop its future leaders, and we are
committed to continuing the support and development of women and other underrepresented groups into the future.
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DIRECTORS’ REPORT – SUSTAINABILITY REPORT (CONTINUED)
(c) Employee health and safety
During FY22, we enhanced our Health and Safety Framework and Strategy. Positive progress has been made against the strategic
objectives with enhanced health and safety governance structures in place. Enhanced planning and reporting has been implemented
across our controlled entities in Australia.
In FY22, franchisees and their staff continued to undertake a range of training opportunities across Work Health and Safety (WHS) focus
areas throughout the year, including discrimination, harassment and workplace bullying, workplace drugs, alcohol and gambling and
occupational health and safety.
The consolidated entity also undertook a range of training and education opportunities to keep employees well-informed and safe.
We complete WHS audits of sites in Australia, New Zealand, Slovenia, Croatia and Ireland and monitor lost time injuries in New Zealand
and Ireland.
Regarding the implications of COVID-19, the safety of our people and customers continued to be a priority in FY22. We are committed
to maintaining a safe environment where our people, our franchisees and their staff can work safely and customers can shop safely. The
Incident Management Team continued to communicate regularly to each team member to enable swift and decisive actions in response
to the evolving risks and government restrictions experienced across many of the different countries and jurisdictions in which we, and
our franchisees, operate.
COVID-safe practices were implemented in franchised complexes from March 2020 and continued to be in place as required in FY22.
Each franchisee continues to focus on safety controls including personal protective equipment, personal hygiene protocols, sanitisation
practices, employee training, physical distancing measures, contactless click and collect and contactless delivery as required.
2. Data security and privacy
We are committed to the safe handling of personal information of customers and staff and the maintenance of confidentiality of data
in systems used by the business globally. We maintain a strong governance structure to support the business for privacy and security
related activities, comprising senior management and representatives from the consolidated entity.
Given the exponential growth in cybercrime and the advent of more rigorous privacy regimes such as General Data Protection
Regulation (GDPR), having and maintaining a mature IT Security/Cyber framework is of vital importance.
In FY22, we continued to improve the global data security controls of the consolidated entity as part of an ongoing global security
strategy (GSS).
Key initiatives of the GSS included:
• Deployment of Threat and Vulnerability scanning, Endpoint Detection and Response capability and Secure Access Management.
• Expansion of the Security Operations Centre to cover all global regions.
• Uplift of the security capability in the European Union, considering the geopolitical tensions in the region.
• Formalised Disaster Recovery strategies for each region.
• Enhanced education program to further assist with the avoidance of phishing attacks on Company systems.
Staff in each of our controlled entities participate in privacy awareness training programs which focus on operational activities that may
bring privacy risk to the consolidated entity.
3. Socio-economic contribution
Harvey Norman® has always felt a strong connection to community, on local and national levels. We recognise the importance of
forming relationships of mutual strength and support. We are committed to giving back and supporting local communities, which we
have been doing since establishment in 1982 to maintain, promote and enhance the brands. This year we continue to support our
communities by providing support to community groups, sporting associations and recognised causes, through donations and donation
of goods. We have included details of a sample of our community initiative achievements below.
ANNUAL REPORT JUNE 2022
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DIRECTORS’ REPORT – SUSTAINABILITY REPORT (CONTINUED)
I N I T I AT I V E S I N 2 0 2 2 :
Women in Sport
Harvey Norman® has long been a proud supporter of women in sport – with
sponsorship involvement spanning from juniors and grassroots all the way up
to the elite levels.
This support is helping these athletes achieve their goals, and by doing so
also inspiring the next generation of women – creating pathways for them to
pursue their own sporting endeavours.
Women’s State of Origin – back and live with an audience of over 250,000.
AFLW expanding to 18 teams. The Australian Commonwealth Games Team
blitzing the field in Birmingham. Australian sportswomen are setting the pace
for us all.
Ariarne Titmus
Harvey Norman®
Brand Ambassador
& Olympic Gold
Medallist
Sally Fitzgibbons
Harvey Norman® Brand
Ambassador & World
Surf League Surfer
Montana Atkinson
Harvey Norman®
Brand Ambassador
& Para-swimmer
Jada Taylor
NRLW & U19’s State of
Origin Player
Alicia Eva
Captain of the GIANTS
AFLW Team
Simaima Taufa • Brittany Breayley-Nati • Kezie Apps • Isabelle Kelly • Hannah Southwell • Ali Brigginshaw
NRLW Captains
NRLW 2022 Players
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Harvey Norman® Scholarship - Western Sydney University
Harvey Norman® proudly supports the Western Sydney University scholarship
program, helping students reach their full potential to become tomorrow’s
leaders and pave the way forward in industry, government and the community.
Since 2015, Harvey Norman® and our CEO, Katie Page, has supported 57
Western Sydney University scholarships. The recipients fell into categories of
high achieving women, women who have overcome disadvantage and refugee
women. Over the years, many have graduated with Honours across various
faculties, with others continuing in the program as current students today.
“Harvey Norman® is so proud to be rewarding hard work and furthering the
potential of students at Western Sydney University,” said Ms Page. “Western
Sydney is where Harvey Norman®’s success began in Auburn, and it is fitting to
be involved in supporting the University that is so vital to securing the region’s
future success. I encourage business and community to get behind Western
Sydney University by supporting scholarships for students who represent this
region – they are bright, hardworking, determined and diverse.”
As a Scholarship recipient and graduate, Patricia Kay says “The scholarship has
supported me to continue to achieve academic excellence, as it has alleviated
some of the financial pressure that
comes with studying”.
Good360
The last two years have been accentuated by continued back-to-back
disasters including COVID-19, drought, mouse plague and devastating
floods. Harvey Norman® partnered with Good360’s disaster recovery
team to ensure the right goods, get to the right people at the right
time while also reducing waste and diverting landfill. This financial year,
Harvey Norman® has donated $1,504,451 of goods across Australia
helping communities and individuals rebuild their homes and lives.
This goes to helping children and youth, community improvement
& economic development, families, education & literacy and
homelessness.
Zephyr Education
In partnership with Sky News and the Paul Murray
Live program, Paul shone a light on Zephyr
Education. Zephyr Education helps children
affected by domestic violence get back to school
– minimising the disruption by fast-tracking school
supplies to those who desperately need them.
To further support the incredible work Zephyr do,
Harvey Norman® and The School Locker® agreed
to donate up to $100,000 to go towards school
supplies which include school uniforms, bags, shoes
and stationery. Zephyr is run entirely by volunteers
who are now servicing more than 120 shelters and
other family support organizations throughout
Queensland, from the Gold Coast to Weipa, as well
as in Mount Isa and other western regions. 24 of the
shelters are run by indigenous organisations and one
supports immigrant women. Zephyr also supports
37 DV organisations in Tasmania, Western Australia,
NSW, the ACT and the Northern Territory.
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Paralympics Australia
Multi-Sport Days
Harvey Norman® are Proud
Partners of Paralympics
Australia and their Multi-
Sport Days, which took place
in multiple states in 2022,
with over 180 people getting
involved in a range of different
Para-sports and meeting some
of their favourite Paralympians.
Local Harvey Norman® franchised complexes, Gepps
Cross (SA), Garden City (QLD), Moore Park (NSW) and
Preston (VIC) were there on the day to support each
event and also get involved in trying some Para-sports.
They set up a Harvey Norman® chill out area for the
families of the participants and had some great giveaways
for all involved.
What Ability
Harvey Norman® are proud to partner with What Ability, an
NDIS registered support service that exists to bring happiness
to people living with a disability. Their support is focused on
the participants, from bushwalks to beach days, café trips and
holiday camps. They believe when happiness comes first, you
unlock your potential.
Founder Steve Dresler saw the benefits first-hand of athletes as
support workers. Having faced early retirement through injury,
What Ability is the evolution of Steve’s innate desire to create
a positive impact amongst his peers. He has built a community
connecting with children and adults with disabilities.
Harvey Norman® is proud to support What Ability camps
throughout the year, allowing participants to build meaningful
friendships and develop independence through fun-filled social
opportunities as well as provide opportunities and experiences
that allow participants to thrive and flourish to their full potential,
all whilst having fun. The partnership also rewards support
workers with the Harvey Norman® Happiness Awards and
connecting What Ability to our other partners like Sydney Zoo,
NSWRL and QRL.
Commonwealth Games
Harvey Norman sponsored the Australian Commonwealth Games
Team, supporting a team of 429 athletes competing across 21
sports, plus another 321 officials who attended the Birmingham 2022
Commonwealth Games in the United Kingdom. The Games took place
in July / August 2022 with 136 medal events for women and 134 for
men and 13 mixed events. The Commonwealth Games also has fully
integrated events for Para-sport athletes, competing in eight sports.
Harvey Norman® was proud to have supported the team of Australian
athletes as they realised their dreams of representing their country at
the Birmingham 2022 Commonwealth Games. Whether they were part
of a team sport or they competed individually, years of dedication and
sacrifice came to fruition. Harvey Norman® was there to recognise their
hard work as individuals, and to celebrate their collective victory as the
2022 Australian Commonwealth Games Team.
HOME OF
PERFORMANCE
P O W E R E D B Y
Ariarne Titmus
Harvey Norman®
Ambassador
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Harvey Norman® Brand Ambassadors
Ariarne Titmus
Montana Atkinson
Jye Edwards
Harvey Norman® have been proud
partners of Ariarne Titmus throughout
her Tokyo 2020 journey and now on
the path to Paris 2024 including the
2022 Commonwealth Games.
At her first Olympic outing, Ariarne
remarkably took home two individual
gold medals in the 200m and 400m
freestyle, placing her among Australia’s
most successful swimmers. Most
recently in Birmingham, Ariarne
brought home 4 gold medals, a triple
of the freestyle gold over 200m, 400m
and 800m - and all in Commonwealth
Games record times.
Ariarne is passionate about health and
fitness and is a self-confessed foodie.
Harvey Norman® proudly welcomes
Montana Atkinson as an ambassador
following on from her Champions
of Sport award at the 2021
Harvey Norman® Gold Coast
Women of the Year.
Just 14, Montana is an aspiring
Para-swimmer hoping to make her
Paralympic debut at Paris 2024. She
has already achieved great success
with Australian S14 Multiclass age
records, as well as winning medals at
State and National Championships.
Montana wants to be a part of history,
supporting and shaping the future of
people with disabilities.
Harvey Norman® was also pleased
to introduce Jye Edwards as an
ambassador from 2022 as he began
preparations for Paris 2024. Jye is an
Australian middle-distance runner and
began competing in athletics at six
years of age on the NSW South Coast.
Inspirationally, Jye overcame injury
and illness to represent Australia in
Tokyo at the 2020 Olympic Games,
breaking three personal bests on his
path to qualifying. Jye has ambitions
to become the best athlete he can
be, both on and off the track, and we
excitedly look forward to seeing what
he achieves next.
GIANTS Local Community Grants
In support of the continued partnership
with the GIANTS, Harvey Norman® donated
$1,000 to each of the 18 local clubs across the
Western Sydney region, after the COVID-19
pandemic forced the cancellation of the last two
community AFL seasons.
Clubs used the grants to upgrade facilities,
purchase training and fitness equipment and
launch new inclusive programs.
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NRL All Stars
2022 saw Harvey Norman® continue in its role as the naming
rights partner of the NRL All-Stars match between Indigenous
and Maori teams, as the match came to Sydney for the first time
since its inception in 2010.
Prior to the match on 12th February 2022, both male and female
representatives from each team attended the Harvey Norman®
Penrith franchised complex to engage with the local community
of Western Sydney NRL fans. Over 250 fans were able to hear
from some of their favourite players and were given the chance
to win tickets to the game and a signed jersey for their team.
As the first major Rugby League event of the calendar year, this
was a great opportunity to bring the community together in a
positive way that celebrates the contribution of Indigenous and
Maori players. NRL have since made the announcement that the
2023 Harvey Norman® All Stars will be in Rotorua, New Zealand,
on Maori turf for the first time ever.
Spark Futbol
As proud partners of Spark Futbol, Harvey Norman® provided
their players and parents financial relief for the 2022 Academy
Player Development Accelerator program. As part of the
“Partnership 4 Purpose” program, Harvey Norman® has
donated registration fee reductions per family and program
development costs. Spark Futbol’s ‘Player Experience’
Programs exist to ‘fill the gaps’ in junior and youth players
individual football development and experience maximising
their football potential and love for the game.
In addition to the community partnerships listed above, Harvey Norman® supports many local causes in countries where we operate,
supporting disadvantaged persons and persons experiencing loss due to natural disasters. Franchisee businesses in Australia regularly
provide support to local community organisations both in the form of financial and goods-in-kind support. Whether a company-
operated store or a franchised complex, the staff of each site are drawn from local communities around the store and reinvesting
support into those communities has long been an attribute of the Harvey Norman®, Domayne® and Joyce Mayne® brands.
Each franchised complex is well-situated within their local community to enable their initiatives to create long-term sustainable growth
for the Company.
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P L A C E S
We are focused on minimising the environmental impacts of our business, including each of the company-operated stores and
franchised complexes. This includes enhancing customer experiences in store and increasing awareness and engagement with
environmental issues. The consolidated entity has undertaken energy reduction and waste reduction actions in FY22 and have engaged
with customers to better understand attitudes towards waste.
The consolidated entity is a member of the following organisations and associations to support our commitment to environmental and
social responsibility:
• Consumer Electronics Association
• New Zealand Leather and Shoe Research Association (LASRA)
• Energy Users Association of Australia
• Australasia Furniture Research and Development Institute (AFRDI)
• National Retailers Association
• Australian Bedding Stewardship Council (founding member and Board representation)
1. Waste and circular economy
We continue to identify opportunities to reduce landfill waste across our company-operated stores and franchised complexes in
Australia. Each country has in place services to maximise the diversion of waste material from landfill, including circular economy based
programs for e-waste.
Harvey Norman® New Zealand formed a Sustainability Committee, with the strategic objective of identifying, assessing, proposing,
and monitoring sustainability initiatives across the company with a view to continuously improving Sustainability performance. The
committee has representatives from general management, the local merchant teams, corporate office, and the HNHL Board. The
committee is actively working on initiatives associated with energy emissions reduction, packaging, waste minimisation, people
engagement and ethical sourcing.
Waste Stream
Waste Management Performance of Independent Franchisee businesses in Australia
E-Waste
Each franchised complex facilitates the safe disposal of e-waste. This service is provided under the
National Television and Computer Recycling Scheme and includes computers, computer accessories,
televisions, and printers.
Mattresses
The Australian Bedding Stewardship Council (ABSC) is a not-for-profit organisation dedicated to the
development of a mattress product stewardship scheme in Australia. 14,348 mattresses were recycled through
Soft Landing in FY22. Soft Landing is an accredited supplier to the ABSC. This is down from 15,868 mattresses
which were recycled through Soft Landing in FY21 due to protracted lockdown periods in FY22.
Polystyrene
Franchised complexes in Australia facilitate the safe recycling of polystyrene.
Cardboard and
plastic recycling
Each franchisee in Australia carries out cardboard and plastic recycling. Harvey Norman®, Domayne® and
Joyce Mayne® franchisees recycled 5,612 tonnes (FY21: 7,825 tonnes), in aggregate, of cardboard and paper
and 8 tonnes (FY21: 5.3 tonnes) of low density polyethylene (LDPE), in aggregate, in FY2022. The protracted
lockdowns in FY22 have impacted this initiative.
Plastic bag
distribution
Harvey Norman®, Domayne® and Joyce Mayne® franchisees are currently considering removal of plastic bags
and replacement with paper bags. In FY22 we introduced paper bags in Western Australian and at Domayne®
franchised complexes. Smaller plastic bags are also being phased out at Domayne® franchised stores.
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DIRECTORS’ REPORT – SUSTAINABILITY REPORT (CONTINUED)
The initiatives outlined in the table below were implemented at company-operated stores:
Other activities that contributed to landfill diversion
New Zealand
Ireland
Slovenia
Harvey Norman® New Zealand’s waste service provider (EnviroWaste) collects the following waste streams:
cardboard and paper; shrink wrap and polystyrene; comingled recycling and organics; and wood. Where
feasible, EnviroWaste diverts these streams for recycling. A pilot of ‘method bins’ (separate bins for recyclable
materials within the store, encouraging recycling) commenced at the Manukau store in April 2022. In the three
months to June 2022, this initiative saw 1.2 tonnes diverted from landfill.
E-waste and battery recycling initiatives are in place in our Irish operations. Mattress recycling is available at
some of our stores in Ireland and plastic bags are not provided to customers in retail stores.
All stores in Slovenia recycle paper, cardboard, styrofoam and plastic and staff have been adequately trained on
how these items should be properly separated upon disposal. Plastic bags are no longer provided to customers
in retail stores.
Croatia
Stores in Croatia recycle paper, cardboard, styrofoam and plastic materials.
Malaysia
Waste collected from stores in Malaysia is sorted at centralised recycling centres, where recyclable materials are
separated from non-recyclables and processed.
Singapore
In July 2021, the Singapore government introduced a mandatory e-waste collection and disposal via a
nominated e-waste recycler. This helps ensure that there is no indiscriminate disposal of e-waste and all e-waste
collected is recycled with less than 5% residue sent to landfill.
2. Climate change impact and resilience
The global changing climate is a major consideration for the future of our business operations, supply chain, stakeholders, customers
and franchisees and their customers. Over the past 12 months we have continued to progress how we manage, report and address
climate change issues. This includes energy and emissions and renewable energy investment.
(a) Energy and emissions
Across the franchised complexes in Australia, 64 solar arrays have been installed at 50 locations. Solar installation and other energy
efficiency initiatives commenced at these complexes has contributed to the continued reduction of electricity consumption at franchised
complexes in Australia.
An audit of the effectiveness of the installed solar panels at each location was undertaken in FY22, revealing that, on average, the
installed systems produce over 113 megawatt hours (MWh) of electricity per annum per array for use at that complex. In total, 6,848
MWh of electricity was generated by installed solar arrays at properties across Australia in FY22. Using emission factors for electricity
generated in New South Wales, that equates to approximately 5,613 tonnes of Co2e abated by these solar installations, up from 3,900
tonnes of Co2e abated in FY21.
(b) Task Force on Climate related Financial Disclosures (TCFD)
The consolidated entity has continued to put into place the required elements to build towards a TCFD compliant report.
We have assembled a number of the required elements under the four pillars of Governance, Strategy, Risk Management and Metrics and
Targets. Utilising the recently completed sustainability framework, each controlled entity will be required to provide further information in
relation to their strategic and risk management activities in relation to climate change and business resilience over the coming years.
3. Customer engagement
We undertook a survey of customers of franchisees in relation to the expectation of the customers regarding packaging and the safe
disposal of that packaging.
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P R O D U C T S
We are committed to delivering quality products encompassed by ethical supply chains. We have undertaken activities in FY22 to
improve product safety and sustainability and to comply with responsible sourcing standards. We have focused on working with
suppliers to reduce packaging and supply chain waste, to improve product sustainability and to eradicate modern slavery and human
rights violations.
1. Product safety and sustainability
The longevity, quality, and impact of products that are sold in Harvey Norman® franchised complexes and company-operated stores is
an important consideration. Factors such as energy efficiency, water use, sustainability of materials, safety & quality, and natural resource
use are considered in product safety and sustainability.
