ANNUAL REPORT | 2023
Australia
New Zealand
Singapore
Slovenia
Ireland
Northern Ireland
Malaysia
Croatia
Key dates
Company info
Contents
16 October 2023
Record Date for Determining
Entitlement to Final 2023
Dividend
13 November 2023
Payment of Final 2023 Dividend
29 November 2023 at 11 am
Annual General Meeting of
Shareholders
29 February 2024
Announcement of Half-Year
Profit to 31 December 2023 &
Announcement of Interim 2024
Dividend
3 April 2024
Record Date for Determining
Entitlement to Interim 2024
Dividend
1 May 2024
Payment of Interim 2024
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
Holdings Limited (HVN) are
quoted on the Australian
Securities Exchange Limited
(ASX)
Solicitors
Brown Wright Stein
Company secretary
Mr. Chris Mentis
Financial Highlights
Chairman and CEO’s report
5
7
Operating and Financial Review
9
Directors’ Report
Remuneration Report
Sustainability Report
Auditor’s Independence
Declaration
28
32
58
72
Independent Auditor’s Report
73
Directors’ Declaration
79
Statement of Financial Position 81
Income Statement
Statement of Comprehensive
Income
82
83
Statement of Changes in Equity 84
Statement of Cash Flows
Notes to the Financial
Statements
86
87
Shareholder Information
145
2
Annual Report 2023 Harvey Norman Holdings Limited ACN 003 237 545
2023 Results
EBITDA
$1,130.71m
Reported PBT
$776.08m
[$m]
[$m]
$305.85m from FY22
$442.11m from FY19
4-YEAR CAGR 13.2%
$364.36m from FY22
$201.52m from FY19
4-YEAR CAGR 7.8%
Reported NPAT & NCI
Operating Cash Flows
$539.52m
$680.26m
[$m]
[$m]
$272.01m from FY22
$137.20m from FY19
4-YEAR CAGR 7.6%
$82.96m from FY22
$307.41m from FY19
4-YEAR CAGR 16.2%
Net Assets
Total System Sales Revenue*
$4.466bn
$9.193bn
[$m]
[$m]
$172.37m from FY22
$1,268.70m from FY19
4-YEAR CAGR 8.7%
$364.66m from FY22
$1,301.84m from FY19
4-YEAR CAGR 3.9%
Annual Report 2023
3
Harvey Norman® & Greater Western Sydney
Harvey Norman® has been at home in Greater Western
Sydney, for over 40 years, with the first Harvey Norman®
franchised complex open at Parramatta Road, Auburn in
October 1982. This complex continues to be the largest
Harvey Norman® complex globally and is our Flagship
Complex in Australia. Our global headquarters, situated at
Homebush West, employs over 700 employees and
manages our integrated retail, franchise and property
system across 8 countries.
between the NRL and Harvey Norman® has grown from the
original State of Origin alliance in 1998 and NRL
Premiership in 2002, through to the establishment and
expansion of the women’s game. From the Jillaroos, the
Women’s State of Origin in 2018, launch of the NRLW in
2018 and the uninterrupted support at the grassroots of
the game for both boys and girls – volunteers and officials.
Harvey Norman® has been in lockstep with the NRL’s
Greater Western Sydney heartland for close to 30 years.
With a population of over 2.5 million Australians and the
third largest economy in the country, a thriving Greater
Western Sydney has and always will be fundamental to
Australian prosperity. Harvey Norman® has a uniquely
invested, local understanding of what it takes for this
economic powerhouse to thrive – access to sustainable and
convenient employment, education, health care services,
community sport and recreational facilities.
Led by Executive Chairman, Gerry Harvey and CEO, Katie
Page, Harvey Norman® has consistently contributed to the
grassroots of Western Sydney for decades.
As codes and sports seek to expand, Harvey Norman®
works to ensure a local business and household name is
there with the emerging club to build and maintain their
fan base and participation. In 2015, Harvey Norman® was
the first to partner with the GWS Auburn Giants – the AFL’s
first all-female Muslim team. From there, Harvey Norman®
has been a mainstay of support, continuing to expand to
now include the GWS AFLW in 2017 and GWS Giants in
2021. Harvey Norman® understands sporting clubs are
hubs for engaged family life and community social
engagement and the support is relied upon to enable
clubs to benefit the broadest audience.
Since 2015, Harvey Norman® has created nearly 100
Western Sydney University scholarships. 83 have already
graduated with another 11 to graduate by the end of 2024.