(a) Packaging / supply chain waste
We are working with suppliers to minimise packaging and supply chain waste. New furniture, bedding, technology and home appliances
purchases and the replacement and upgrade of these items by consumers, generates a substantial amount of waste. This waste is
produced in relation to the product itself as well as the packaging used for the product.
At our company-operated stores we have commenced engaging with suppliers to encourage them to review their packaging design, to
minimise packaging waste and to move to more environmentally friendly packaging options.
(b) Engagement with suppliers on product sustainability / safety
We are working with suppliers to improve product sustainability. Product longevity, quality and impact are important considerations
for products sold at Harvey Norman®. In FY22 we have focused on working with suppliers who are proactively reviewing their product
sustainability and have engaged with suppliers that minimise waste generated through using recycled materials in the development of
products, have improved product energy ratings, have good product safety standards and repair practices.
(c) Engagement with customers on sustainable products
Harvey Norman® New Zealand introduced an ink recycling programme in their computer division in FY22 in partnership with Croxley
Recycling. Under this programme, customers receive a 10% discount on ink products if they return their used cartridge for recycling.
Additionally, a recycling programme has been implemented for ink cartridges used in Harvey Norman® New Zealand Photo Centres.
2. Supply chain sustainability
During FY22 we continued to assess ethical and environmental considerations across the full value chain, including factors such as scope
3 emissions from supply chain logistics and transport, and modern slavery considerations.
3. Human Rights
At Harvey Norman®, we value the rights of our workers and in FY22 we completed a review of all controlled entities and their
employment practices. Included within the results of this exercise, we found that:
• All workers are provided with a written contract in a language they understand, where terms of employment including wage rates and
hours of work are clear and original copies of identity related documents are not retained by the business.
• All workers are free to resign from their employment without restriction or penalty. Similarly, no workers are required to lodge any
‘security deposits’ (this could include financial or personal property) or pay any recruitment fees nor does any subsidiary deduct
wages, impose monetary fines, and/or withhold pay or pay entitlements of workers for disciplinary reasons.
Harvey Norman® supports the objectives of governments around the world to eradicate all forms of modern slavery and human
trafficking. We conduct business in a way consistent with all applicable laws (including in relation to modern slavery) and our corporate
governance and risk management framework. Our Modern Slavery Committee (a sub-committee of the Board) is responsible for dealing
with modern slavery risks and issues for the consolidated entity.
We also employ a due diligence process during the engagement of suppliers for overseas company-operated stores and retail and
wholesale trading operations in Australia owned by HNHL controlled entities.
We provide education and training in relation to modern slavery and we are continuing to develop training modules and user guides to
accompany our internal modern slavery policy.
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73
OPERATING AND FINANCIAL REVIEW (CONTINUED)
DIRECTORS’ REPORT (CONTINUED)
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 & Risk 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 & Risk 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 2022 are outlined in Note 30. Remuneration of Auditors of this annual report.
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 Declara(cid:415)on to the Directors of Harvey Norman Holdings Limited
As lead auditor for the audit of the financial report of Harvey Norman Holdings Limited for the financial year ended 30 June 2022,
I declare to the best of my knowledge and belief, there have been:
a. No contraven(cid:415)ons of the auditor independence requirements of the Corpora(cid:415)ons Act 2001 in rela(cid:415)on to the audit;
b. No contraven(cid:415)ons of any applicable code of professional conduct in rela(cid:415)on to the audit; and
c. No non-audit services provided that contravene any applicable code of professional conduct in rela(cid:415)on to the audit.
This declara(cid:415)on is in respect of Harvey Norman Holdings Limited and the en(cid:415)(cid:415)es it controlled during the financial year.
Ernst & Young
James Karekinian
Partner
Sydney
30 September 2022
Signed in accordance with a resolution of the directors.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legisla(cid:415)on
G. HARVEY
Chairman
Sydney
30 September 2022
74
K.L. PAGE
Chief Executive Officer
Sydney
30 September 2022
ANNUAL REPORT JUNE 2022
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 2022, 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 2022 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 (including Independence Standards) (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
75
1. Valuation of investment properties and owner-occupied properties
Why significant
How our audit addressed the key audit matter
Investment properties and owner-occupied
properties (collectively, “properties”) represent
51% of the Group’s total assets at 30 June 2022.
Investment properties are carried at fair value with
changes in fair value recognised in the income
statement. Note 14 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 fair
value increments / decrements above cost
recognised in equity and increments / decrements
lower than cost recognised in the profit and loss.
Note 12 of the financial report describes the basis
upon which fair value has been determined.
Fair value is assessed by the directors with
reference to either external independent property
valuations or internal valuations and are based on
market conditions existing at the reporting date.
For the year ended 30 June 2022, valuation of
investment properties and owner-occupied
properties was considered a key audit matter given:
►
►
►
the value of the properties relative to total
assets of the Group;
the extent of judgement exercised by both
independent valuation specialists and the
Directors in determining fair value; and
by their nature, the use of Directors’
valuations.
Our audit procedures included the following:
► Assessed the Group’s accounting policies with
respect to investment properties and owner-
occupied properties for compliance with the
relevant Australian Accounting Standards.
► Assessed the work of those responsible for the
Director’s valuations and the work of the
independent valuation specialists by considering
their qualifications, competence and objectivity.
►
For a sample of properties we:
► Assessed the reasonableness of key
assumptions used in these valuations
with reference to external market
evidence;
► We involved our real estate valuation
specialists to assist with the assessment
of the valuation assumptions and
methodologies used in both internal and
external valuations;
► Tested the mathematical accuracy of
both internal and external valuations;
► Assessed the accuracy of tenancy
schedules which are used as source data
in the property valuations by testing a
sample of leases to signed lease
documents.
►
Evaluated the suitability of the valuation
methodology across the portfolio based on the
type of asset.
► Considered the disclosures included in Note 1,
Note 12 and Note 14 of the financial report.
76
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
2. Recoverability of Receivables from Franchisees
Why significant
How our audit addressed the key audit matter
At 30 June 2022, the value of receivables due from
franchisees was $892.9 million representing 12% of
the Group’s total assets.
Note 7 of the financial report describes the nature
of the balances receivable from franchisees and
outlines the accounting policy in relation to
receivables from franchisees.
The recoverability of receivables from franchisees
was considered a key audit matter given the value
of the balance and the judgements exercised by the
Group in making their recoverability assessment.
Our audit procedures included the following:
►
Evaluated the Group’s assessment of the
recoverability of receivables from franchisees.
► Performed a range of scenario analysis in
considering assumptions applied by management
in determining the recoverability of receivables
from franchisees.
►
For a sample of franchisee receivables, we
obtained confirmation from the franchisees
acknowledging the amounts owing to the Group at
year end.
► Reviewed a sample of General Security Deeds
between the franchisees and the Group that
provides the Group with security over the assets of
franchisees, consisting mainly of franchisee
inventory.
► Considered the value of assets provided as
security by the franchisees against the franchisee
receivable balances.
►
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.
► Considered the adequacy of the disclosures
included in Note 7 of the financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
77
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 2022 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
78
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► 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
► 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, actions
taken to eliminate threats or safeguards applied.
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
79
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 34 to 60 of the directors' report for the
year ended 30 June 2022.
In our opinion, the Remuneration Report of Harvey Norman Holdings Limited for the year ended
30 June 2022, 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
James Karekinian
Partner
Sydney
30 September 2022
80
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
OPERATING AND FINANCIAL REVIEW (CONTINUED)
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
Company and its subsidiaries (collectively 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 2022 and of its performance for
CHAIRMAN AND CEO’s REPORT
the year ended on that date; and
complying with Accounting Standards and the Corporations Regulations 2001; and
ii.
(b)
(c)
the financial statements and notes also comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board; 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 2022.
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 37. Deed of Cross Guarantee 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 K.L. PAGE
Chairman Chief Executive Officer
Sydney S ydney
30 September 2022 30 September 2022
ANNUAL REPORT JUNE 2022
81
OPERATING AND FINANCIAL REVIEW (CONTINUED)
STATEMENT OF FINANCIAL POSITION — 30 JUNE 2022
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Other assets
Intangible assets
Assets held for sale
Total current assets
Trade and other receivables
Investments in joint venture entities
Other financial assets
Property, plant and equipment
Property, plant and equipment: Right-of-use assets
Investment properties: Freehold
Investment properties: Leasehold Right-of-use assets
s
t
e
s
s
A
t
n
e
r
r
u
C
s
t
e
s
s
A
t
n
e
r
r
u
c
-
n
o
N
Intangible assets
Deferred tax assets
Total non-current assets
Total Assets
Trade and other payables
Interest-bearing loans and borrowings
Lease liabilities
Income tax payable
Other liabilities
Provisions
Total current liabilities
Interest-bearing loans and borrowings
Lease liabilities
Provisions
Deferred tax liabilities
Other liabilities
Total non-current liabilities
Total Liabilities
NET ASSETS
Contributed equity
Reserves
Retained profits
Parent entity interests
Non-controlling interests
TOTAL EQUITY
s
e
i
t
i
l
i
i
b
a
L
t
n
e
r
r
u
C
s
e
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l
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a
L
t
n
e
r
r
u
C
-
n
o
N
y
t
i
u
q
E
CONSOLIDATED
June 2022
$000
June 2021
$000
248,804
1,065,304
346
524,274
55,359
280
12,104
264,431
889,201
41,376
479,093
39,555
258
12,662
1,906,471
1,726,576
53,494
1,502
61,073
779,217
472,510
72,560
1,321
33,083
729,847
511,167
3,230,213
2,905,509
675,600
620,461
58,420
7,903
63,668
8,742
5,339,932
4,946,358
7,246,403
6,672,934
358,341
261,053
139,288
67,830
126,236
37,059
989,807
355,663
359,969
135,389
148,031
108,847
37,162
1,145,061
438,522
200,000
1,065,340
1,043,276
10,261
446,810
1,539
9,823
380,932
823
1,962,472
1,634,854
2,952,279
2,779,915
4,294,124
3,893,019
717,925
288,170
717,925
267,393
3,254,936
2,879,511
4,261,031
3,864,829
33,093
28,190
4,294,124
3,893,019
Note
26(a)
7
8
9
10
11
28
7
27
8
12
13
14
15
11
16
17
19
20
21
17
19
21
20
22
25
23
24
82
ANNUAL REPORT JUNE 2022
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
OPERATING AND FINANCIAL REVIEW (CONTINUED)
INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2022
Sales of products to customers
Cost of sales
Gross profit
Revenues received from franchisees
Revenues and other income items
Distribution expenses
Marketing expenses
Occupancy expenses
Administrative expenses
Other expenses
Finance costs
Share of net profit of joint venture 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
3
4,13,15
4
4,19
27
5
CONSOLIDATED
June 2022
$000
June 2021
$000
2,807,329
(1,871,051)
936,278
2,768,328
(1,838,365)
929,963
1,301,142
397,186
(56,880)
(396,208)
(270,320)
(667,931)
(59,637)
(52,148)
8,961
1,140,443 1
(322,564)
817,879 1
811,527
6,352
817,879
1,345,782
324,521
(49,971)
(377,639)
(243,066)
(637,583)
(67,585)
(50,213)
8,320
1,182,529
(335,684)
846,845
841,414
5,431
846,845
6
6
23
65.13 cents
65.04 cents
67.53 cents
67.45 cents
37.5 cents
35.0 cents
The above Income Statement should be read in conjunction with the accompanying notes.
ANNUAL REPORT JUNE 2022
83
OPERATING AND FINANCIAL REVIEW (CONTINUED)
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2022
CONSOLIDATED
June 2022
$000
June 2021
$000
Profit for the year
817,879
846,845
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation
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
Net fair value (losses) / gains on financial assets at fair value
through other comprehensive income
(13,256)
(16,897)
23
(7)
41,967
(4,509)
(2,084)
46
(14)
55,616
(5,578)
12,655
Other comprehensive income for the year (net of tax)
22,134
45,828
Total comprehensive income for the year (net of tax)
840,013
892,673
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
831,782
8,231
840,013
889,249
3,424
892,673
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
84
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2022
Attributable to Equity Holders of the Parent
CONSOLIDATED
$000
E
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-
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At 1 July 2021
717,925 2,879,511
208,646
42,051
22,574
(3)
10,399
(16,274)
28,190 3,893,019
Revaluation of land
and buildings
Currency translation
differences
Reverse expired or
realised cash flow
hedge reserves
Fair value of forward
foreign exchange
contracts
Fair value of financial
assets at fair value
through other
comprehensive
income
Other comprehen-
sive income
Profit for the year
Total comprehensive
income for the
year
Cost of share based
payments
Utilisation of
employee equity
benefits reserve
-
-
-
-
-
-
-
36,802
-
-
(14,479)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3
13
-
-
-
(2,084)
-
-
36,802
(14,479)
(2,084)
811,527
-
-
-
-
811,527
36,802
(14,479)
(2,084)
-
-
-
-
-
-
-
-
-
-
-
-
-
16
-
16
-
-
-
-
-
-
-
-
-
-
-
3,297
(2,775)
-
-
-
-
-
-
-
-
-
-
-
-
656
37,458
1,223
(13,256)
-
-
3
13
-
(2,084)
1,879
22,134
6,352
817,879
8,231
840,013
-
-
3,297
(2,775)
(3,328)
(439,430)
Dividends paid
-
(436,102)
At 30 June 2022
717,925 3,254,936
245,448
27,572
20,490
13
10,921
(16,274)
33,093 4,294,124
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
ANNUAL REPORT JUNE 2022
85
OPERATING AND FINANCIAL REVIEW (CONTINUED)
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2022
Attributable to Equity Holders of the Parent
CONSOLIDATED
$000
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N
o
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-
T
o
t
a
l
At 1 July 2020
717,925 2,511,580
158,608
56,941
9,919
(35)
10,005
(18,601)
30,983 3,477,325
Revaluation of land
and buildings
Currency translation
differences
Reverse expired or
realised cash flow
hedge reserves
Fair value of forward
foreign exchange
contracts
Fair value of financial
assets at fair value
through other
comprehensive
income
Other comprehen-
sive income
Profit for the year
Total comprehensive
income for the
year
Cost of share based
payments
Utilisation of
employee equity
benefits reserve
-
-
-
-
-
-
-
50,038
-
-
(14,890)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
35
(3)
-
-
-
12,655
-
-
50,038
(14,890)
12,655
841,414
-
-
-
-
841,414
50,038
(14,890)
12,655
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
32
-
32
-
-
-
-
-
-
-
-
-
-
-
-
1,453
(1,059)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,038
(2,007)
(16,897)
-
-
35
(3)
-
12,655
(2,007)
45,828
5,431
846,845
3,424
892,673
-
-
1,453
(1,059)
(2,634)
(476,117)
2,327
(3,583)
(1,256)
Dividends paid
-
(473,483)
Disposal of invest-
ment
-
-
At 30 June 2021
717,925 2,879,511
208,646
42,051
22,574
(3)
10,399
(16,274)
28,190 3,893,019
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
86
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2022
Cash Flows from Operating Activities
Note
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
Interest paid on lease liabilities
Income taxes paid
Dividends received
Net Cash Flows From Operating Activities
26(b)
Cash Flows from Investing Activities
Payments for purchases of property, plant and equipment and
intangible assets
Payments for purchase and refurbishments of freehold 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
Payments for purchase of listed securities
Proceeds from sale of listed securities
Proceeds from sale of a controlled entity
Proceeds from insurance claims
Loans (granted to) / repaid from joint venture entities, joint
venture partners, related and unrelated entities
CONSOLIDATED
June 2022
$000
June 2021
$000
1,187,422
2,968,636
(3,097,107)
9,210
(93,194)
6,964
(9,702)
(41,738)
(336,225)
3,034
597,300
886,344
2,984,441
(2,984,050)
9,332
(103,403)
5,496
(8,953)
(40,941)
(206,595)
2,198
543,869
(94,918)
(100,300)
(81,155)
(173,822)
4,735
(145)
(950)
-
7,511
-
2,381
(16,254)
1,922
(2,312)
(409)
(2,360)
78
15,082
2,689
5,316
Net Cash Flows Used In Investing Activities
(178,795)
(254,116)
Cash Flows from Financing Activities
Lease payments (principal component)
Proceeds from Syndicated Facility
Dividends paid
Proceeds from / (Repayments of) other borrowings
Net Cash Flows Used In Financing Activities
Net Decrease in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of the Year
Cash and Cash Equivalents at End of the Year
26(a)
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
(137,615)
120,000
(436,102)
20,843
(432,874)
(14,369)
248,727
234,358
(130,849)
295,000
(473,483)
(26,140)
(335,472)
(45,719)
294,446
248,727
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i
ANNUAL REPORT JUNE 2022
87
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS — 30 JUNE 2022
1 Statement of Significant Accounting Policies
Corporate Information
(a)
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.
Basis of Preparation
(b)
The financial report has been prepared on a historical cost basis, except for freehold investment properties, leasehold
investment properties: right-of-use assets, land and buildings, derivative financial instruments and equity financial assets, which
have been measured at fair value. Certain comparative amounts have been re-presented to align with the presentation in the
current year. 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 and the amended Instrument
2022/519. 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
2022 were authorised for issue in accordance with a resolution of the directors on 30 September 2022.
(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 2022. For details on the impact of
future accounting standards, refer to page 91.
(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 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.
88
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
1 Statement of Significant Accounting Policies (continued)
(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 ended 30 June 2021 except for IFRIC
agenda decision on Net Realisable Value of Inventories and Software-as-a-service Arrangements as noted below. The consoli-
dated entity has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
Impact of new IFRIC agenda decision on Net Realisable Value of Inventories
The IFRS Interpretations Committee (IFRIC) has issued an agenda decision relating to the costs an entity includes as the
‘estimated costs necessary to make the sale’ when determining the net realisable value of inventories. When determining the
net realisable value of inventories, AASB 102 Inventories requires an entity to estimate the costs necessary to make the sale.
The IFRIC agenda decision states that this requirement does not allow an entity to limit such costs to only those that are
incremental, thereby potentially excluding costs the entity must incur to sell its inventories but which are not incremental to a
particular sale. Therefore, when determining the net realisable value of inventories, an entity estimates the costs necessary to
make the sale in the ordinary course of business. An entity uses its judgement to determine which costs are necessary to make
the sale considering its specific facts and circumstances, including the nature of the inventories.
The change in accounting policy has been applied and there was no material impact on the consolidated entity’s FY22 financial
report.
Impact of new IFRIC agenda decision on Software-as-a-service Arrangements
IFRIC published an agenda decision in relation to the accounting treatment of configuration and customisation costs related to
Software-as-a-Service (‘SaaS’) arrangements. The IFRIC concluded that costs relating to configuration and customisation are
only capitalised if the implementation activities create an intangible asset that an entity controls in accordance with the require-
ments of AASB 138 Intangible Assets. Costs that do not result in intangible assets should be expensed as incurred unless the
costs are incurred to significantly customise the cloud-based software. In this case, the costs are recorded as a prepayment for
services and amortised over the expected renewable term of the arrangement.
The change in accounting policy has been applied and there was no material impact on the consolidated entity’s FY22 financial
report.
(ii) Significant accounting judgements and estimates
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 judgements, 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 judgements, estimates and
assumptions. Significant judgements and estimates made by management in the preparation of these financial statements are
outlined below:
•
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 judgement 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.
ANNUAL REPORT JUNE 2022
89
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
1 Statement of Significant Accounting Policies (continued)
(e) Summary of Significant Accounting Policies (continued)
(ii) Significant accounting judgements and estimates (continued)
•
Assessment of AASB 10 Consolidated Financial Statements in respect of Harvey Norman®, Domayne® and Joyce
Mayne® Franchisees in Australia (continued)
At least on an annual basis, the directors of HNHL assess the requirements of control in accordance with AASB 10 Consolidated
Financial Statements. During the 2022 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 or 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.
•
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. The recoverable amount of an asset or cash generating unit (CGU) is the higher of that asset or CGU’s 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.
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.
•
•
•
•
•
•
•
•
Recovery of Deferred Tax Assets – refer to Note 5. Income Tax
Expected Credit Loss Assessment for Financial Assets – refer to Note 7. Trade and Other Receivables
Valuation of Freehold Owner-Occupied Properties – refer to note 12. Property, Plant and Equipment
Valuation of Freehold Investment Properties – refer to Note 14. Investment Properties (Freehold)
Valuation of Investment Properties (Leasehold): Right-of-Use Assets – refer to Note 15. Investment Properties
(Leasehold): Right-of-Use Assets
Determining the Incremental Borrowing Rate and Lease Term – refer to Note 19. Lease Liabilities
Provision for Lease Make Good – refer to Note 21. Provisions
Measurement of the Cost of Equity–Settled Transactions – refer to Note 25. Reserves
90
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
1 Statement of Significant Accounting Policies (continued)
(iii) Taxes
Refer to Note 5. Income Tax for accounting policy on current income tax and deferred tax.
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; and
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.
(iv) Foreign Currency Translation
The consolidated entity’s financial statements are presented in 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 set-
tlement or translation of monetary items are recognised in the income statement. 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.
f) Future Accounting Standards
The table below lists the Australian Accounting Standards which have recently been issued or amended but not yet effective
and have not been adopted by the consolidated entity for the year ended 30 June 2022. The consolidated entity does not
expect a material impact on the application of the below standards.
Reference
New Standard
Effective Date
Application Date
AASB 2020-3 Amendments to Australian Accounting Standards — Annual
1 January 2022
1 July 2022
Improvements 2018-2020 and Other Amendments
AASB 2021-7 Amendments to Australian Accounting Standards — Effective Date of
1 January 2022
1 July 2022
Amendments to AASB 10 and AASB 128 and Editorial Corrections
AASB 2020-1 Amendments to Australian Accounting Standards — Classification of
1 January 2023
1 July 2023
Liabilities as Current or Non-current
AASB 2021-2 Amendments to Australian Accounting Standards — Disclosure of
1 January 2023
1 July 2023
Accounting Policies and Definition of Accounting Estimates
AASB 2021-5 Amendments to Australian Accounting Standards — Deferred Tax Related
to Assets and Liabilities arising from a Single Transaction
1 January 2023
1 July 2023
AASB 2022-1 Amendments to Australian Accounting Standards– Initial Application of
1 January 2023
1 July 2023
AASB 17 and AASB 9– Comparative information
AASB 2014-10 Amendments to Australian Accounting Standards — Sale or Contribution
1 January 2025
1 July 2025
of Assets between an Investor and its Associate or Joint Venture
ANNUAL REPORT JUNE 2022
91
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2 Operating Segments
Operating Segment Revenue
30 June 2022
CONSOLIDATED ($000)
Sales of products to
customers
Revenues received
from franchisees and
other income items
Total Revenue by
Segment
FRANCHISING OPERATIONS
-
1,193,169
1,193,169
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
1,119,089
621,230
189,319
645,285
242,040
2,816,963
385
385
-
1,872
28,218
16,726
3,488
11,363
2,748
62,543
494,007
494,007
3,090
12,830
1,147,307
637,956
192,807
656,648
244,788
2,879,506
494,392
494,392
3,090
14,702
INTERCOMPANY ELIMINATIONS
(11,891)
(67,311)
(79,202)
TOTAL SEGMENT REVENUE
2,807,329
1,698,328
4,505,657
Operating Segment Revenue
30 June 2021
CONSOLIDATED ($000)
Sales of products to
customers
Revenues received
from franchisees and
other income items
Total Revenue by
Segment
FRANCHISING OPERATIONS
-
1,237,706
1,237,706
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
1,148,150
577,483
179,223
647,903
224,538
2,777,297
6
6
-
2,805
28,537
10,788
3,274
11,225
5,990
59,814
409,197
409,197
11,103
20,360
1,176,687
588,271
182,497
659,128
230,528
2,837,111
409,203
409,203
11,103
23,165
INTERCOMPANY ELIMINATIONS
(11,780)
(67,877)
(79,657)
TOTAL SEGMENT REVENUE
2,768,328
1,670,303
4,438,631
92
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2 Operating Segments (continued)
CONSOLIDATED ($000)
Operating Segment Result
30 June 2022
Segment
Result Before
Interest, Tax,
Depreciation &
Amortisation
Interest
Expense
Depreciation
Expense
(excl ROU
Assets)
Depreciation
& Fair Value
Re-
measurement
of ROU Asset
Amortisation
Expense
Segment
Result
Before
Tax
FRANCHISING OPERATIONS
718,222
(27,128)
(26,938)
(90,723)
(20,418)
553,015
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
TOTAL PROPERTY
EQUITY INVESTMENTS
OTHER
INTER-COMPANY ELIMINATIONS
152,744
89,761
18,202
74,178
1,555
(4,468)
(5,086)
(1,005)
(5,884)
(1,355)
(7,681)
(7,649)
(2,814)
(6,648)
(2,497)
(11,257)
(31,634)
(2,860)
(15,245)
(1,709)
336,440
(17,798)
(27,289)
(62,705)
387,040
(6,533)
(10,179)
(852)
(2,582)
(163)
(25)
-
-
383,606
(6,721)
(10,179)
8
(1,643)
(79)
(67)
(513)
79
-
(4,669)
-
-
-
-
-
-
-
-
(261)
(32)
(121)
(242)
(157)
(813)
129,077
45,360
11,402
46,159
(4,163)
227,835
(229)
370,099
-
-
(1,015)
(2,607)
(229)
366,477
-
-
-
(59)
(6,825)
-
TOTAL SEGMENT RESULT BEFORE TAX
1,436,554
(52,148)
(69,075)
(153,428)
(21,460)
1,140,443
Operating Segment Result
30 June 2021
CONSOLIDATED ($000)
Segment
Result Before
Interest, Tax,
Depreciation,
Impairment &
Amortisation
Interest
Expense
Depreciation
Expense
(excl ROU
Assets)
Depreciation
& Fair Value
Re-
measurement
of ROU Asset
Impairment
&
Amortisation
Expense
Segment
Result
Before
Tax
FRANCHISING OPERATIONS
776,309
(25,218)
(26,286)
(77,947)
(18,670)
628,188
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
163,667
80,465
18,019
78,787
8,492
349,430
307,647
(104)
(104)
(4,591)
(5,595)
(1,032)
(6,211)
(1,137)
(7,307)
(7,247)
(2,935)
(6,531)
(2,368)
(18,566)
(5,868)
(26,388)
(9,687)
(14)
(28)
-
-
TOTAL PROPERTY
307,439
(5,910)
(9,687)
EQUITY INVESTMENTS
10,959
(77)
-
OTHER
13,026
(468)
(4,753)
INTER-COMPANY ELIMINATIONS
(26)
26
-
(9,804)
(31,315)
(2,544)
(13,966)
(1,408)
(59,037)
-
-
-
-
-
-
-
(355)
(393)
(126)
(193)
(255)
(1,322)
(305)
-
-
141,610
35,915
11,382
51,886
3,324
244,117
291,787
(118)
(132)
(305)
291,537
-
-
-
10,882
7,805
-
TOTAL SEGMENT RESULT BEFORE TAX
1,457,137
(50,213)
(67,114)
(136,984)
(20,297)
1,182,529
ANNUAL REPORT JUNE 2022
93
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2 Operating Segments (continued)
CONSOLIDATED ($000)
Operating Segment
Assets and Liabilities
30 June 2022
Segment
Assets
Inter-
Company
Eliminations
Segment
Assets After
Eliminations
Segment
Liabilities
Inter-
Company
Eliminations
Segment
Liabilities
After Elimina-
tions
FRANCHISING OPERATIONS
4,282,910
(2,364,206)
1,918,704
1,004,402
(20,975)
983,427
Retail — New Zealand
Retail — Singapore & Malaysia
390,779
487,257
-
390,779
240,049
(2,200)
237,849
(2,820)
484,437
306,712
(43,313)
263,399
Retail — Slovenia & Croatia
83,447
(2,079)
81,368
68,640
Retail — Ireland & Northern Ireland
262,551
-
262,551
252,088
(423)
(2,263)
Other Non-Franchised Retail
222,281
(32,674)
189,607
305,705
(175,728)
68,217
249,825
129,977
TOTAL RETAIL
Retail Property
1,446,315
(37,573)
1,408,742
1,173,194
(223,927)
949,267
3,620,867
10,988
3,631,855
2,375,464
(1,983,024)
392,440
Retail Property Under Construction
Property Developments for Resale
81,550
24,604
20
-
81,570
24,604
86,220
3,804
(7,609)
(2,152)
78,611
1,652
TOTAL PROPERTY
3,727,021
11,008
3,738,029
2,465,488
(1,992,785)
472,703
EQUITY INVESTMENTS
55,890
-
55,890
4,458
-
4,458
OTHER
172,727
(55,592)
117,135
236,460
(208,676)
27,784
TOTAL SEGMENT ASSETS/LIABILITIES
BEFORE TAX
9,684,863
(2,446,363)
7,238,500*
4,884,002
(2,446,363)
2,437,639*
CONSOLIDATED ($000)
Operating Segment
Assets and Liabilities
30 June 2021
Segment
Assets
Inter-
Company
Eliminations
Segment
Assets After
Eliminations
Segment
Liabilities
Inter-
Company
Eliminations
Segment
Liabilities
After Elimina-
tions
FRANCHISING OPERATIONS
3,981,402
(2,272,596)
1,708,806
850,415
(7,348)
843,067
Retail — New Zealand
Retail — Singapore & Malaysia
390,749
475,869
-
390,749
250,246
(2,232)
248,014
(2,451)
473,418
326,132
(40,731)
285,401
Retail — Slovenia & Croatia
85,457
(2,156)
83,301
75,810
Retail — Ireland & Northern Ireland
281,545
-
281,545
267,794
(525)
(577)
Other Non-Franchised Retail
218,656
(58,705)
159,951
267,252
(154,111)
TOTAL RETAIL
Retail Property
Retail Property Under Construction
Property Developments for Resale
1,452,276
3,339,075
7,486
27,662
(63,312)
1,388,964
1,187,234
(198,176)
(3,567)
3,335,508
2,334,254
(1,983,024)
-
-
7,486
27,662
7,562
3,917
(7,562)
(2,199)
75,285
267,217
113,141
989,058
351,230
-
1,718
TOTAL PROPERTY
3,374,223
(3,567)
3,370,656
2,345,733
(1,992,785)
352,948
EQUITY INVESTMENTS
69,327
-
69,327
4,861
-
4,861
OTHER
179,604
(53,165)
126,439
255,349
(194,331)
61,018
TOTAL SEGMENT ASSETS/LIABILITIES
BEFORE TAX
9,056,832
(2,392,640)
6,664,192*
4,643,592
(2,392,640)
2,250,952*
* Segment assets for FY22 and FY21 are exclusive of deferred tax assets. Segment liabilities for FY22 and FY21 are exclusive of
income tax payable and deferred tax liabilities.
94
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
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
Retail – Singapore &
Malaysia
Retail – Slovenia &
Croatia
Retail – Ireland &
Northern Ireland
Consists of the wholly-owned operations of the consolidated entity in the retail trading operations in New
Zealand under the Harvey Norman® brand name.
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.
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.
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 and wholesale trading operations in Australia which are wholly-owned or
controlled by the consolidated entity, and does not include the operations of any Harvey Norman®,
Domayne® and Joyce Mayne® franchisees.
Retail Property
Consists of freehold 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 freehold 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 freehold land and buildings acquired by the consolidated entity, to be developed, or currently
under development, for the sole purpose of resale at a profit. This segment includes land and buildings
held for sale, which were previously reported in the Retail Property segment.
Equity Investments
This segment refers to the investment in, and trading of, equity investments.
Other
This segment primarily relates to credit facilities provided to related and unrelated parties and other
unallocated income and expense items.
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:
•
•
•
•
•
Nature of the products and services;
Nature of the production processes;
Type or class of customer for the products and services;
Methods used to distribute the products or provide the services; and, if applicable
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”.
ANNUAL REPORT JUNE 2022
95
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED
June 2022
$000
June 2021
$000
3 Revenues
Revenue from contracts with customers and franchisees:
Sale of products to customers (a)
Services to customers (c)
Franchise fees in accordance with franchise agreements (b)
Total revenue from contracts with customers and franchisees
Other revenue from franchisees:
Rent and outgoings received from franchisees
Interest to implement and administer the financial accommodation facilities
Total other revenue received from franchises (b)
Gross revenue from other unrelated parties:
Rent and outgoings received from external tenants
Interest received from financial institutions and other parties
Dividends received
Total other revenue received from unrelated parties (c)
Other income items:
Net property revaluation increment on Australian freehold
investment properties
Property revaluation (decrement)/increment for overseas controlled entities
Net revaluation increment of equity investments to fair value
Other income
Total other income items (c)
Disclosed in the Income Statement as follows:
(a) Sale of products to customers
(b) Revenues received from franchisees
(c) Revenues and other income items
2,807,329
35,095
1,033,166
3,875,590
248,650
19,326
267,976
110,072
6,963
3,090
120,125
213,684
(5)
-
28,287
241,966
2,807,329
1,301,142
397,186
2,768,328
33,496
1,075,753
3,877,577
248,598
21,431
270,029
98,006
5,068
2,340
105,414
138,686
1,688
8,763
36,474
185,611
2,768,328
1,345,782
324,521
Revenue from Franchisees
The application of AASB 15 Revenue from Contracts with Customers to franchise agreements with franchisees requires the consolidated
entity to recognise revenue from franchisees based on the amount it expects to receive in exchange for the provision of franchising
operations’ activities to franchisees, pursuant to a franchise agreement.
Sale of goods
The customer obtains control over the product upon delivery and revenue is therefore recognised at the point in time the product is
delivered or handed over to the customer. Revenue is measured based on the consideration expected to be received, net of trade
rebates and discounts paid.
Revenue from services
The consolidated entity provides repair services, installation services and delivery services to customers. These services are sold either
in their own contracts with the customers or bundled together with the sale of products. The consolidated entity recognises revenue
when the service is rendered. For bundled packages, the consolidated entity accounts for individual products and services separately, if
they are distinct.
96
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
3 Revenues (continued)
TYPES OF CONTRACTS $000
Operating Segments
30 June 2022
Sale of Products to
Customers
Services to
Customers
Franchisee Fees
from Franchisees
Total Revenue
from Contracts
with Customers
FRANCHISING OPERATIONS
-
-
1,033,166
1,033,166
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
INTER-COMPANY ELIMINATIONS
1,119,089
17,737
621,230
189,319
645,285
242,040
6,094
2,867
8,017
380
2,816,963
35,095
385
385
-
1,872
(11,891)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,136,826
627,324
192,186
653,302
242,420
2,852,058
385
385
-
1,872
(11,891)
TOTAL SEGMENT REVENUE
2,807,329
35,095
1,033,166
3,875,590
TYPES OF CONTRACTS $000
Operating Segments
30 June 2021
Sale of Products to
Customers
Services to
Customers
Franchisee Fees
from Franchisees
Total Revenue
from Contracts
with Customers
FRANCHISING OPERATIONS
-
-
1,075,753
1,075,753
Retail — New Zealand
1,148,150
16,446
Retail — Singapore & Malaysia
Retail — Slovenia & Croatia
Retail — Ireland & Northern Ireland
Other Non-Franchised Retail
TOTAL RETAIL
Retail Property
TOTAL PROPERTY
EQUITY INVESTMENTS
OTHER
INTER-COMPANY ELIMINATIONS
577,483
179,223
647,903
224,538
5,197
2,385
8,983
485
2,777,297
33,496
6
6
-
2,805
(11,780)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,164,596
582,680
181,608
656,886
225,023
2,810,793
6
6
-
2,805
(11,780)
TOTAL SEGMENT REVENUE
2,768,328
33,496
1,075,753
3,877,577
ANNUAL REPORT JUNE 2022
97
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
3 Revenues (continued)
PRIMARY GEOGRAPHICAL MARKETS $000
Operating Segments
30 June 2022
Australia
New Zealand
Asia
Europe
Total Revenue
from Contracts
with Customers
FRANCHISING OPERATIONS
1,033,166
-
Retail — New Zealand
Retail — Singapore & Malaysia
Retail — Slovenia & Croatia
Retail — Ireland & Northern Ireland
-
-
-
-
1,136,826
-
-
-
Other Non-Franchised Retail
229,836
12,584
-
-
627,324
-
-
-
-
-
-
192,186
653,302
-
1,033,166
1,136,826
627,324
192,186
653,302
242,420
229,836
1,149,410
627,324
845,488
2,852,058
TOTAL RETAIL
Retail Property
TOTAL PROPERTY
EQUITY INVESTMENTS
OTHER
385
385
-
1,872
-
-
-
-
-
-
-
-
-
-
-
-
-
385
385
-
1,872
(11,891)
INTER-COMPANY ELIMINATIONS
-
(11,153)
(738)
TOTAL SEGMENT REVENUE
1,265,259
1,138,257
626,586
845,488
3,875,590
PRIMARY GEOGRAPHICAL MARKETS $000
Operating Segments
30 June 2021
Australia
New Zealand
Asia
Europe
Total Revenue
from Contracts
with Customers
FRANCHISING OPERATIONS
1,075,753
-
Retail — New Zealand
Retail — Singapore & Malaysia
Retail — Slovenia & Croatia
Retail — Ireland & Northern Ireland
-
-
-
-
1,164,596
-
-
-
Other Non-Franchised Retail
213,191
11,832
-
-
582,680
-
-
-
-
-
-
181,608
656,886
-
1,075,753
1,164,596
582,680
181,608
656,886
225,023
213,191
1,176,428
582,680
838,494
2,810,793
TOTAL RETAIL
Retail Property
TOTAL PROPERTY
EQUITY INVESTMENTS
OTHER
6
6
-
2,805
-
-
-
-
-
-
-
-
-
-
-
-
-
6
6
-
2,805
(11,780)
INTER-COMPANY ELIMINATIONS
-
(11,177)
(603)
TOTAL SEGMENT REVENUE
1,291,755
1,165,251
582,077
838,494
3,877,577
98
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED
June 2022
$000
June 2021
$000
4 Expenses and Losses
Employee benefits expense:
Wages and salaries *
Workers compensation
Superannuation contributions
Payroll tax
Share-based payments
Other employee benefits
Total employee benefits expense
Finance costs:
Interest on lease liabilities
Bank interest paid to financial institutions
Other
Total finance costs
Occupancy expenses:
Variable lease payments (including short-term and low-value leases)
Property, plant and equipment: Right-of-use assets
- Depreciation expense
Property, plant and equipment: Right-of-use assets
- Impairment expense
Investment properties (leasehold): Right-of-use assets
- Fair value re-measurement
Other occupancy expenses
Total occupancy expenses
Depreciation, amortisation and impairment:
Depreciation of (excluding AASB 16 depreciation in occupancy
expenses above):
- Buildings
- Plant and equipment
Amortisation of:
- Computer software
- Net licence property and other intangible assets
Total depreciation, amortisation and impairment
374,519
2,950
18,032
15,278
3,089
10,904
424,772
41,738
9,444
966
52,148
34,534
65,870
2,148
87,558
80,210
270,320
10,179
58,896
20,778
682
90,535
351,110
2,768
16,782
14,828
1,488
12,797
399,773
40,941
7,975
1,297
50,213
30,407
62,908
-
74,076
75,675
243,066
9,276
57,838
19,777
520
87,411
* These amounts are net of the COVID-19 wages support and assistance received for the year-ended 30 June 2022 totalling $2.41
million in Malaysia, Singapore, Northern Ireland and Slovenia (2021: $4.43 million).