The scholarship recipients have been prospective students,
primarily women, who are overcoming significant
disadvantage from backgrounds including indigenous,
refugee, domestic violence, mental health, substance
abuse, long term unemployed and financial hardship.
Investment in Greater Western Sydney sport has been a
constant for decades. The long-established partnership
In FY24, Harvey Norman® will activate a new partnership
with the Sydney Kings and Sydney Flames. Together, the
focus will be on developing pathways for young female
players and officials, growing the game in Greater Western
Sydney and increasing participation and access to elite
level basketball games in regional NSW. The aim is to
elevate women’s basketball, foster community
engagement and expand pathways through training,
education, employment, and mentorship.
4
Annual Report 2023
2023
Financial Highlights
EBITDA
$1.131 bn
EBIT
$867.74 m
$305.85m or –21.3% from $1.437bn in FY22
$442.11m or 64.2% from $688.60m in FY19
$324.85m or –27.2% from $1.193bn in FY22
$264.40m or 43.8% from $603.34m in FY19
4-YEAR CAGR 13.2%
4-YEAR CAGR 9.5%
EBITDA excluding AASB16 net impact and
net property revaluations
$812.90 m
$230.84m or –22.1% from $1.044bn in FY22
$194.60m or 31.5% from $618.30m in FY19
EBIT excluding AASB16 net impact and
net property revaluations
$721.59 m
$231.61m or –24.3% from $953.20m in FY22
$188.56m or 35.4% from $533.04m in FY19
4-YEAR CAGR 7.1%
4-YEAR CAGR 7.9%
REPORTED PBT
$776.08 m
$364.36m or –31.9% from $1.140bn in FY22
$201.52m or 35.1% from $574.56m in FY19
REPORTED PROFIT AFTER TAX & NCI
$539.52 m
$272.01m or –33.5% from $811.53m in FY22
$137.20m or 34.1% from $402.32m in FY19
4-YEAR CAGR 7.8%
4-YEAR CAGR 7.6%
PBT excluding AASB16 net impact and
net property revaluations
$680.23 m
$262.56m or –27.8% from $942.79m in FY22
$175.98m or 34.9% from $504.26m in FY19
PAT excluding AASB16 net impact and
net property revaluations
$471.88 m
$201.66m or –29.9% from $673.55m in FY22
$118.80m or 33.6% from $353.09m in FY19
4-YEAR CAGR 7.8%
4-YEAR CAGR 7.5%
TOTAL SYSTEM SALES REVENUE
$9.193 bn
Aggregated headline franchisee sales revenue* $6.417bn
Company-operated sales revenue $2.776bn
HNHL CONSOLIDATED REVENUE
$4.275 bn
Sales of products to customers $2.776bn
Revenue received from franchisees $1.171bn
Revenue and other income items $327.99m
*Sales made by franchisees in Australia do not form part of the financial results of the consolidated entity.
NET
ASSETS
$4.466 bn
4.0% from $4.29bn in June 22
39.7% from $3.198bn in June 19
BASIC EARNINGS
PER SHARE
$43.30c
from 65.13c in FY22
from 34.70c in FY19
Where: EBITDA: Earnings Before Interest, Tax, Depreciation & Amortisation | EBIT: Earnings Before Interest & Tax
PBT: Profit Before Tax | PAT: Profit After Tax | CAGR: Compound Average Growth Rate
DIVIDENDS
PER SHARE
(FULLY-FRANKED)
25.0c
from 37.50c in FY22
from 33.00c in FY19
Annual Report 2023
5
An Integrated Retail, Franchise, Property and Digital System
G
E
D
H
F
C
Our Global Footprint
We operate an integrated retail, franchise, property and
digital system across 8 countries.
A
197
Franchised Complexes in Australia
B
A
Australia
197
franchised
complexes
B New Zealand
45
stores
C
Singapore
12
stores
D
Slovenia
5
stores
E
Ireland
16
stores
F
Malaysia
G
28
stores
Northern Ireland
2
stores
H
Croatia
3
stores
Australian Franchising Operations
Overseas Company – Operated Retail
• 197 franchised complexes in Australia comprising 555
• 111 company-operated stores in 7 countries
independent franchisees
• FY23 Aggregated Franchisee Sales Revenue: $6.42 billion
• FY23 Franchising Operations PBT: $373.36 million
• FY23 Overseas Company-Operated Revenue: $2.60 billion
• FY23 Overseas Retail PBT: $139.06 million
• Comprises 21% of PBT excluding revaluations [18% of Total PBT]
Strategic ‘Large-format’ Retail Property Portfolio
• 96 franchised complexes owned (49% of total)
• 27 international owned retail property assets
• 470 diverse third-party tenants (large proportion ASX-listed)
• $3.44 billion Australian investment property portfolio (largest
single owner in Australia)
• FY23 Property PBT: $271.66 million (including revaluations)
(24% of total)
• $596.65 million overseas owner-occupied and investment
property portfolio
Investment in Technology, Digital Transformation and IT Infrastructure Assets
Online sales
channel
6
Click & collect
Quick reserve
Store finder
Trak by
Harvey Norman®
LiveChat
Annual Report 2023
Chairman and CEO’s Report
Dear Stakeholders,
Thank you for your continued support of our integrated retail, franchise, property and digital system across 8 countries.