No COVID-19 wages support and assistance was received by any controlled entity of Harvey Norman Holdings Limited in Australia
during the 2022 financial year.
In August 2021, all of the wages support and assistance previously received by controlled entities in Australia totalling $6.02 million
(FY21: $3.63 million and FY20: $2.39 million) was repaid to the Federal Government via the Australian Taxation Office. This payment
has been recorded in the Non-Franchised Retail Segment within Note 2. Operating Segments for the year-ended 30 June 2022.
ANNUAL REPORT JUNE 2022
99
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED
June 2022
$000
June 2021
$000
5
Income Tax
(a) Income tax recognised in the Income Statement:
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
(b) Income tax recognised in the Statement of Changes in Equity :
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 other comprehensive income
(c) Reconciliation between income tax expense and prima facie income tax:
252,294
(1,086)
71,356
322,564
7
4,509
4,516
285,742
(76)
50,018
335,684
14
5,578
5,592
Accounting profit before tax
1,140,443
1,182,529
At the Australian statutory income tax rate of 30% (2021: 30%)
342,133
354,759
Adjustments to arrive at total income tax expense recognised for the year:
Transactions undertaken by Harvey Norman Holdings Limited and Harvey
Norman Holdings (Ireland) Limited as agreed under the terms of an
Advance Pricing Arrangement with the Australian Taxation Office dated 6
February 2012 which expired in June 2021
Brand licensing fees charged to overseas controlled entities
Adjustments in respect of current income tax of previous year
Share-based payment expenses
Expenditure not allowable for income tax purposes
Income not assessable for income tax purposes
Unrecognised tax losses
Utilisation of previously unrecognised 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
Total income tax reported in the Income Statement
Effective income tax rate (%)
-
11,125
3,174
(1,086)
196
712
(201)
455
(5,322)
-
(642)
(571)
(993)
(51)
(15,240)
(19,569)
322,564
28.28%
-
(76)
129
1,931
(2,445)
105
(13,196)
(189)
(334)
266
(771)
(74)
(15,546)
(19,075)
335,684
28.39%
100
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
5
Income Tax (continued)
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 a 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 or a decrease in the inter-company accounts of the subsidiaries with the tax consolidated head entity.
(d) Deferred income tax assets and liabilities:
Deferred income tax at 30 June relates to the following:
Deferred tax liabilities:
STATEMENT OF FINANCIAL
POSITION
DEFERRED TAX EXPENSES in
the INCOME STATEMENT
June 2022
$000
June 2021
$000
June 2022
$000
June 2021
$000
Revaluations of freehold investment properties to fair value
(296,796)
(233,220)
63,442
40,892
Revaluations of owner-occupied land and buildings to fair value
(45,325)
(45,125)
-
-
Non-allowable building depreciation in respect of properties in New
Zealand
Reversal of building depreciation expense for freehold investment
properties
Research and development
Other items
Total deferred tax liabilities
Deferred tax assets:
Employee provisions
Unused tax losses and tax credits
Right-of-use assets and lease liabilities
Capital losses
Other provisions
Provisions for lease makegood
Provision for executive remuneration
Revaluations of owner-occupied land and buildings to fair value
-
-
(1,924)
(760)
(144,842)
(130,307)
14,388
13,969
(2,973)
(13,548)
(1,969)
(1,731)
(10,831)
(8,455)
2,053
3,795
(500,767)
(430,655)
11,354
8,033
24,452
8,836
7,178
511
946
550
10,904
8,875
19,146
9,188
7,416
440
968
1,527
(474)
497
(5,172)
300
238
(45)
22
-
(1,221)
(5,592)
(1,702)
300
2,275
(61)
(146)
-
Total deferred tax assets*
61,860
58,464 5
Total deferred tax
(438,907)
(372,191) 5
71,356
50,018
* Of the total deferred tax assets of $61.86 million (30 Jun 2021: $58.46 million), $53.96 million (30 June 2021: $49.72 million) was
offset with the deferred tax liabilities in accordance with the deferred income tax accounting policy outlined on page 102.
The consolidated entity has not recognised deferred tax assets relating to tax losses of $97.64 million (2021: $88.71 million) which
are available for offset against taxable profits of the companies in which the losses arose. At 30 June 2022, no deferred tax liability
has been recognised (2021: nil) in respect of the unremitted earnings of certain subsidiaries, associates or joint ventures.
ANNUAL REPORT JUNE 2022
101
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
5
Income Tax (continued)
Current income tax
Current income tax assets and liabilities are measured at the amount expected to the 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 are recognised in equity, and not in the income statement.
Deferred income 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 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 items recognised outside the income statement are recognised in
correlation to the underlying transaction either in other comprehensive income or directly in equity.
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. The carrying amount of deferred tax assets are 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.
Deferred tax assets and liabilities are not recognised if temporary differences arise 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.
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.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences as the consolidated entity considers that it is probable that
future taxable profit 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 future taxable profit will be available against which the losses can be utilised. Significant 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.
102
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
6 Earnings Per Share
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
CONSOLIDATED
June 2022
$000
June 2021
$000
65.13c
65.04c
The following reflects the income and number of HVN shares used in the calculation 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
817,879
(6,352)
811,527
67.53c
67.45c
846,845
(5,431)
841,414
NUMBER OF SHARES
June 2022
Number
June 2021
Number
Weighted average number of ordinary shares used in calculating basic
earnings per share (a)
1,246,006,654
1,246,006,654
Effect of dilutive securities (b)
1,738,851
1,413,644
Adjusted weighted average number of ordinary shares used in
calculating diluted earnings per share
(a) Weighted Average Number of Ordinary Shares
1,247,745,505
1,247,420,298
No new shares issued during the current year, the weighted average number of ordinary shares used in calculating basic earn-
ings per share for the 2022 financial year was the number of shares on issue as at 30 June 2022.
(b)
Effect of Dilutive Securities
Performance rights pursuant to Tranche FY19, Tranche FY20, Tranche FY21 and Tranche FY22 of the 2016 LTI Plan that have
been granted to Executive Directors have been included in the calculation of dilutive earnings per share. Refer to Table 4.
Performance Rights of Key Management Personnel for the Year Ended 30 June 2022 on page 57 of this report for further
information.
There have been no conversions to, calls of, or subscriptions for ordinary shares or issues of potential ordinary shares since the
reporting date.
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.
ANNUAL REPORT JUNE 2022
103
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
7 Trade and Other Receivables
Current
Receivables from franchisees
Trade receivables (a)
Consumer finance loans (b)
Allowance for expected credit loss (a) (b)
Trade receivables, net
Amounts receivable in respect of finance leases (c)
Non-trade debts receivable from (d):
- Related parties (including joint ventures and joint venture partners)
- Unrelated parties
Allowance for expected credit loss (d)
Non-trade debts receivable, net
CONSOLIDATED
June 2022
$000
June 2021
$000
892,917
119,099
2,669
(3,493)
118,275
3,155
4,407
46,676
(126)
50,957
793,228
78,917
2,094
(3,578)
77,433
3,206
1,824
13,738
(228)
15,334
Total trade and other receivables (current)
1,065,304
889,201
Non-Current
Trade receivables (a)
Consumer finance loans (b)
Allowance for expected credit loss (a) (b)
Trade receivables, net
Amounts receivable in respect of finance leases (c)
Non-trade debts receivable from (d):
- Related parties (including joint ventures and joint venture partners)
- Unrelated parties
Allowance for expected credit loss (d)
Non-trade debts receivable, net
Total trade and other receivables (non-current)
7,087
570
(5)
7,652
537
46,345
19,628
(20,668)
45,305
53,494
6,703
441
(3)
7,141
713
56,022
29,352
(20,668)
64,706
72,560
Trade and other receivables
Trade and other receivables are classified, at initial recognition, and subsequently measured at amortised cost if both of the following
conditions are met:
•
The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual
cashflows, and
•
The contractual terms of the financial asset give rise on specific dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently subjected to an expected credit loss assessment. Gains or losses are recognised in
the income statement when the asset is derecognised, modified or impaired. The financial assets at amortised cost of the consolidated
entity includes receivables from franchisees, trade receivables, consumer finance loans, non-trade debts receivable from related entities
and unrelated entities and finance lease receivables.
104
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
7 Trade and Other Receivables (continued)
Allowance for expected credit losses
The consolidated entity recognises an allowance for expected credit losses (ECLs) for financial assets measured at amortised cost. ECLs
are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the
consolidated entity expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows
will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
For receivables from franchisees, consumer finance loans and non-trade debts receivable from related entities and unrelated entities,
the consolidated entity applies the general approach, as prescribed in AASB 9 Financial Instruments, in calculating ECLs. For trade
receivables and finance leases, the consolidated entity applies the simplified approach, as prescribed in AASB 9, in calculating ECLs.
The consolidated entity has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-
looking factors specific to the debtors and the economic environment.
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 indebted-
ness 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 $892.92 million as at 30 June 2022 (2021: $793.23 million) comprises the aggregate of the
balances due from each franchisee to Derni, and is net of any 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.
Receivables from franchisees have been measured at amortised cost. The consolidated entity has performed an assessment of the fran-
chisee receivables and has calculated the expected credit loss by applying the general approach for provisioning for expected credit
losses prescribed by AASB 9. The expected credit loss assessment was conducted on the carrying value of franchisee receivables as at
30 June 2022 totalling $892.92 million (2021: $793.23 million). Based on the assessment, receivables from franchisees are current
and neither past due nor impaired as at 30 June 2022.
(a)
Trade receivables and allowance for expected credit loss
Trade receivables are non-interest bearing and are generally on 30-day terms. An allowance 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 $0.56 million (2021: $0.25 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:
•
•
•
$102.24 million of the trade receivables balance as at 30 June 2022 (2021: $72.08 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.
$20.48 million of the trade receivables balance as at 30 June 2022 (2021: $9.98 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 2022
(2021: nil).
$3.47 million of the trade receivables balance as at 30 June 2022 (2021: $3.56 million) are past due and impaired, and
have been provided for in full as at balance date.
Past due but not impaired
Past due and impaired
Ageing
Analysis
2022 ($000)
2021 ($000)
Neither past
due or
impaired
31-60
Days
61-90
Days
+90
Days
31-60
Days
61-90
Days
+90
Days
Total
102,238
8,525
2,307
9,647
72,077
2,629
2,193
5,161
244
507
129
246
3,096
2,807
126,186
85,620
ANNUAL REPORT JUNE 2022
105
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED
June 2022
$000
June 2021
$000
7 Trade and Other Receivables (continued)
Reconciled to:
Trade receivables (Current)
Trade receivables (Non-current)
Total trade receivables
Movement in the allowance for expected credit loss for trade receivables were as follows:
At 1 July
Charge for the year
Foreign exchange translation
Amounts written off
At 30 June
(b) Consumer finance loans and allowance for expected credit loss
119,099
7,087
126,186
3,560
561
(35)
(617)
3,469
78,917
6,703
85,620
3,697
254
(16)
(375)
3,560
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:
•
$1.05 million of the consumer finance loans at 30 June 2022 (2021: $0.86 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. $2.16 million of the consumer finance loans balance as at 30 June 2022 (2021: $1.66 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 2022 (2021: $0.02 million) are past due and impaired, and have
been provided for in full as at balance date.
•
•
Ageing
Analysis
2022 ($000)
2021 ($000)
Past due but not impaired
Past due and impaired
Neither past
due or
impaired
31-60
Days
61-90
Days
+90
Days
31-60
Days
61-90
Days
+90
Days
Total
1,053
858
605
393
523
297
1,029
966
-
-
-
-
29
21
3,239
2,535
Reconciled to:
Consumer finance loans (Current)
Consumer finance loans (Non-current)
Total consumer finance loans
CONSOLIDATED
June 2022
$000
June 2021
$000
2,669
570
3,239
Movement in the allowance for expected credit loss for consumer finance loans were as follows:
At 1 July
Charge for the year
Amounts written off
At 30 June
21
8
-
29
106
ANNUAL REPORT JUNE 2022
2,094
441
2,535
23
-
(2)
21
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED
June 2022
$000
June 2021
$000
7 Trade and Other Receivables (continued)
(c) Finance lease receivables and allowance for expected credit loss
Finance lease receivables are reconciled 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
Reconciled to:
Amounts receivable in respect of finance leases (current)
Amounts receivable in respect of finance leases (non-current)
Total finance lease receivables
3,264
594
3,858
(109)
(57)
3,692
3,155
537
3,692
3,365
758
4,123
(135)
(69)
3,919
3,230
689
3,919
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. An expected credit loss allowance is made for estimated unrecoverable finance lease receivable amounts. No
expected credit loss was recognised in the 2022 financial year (2021: nil).
The ageing analysis of current and non-current finance lease receivables is as follows:
•
$0.97 million of the finance lease receivable balance as at 30 June 2022 (2021: $1.20 million) are neither past due nor
impaired.
$2.72 million of the finance lease receivable balance as at 30 June 2022 (2021: $2.72 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.
There was no finance lease receivable balance as at 30 June 2022 that was past due and impaired (2021: nil).
•
•
(d) Non-trade debts receivable and allowance for expected credit loss
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 2022 was $117.06 million (2021: $100.94 million) as follows:
•
$78.06 million of the non-trade debts receivable balance as at 30 June 2022 (2021: $54.15 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.
$18.20 million of the non-trade debts receivable balance as at 30 June 2022 (2021: $25.89 million) are past due but not
impaired. These receivables are subject to regular monitoring and periodic impairment testing to ensure that they are
recoverable.
$20.79 million of the non-trade debts receivable balance as at 30 June 2022 (2021: $20.90 million) are past due and
impaired, and have been provided for in full as at balance date.
•
•
Ageing
Analysis
2022 ($000)
2021 ($000)
Neither past
due or
impaired
78,062
54,150
Past due but not impaired
Past due and impaired
31-60
Days
61-90
Days
+90
Days
31-60
Days
61-90
Days
+90
Days
Total
-
-
-
-
18,200
25,890
-
-
-
-
20,794
20,896
117,056
100,936
ANNUAL REPORT JUNE 2022
107
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED
June 2022
$000
June 2021
$000
7 Trade and Other Receivables (continued)
(d) Non-trade debts receivable and allowance for expected credit loss (continued)
Reconciled to:
Non-trade debts receivable (current)
Non-trade debts receivable (non-current)
Total non-trade debts receivables
51,083
65,973
117,056
Movement in the allowance for expected credit loss for non-trade debts receivable were as follows:
At 1 July
Charge for the year
Reversal during the year (i)
Utilisation of allowance for expected credit loss
At 30 June
20,896
134
-
(236)
20,794
15,562
85,374
100,936
29,162
35
(8,000)
(301)
20,896
(i)
Non-trade debts receivable from mining camp joint venture:
The consolidated entity has non-trade debts receivable from the mining camp joint ventures totalling $25.16 million (2021:
$30.69 million) in aggregate as at 30 June 2022. The recoverable amount of non-trade receivable from the mining camp joint
ventures was assessed during the year. No impairment reversal or loss was recognised in the current year (2021: impairment
reversal of $8.00 million). The total balance of the allowance for expected credit loss as at 30 June 2022 relating to non-trade
receivables from the mining camp joint ventures was $3.23 million (2021: $3.23 million).
Allowance for expected credit loss of these non-trade receivables have been determined based on the present value of estimated
cash flow projections as at 30 June 2022 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, to each of these variables to assess the recoverable amount of the non-trade receivables as at balance date.
108
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
8 Other Financial Assets
Current
Equity investments at fair value through profit or loss
Derivatives receivable
Total other financial assets (current)
Non-Current
Equity investments at fair value through profit or loss
Equity investments at fair value through other comprehensive income
Units in unit trusts
Other non-current financial assets
Total other financial assets (non-current)
CONSOLIDATED
June 2022
$000
June 2021
$000
-
346
346
30,796
25,095
414
4,768
61,073
41,281
95
41,376
-
28,046
414
4,623
33,083
During FY22, the consolidated entity reclassified the equity investments at fair value through profit or loss from current to non-
current financial assets.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include listed shares held for trading and derivative receivables. Financial assets are
classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives are also
classified as held for trading unless they are designated as effective hedging instruments. 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 recognised in the income statement.
Financial assets at fair value through other comprehensive income (OCI) (equity instruments)
Upon initial recognition, the consolidated entity can elect to classify irrevocably its equity investments as equity instruments designated
at fair value through OCI when they meet the definition of equity under AASB 132 Financial Instruments: Presentation and are not held
for trading. The classification is determined on an instrument-by-instrument basis. Gains and losses on these financial assets are not
recycled to the income statement. Dividends are recognised as other income in the income statement when the right of payment has
been established. Equity instruments designated at fair value through OCI are not subject to an impairment assessment.
9
Inventories (Current)
Finished goods at cost
Provision for obsolescence
Total inventories (current)
534,386
(10,112)
524,274
490,015
(10,922)
479,093
During the year, the Company revised its accounting policy in relation to the costs an entity includes as the ‘estimated costs necessary to
make the sale’ when determining the net realisable value of inventories. This is in response to the IFRIC agenda decision which clarifies
that such costs are not limited to only those that are incremental. The new accounting policy is presented below.
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour
costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated
using the weighted average cost method. Net realisable value represents the estimated selling price in the ordinary course of business
less all estimated costs of completion and all costs to be incurred in marketing, selling and distribution.
ANNUAL REPORT JUNE 2022
109
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
10 Other Assets (Current)
Prepayments
Other current assets
Total other assets (current)
11 Intangible Assets
Current
Net licence property (current)
Non-Current
Net licence property
Other intangible assets
Computer software:
At cost
Accumulated amortisation and impairment
Net computer software
CONSOLIDATED
June 2022
$000
June 2021
$000
52,551
2,808
55,359
280
1,817
66
247,628
(191,091)
56,537
36,803
2,752
39,555
258
1,981
90
232,571
(170,974)
61,597
Total net intangible assets (non-current)
58,420
63,668
Reconciliation of non-current computer software is as follows:
Opening balance
Additions
Disposals
Amortisation
Net foreign currency differences arising from foreign operations
Net computer software (non-current)
61,597
15,876
(384)
(20,778)
226
56,537
60,353
20,791
(36)
(19,777)
266
61,597
110
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
11 Intangible Assets (continued)
Intangible assets
Intangible assets, consisting of capitalised computer software assets, capitalised development expenditure 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.
During the year, the consolidated entity revised its accounting policy in relation to upfront configuration and customisation costs
incurred in implementing SaaS arrangements in response to the IFRIC agenda decision clarifying its interpretation of how current ac-
counting standards apply to these types of arrangements. The new accounting policy is presented below.
SaaS arrangements are service contracts providing the consolidated entity with the right to access the cloud provider’s application soft-
ware over the contract period. Costs incurred to configure or customise, and the ongoing fees to obtain access to the cloud provider's
application software, are recognised as operating expenses when the services are received. Some of these costs incurred are for the
development of software code that enhances or modifies, or creates additional capability to, existing on-premise systems and meets
the definition of and recognition criteria for an intangible asset. These costs are recognised as intangible software assets and amortised
over the useful life of the software on a straight-line basis.
Intangible assets are tested for impairment where there are any indicators of impairment, 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 are recognised in the income statement in the expense category consistent
with the function of the intangible asset.
Gain or loss arising from the derecognition of an intangible asset is measured as the difference between the net disposal proceeds and
the carrying amount of the intangible asset, and is recognised in the income statement when the intangible asset is derecognised.
12 Property, Plant and Equipment
Land at fair value
Buildings at fair value
Land and buildings at fair value (a)
Plant and equipment:
At cost
Accumulated depreciation
Net 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 of property, plant and equipment
CONSOLIDATED
June 2022
$000
June 2021
$000
219,802
274,319
494,121
836,313
(551,217)
285,096
494,121
836,313
1,330,434
(551,217)
779,217
185,916
265,173
451,089
798,335
(519,577)
278,758
451,089
798,335
1,249,424
(519,577)
729,847
ANNUAL REPORT JUNE 2022
111
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED
June 2022
$000
June 2021
$000
12 Property, Plant and Equipment (continued)
Reconciliation of the carrying amounts of property, plant & equipment were as follows:
Land at fair value
Opening balance
Additions
Increase resulting from revaluation
Net foreign currency differences arising from foreign operations
Closing balance
Buildings at fair value
Opening balance
Additions
Disposals
Increase resulting from revaluation
Depreciation for the year
Net foreign currency differences arising from foreign operations
Closing balance
Net land and buildings at fair value (a)
185,916
10,613
28,516
(5,243)
219,802
265,173
12,353
-
14,699
(10,131)
(7,775)
274,319
494,121
150,235
1,685
35,910
(1,914)
185,916
252,681
3,222
(646)
21,938
(9,210)
(2,812)
265,173
451,089
(a) The net book value of land and buildings (other than land and buildings classified as freehold investment properties) would have
been $201.22 million (2021: $191.43 million) if measured on a historical cost basis.
Plant and equipment at cost:
Opening balance
Additions
Disposals
Transfers from other asset categories
Net foreign currency differences arising from foreign operations
Closing balance
Plant and equipment accumulated depreciation:
Opening balance
Depreciation for the year
Disposals
Transfers from other asset categories
Net foreign currency differences arising from foreign operations
Closing balance
Net book value plant and equipment
Total written down amount of property, plant and equipment
798,335
73,616
(39,620)
9,732
(5,750)
836,313
519,577
58,896
(31,383)
8,102
(3,975)
551,217
285,096
779,217
837,764
83,776
(115,390)
-
(7,815)
798,335
577,791
57,838
(110,938)
-
(5,114)
519,577
278,758
729,847
112
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
12 Property, Plant and Equipment (continued)
Freehold owner-occupied properties
Following initial recognition at cost, owner-occupied land and buildings are carried at fair value less any subsequent accumulated
depreciation and accumulated impairment losses. Depreciation is calculated on a straight-line basis over the estimated useful life of the
asset as follows:
•
•
Land – not depreciated
Buildings – 20 to 40 years
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. Valuations are performed
with sufficient regularity to ensure that the carrying amount does not differ materially from the fair value of the asset at the balance date.
Plant and equipment assets
Plant and equipment assets are recognised at historical cost less accumulated depreciation and any accumulated impairment losses.
Depreciation is calculated on a straight-line basis over the estimated useful life of the plant and equipment assets (3 to 20 years). The
residual values, useful lives and amortisation methods of plant and equipment assets are reviewed, and adjusted if appropriate, at each
financial year end.
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.
Valuation of freehold owner-occupied properties
The consolidated entity values land and buildings at fair value. 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.
The Board of Directors make an assessment of the fair value of each freehold owner-occupied property as at balance date. This
assessment is informed by:
•
the information and advice contained in the last independent external valuation report for that property prepared by an external
professionally qualified valuer who holds a recognised relevant professional qualification and has specialised expertise in the
property being valued (Independent Valuer);
•
•
•
the information and advice in the last internal valuation report for that property;
the last management review for that property; and
other information and professional or expert advice given or prepared by reliable and competent persons in relation to that
property.
Independent External Valuations
From 1 January 2020, the entire freehold owner-occupied property portfolio is being independently valued by an Independent Valuer
at least once every two (2) years.
Internal Valuation and Reviews
Freehold owner-occupied properties not independently externally valued as at balance date are subject to an internal valuation or a
management review, performed by persons qualified by relevant education, training or experience. The key assumptions used to
determine the fair value of freehold owner-occupied properties, and the relevant sensitivity analysis, are disclosed in Note 12(b) and
Note 12(c).
ANNUAL REPORT JUNE 2022
113
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
12 Property, Plant and Equipment (continued)
(a) Reconciliation of owner occupied properties—land and building at fair value
New Zealand
Slovenia
Singapore
Ireland
Australia
Total
Retail
$000
Warehouse
$000
Retail
$000
Warehouse
$000
Office
$000
Retail
$000
Retail
$000
2022
$000
2021
$000
334,653
5,184
75,727
1,684
7,648
15,823
10,370
451,089
402,916
11,981
-
24
-
-
-
26,143
1,159
7,402
(7,658)
(95)
(1,921)
232
-
-
-
-
-
5,255
10,715
14
22,966
4,905
-
-
-
-
(645)
3,256
43,215
57,849
(18)
(299)
(140)
(10,131)
(9,210)
(9,521)
(157)
(3,050)
(69)
418
(639)
-
(13,018)
(4,726)
355,598
6,115
78,158
1,847
13,303
25,600
13,500
494,121
451,089
Opening
balance
Additions
Disposals
Fair value
adjustments
Depreciation
for the year
Net foreign
currency
differences
Closing
balance
(b) Fair value measurement, valuation techniques and inputs
Class of property
Fair value
hierarchy*
Fair value
30 June 2022
$000
Valuation Technique
Key
unobservable inputs
2022 Range of
unobservable
inputs
2021 Range of
unobservable
inputs
Retail
Level 3
472,856
(Jun-21: 436,573)
Discounted cash flow
Income capitalisation
Terminal Yield
3.1% - 7.8%
3.1% - 7.8%
Discount Rate
4.0% - 8.0%
4.0% - 8.5%
Net market rent per sqm p.a
$53 - $550
$98 - $362
Capitalisation Rate
4.0% - 8.0%
4.5% - 7.9%
Direct sale comparison
Price per sqm of lettable
$10,235
$7,621
Warehouse
Level 3
7,962
(Jun-21: 6,868 )
Discounted cash flow
Terminal Yield
Discount Rate
Income Capitalisation
Net market rent per sqm p.a
Capitalisation Rate
Office
Level 3
13,303
(Jun-21: 7,648)
Income capitalisation
Discounted cash flow
Terminal Yield
Discount Rate
Net market rent per sqm p.a
Capitalisation Rate
5.3%
6.5%
$111
5.0%
N/A
N/A
N/A
N/A
5.9%
6.6%
$98
5.6%
3.5%
4.0%
$215-$250
3.3%
Direct sale comparison
Price per sqm of lettable $12,101 - $16,030
$7,266 - $9,026
TOTAL
494,121
(Jun-21: 451,089)
* Level 3 - fair value is estimated using inputs that are not based on observable market data.
114
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
12 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 and warehouse 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
properties in Slovenia and one (1) retail property in Ireland.
The direct sale comparison method was used for the valuation
of the office 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 using the current market rental value 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 terminal yield 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 yield 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 adjust-
ments 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) 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
Decrease
Capitalisation rate
Terminal yield
Discount rate
Decrease
Decrease
Decrease
Increase
Increase
Increase
Price per square metre
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.
ANNUAL REPORT JUNE 2022
115
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
12 Property, Plant and Equipment (continued)
(d) Highest and best use
For all freehold owner-occupied properties that are measured at fair value, the current use of the property is considered its highest
and best use.
13 Property, Plant and Equipment: Right-Of-Use Assets (ROUA)
CONSOLIDATED
Leasehold
properties:
ROUA
$000
Plant and
equipment:
ROUA
$000
Total ROUA
$000
As at 1 July 2020
New and modified leases
Leases exited
Depreciation
Foreign currency
As at 30 June 2021
As at 1 July 2021
New, modified and re-measured leases
Leases exited
Impairment
Depreciation
Foreign currency
As at 30 June 2022
(a) The leasehold properties relate to leases of owner-occupied properties.
Australia
New Zealand
Singapore & Malaysia
Slovenia & Croatia
Ireland & Northern Ireland
Total lease liabilities of leases of owner occupied properties and plant and
equipment assets
509,220
81,116
(5,390)
(60,788)
(16,868)
507,290
507,290
36,266
(14,648)
(2,148)
(63,668)
5,125
468,217
4,562
1,490
-
(2,120)
(55)
3,877
3,877
2,652
-
-
(2,202)
(34)
4,293
513,782
82,606
(5,390)
(62,908)
(16,923)
511,167
511,167
38,918
(14,648)
(2,148)
(65,870)
5,091
472,510
CONSOLIDATED
June 2022
$000
June 2021
$000
25,792
118,485
218,386
14,947
94,900
472,510
30,181
113,083
244,163
19,235
104,505
511,167
Property, Plant and Equipment: Right-of-Assets
The consolidated entity recognises right-of-use assets in respect of leases of property, plant and equipment at the commence-
ment date of the lease (i.e. the date the underlying asset is available for use). The initial measurement of right-of-use assets
includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the
commencement date, less any lease incentives received. Right-of-use assets are subsequently measured at cost, less any
accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The right-of-use
assets are depreciated on a straight-line basis over the shorter of its estimated useful life or the lease term. Right-of-use assets
are subject to an impairment assessment under AASB 136 Impairment of Assets at each reporting date.
116
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
14 Investment Properties: Freehold
Opening balance at beginning of the year, at fair value
Net additions, disposals and transfers
Net increase from fair value adjustments
Closing balance at end of the year, at fair value
CONSOLIDATED
June 2022
$000
June 2021
$000
2,905,509
111,020
213,684
3,230,213
2,593,330
171,805
140,374
2,905,509
Below is a list of the top 20 freehold investment properties ranked in order of fair value as at 30 June 2022:
Property
Last independent
valuation date
Independent
valuation at last
valuation date
($000)
Fair value
30 June 2022
($000)
Cap rate
30 June 2022
%
Penrith Homemaker Centre — Harvey Norman® / Domayne®
31 Dec 2021
240,000
241,263
Springvale Homemaker Centre — Harvey Norman® / Domayne®
30 Jun 2022
170,000
170,000
5.50%
5.75%
Maroochydore Homemaker Centre — Harvey Norman® /
Domayne® / Joyce Mayne®
30 Jun 2021
98,000
103,600
6.50%
Watergardens Homeplace — Harvey Norman® (a)
N/A
N/A
102,546
Alexandria Complex — Domayne®
30 Jun 2022
81,200
Toowoomba Centre Complex — Harvey Norman®
31 Dec 2021
71,000
Silverwater Warehouse Complex
31 Dec 2020
68,000
The Cambridge Park Centre — Harvey Norman®
31 Dec 2020
61,300
Perth City West Complex — Harvey Norman® / Domayne® (b)
30 Jun 2022
61,250
Albury Homemaker Centre — Harvey Norman®
30 Jun 2021
54,000
Auburn Complex — Domayne® / Harvey Norman®
30 Jun 2022
55,000
Auburn Flagship Store Complex — Harvey Norman®
30 Jun 2021
51,000
Maribyrnong Complex — Harvey Norman®
31 Dec 2020
50,000
Rutherford (Maitland) Complex — Harvey Norman® / Domayne®
31 Dec 2020
47,300
Browns Plains Homemaker Centre — Harvey Norman®
31 Dec 2020
46,000
Devonport Homemaker Centre — Harvey Norman®
31 Dec 2021
47,500
Alexandria Harvey Norman Warehouse Complex
31 Dec 2021
Macgregor Homemaker Centre — Harvey Norman® (c)
N/A
46,600
N/A
Munno Para Shopping City — Harvey Norman®
31 Dec 2020
42,200
Tweed Heads Homemakers Centre — Harvey Norman®
31 Dec 2021
43,500
81,200
71,158
71,000
64,953
61,250
57,900
55,000
51,093
50,156
49,025
47,561
47,540
46,722
45,797
44,119
43,589
N/A
4.25%
7.00%
6.25%
7.50%
6.00%
7.00%
4.75%
5.75%
6.50%
7.25%
7.25%
6.25%
4.75%
N/A
7.25%
6.50%
TOTAL TOP 20 INVESTMENT PROPERTIES
1,505,472*
The fair value of the top 20 freehold investment properties amounted to $1.51 billion as at 30 June 2022, representing 46.6% of the
total fair value of freehold investment properties of $3.23 billion. The fair value of the remaining 117 freehold investment properties as
at 30 June 2022 totalled $1.72 billion, representing 53.4% of the portfolio as at balance date.
(a)
(b)
(c)
The investment property was acquired in April 2021.
Balances represent the consolidated entity’s 50% ownership interest in the investment property.
The property is under construction and less than 75% complete. No external valuation is required per valuation methodologies
on page 118 of this report.
* The difference between the fair value of the freehold investment property as at 30 June 2022 and the independent valuation as at
the last valuation date mainly relates to Internal Valuations and Reviews and capital additions in respect of the freehold investment
property between the periods.
ANNUAL REPORT JUNE 2022
117
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
14 Investment Properties: Freehold (continued)
Valuation of Freehold Investment Properties
Each freehold investment property, which is property held to
earn rentals and/or for capital appreciation is initially measured
at cost, including transaction costs, and subsequently valued at
fair value. Fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Gains
and losses arising from changes in fair value of freehold
investment properties are recognised in the income statement
in the period in which they arise. An investment property is
derecognised when the property has been disposed of. 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.
Each freehold investment property is the subject of a lease or
licence in favour of independent third parties, including Harvey
Norman®, Domayne® and Joyce Mayne® franchisees.
Valuation Approach:
The Board of Directors make an assessment of the fair value of
each freehold investment property as at balance date. This
assessment is informed by:
•
the information and advice contained in the last
independent external valuation report for that property
prepared by an external, professionally qualified valuer
who holds a recognised relevant professional
qualification and has specialised expertise in the
property being valued (Independent Valuer);
•
•
•
the information and advice contained in the last internal
valuation report for that property (which was informed
by the immediately preceding independent external
valuation report for that property);
the last management review for that property; and
other information and professional or expert advice
given or prepared by reliable and competent persons in
relation to that property.
•
•
•
•
•
Internal Valuations and Reviews
Freehold investment properties not independently externally
valued as at balance date are subject to an internal valuation or
a management review, performed by persons qualified by rele-
vant education, training or experience. Each internal valuation
and management review is informed by the last independent
external valuation and reliable market evidence. For the cur-
rent year, thirteen (13) freehold investment properties had
been affected by the same factors as the properties which had
been independently externally valued. As a consequence, in-
ternal valuations for these thirteen (13) properties were under-
taken to determine the effect of these factors.
Valuation Methodologies:
The large-format retail market in Australia continues to be a
resilient and buoyant asset class providing an attractive return
on investment relative to alternative asset classes since the
commencement of the pandemic. This has been underpinned
by the strength of the Home & Lifestyle retail category
throughout FY22 and robust sales volumes and historically low
yields reported by the large-format property market. Investor
competitiveness for scarce, well-located large-format property
investments, with strong national lease covenants and lease
tenure, has also contributed to the increase in large-format
retail values.
The fair value in respect of each freehold 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 of the property
the age and condition of improvements
the quality of construction
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
the tenure of franchisees and external tenants
adaptive reuse of buildings
non-reliance on turnover rent
other specific circumstances of the property
Independent External Valuations
The entire freehold investment property portfolio in Australia is
valued by an Independent Valuer at least once every two (2)
years on a rotational basis.
For the 2022 financial year, sixty-eight (68) valuations of free-
hold investment properties were performed by an Independent
Valuer: thirty-two (32) at 31 December 2021 and thirty-six (36)
at 30 June 2022. This represents a total of 49.6% of
the number of freehold investment properties independently
externally valued this year, and 52.2% in terms of the fair value
of the freehold investment property portfolio in Australia
subject to independent external valuation.
As a secondary method, a discounted cash flow valuation or a
direct sale comparison valuation is undertaken as a check
method.
The fair value of a freehold investment property under
construction is determined using the income capitalisation
method by estimating the fair value of the property as at the
relevant completion date less the remaining costs to complete
and allowances for associated risk. As a secondary method, a
discounted cash flow valuation is undertaken. An internal
valuation or management review is performed 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. Normally, the direct sale comparison method of
valuation is used for properties held for future development.
118
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
14 Investment Properties: Freehold (continued)
(a) Reconciliation of investment properties: freehold
New Zealand
Ireland
Australia
Total
Retail
$000
Ware-
house
Retail
$000
Retail
Warehouse
Office
$000
$000
$000
2022
$000
2021
$000
Opening balance
6,501
4,793
- 2,599,604
255,860
38,751
2,905,509
2,593,330
Additions
Disposals
Fair value adjustments*
-
-
-
-
-
-
Depreciation for the year
(43)
(5)
Net foreign currency differences
(199)
(148)
28,970
83,357
2,970
184
115,481
174,242
-
-
-
-
(3,769)
(297)
-
(4,066)
(2,334)
177,587
31,692
4,405
213,684
140,374
-
-
-
-
-
-
(48)
(347)
(66)
(37)
Closing balance
6,259
4,640
28,970 2,856,779
290,225
43,340
3,230,213
2,905,509
* Fair value adjustments totalling $213.68 million for the year ended 30 June 2022 are included in other income (2021: $140.37 million).