the Harvey Norman® brand remains strong and we look forward to increasing our footprint as we continue to open new
stores overseas.
Amid progressively worsening macroeconomic conditions and cost of living pressures this year, our balance sheet remains strong
with total assets of $7.67 billion, anchored by a $4 billion property portfolio. We have delivered a substantial 40% growth in net
assets since the beginning of the pandemic, rising to $4.47 billion as at 30 June 2023.
Our profitability is well-above pre-pandemic levels growing by 35% from FY19 to $776.08 million in FY23, resulting in a CAGR of
7.8% over the past 4 years. We have seen a decline in profitability by 32% relative to FY22 due to lockdowns last year which
curtailed operating expenses, followed by a period of significantly elevated sales due to pent-up demand.
Our prudent financial management has resulted in ample liquidity and a low net debt to equity ratio of 13.85%, providing us with
the capacity to access additional liquidity as required. Our operating cash flows are strong at $680.26 million for FY23, delivering a
cash conversion ratio of 97.4%. This was achieved by a significant improvement in working capital in 2H23 with operating cash flows
growing by $308.05 million compared to 2H22, a cash conversion ratio of 108.4% in the 2nd half.
Technological advancement remains a key priority, as we continue to invest in initiatives to bolster our digital infrastructure and
enhance customer loyalty. Our solid financial position continues to hold us in good stead to withstand the current challenges
affecting discretionary retail.
We are confident in the quality of the Harvey Norman®, Domayne® and Joyce Mayne® brands and the solid market position of our
Australian franchisees and overseas company-operated stores. We are committed to delivering stable returns and sustainable
growth for our stakeholders and are well-placed to benefit from any upturn in trading conditions and any growth that may arise from
the home renovation cycle, new home starts and net migration increases.
Profit before tax excluding the effects of AASB 16 Leases and
net property revaluations for FY23 was $680.23 million, down
by $262.56 million or –27.8% on FY22. When compared to
FY19, the increase was $175.98 million or 34.9%, resulting in a
4-year CAGR of 7.8%.
Total revenues of $4.28 billion across all business segments
moderated by $230.46 million or –5.1%, off a high base last
year, but was up by $855.02 million or 25.0% on FY19, with a
4-year CAGR of 5.7%.
Revenues received from franchisees are down by $130.00
million or –10.0% on the back of a reduction in aggregated
franchisee sales revenue by -4.9% to $6.42 billion in FY23.
Company-operated sales revenue was down by $31.26 million
or –1.1% and other income items were down by $69.20 million
or –17.4% primarily due to a reduction in the net property
revaluation increment by $94.93 million or –44.4%.
Operating expenses have normalised this year, rising by
$121.74 million or 8.1%, after being abnormally low last year
due to COVID restrictions. Total operating expenses of the
consolidated entity as a percentage of total system sales
revenue remain efficient at 17.68% for FY23, which is
comparable to pre-pandemic levels.
Global marketing expenses in the 8 countries as a percentage
of total system sales revenue for the brands was 4.3% for FY23,
compared to the pre-pandemic level of 5.0% in FY19. Rising
costs of borrowing and higher utilisation of the syndicated
facility has driven up finance costs by $39.51 million or 75.8%.
Other expenses have increased by $49.59 million, primarily due
to the cost of bonus gift cards as franchisees continue to
strengthen customer loyalty. The consolidated entity assists
each franchisee in this investment in order to protect, enhance
and promote the brands to keep customers within the Harvey
Norman®, Domayne® and Joyce Mayne® branded ecosystems.
For the prior year, this expense was included in marketing
expenses. In total, the cost of bonus gift cards has increased by
$11.02 million from the previous year.