(b) Fair value measurement, valuation techniques and inputs
Class of
property
Fair value
hierarchy*
Fair value
30 June 2022
$000
Valuation Technique
Key
unobservable inputs
2022 Range of
unobservable
inputs
2021 Range of
unobservable
inputs
Retail
Level 3
Metropolitan = 1,755,018
(Jun-21: 1,566,037)
Regional = 1,136,990
(Jun-21: 1,040,068)
Total = 2,892,008
(Jun-21: 2,606,105)
Income capitalisation
Discounted cash flow
Capitalisation Rate
- Metropolitan
- Regional
Terminal Yield
Discount Rate
4.3% - 9.3%
5.8% - 9.3%
4.0% - 8.0%
6.5% - 9.8%
4.5% - 9.0%
4.1% - 9.8%
5.0% - 9.0%
5.0% - 9.8%
Net market rent per sqm p.a
$70 - $326
$70 - $326
Warehouse
Level 3
294,865
(Jun-21: 260,653)
Direct sale comparison Price per sqm of lettable area
$710 - $5,664
$710 - $5,664
Income Capitalisation
Net market rent per sqm p.a
$69 - $160
$69 - $160
Capitalisation Rate
4.8% - 9.5%
5.8% - 9.5%
Discounted cash flow
Terminal Yield
Discount Rate
5.0% - 7.0%
6.0% - 8.3%
5.5% - 7.3%
6.3% - 8.5%
Direct sale comparison Price per sqm of lettable area
$709 - $3,151
$709 - $3,018
Income capitalisation
Net market rent per sqm p.a
$115 - $233
$115 - $385
Capitalisation Rate
6.5% - 8.0%
7.0% - 8.8%
Office
Level 3
43,340
(Jun-21: 38,751)
Discounted cash flow
Terminal Yield
Discount Rate
6.5%
7.0%
7.3%
7.0%
Direct sale comparison Price per sqm of lettable area
$1,676 - $3,545
$1,442 - $4,793
TOTAL
3,230,213
(Jun-21: 2,905,509)
* Level 3 - fair value is estimated using inputs that are not based on observable market data.
ANNUAL REPORT JUNE 2022
119
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
14 Investment Properties: Freehold (continued)
(b) Fair value measurement, valuation techniques and inputs (continued)
The income capitalisation method of valuation was primarily used for the valuation of all Retail, Warehouse and Office investment
properties in Australia and the Retail and Warehouse 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 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 freehold owner-occupied properties detailed in
Note 12(b).
(c) 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
Capitalisation rate
Terminal Yield
Discount rate
Price per square metre
Increase
Decrease
Decrease
Decrease
Increase
Decrease
Increase
Increase
Increase
Decrease
(d) 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 as disclosed in Note 3.
Revenues is rent and outgoings received from investment properties of $231.31 million for the year ended 30 June 2022 (2021:
$223.15 million). Operating expenses, including rates and taxes and repairs and maintenance, recognised in the income statement in
relation to investment properties amounted to $55.43 million for the year ended 30 June 2022 (2021: $52.34 million).
120
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED
June 2022
$000
June 2021
$000
15 Investment Properties (Leasehold): Right-Of-Use Assets
Opening balance at beginning of the year, at fair value
New and modified leases
Leases exited
Net decrease from fair value re-measurements
Closing balance at end of the year, at fair value
620,461
151,728
(9,031)
(87,558)
675,600
621,903
85,659
(13,025)
(74,076)
620,461
(a) Fair value measurement, valuation techniques and inputs
Class of property
Fair value
hierarchy*
Fair value
30 June 2022
$000
Valuation
Technique
Key
unobservable inputs
2022 Range of
unobservable inputs
2021 Range of
unobservable inputs
Retail
Level 3
487,593
(Jun-21: 469,623)
Discounted
cash flow
Warehouse
Level 3
188,007
(Jun-21: 150,838)
Discounted
cash flow
TOTAL
675,600
(Jun-21: 620,461)
Discount rate
4.69% to 5.48%
2.96% to 5.21%
Market rental ranges:
- Gross
- Net
$50—$575 per sqm
$80—$265 per sqm
$64—$851 per sqm
$21—$453 per sqm
Discount rate
4.69% to 5.48%
2.96% to 5.21%
Market rental ranges:
- Gross
- Net
$25-$750 per sqm
$30-$190 per sqm
$29-$500 per sqm
$39-$300 per sqm
* Level 3 - fair value is estimated using inputs that are not based on observable market data.
(b) Sensitivity information
Key unobservable inputs
Discount rate
Market rent ranges
Impact on fair value for significant
increase in input
Impact on fair value for significant
decrease in input
Decrease
Increase
Increase
Decrease
(c) Rent and outgoings received and operating expenses of leasehold investment properties
Included in rent and outgoings received from franchisees as disclosed in Note 3. Revenues is rent and outgoings received from
leasehold investment properties of $117.53 million for the year ended 30 June 2022 (2021: $115.19 million). Operating
expenses, excluding interest on lease liabilities and fair value re-measurements on leasehold investment properties: ROU Assets,
recognised in the income statement in relation to leasehold investment properties amounted to $27.73 million for the year ended
30 June 2022 (2021: $24.42 million).
ANNUAL REPORT JUNE 2022
121
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
15 Investment Properties (Leasehold): Right-Of-Use Assets (continued)
Investment Properties (Leasehold): Right-Of-Use Assets
Subsidiaries of Harvey Norman Holdings Limited (HNHL) enter into
leases of properties in Australia (each a Leasehold Investment
Property) with third party landlords. After entry into a lease with an
external landlord, the relevant subsidiary of HNHL grants a sub-lease or
licence to a Harvey Norman®, Domayne® and Joyce Mayne®
franchisee, to occupy an area of that Leasehold Investment Property.
3)
The adoption of AASB 16 Leases resulted in the recognition of a right-
of-use asset by the consolidated entity in respect of each subsidiary's
right to use each Leasehold Investment Property for the respective
lease term (each an IP Leasehold ROU Asset). As each IP Leasehold
ROU Asset meets the definition of investment property under AASB
140 Investment Property, the consolidated entity is required to
measure each IP Leasehold ROU Asset at fair value. The consolidated
entity has adopted the fair value model in AASB 140 and each IP
Leasehold ROU Asset is measured at fair value.
In respect of each lease of a Leasehold Investment Property, the
present value of the lease payments is determined and carried as a
lease liability and the fair value of the lessee's right to use the
Leasehold Investment Property over the lease term is recorded as an IP
Leasehold ROU Asset. Gains or losses arising from re-measurement of
the fair value of an IP Leasehold ROU Asset are included in the Income
Statement of the consolidated entity as a fair value increment or
decrement in the period in which they arise.
Valuation of Investment Properties (Leasehold): Right-Of-Use Assets
The directors make an assessment of the fair value of each IP
Leasehold ROU Asset as at balance date. Each IP Leasehold ROU
Asset is reviewed at least every 6 months. This review is undertaken by
persons qualified by relevant education, training or experience, with
the assistance of qualified management. As part of the review, an
independent, professionally qualified valuer who holds a recognised
relevant professional qualification and has relevant specialised
expertise (Leasehold Independent Valuer) is engaged to provide
independent verification of key observable inputs.
The re-measurement of an IP Leasehold ROU Asset to fair
value comprises the following:
1)
A reduction in the IP Leasehold ROU Asset to reflect the
decrease in its future value due to the usage of the asset during
the period, reflecting the passage of time and a reduction in
remaining lease tenure. This is recognised as a fair value
decrement in the Income Statement.
Re-measurement of the IP Leasehold ROU Asset at the
prevailing discount rate as at the reporting date. If the discount
rate at the end of the period is higher than the discount rate at
the beginning of the period, there will be a decrease in the value
2)
of the IP Leasehold ROU Asset and a corresponding fair value
decrement is recognised in the Income Statement. If the
discount rate at the end of the period is lower than the discount
rate at the beginning of the period, there will be an increase in
the value of the IP Leasehold ROU Asset and a corresponding
fair value increment is recognised in the Income Statement. The
discount rate used is determined using market data, information
on margins available to the consolidated entity, and other
adjustments appropriate as at the reporting date.
The Leasehold Independent Valuer provides independent
verification of key observable inputs including the current market
rent ranges, being the amount that could be exchanged
between knowledgeable, willing parties in an arm’s length
transaction, at each reporting date. If the current market rent
range increases, there may be an increase in the value of the IP
Leasehold ROU Asset and a corresponding fair value increment
may be recognised in the Income Statement. If the current
market rent range decreases, there may be a decrease in the
value of the IP Leasehold ROU Asset and a corresponding fair
value decrement may be recognised in the Income Statement.
The results and recommendations of the review and the information
and professional advice provided by the Independent Valuer are used
to inform the assessment of the fair value of each IP Leasehold ROU
Asset at balance date.
Discount rate
Investment properties (leasehold): right-of-use assets are
re-measured to fair value by using the prevailing discount rate as at the
reporting date which is determined by taking into account the
following:
•
External market based rates for a range of maturities as at the
reporting date;
•
•
The lending margins available to the consolidated entity; and
Other adjustments that may be made by market
participants over the lease term.
As at 30 June 2022, the discount rates used in re-measuring
investment properties (leasehold): right-of-use asses range from 4.69%
to 5.48% (2021: 2.96% to 5.21%).
Market rent ranges
As at each balance date, the Leasehold Independent Valuer provides
market rent ranges for each leasehold investment property, being the
amount that could be exchanged between knowledgeable, willing
parties in an arm’s length transaction at each reporting date. The
market rent ranges are used to assess whether future lease payments
are representative of what market participants would pay for a
particular asset over a similar term.
122
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
16 Trade and Other Payables
Trade and other creditors
Accruals
Total trade and other payables
17 Interest-Bearing Loans and Borrowings
Current Secured:
Bank overdraft (a)
Commercial bills payable (b)
Syndicated Facility Agreement (c)
Other short-term borrowings (d)
Current Unsecured:
Derivatives payable
Non-trade amounts owing to:
- Related parties
- Unrelated parties
Total interest-bearing loans and borrowings (current)
Non—Current
Syndicated Facility Agreement (c)
Other borrowings (d)
Total interest-bearing loans and borrowings (non-current)
CONSOLIDATED
June 2022
$000
June 2021
$000
258,965
99,376
358,341
14,446
5,400
200,000
36,795
269,959
85,704
355,663
15,704
5,650
290,000
44,202
20
-
4,238
154
261,053
410,000
28,522
438,522
4,237
176
359,969
200,000
-
200,000
Bank Overdraft
(a)
The total bank overdraft of $14.45 million as at 30 June 2022 (2021: $15.70 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 17(c).
Commercial bills payable
(b)
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 17(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 17(c)) under the Syndicated Facility Agreement, or after any annual review date.
Syndicated Facility Agreement
(c)
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 (the Facility) with certain banks (Financiers and each a Financier). On 26 November 2018,
the Amending Deed (No. 6) to the Facility was executed with the effect of extending the repayment date of Tranche B of the Facility total-
ling $240 million to 4 December 2021. On 29 November 2019, the Amending Deed (No. 7) to the Facility was executed with the effect of
extending the repayment date of Tranche A1 of the Facility totalling $170 million to 4 December 2021 and Tranche A2 of the Facility total-
ling $200 million to 4 December 2022. On 26 November 2020, Tranche A3 of the Facility totalling $200 million was cancelled, reducing
the aggregate available facility of the Syndicated Facility Agreement from $810 million to $610 million.
On 30 November 2021, the Amending Deed (No. 8) to the Facility was executed with the effect of extending the repayment date of
Tranche A1 of the Facility totalling $170 million to 4 December 2026 and Tranche B of the Facility totalling $240 million to 4 December
2025.
ANNUAL REPORT JUNE 2022
123
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
17 Interest-Bearing Loans and Borrowings (continued)
(c) Syndicated Facility Agreement (continued)
The utilised amount of the Facility as at 30 June 2022 was $610 million, repayable as set out below, with $200 million
classified as current interest bearing loans and borrowings and $410 million of which was classified as non-current interest-bearing
loans and borrowings.
This Facility is secured by:
•
a fixed and floating charge granted by the Company and each of the Guarantors in favour of a security trustee for the
Financiers; and
•
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 2026 ($170 million utilised at 30 June 2022);
•
•
•
in respect of Tranche A2 totalling $200 million, on 4 December 2022 ($200 million utilised at 30 June 2022); and
in respect of Tranche B totalling $240 million, on 4 December 2025 ($240 million utilised at 30 June 2022);
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:
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 Facility, 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.
The Company has not received notice of the occurrence of any Relevant Event from any Financier. During FY22 and FY21, there
were no defaults or breaches on any of the interest-bearing loans and borrowings referred to in this note.
(d) Other Short-Term Borrowings
On 28 April 2022, a subsidiary of the Company entered into a Floating Rate Loan Facility with the ANZ Bank with a total limit of
$120 million, repayable on 31 October 2022. As at 30 June 2022, this facility was not utilised. In addition, a short term facility with
a limit of $10.4 million in Singapore secured by the securities pursuant to the Syndicated Facility Agreement remains unutilised as
at 30 June 2022.
Of the total other short-term borrowings of $36.80 million (2021: $44.20 million):
•
a total of $6.80 million (2021: nil) in Ireland is secured by fixed and floating charges over the property at Eastgate Retail Park
in Little Island, Cork, repayable by 30 June 2023. The total facility limit is $35.33 million and was fully utilised as at 30 June
2022 with $6.80 million classified as current borrowings, with the remaining $28.52 million classified as non-current
borrowings.
a total of $26.73 million (2021: $29.11 million) in Slovenia and Croatia, with a maturity date of 4 December 2022, is secured
by the securities given pursuant to the Syndicated Facility Agreement and has a total facility limit of $51.61 million as at 30
June 2022.
a total of $2.61 million (2021: $4.45 million) relates to a revolving credit facility with ANZ in Singapore and has a total facility
limit of $5.22 million as at 30 June 2022.
a total of $0.66 million (2021: $0.80 million) relates to a revolving credit facility with AmBank (M) Berhad in Malaysia, subject
to periodic review and otherwise repayable on demand, and has a total facility limit of $0.99 million as at 30 June 2022.
•
•
•
Defaults and Breaches
(e)
The Company has not received notice of the occurrence of any Relevant Event from any Financier. During the 2022 and 2021
financial years, there were no defaults or breaches on any of the interest-bearing loans and borrowings referred to in this note.
124
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
17 Interest-Bearing Loans and Borrowings (continued)
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 attributa-
ble transaction costs.
The consolidated entity’s financial liabilities include trade and other payables, derivative payable and loans and borrowings including
bank overdrafts, commercial bills payable, Syndicated Facility Agreement, short-term borrowings, non-trade amounts owing to related
parties and unrelated parties.
After initial recognition, loans and borrowings are subsequently measured at amortised cost. Gains and losses are recognised in the
income statement when the liabilities are derecognised.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
18 Financing Facilities Available
At balance date, the following financing facilities had been negotiated and were available.
CONSOLIDATED
June 2022
$000
June 2021
$000
Total facilities:
Bank overdraft
Other borrowings
Commercial bank bills
Syndicated Facility
Total Available Facilities
Facilities used at reporting date:
Bank overdraft
Other borrowings (current)
Other borrowings (non-current)
Commercial bank bills (current)
Syndicated Facility (current)
Syndicated Facility (non-current)
Total Used Facilities
Facilities unused at reporting date:
Bank overdraft
Other borrowings
Syndicated Facility
Total Unused Facilities
45,834
223,573
5,400
610,000
884,807
14,446
36,795
28,522
5,400
200,000
410,000
695,163
31,388
158,256
-
189,644
48,415
85,452
5,650
610,000
749,517
15,704
44,202
-
5,650
290,000
200,000
555,556
32,711
41,250
120,000
193,961
Refer to Note 17. Interest-Bearing Loans and Borrowings for details regarding the security provided by the consolidated entity
over each of the financing facilities disclosed above.
ANNUAL REPORT JUNE 2022
125
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED
June 2022
$000
June 2021
$000
19 Lease Liabilities
Lease liabilities at beginning of the year
1,178,665
1,173,087
New, modified and exited leases
Interest on lease liabilities
Lease payments
Foreign currency
Lease liabilities at the end of the year
Disclosed as:
Lease liabilities (current)
Lease liabilities (non-current)
Total lease liabilities
(b) The geographical split of lease liabilities is as follows:
Leases of owner-occupied properties and plant and equipment assets:
Australia
New Zealand
Singapore & Malaysia
Slovenia & Croatia
Ireland & Northern Ireland
Total lease liabilities of leases of owner occupied properties and plant and
equipment assets
Leases of properties sub-leased to external parties:
Australia
Total lease liabilities of leases of sub-leased to external parties
163,999
41,738
(179,353)
(421)
1,204,628
139,288
1,065,340
1,204,628
41,108
136,175
164,229
16,871
127,222
485,605
719,023
719,023
150,809
40,941
(171,790)
(14,382)
1,178,665
135,389
1,043,276
1,178,665
46,190
130,554
190,123
21,272
143,410
531,549
647,116
647,116
Total lease liabilities
1,204,628
1,178,665
(c) The maturity profile of undiscounted lease liabilities as at 30 June 2022 is as follows:
Less than 1 year
1 to 2 years
2 to 5 years
Over 5 years
181,083
171,699
452,210
646,458
174,665
166,888
440,412
661,850
Total undiscounted lease liabilities
1,451,450
1,443,815
(d)
Commitments for leases not yet commenced
The consolidated entity had committed to leases which had not yet commenced as at 30 June 2022. These leases are not
included in the calculation of the consolidated entity’s lease liabilities. The estimated undiscounted lease liabilities for these
leases are $14.15 million (2021: $0.78 million).
126
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
19 Lease Liabilities (continued)
Short-term leases and lease of low-value assets
The consolidated entity applies a recognition exemption to leases
that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option. It also
applies a recognition exemption to leases that are considered of
low value.
Lease liabilities
At the commencement of a lease, the consolidated entity
recognises lease liabilities measured at the present value of lease
payments to be made over the lease term. The lease payments
include fixed payments (including in-substance fixed payments)
less any lease incentives receivable and amounts expected to be
paid under residual value guarantees. In determining the lease
term, the consolidated entity considers all facts and circumstances
that create an economic incentive to exercise a renewal option, or
not to exercise a termination option. Renewal options (or periods
after termination options) are only included in the lease term if the
lease is reasonably certain to be extended (or not terminated).
Outgoings and other variable lease payments that do not depend
on an index or a rate are recognised as incurred.
In calculating the present value of lease payments, the
consolidated entity uses the incremental borrowing rate at the
lease commencement date if the interest rate implicit in the lease is
not readily determinable. After the commencement date, the
amount of lease liabilities is increased to reflect the accretion of
interest and reduced for the lease payments made. In addition, the
carrying amount of lease liabilities is remeasured if there is a
change in the lease term, a change in the in-substance fixed lease
payments or a change in the assessment to purchase the
underlying asset.
Incremental borrowing rate
The incremental borrowing rate is derived by reference to the rate
at which a lessee would borrow to acquire the underlying asset,
repaying over a similar term to the lease term. If the interest rate in
the lease is not readily determinable, the consolidated entity
determines the incremental borrowing rate for each lease by taking
into account the following:
•
external market based rate for a similar term to the lease
term at the lease commencement date;
•
•
the lending margins available to the consolidated entity for
the respective jurisdiction at the lease commencement
date; and
other adjustments that may be made by market participants
over the lease term.
As at 30 June 2022, the incremental borrowing rates applied by
the consolidated entity were as follows:
Location
Australia
New Zealand
Singapore & Malaysia
Slovenia & Croatia
Ireland & Northern Ireland
Weighted average
incremental
borrowing rate (%)
3.89%
3.26%
2.98%
3.31%
3.64%
Lease term
The lease term is determined at lease commencement or at the
effective date of lease modification, and is reviewed if a significant
change in circumstances occurs. In determining the lease term, the
consolidated entity considers all facts and circumstances that
create an economic incentive to exercise a renewal option, or not
to exercise a termination option. Renewal options (or periods after
termination options) are only included in the lease term if the lease
is reasonably certain to be extended (or not terminated).
As at 30 June 2022, the lease terms adopted by the consolidated
entity were as follows:
Location
Australia
New Zealand
Singapore & Malaysia
Slovenia & Croatia
Ireland & Northern Ireland
Weighted average
lease term
(years)
10.65
12.66
5.08
8.53
8.06
As at 30 June 2022, the consolidated entity have assessed that a
number of options do not meet the criteria of ‘reasonably certain’
and therefore the lease payments relating to these options have
not been included in the lease liability. The undiscounted lease
payments for these excluded options would amount to $84.08
million (2021: $33.62 million).
ANNUAL REPORT JUNE 2022
127
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
20 Other Liabilities
Total unearned revenue (current)
Total unearned revenue (non-current)
21 Provisions
Employee entitlements
Total provisions (current)
Employee entitlements
Lease make good
Total provisions (non-current)
CONSOLIDATED
June 2022
$000
June 2021
$000
126,236
1,539
37,059
37,059
2,546
7,715
10,261
108,847
823
37,162
37,162
2,380
7,443
9,823
Provision for employee entitlements
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 that are 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 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. Expenses for non-accumulating sick leave
are recognised when the leave is taken and are measured at the rates paid or payable.
Provision for lease make good
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.
22 Contributed Equity
Ordinary shares
Total contributed equity
Movements in ordinary shares on issue
Balance at 1 July 2021
Issue of shares
Balance at end of the year
717,925
717,925
717,925
717,925
June 2022
No. of Shares
June 2022
$000
1,246,006,654
-
1,246,006,654
717,925
-
717,925
Number of ordinary shares issued and fully paid as at 30 June 2022 was 1,246,006,654 (2021: 1,246,006,654)
Ordinary shares — terms and conditions
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.
128
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
22 Contributed Equity (continued)
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.
23 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 on ordinary shares:
Final fully-franked dividend for 2021: 15.0 cents (2020: 18.0 cents)
Interim fully-franked dividend for 2022: 20.0 cents (2021: 20.0 cents)
Total dividends paid
CONSOLIDATED
June 2022
$000
June 2021
$000
2,879,511
811,527
(436,102)
3,254,936
186,901
249,201
436,102
2,511,580
841,414
(473,483)
2,879,511
224,281
249,202
473,483
The final dividend of $186.90 million, fully franked, for the year ended 30 June 2021 was paid on 15 November 2021.
The interim dividend of 20.0 cents per share, totalling $249.20 million fully-franked, for the year ended 30 June 2022 was paid on
2 May 2022.
The final dividend of 17.5 cents per share totalling $218.05 million, fully franked, for the year ended 30 June 2022 will be paid on
14 November 2022 to shareholders registered at the close of business on 17 October 2022. 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 subsequent financial years are:
- franking account balance as at the end of the financial year at 30%
- 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 the proposed
final dividend
Amount of franking credits available for future reporting years
24 Non-Controlling Interests
Interest in:
- Ordinary shares
- Reserves
- Retained earnings
Total non-controlling interests
553,700
49,284
(93,450)
509,534
1,091
14,478
17,524
33,093
455,197
122,596
(80,100)
497,693
2,591
12,716
12,883
28,190
ANNUAL REPORT JUNE 2022
129
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
25 Reserves
CONSOLIDATED $000
Asset
Revaluation
Reserve
Foreign
Currency
Translation
Reserve
FVOCI
Reserve
Cash Flow
Hedge
Reserve
Employee
Equity
Benefits
Reserve
Acquisition
Reserve
Total
At 1 July 2021
208,646
42,051
22,574
(3)
10,399
(16,274)
267,393
Revaluation of land and buildings
Tax effect of revaluation of land
and buildings
Currency translation differences
Unrealised loss on financial assets
at fair value through other
comprehensive income
Reverse expired or realised cash
flow hedge reserves
Net gain on forward foreign
exchange contracts
Tax effect on net gain on forward
foreign exchange contracts
Cost of share based payments
Utilisation of employee equity
benefits reserve
41,311
(4,509)
-
-
-
-
-
-
-
-
-
(14,479)
-
-
-
-
-
-
-
-
-
(2,084)
-
-
-
-
-
-
-
-
3
19
(6)
-
-
-
-
-
-
-
-
-
3,297
(2,775)
-
-
-
-
-
-
-
-
-
41,311
(4,509)
(14,479)
(2,084)
3
19
(6)
3,297
(2,775)
At 30 June 2022
245,448
27,572
20,490
13
10,921
(16,274)
288,170
At 1 July 2020
158,608
56,941
9,919
(35)
10,005
(18,601)
216,837
Revaluation of land and buildings
Tax effect of revaluation of land
and buildings
Currency translation differences
Unrealised gain on financial assets
at fair value through other
comprehensive income
Reverse expired or realised cash
flow hedge reserves
Net loss on forward foreign ex-
change contracts
Tax effect on net loss on forward
foreign exchange contracts
Cost of share based payments
Utilisation of employee equity
benefits reserve
Sale of a controlled entity
55,616
(5,578)
-
-
-
-
-
-
-
-
-
-
(14,890)
-
-
-
-
-
-
-
-
-
-
12,655
-
-
-
-
-
-
-
-
-
-
35
(4)
1
-
-
-
-
-
-
-
-
-
-
1,453
(1,059)
-
-
-
-
-
-
-
-
-
55,616
(5,578)
(14,890)
12,655
35
(4)
1
1,453
(1,059)
-
2,327
2,327
At 30 June 2021
208,646
42,051
22,574
(3)
10,399
(16,274)
267,393
130
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
25 Reserves (continued)
Asset revaluation reserve
Any revaluation increment arising from revaluation of freehold owner-occupied properties is recorded in other comprehensive income
(OCI) and credited to the asset revaluation reserve in equity. However, to the extent that it reverses a revaluation decrement of the same
asset previously recognised in the income statement, the increase is recognised in the income statement. Any revaluation decrement is
recognised in the income statement, except to the extent that it offsets a previous increment of the same asset in the asset revaluation
reserve.
Foreign currency translation reserve
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 OCI in the foreign currency translation
reserve.
Fair Value through Other Comprehensive Income (FVOCI) Reserve
The consolidated entity elected to classify some non-current equity investments as equity instruments designated at fair value through
other comprehensive income. The fair value changes on the non-current equity investments are recorded in OCI in the FVOCI reserve.
Cash Flow Hedge Reserve
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 foreign currency contracts is recognised as other expense in the income
statement. The effective portion of the gain or loss on the hedging instrument is recognised in OCI in the cash flow hedge reserve.
Employee equity benefits reserve
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. Further disclosure relating to equity-settled transactions is also
provided in the Remuneration Report, Note 4. Expenses and Losses and Note 29. Employee Benefits.
Acquisition Reserve
Changes in the consolidated entity’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity
transactions. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the
consideration paid or received shall be recognised in the acquisition reserve.
Equity-settled transactions
The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity in-
struments at the date when they are granted by using an appropriate valuation model.
ANNUAL REPORT JUNE 2022
131
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED
June 2022
$000
June 2021
$000
26 Cash and Cash Equivalents
Reconciliation to the Statement of Cash Flows
(a)
Cash and cash equivalents comprise the following:
Cash at bank and on hand
Short-term money market deposits
Bank overdraft (refer to Note 17)
Cash and cash equivalents
(b) Reconciliation of profit after income tax to net operating cash flows
Profit after tax
Adjustments for non-cash items:
Net foreign exchange (gain) / loss
Allowance for expected credit loss
Share of net profit from joint venture entities
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Fair value re-measurement of investment properties (leasehold): ROU assets
Amortisation
Impairment of ROU assets
Gain on exited/disposed leasehold ROU assets and lease liabilities
155,158
93,646
248,804
(14,446)
234,358
206,971
57,460
264,431
(15,704)
248,727
817,879
846,845
(192)
703
(8,961)
69,075
65,870
87,558
21,460
2,148
(3,428)
268
289
(8,320)
67,114
62,908
74,076
20,296
-
-
Revaluation of freehold investment properties
(213,679)
(140,374)
Executive remuneration expenses
Profit / (loss) on disposal and sale of property, plant and equipment and the
revaluation of listed securities
Changes in assets and liabilities:
(Increase)/decrease in assets:
Receivables
Inventories
Other assets
Increase/(decrease) in liabilities:
Payables and other current liabilities
Income tax payable
Provisions
Net cash flows from operating activities
7,326
4,337
(140,755)
(44,371)
(14,687)
29,075
(80,201)
(1,857)
597,300
5,648
(8,397)
(407,714)
(90,162)
(5,299)
50,916
80,472
(4,697)
543,869
Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash at bank and on hand and short-term highly liquid
deposits with a maturity of three months or less, that are readily convertible to a known amount of cash and subject to an insignificant
risk of changes in value. 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 in the statement of financial position.
132
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED
June 2022
$000
June 2021
$000
27 Investments in Joint Venture Entities
Total investments accounted for using the equity method
1,502
1,321
Noarlunga (Shopping complex)
Perth City West (Shopping complex)
Warrawong King St (Shopping complex) (a)
Dubbo (Shopping complex)
Bundaberg (Land held for investment)
Gepps Cross (Shopping complex)
QCV (Miners residential complex) (b)
Other
Ownership interest
Contribution to Profit / (Loss)
Before Tax
June 2022
%
June 2021
%
June 2022
$000
June 2021
$000
50%
50%
62.5%
50%
50%
50%
50%
50%
50%
50%
62.5%
50%
50%
50%
50%
50%
1,698
2,446
1,008
725
-
3,074
10
-
8,961
1,500
2,238
1,056
692
(205)
3,028
13
(2)
8,320
(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) A finance facility from ANZ for the amount of $5.15 million plus interest and costs, with a maturity date of 29 July
2022. On 29 July 2022, the maturity date of this finance facility from ANZ was extended to 31 January 2023.
(ii) Finance facilities from Network Consumer Finance Pty Limited (“NCF”), a wholly-owned subsidiary of HNHL, for the
amount of $26.47 million (2021: $31.89 million) plus interest and costs, subject to bi-annual review.
Investments 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 investments in associates and joint ventures of the consolidated entity 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 its 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.
ANNUAL REPORT JUNE 2022
133
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
28 Assets Held for Sale
As at 30 June 2022, the assets held for sale balance of $12.10 million (2021: $12.66 million) represents the carrying amount of a
warehouse in Singapore that is currently held for sale.
Assets held for sale
The consolidated entity classifies assets as held for sale if their carrying amounts will be recovered principally through a sale transaction
rather than through continuing use. Assets classified as held for sale are measured at the lower of their carrying amount and fair value
less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal of an asset, excluding finance costs and
income tax expense. The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset is
available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that signifi-
cant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the plan to sell
the asset and the sale expected to be completed within one year from the date of the classification. Property, plant and equipment and
intangible assets are not depreciated or amortised once classified as held for sale.
29 Employee Benefits
The aggregate employee benefit liability was comprised of:
Accrued wages, salaries and on-costs
Provisions (Current—Note 21)
Provisions (Non-current—Note 21)
Total employee benefit provisions
CONSOLIDATED
June 2022
$000
June 2021
$000
24,192
37,059
2,546
63,797
24,288
37,162
2,380
63,830
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.
Performance rights
At balance date, the performance rights in the table below were outstanding and vested (or able to be exercised) by, or for the
benefit of, directors of Harvey Norman Holdings Limited. Refer to Table 4. Performance Rights of Key Management Personnel for
the year ended 30 June 2022 on page 57 of this report for further information.
Number of Performance Rights
Outstanding
Number of Performance Rights Vested
Grant date
Last Exercise Date
2022
01/12/2017
30/06/2023
04/12/2018
30/06/2024
02/12/2019
30/06/2025
04/12/2020
30/06/2026
30/11/2021
31/10/2026
-
-
549,500
549,500
914,000
2021
-
549,500
549,500
549,500
-
2022
-
549,500
-
-
-
2021
226,400
-
-
-
-
2,013,000
1,648,500
549,500
226,400
134
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
30 Remuneration of Auditors
Fees to Ernst & Young Australia:
Audit or review of financial reports
Tax services
Consulting services
Total payable to Ernst & Young Australia
Fees to overseas member firms of Ernst & Young Australia:
Audit or review of financial reports
Tax services
Consulting services
CONSOLIDATED
June 2022
$
June 2021
$
1,393,689
168,600
121,160
1,683,449
878,417
232,365
32,927
1,346,588
178,800
-
1,525,388
980,660
218,776
14,778
Total payable to overseas member firms of Ernst & Young Australia
1,143,709
1,214,214
Total remuneration payable to Ernst & Young
2,827,158
2,739,602
31 Key Management Personnel
(a) Details of Key Management Personnel
Title
Senior Executives
Title
Executive Chairman
Thomas James Scott General Manager — Property
Directors
Gerald Harvey
Kay Lesley Page
John Evyn Slack-Smith
Executive Director and
Chief Executive Officer
Executive Director and
Chief Operating Officer
David Matthew Ackery
Executive Director
Chris Mentis
Executive Director and
Chief Financial Officer and
Company Secretary
Christopher Herbert Brown OAM Non-Executive Director
Michael John Harvey
Non-Executive Director
Gordon Ian Dingwall Chief Information Officer
Lachlan Roach
Emmanuel Hohlastos
General Manager —
Home Appliances (Resigned 19
November 2021)
General Manager — Audio Visual
(Resigned 30 November 2021)
General Manager —
Home Appliances (Appointed 1
December 2021)
Glen Gregory
General Manager —
Technology & Entertainment
Kenneth William Gunderson-
Briggs
Non-Executive Director (Independent)
Richard Beaini
Maurice John Craven
Non-Executive Director (Independent)
Luisa Catanzaro
Non-Executive Director (Independent)
Carene Myers
General Manager —
Audio Visual (appointed 8 April
2022)
General Manager —
Small Appliances (from 1 July
2021)
ANNUAL REPORT JUNE 2022
135
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED
June 2022
$
June 2021
$
31 Key Management Personnel (continued)
(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 (share-based payments)
Other—long service leave accrual
Other—termination benefit
13,107,159
324,651
2,249,723
95,211
36,447
13,380,900
305,816
2,032,255
99,564
33,985
Total compensation to Key Management Personnel
15,813,191
15,852,520
Refer to Tables 1 and 2 on pages 55 and 56 of this report 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) 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. The amount of receivables from related
parties at 30 June 2022 were $50,751,835 (30 June 2021: $57,846,269).
(ii) 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 30 June 2022 was $4,237,364 (30 June 2021:
$4,237,364).
Refer to information provided in Section 16. Other Transactions and Balances with Key Management Personnel and their Related
Parties in this report on page 60 for further information.
CONSOLIDATED
June 2022
$000
June 2021
$000
33 Commitment s
(a) Leases (the consolidated entity as a lessor):
Future minimum amounts receivable under non-cancellable operating leases are as follows:
Not later than one year
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
Between 4 and 5 years
Later than five years
Minimum lease receivable
120,630
112,714
78,765
64,122
44,459
30,786
42,380
381,142
76,610
58,548
42,330
30,590
44,847
365,639
136
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED
June 2022
$000
June 2021
$000
33 Commitments (continued)
The consolidated entity as lessor
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. The consolidated entity has entered into commercial leases in respect of its freehold property portfolio and motor
vehicles. All leases in the consolidated entity’s freehold property portfolio include a clause to enable upward revision of the rental
charge on an annual basis according to prevailing market conditions.
(b) 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
108,880
20,051
128,931
17,931
949
18,880
The consolidated entity had contractual obligations to purchase and refurbish property, plant and equipment and investment
properties of $128.93 million (2021: $18.88 million). The contractual obligations relating to joint venture entities for the year
ended 30 June 2022 was $8.04 million (2021: $5.96 million).
34 Contingent Liabilities
As at 30 June 2022, Harvey Norman Holdings Limited (the Company) and its wholly-owned subsidiaries have entered into the
following guarantees, however the probability of having to make a payment under these guarantees is considered remote:
Guarantees in the normal course of business relating to lease make-good obligations under certain operating lease
a)
contracts (with the exclusion of those lease make-good payments that are considered to be probable and recognised as a
provision in Note 21. Provisions); and
Indemnities to financial institutions to support bank guarantees in respect of the performance of contracts.
b)
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.
Contingent liabilities
The consolidated entity does not recognise liabilities that do not meet the recognition criteria as prescribed in AASB 137 Provisions,
Contingent Liabilities and Contingent Assets. Contingent liabilities are not recognised as liabilities if the possibility of a probable
outflow is considered remote as their existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain
future events not wholly within the control of the consolidated entity.
At each reporting date, the consolidated entity assesses whether an outflow of future economic benefits has become probable. If it
becomes probable that an outflow of future economic benefits will be required for an item previously dealt with as a contingent liability,
a provision is recognised in the financial statements of the period in which the change in probability occurs.
35 Financial Risk Management
(a) Financial Risk Management Objectives and Policies
The treasury function of the consolidated entity is responsible for the management of the following risks:
•
•
•
market risk;
credit risk; and
liquidity risk.
ANNUAL REPORT JUNE 2022
137
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
35 Financial Risk Management (continued)
Financial Risk Management Objectives and Policies (continued)
(a)
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 and equity investments at fair value. The consolidated entity manages its exposure to key
financial risks, such as interest rate and currency risk in accordance with the consolidated entity’s treasury policy which is
approved by the Board of Directors. The objective of the treasury 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, to manage the currency risks arising from the consolidated entity’s operations and its source of finance.
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;
ageing analyses and monitoring of specific credit allowances to manage credit risk; and
monitoring liquidity risk through the future rolling cash flow forecasts.
Market Risk
(b)
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.
Foreign Currency Risk Management
i)
Foreign currency risk refers to the risk that the value of financial instruments, recognised asset or liability will fluctuate due to
changes in foreign exchange 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 Croatian kuna.
The consolidated entity minimises its exposure to foreign currency risk by initially seeking contracts effectively denominated in the
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.
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
138
ANNUAL REPORT JUNE 2022
CONSOLIDATED
June 2022
$000
June 2021
$000
79,146
4,508
346
84,000
44,314
16,619
20
60,953
23,047
52,597
4,098
95
56,790
36,441
16,269
-
52,710
4,080
OPERATING AND FINANCIAL REVIEW (CONTINUED)
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
receivables from related entities and unrelated entities, finance lease receivables, bank overdraft, non-trade amounts owing to
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.