Annual Report 2023
7
Harvey Norman® proudly
supports the Australian
Paralympic and Olympic Teams
Chairman and CEO’s Report (continued)
[$m]
PBT Return on
Net Assets
17.4%
Profit After
Tax & NCI
$539.52m
$272.01m or –33.5% from FY22
$137.20m or +34.1% from FY19
We continue on our journey to provide our stakeholders
with sustainable growth through organic expansion of our
global store network and continued investment in our key
segments. We are on track to open 13 stores in FY24 and
deliver on our expansion plan in Malaysia.
We thank our franchisees and our staff for their continued
loyalty and commitment to our long-term vision and
strategy. We value and appreciate the ongoing support
and confidence of our shareholders in the leadership and
future direction of our business.
Harvey Norman® has
partnered with Hoops
Capital, the owner of the
Sydney Flames & Sydney
Kings basketball teams
PBT
Excluding net impact of
AASB 16 and property
revaluations
$680.23m
FY22
FY19
1H23 vs 1H22 2H23 vs 2H22
-27.8%
(down $262.56m)
+34.9%
(up $175.98m)
-11.7%
(down $57.02m)
-45.2%
(down $205.54m)
Operating Cash Flows
Substantial improvement in
working capital to deliver
strong operating cash flows
$680.26m
FY22
FY19
1H23 vs 1H22 2H23 vs 2H22
+13.9%
(up $82.96m)
+82.5%
(up $307.41m)
-39.8%
(down $225.09m)
+989.4%
(up $308.05m)
Strong Cash Conversion
1H23
2H23
90.1%
108.4%
Total Assets
Very strong balance sheet
underpinned by an appreciating,
resilient tangible asset base
FY22
FY19
+5.9%
(up $425.43m)
+59.9%
(up $2.87bn)
97.4%
$7.67bn
Solid working capital and a strong
property portfolio are key competitive
advantages that provides us with
capacity to access additional capital
as required.
G. HARVEY
Chairman
K.L. PAGE
Director and Chief Executive Officer
Sydney
29 September 2023
Sydney
29 September 2023
Net Assets
pre-covid position in June 19.
4% increase since June 22.
FY22
FY19
+4.0%
(up $172.37m)
+39.7%
(up $1.27bn)
$4.47bn
Versatile & adaptable operating
model and organic expansion in
growth in net assets since FY19.
[4-year CAGR of 8.7%]
8
Annual Report 2023
Operating and Financial Review | Segment Analysis
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:
complemented by a sustained investment in technology, digital transformation and IT
infrastructure assets.
Franchising
Operations
Segment
4-year CAGR 10.7%
REVENUE
$1.07bn
vs FY22
vs FY19
-10.7%
(down $127.50m)
+27.1%
(up $227.01m)
1H23 vs 1H22 2H23 vs 2H22
-0.1%
(down $0.85m)
-21.2%
(down $126.65m)
TOTAL EXPENSES
$692.31m
vs FY22
vs FY19
+8.1%
(up $52.16m)
+17.3%
(up $102.05m)
1H23 vs 1H22 2H23 vs 2H22
+17.9%
(up $54.36m)
-0.7%
(down $2.20m)
PBT RESULT
$373.36m
vs FY22
vs FY19
-32.5%
(down $179.66m)
+50.3%
(up $124.96m)
1H23 vs 1H22 2H23 vs 2H22
-18.9%
(down $55.21m)
-47.8%
(down $124.45m)
Representing
56.8%
of PBT excluding
property revaluations
[or 48.1% of Total PBT]
Overseas
Company-
Operated
Retail Segment
4-year CAGR 1.8%
REVENUE
$2.60bn
vs FY22
vs FY19
-1.3%
(down $34.08m)
+26.6%
(up $545.84m)
Property
Segment
4-year CAGR 7.3%
REVENUE
$423.13m
vs FY22
vs FY19
-14.4%
(down $71.27m)
+27.4%
(up $90.97m)
1H23 vs 1H22 2H23 vs 2H22
1H23 vs 1H22 2H23 vs 2H22
-1.1%
(down $15.56m)
-1.5%
(down $18.52m)
TOTAL EXPENSES
$2.46bn
vs FY22
vs FY19
+2.5%
(up $58.87m)
+27.9%
(up $536.48m)
1H23 vs 1H22 2H23 vs 2H22
+1.0%
(up $13.33m)
+4.0%
(up $45.54m)
PBT RESULT
$139.06m
vs FY22
vs FY19
-40.1%
(down $92.94m)
+7.2%
(up $9.35m)
1H23 vs 1H22 2H23 vs 2H22
-22.5%
(down $28.88m)
-61.9%
(down $64.06m)
Representing
21.2%
of PBT excluding
property revaluations
[or 17.9% of Total PBT]
-0.6%
(down $1.60m)
-29.6%
(down $69.67m)
TOTAL EXPENSES
$151.46m
vs FY22
vs FY19
+18.4%
(up $23.55m)
+18.8%
(up $23.99m)
1H23 vs 1H22 2H23 vs 2H22
+16.0%
(up $9.85m)
+20.7%
(up $13.70m)
PBT RESULT
$271.66m
vs FY22
vs FY19
-25.9%
(down $94.82m)
+32.7%
(up $66.98m)
1H23 vs 1H22 2H23 vs 2H22
-5.8%
(down $11.45m)
-49.4%
(down $83.37m)
Representing
23.3%
of PBT excluding
property revaluations
[or 35.0% of Total PBT]
Annual Report 2023 Operating and Financial Review
9
Operating and Financial Review
Operating and Financial Review
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®,
software and other confidential information to promote and
enhance the brands.