Fixed interest rate maturing in
Average interest rate
Principal sub-
ject to floating
interest rate
1 year or
less
Over 1 to
5 years
More than
5 years
Non-interest
bearing
30 June 2022
$000
$000
$000
$000
$000
Total
$000
Floating
Fixed
Cash
115,888
93,599
-
-
-
433
537
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
39,317
248,804
0.00% - 2.0% 0.14% - 2.60%
3,239
3,239
2,722
3,692
892,917
892,917
126,186
126,186
61,419
61,419
-
-
-
-
-
-
11.00%
-
-
-
Consumer
finance loans
Finance lease
receivables
Receivables from
franchisees
Trade receivables
Other financial
assets
Non-trade debts
receivables &
loans
48,407
46,524
18,391
2,274
1,460
117,056
2.30% - 5.19%
5.00% - 10.0%
Total
164,295
140,556
18,928
2,274
1,127,260 1,453,313
Syndicated
Facility and other
short-term
borrowings
Trade creditors
Other loans
675,317
-
4,238
Bank overdraft
14,446
Bills payable
5,400
Total
699,401
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
675,317
0.24% - 4.75%
358,341
358,341
-
174
4,412
1.15% - 2.29%
-
-
14,446
1.60%-2.00%
5,400
0.06%-0.25%
358,515 1,057,916
-
-
-
-
-
ANNUAL REPORT JUNE 2022
139
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
35 Financial Risk Management (continued)
(b) Market Risk (continued)
ii) Interest Rate Risk Management (continued)
Fixed interest rate maturing in
Average interest rate
Principal sub-
ject to floating
interest rate
1 year or
less
Over 1 to
5 years
More than
5 years
Non-interest
bearing
$000
$000
$000
$000
Total
$000
30 June 2021
Floating
Fixed
Cash
132,842
57,459
-
-
-
508
689
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
74,130
264,431 0.00% - 0.60% 0.17% - 3.65%
2,535
2,535
2,722
3,919
793,228
793,228
85,620
85,620
74,459
74,459
-
-
-
-
11.00%
-
-
-
Consumer
finance loans
Finance lease
receivables
Receivables from
franchisees
Trade receivables
Other financial
assets
Non-trade debts
receivables &
loans
55,409
13,161
26,708
3,921
1,737
100,936 2.30% - 4.15%
5.00% - 13.0%
Total
188,251
71,128
27,397
3,921
1,034,431 1,325,128
Syndicated
Facility and other
short-term
borrowings
Trade creditors
Other loans
534,202
-
4,237
Bank overdraft
15,704
Bills payable
5,650
Total
559,793
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
534,202 0.30% - 5.09%
355,663
355,663
-
176
4,413 1.15% - 1.25%
-
-
15,704
2.01%
5,650 0.06% - 0.14%
355,839
915,632
-
-
-
-
-
140
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
35 Financial Risk Management (continued)
(b) Market Risk (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 $30.80 million as at 30 June 2022 (2021: $41.28 million). The fair value of the equity investments publicly traded on the
NZX was $25.10 million as at 30 June 2022 (2021: $28.05 million).
iv) Sensitivity analysis
At the reporting date, the consolidated entity’s exposure to interest rate risk, foreign currency risk (after taking into consideration
the hedge of foreign currency payables) and equity price risk are not considered material.
(c)
Credit Risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to
a financial loss. 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, with a maximum
exposure equal to the carrying amount of these financial assets.
The consolidated entity manages the credit risk exposure by taking the following measures:
•
•
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;
Minimising concentrations of credit risk by undertaking transactions with a large number of debtors in various countries
and industries. Trade receivable balances are monitored on an ongoing basis.
Non-trade debts receivable are subject to regular monitoring and/or periodic impairment testing to ensure that they are
recoverable; and
Finance lease receivables are secured by assets with a value equal to, or in excess of, the counterparties’ obligation to the
consolidated entity.
•
•
•
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
CONSOLIDATED
June 2022
$000
June 2021
$000
1,075,160
20,732
14,984
3,703
4,219
1,118,798
919,136
21,433
14,843
3,308
3,041
961,761
As at 30 June 2022, other than the loss allowance recognised in relation to trade and non-trade debts receivables and consumer
finance loans as disclosed in Note 7, no financial assets were impaired.
ANNUAL REPORT JUNE 2022
141
OPERATING AND FINANCIAL REVIEW (CONTINUED)
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:
•
•
has readily accessible standby facilities and other funding arrangements in place; and
maintains instruments that are tradeable in highly liquid markets.
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 undiscount-
ed cash flows of the financial liabilities based on the earliest date on which the consolidated entity can be required to pay.
30 June 2022
Less than 1 year
$000
1 to 2 years
$000
2 to 5 years
$000
Over 5 years
$000
Total
$000
Non derivative financial assets
Cash and cash equivalents
Receivables from franchisees
Trade and other receivables
Other financial assets
Derivative financial assets
248,804
892,917
179,940
-
Forward currency contracts
346
-
-
-
-
14,271
41,273
-
-
-
-
-
-
4,080
61,073
248,804
892,917
239,564
61,073
-
346
Total financial assets
1,322,007
14,271
41,273
65,153
1,442,704
Non derivative financial liabilities
Trade and other payables
Interest-bearing loans and borrowings
Derivative financial liabilities
358,341
275,423
-
7,641
-
463,219
Forward currency contracts
20
-
-
Total financial liabilities
633,784
7,641
463,219
-
-
-
-
358,341
746,283
20
1,104,644
Net maturity
30 June 2021
Non derivative financial assets
Cash and cash equivalents
Receivables from franchisees
Trade and other receivables
Other financial assets
Derivative financial assets
688,223
6,630
(421,946)
65,153
338,060
Less than 1 year
$000
1 to 2 years
$000
2 to 5 years
$000
Over 5 years
$000
Total
$000
264,431
793,228
100,911
41,281
-
-
-
-
24,411
46,779
-
-
-
-
-
-
8,846
33,083
264,431
793,228
180,947
74,364
-
95
Forward currency contracts
95
Total financial assets
1,199,946
24,411
46,779
41,929
1,313,065
Non derivative financial liabilities
Trade and other payables
Interest-bearing loans and borrowings
Total financial liabilities
355,663
365,146
720,809
-
201,170
201,170
-
-
-
-
-
-
355,663
566,316
921,979
Net maturity
479,137
(176,759)
46,779
41,929
391,086
142
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
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).
The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised in the table below.
30 June 2022
Quoted market price (Level 1)
$000
Market observable inputs (Level 2)
$000
Financial assets
Listed investments
Forward currency contracts
Total financial assets
Financial liabilities
Forward currency contracts
Total financial liabilities
55,891
-
55,891
-
-
-
346
346
20
20
30 June 2021
Quoted market price (Level 1)
$000
Market observable inputs (Level 2)
$000
Financial assets
Listed investments
Forward currency contracts
Total financial assets
69,327
-
69,327
-
95
95
Total
$000
55,891
346
56,237
20
20
Total
$000
69,327
95
69,422
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.
ANNUAL REPORT JUNE 2022
143
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
35 Financial Risk Management (continued)
(f) Capital Risk Management Policy
The consolidated entity’s capital management policy objectives are to: create long-term sustainable value for shareholders;
maintain optimal returns to shareholders and benefits to other stakeholders; source the lowest cost available capital; and prevent
the adverse outcomes that can result from short-term decision making.
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 17, cash and
cash equivalents disclosed in Note 26(a) and equity attributable to equity holders of the parent, comprising ordinary shares,
retained profits and reserves as disclosed in Notes 22, 23 and 25 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 Capital Management Policy stipulates a net debt to
equity target for the consolidated entity of less than 50%. As at 30 June 2022, the consolidated entity had unused, available
financing facilities of $189.64 million out of total approved financing facilities of $884.81 million. The net debt to equity ratio as
at 30 June 2022 was 10.31% (30 June 2021: 7.47%).
Borrowings (refer to Note 17: Interest-Bearing Loans and Borrowings)
Less: Cash and Cash equivalents
Net Debt
Total equity (a)
Net debt to equity ratio
CONSOLIDATED
June 2022
$000
June 2021
$000
699,575
(248,804)
450,771
4,371,925
10.31%
559,969
(264,431)
295,538
3,956,330
7.47%
(a)
For the purpose of calculating the net debt to equity ratio, total equity excludes the negative acquisition reserve of $16.27
million (2021: $16.27 million), the right-of-use assets in respect of property, plant and equipment leases of $472.51
million (2021: $511.17 million) and investment properties (leasehold): right-of-use assets of $675.60 million
(2021: $620.46 million) and the lease liabilities recognised under AASB 16 Leases of $1,204.63 million
(2021: $1,178.67million).
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
Foreign currency contracts—held for trading
Foreign currency contracts—cash flow hedges
Current liabilities
Foreign currency contracts—held for trading
Foreign currency contracts—cash flow hedges
CONSOLIDATED
June 2022
$000
June 2021
$000
327
19
20
-
91
4
-
-
The consolidated entity has entered into forward currency contracts which are economic hedges but do not satisfy the
requirements of hedge accounting.
144
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
36 Derivative Financial Instruments (continued)
(a) Forward currency contracts-held for trading
Average Exchange Rate
2022
2021
CONSOLIDATED
Currency
2022
2021
Buy
$000
Sell
$000
Buy
$000
Sell
$000
Euro (0-12 months)
US Dollar (0-12 months)
Total
65.91
72.35
71.44
76.38
3,794
6,127
9,921
-
-
-
5,600
5,131
10,731
-
-
-
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 the income statement in the period they occur. The net fair value gain on forward currency contracts during
the year ended 30 June 2022 was $0.31 million for the consolidated entity (2021: net fair value gain of $0.09 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:
Average Exchange Rate
2022
2021
CONSOLIDATED
Currency
2022
2021
Buy
$000
Sell
$000
Buy
$000
Sell
$000
Euro (0-12 months)
66.16
63.27
4,580
US Dollar (0-12 months)
-
-
Total
-
4,580
-
-
-
3,386
-
3,386
-
-
-
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 2022, the hedges were
100% effective (2021: 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 other comprehensive income is
adjusted to the inventory account in the statement of financial position.
Movement in the forward currency contract cash flow hedge reserve:
Opening balance
Reverse expired or realised cash flow hedge reserves
Gain / (loss) recognised in other comprehensive income
Closing balance
ANNUAL REPORT JUNE 2022
CONSOLIDATED
June 2022
$000
June 2021
$000
Increase/(Decrease)
(3)
3
13
13
(35)
35
(3)
(3)
145
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
37 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
Generic Publications Pty Limited
Harvey Norman Big Buys Pty Limited
Harvey Norman Stores (N.Z.) Pty Limited
Network Consumer Finance Pty Limited
Sarsha Pty Limited
Yoogalu Pty Limited
•
•
•
•
The Statement of Financial Position and Income Statement for the Harvey Norman Holdings Limited Closed Group are as follows:
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 & Equipment
Property, Plant & Equipment: Right-of-use assets
Intangible assets
Total non-current assets
Total assets
Current Liabilities
Trade and other payables
Interest-bearing loans and borrowings
Lease liabilities
Income tax payable
Provisions
Other liabilities
Total current liabilities
Non-Current Liabilities
Interest-bearing loans and borrowings
Lease liabilities
Provisions
Deferred income tax liabilities
Total non-current liabilities
Total liabilities
NET ASSETS
June 2022
$000
June 2021
$000
111,103
1,047,828
153
255,147
280
28,471
131,576
867,574
41,296
235,981
258
25,045
1,442,982
1,301,730
1,894,719
1,712,820
330,645
40,462
177,099
56,984
2,499,909
3,942,891
164,343
205,554
28,346
51,048
32,341
50,560
532,192
410,000
175,813
2,252
115,387
703,452
299,666
32,215
175,641
60,557
2,280,899
3,582,629
106,984
295,833
27,181
139,639
32,475
49,340
651,452
200,000
174,911
2,121
111,402
488,434
1,235,644
2,707,247
1,139,886
2,442,743
146
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
37 Deed of Cross Guarantee (continued)
Equity
Contributed equity
Reserves
Retained profits
Non-controlling interests
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
Dividends provided for or paid
Retained earnings at the end of the year
38 Parent Entity Financial Information
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Contributed equity
Retained profits
Total Equity
Profit for the year
Total Comprehensive Income
June 2022
$000
June 2021
$000
717,925
11,887
1,977,859
(424)
2,707,247 ,
823,728
(121,760)
701,968
1,711,993
701,968
(436,102)
1,977,859
717,925
13,150
1,711,993
(325)
2,442,743
639,151
(147,885)
491,266
1,694,210
491,266
(473,483)
1,711,993
PARENT ENTITY
June 2022
$000
June 2021
$000
1
2,947,077
2,947,078
51,303
136,595
187,898
717,925
2,041,255
2,759,180
614,873
614,873
38
2,838,662
2,838,700
124,093
134,198
258,291
717,925
1,862,484
2,580,409
537,438
537,438
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
Generic Publications Pty Limited
Harvey Norman Big Buys 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.
ANNUAL REPORT JUNE 2022
147
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
38 Parent Entity Financial Information (continued)
Contingent Liabilities
Refer to information provided in Note 34: Contingent Liabilities for disclosures relating to the Parent Entity.
39 Controlled Entities and Unit Trusts
The listing of controlled entities and unit trusts detailed on this page is not a complete and exhaustive list of all controlled entities
and unit trusts held by Harvey Norman Holdings Limited. The financial year of all controlled entities and unit trusts are the same
as that of the Parent Company.
Shares held by Harvey Norman Holdings Limited
A listing of material subsidiaries of Harvey Norman Holdings Limited are detailed below:
Arisit Pty Limited 1, 2
Harvey Norman Croatia d.o.o. 15,16
Harvey Norman Trading d.o.o. 14,15
Bencoolen Properties Pte Limited 6,7
Harvey Norman Europe d.o.o. 14
Network Consumer Finance Pty Limited 1,2
Cascade Consolidated Sdn. Bhd. 9,10
Harvey Norman Holdings (Ireland) Limited 12
Pertama Holdings Pte Limited 6,7,8
Consolidated Design Group Pty Limited 1
Harvey Norman Limited 4
Pertama Merchandising Pte Ltd 6,9
Contemporary Design Group Pty Limited 1,2
Harvey Norman Ossia (Asia) Pte Limited 6,7,8
Sarsha Pty Limited 1,2
Derni Pty Limited 1,2
Harvey Norman Properties (N.Z.) Limited 4,5
Space Furniture Pte Limited 6,7
Elitetrax Marketing Sdn. Bhd. 10,11
Harvey Norman Singapore Pte Limited 6,7
Space Furniture Collection Sdn. Bhd. 10
Generic Publications Pty Limited 1,2
Harvey Norman Stores (N.Z.) Pty Limited 1,2
Yoogalu Pty Limited 1,2
Harvey Norman Big Buys Pty Limited 1,2,3
Harvey Norman Trading (Ireland) Limited 12,13
Notes:
1
2
3
4
5
6
7
8
9
Company incorporated in Australia.
Company is a member of the "Closed Group" relieved under the Class Order described in Note 37.
Harvey Norman Big Buys Pty Limited holds 99.02% of the shares in the KEH Partnership.
Company incorporated in New Zealand.
Shares held by Harvey Norman Limited.
Company incorporated in Singapore.
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 Pertama Holdings Pte Limited.
10 Company incorporated in Malaysia.
11 Shares held by Cascade Consolidated Sdn. Bhd.
12 Company incorporated in Ireland.
13 Shares held by Harvey Norman Holdings (Ireland) Limited.
14 Company incorporated in Slovenia.
15
Harvey Norman Europe d.o.o. owns 100% of the shares in Harvey Norman Trading d.o.o. and 100% of the shares Harvey Norman
Croatia d.o.o.
16 Company incorporated in Croatia.
148
ANNUAL REPORT JUNE 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
39 Controlled Entities and Unit Trusts (continued)
Units in Trusts held by Harvey Norman Holdings Limited
A listing of material unit trusts of Harvey Norman Holdings Limited are detailed below:
Calardu ACT Trust
Calardu Albury Trust
Calardu Alexandria DM Trust
Calardu Alexandria WH 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 Ballina No. 1 Trust
Calardu Bendigo Trust
Calardu Brookvale Trust
Calardu Browns Plains No. 1 Trust
Calardu Cairns Trust
Calardu Cambridge Trust
Calardu Campbelltown Trust
Calardu Penrith No. 1 Trust
Calardu Cannington Trust
Calardu Penrith No. 2 Trust
Calardu Caringbah (Taren Point) Trust
Calardu Perth City West Trust
Calardu Devonport Trust
Calardu Frankston Trust
Calardu Gepps Cross Trust
Calardu Geraldton Trust
Calardu Preston Trust
Calardu Rosebery Trust
Calardu Rutherford Trust
Calardu Silverwater Trust
Calardu Hoppers Crossing Trust
Calardu Springvale Trust
Calardu Loganholme Trust
Calardu MacGregor Trust
Calardu Malaga Trust
Calardu Taylors Lakes Trust
Calardu Toowoomba Trust
Calardu Toowoomba No. 1 Trust
Calardu Maribyrnong Trust
Calardu Toowoomba No. 2 Trust
Calardu Maroochydore Trust
Calardu Tweed Heads No. 1 Trust
Calardu Midland Trust
Calardu Munno Para Trust
Calardu Noarlunga Trust
Calardu Penrith Trust
Calardu Wodonga Trust
Harvey Norman Discounts No. 1 Trust
Harvey Norman No. 1 Trust
The Calardu Trust
40 Significant Events After Balance Date
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.
ANNUAL REPORT JUNE 2022
149
OPERATING AND FINANCIAL REVIEW (CONTINUED)
SHAREHOLDER INFORMATION
Distribution of shareholdings as at 28 September 2022
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
Voting rights
Ordinary Shareholders
14,031
13,228
4,016
3,337
193
34,805
1,816
All ordinary shares issued by Harvey Norman Holdings Limited carry one vote per share.
Twenty largest shareholders as at 28 September 2022
Number of
Ordinary Shares
Shareholder
Percentage of
Ordinary Shares
393,787,754 Mr. Gerald Harvey
205,525,565 Mr. Christopher Herbert Brown
175,614,516 HSBC Custody Nominees Limited
73,429,286 J P Morgan Nominees Australia Limited
58,592,289 Ms. Margaret Lynette Harvey
53,213,245 Citicorp Nominees Pty Limited
21,668,783 BNP Paribas Nominees Pty Limited
20,063,673 Enbeear Pty Limited
20,039,315 Ms. Kay Lesley Page
12,554,120 National Nominees Limited
5,300,984 BKI Investment Company Limited
5,213,182 Argo Investments Limited
3,335,180 Ms Jacqueline Galbraith
2,522,476 Peter & Lyndy White Foundation Pty Ltd
2,500,084 UBS Nominees Pty Ltd
2,033,309 Omnilab Media Investments Pty Ltd
1,636,839 Quotidian No 2 Pty Limited
1,297,486 Mr. Arthur Brew
1,252,893 Mr. John Evyn Slack-Smith
1,244,297 Mr. Chris Mentis
1,060,825,276
150
ANNUAL REPORT JUNE 2022
31.604%
16.495%
14.094%
5.893%
4.702%
4.271%
1.739%
1.610%
1.608%
1.008%
0.425%
0.418%
0.268%
0.202%
0.201%
0.163%
0.131%
0.104%
0.101%
0.100%
85.137%