A subsidiary of HNHL (a franchisor) grants separate franchises
to independent franchisees to use the Harvey Norman®,
Domayne® or Joyce Mayne® trade marks in Australia and to
conduct the retail business of the franchisee at or from a store
within a particular branded complex, pursuant to the terms of a
franchise agreement. Each franchisee owns and controls the
franchisee business of that franchisee.
Each franchisee has control over the day-to-day operations of
the franchisee business and has the discretion and power to
make the decisions necessary to drive sales, control floor
margins and contain operating costs to maximise the
profitability of the franchisee business. Each franchisee pays
between that franchisee and that franchisor.
The franchising operations segment in Australia captures and
records the franchise fees received from franchisees including
franchise fees in accordance with franchise agreements, rent
and outgoings for the use of a branded complex and interest
on the financial accommodation facility that is made available
to each franchisee. The franchising operations segment also
includes the costs of operating the franchised system and
monitoring and evaluating the performance and compliance of
franchisees with their franchise agreements.
• Harvey Norman® Manjimup, WA; 18 November 2022
• Harvey Norman® Port Stephens, NSW; 27 March 2023
(relocation from Salamander Bay)
• Harvey Norman® Renmark, SA; 15 May 2023
Completed Premium Refits during FY23
• Harvey Norman® Fyshwick, ACT (Furniture & Bedding)
Premium Refits Currently in Progress
• Harvey Norman® Balgowlah, NSW
• Harvey Norman® Erina, NSW
• Harvey Norman® Preston, VIC
• Harvey Norman® Penrith, NSW
• Harvey Norman® Cannington, WA
171
Franchised Complexes
19
Franchised Complexes
7
Franchised Complexes
555
Independent franchisees
carrying on their business
under Harvey Norman®,
Domayne® and Joyce
Mayne® brands.
WA
HN
19
DM
1
NT
HN
2
JM
1
QLD
DM
3
HN
36
JM
4
SA
HN
12
NSW
DM
12
HN
58
JM
2
VIC
HN
37
DM
2
ACT
HN
1
DM
1
TAS
HN
6
10
10
Annual Report 2023 Operating and Financial Review
Annual Report 2023 Operating and Financial Review
Operating and Financial Review | Segment Analysis: Franchising Operations (continued)
Franchising Operations Segment PBT (AUD $M)
Franchising Operations Margin (%)
In FY23, the franchising operations segment PBT result was
$373.36 million, a $179.66 million or –32.5% decrease from
$553.02 million in FY22. This led to a franchising operations
margin of 5.82% for FY23, representing a 237 basis points drop
compared to the 8.19% margin reported in FY22. When
compared to the pre-pandemic levels of FY19, the franchising
operations segment result increased by $124.96 million, or
50.3%, from $248.40 million, with a 4-year CAGR of 10.7%.
The franchising operations margin for FY23 was 143 basis
points higher than the margin for FY19 of 4.39%.
1H23 franchising operations segment PBT was $237.65 million,
down by $55.21 million or –18.9%, on 1H22 as operating
expenses were lower in the prior period due to lockdowns.
The result for 2H23 was $135.71 million, a reduction of $124.45
million or –47.8%, on 2H22 as the franchisees were cycling
record 2nd half sales in the prior period due to pent-up
demand and deferral of purchases until the COVID restrictions
were lifted
Franchising operations segment revenues decreased by
$127.50 million, or –10.7%, from $1.19 billion in FY22 to $1.07
billion in FY23, primarily due to a reduction in aggregated
franchisee sales by $333.40 million or –4.9% to $6.42 billion in
FY23. After two years of retail disruptions due to the
pandemic, franchisee trading conditions started to normalise in
the first half of FY23. However, this normalisation coincided
with an abrupt turnaround in previously buoyant
macroeconomic conditions that progressively worsened
throughout FY23, affecting household budgets and consumer
sentiment.
The moderation in aggregated franchisee sales revenue
resulted in a reduction in revenue from franchise fees by
$172.47 million or –16.7%, from $1.03 billion in FY22 to
$860.70 million in FY23.
This was offset by higher rent and outgoings received from
franchisees by $34.93 million or 14.0% as the previous year
included the cost of rent waivers during COVID lockdowns
totalling $19.58 million, of which $8.82 million related to
properties leased by the consolidated entity (and recorded in
the Franchising Operations Segment) and higher interest to
administer franchisee financial accommodation facilities by
$7.54 million.
The costs to operate the franchising operations segment have
increased during the year, including the costs to monitor and
evaluate franchisee compliance with their franchise agreement.
Marketing expenses to promote the brands in Australia have
normalised, after being abnormally low in FY22 due to
lockdowns, and are still lower as a percentage of Australian
franchisee sales revenue compared to pre-pandemic levels.
The franchisor has continued to assist franchisees to invest in
their customers to enhance customer loyalty and retention,
primarily in the form of bonus gift cards. This investment has
increased by $11.02 million as franchisees strive to strengthen
customer loyalty. FY23 has also been adversely impacted by a
rise in finance costs by $10.43 million primarily due to a $6.68
million increase in interest costs on lease liabilities for leases
sub-leased to external tenants.
Franchising operations segment
Franchising operations segment PBT
($m)
Aggregated franchisee sales revenue
($bn)
*Sales made by franchises in Australia do not form part
of the financial results of the consolidated entity.
Franchising operations margin
(%)
[calculated as franchising operations segment PBT ÷
aggregated franchise sales revenue]
FY23
FY22
FY19
FY23
FY22
FY19
FY23
FY22
FY19
1H
$237.65m
$292.85m
$158.47m
$3.51bn
$3.43bn
$2.95bn
6.78%
8.53%
5.37%
2H
$135.71m
$260.16m
$89.93m
$2.91bn
$3.32bn
$2.71bn
4.66%
7.84%
3.32%
FY
$373.36m
$553.02m
$248.40m
$6.42bn
$6.75bn
$5.66bn
5.82%
8.19%
4.39%
Annual Report 2023 Operating and Financial Review
11
Operating and Financial Review | Segment Analysis: Franchising Operations (continued)
Australian Franchisee Sales Revenue Underpins the
Franchising Operations Segment
Trading conditions started to normalise during FY23
following two years of COVID-related disruptions. Post-
COVID, Australian franchisee sales for FY23 decreased by
4.9% to $6.42 billion from a strong base of $6.75 billion for
FY22. When compared to FY19, franchisee sales are well-
above pre-pandemic levels growing by 13.4% from $5.66
billion in FY19.
Australian franchisee sales for 2H23 decreased by 12.3% on
2H22 as 2H22 included pent up demand from nearly 4
months of mandated rolling lockdowns. 1H23 Australian
franchisee sales increased by 2.1% on 1H22.
Cooler than usual temperatures experienced by the east
coast of Australia led to a substantial decrease in sales of
seasonal products by Electrical and Furniture franchises
such as air conditioning units, fans, air treatment units,
outdoor furniture and barbeques.
Harvey Norman®, Domayne® and
Joyce Mayne®
franchisees service the Homemaker category and are well
placed for any growth that may arise from the home
renovation cycle, new home starts and net migration
increases.
Total franchisee sales*
Year ended 30 June 2023
$6.42 bn
4.9% on FY22
13.4% on FY19
4-YEAR CAGR 3.2%
Comparable franchisee sales*
Year ended 30 June 2023
$6.40 bn
5.1% on FY22
14.0% on FY19
4-YEAR CAGR 3.3%
Harvey Norman® Port Stephens, opened March 2023
12
12
Annual Report 2023 Operating and Financial Review
Annual Report 2023
Operating and Financial Review
Overseas company-operated retail segment
Overseas Retail Segment
Comprises
21% of PBT excluding
property revaluations
[18% of Total PBT]
New overseas stores
Opened in FY23
Aggregated overseas retail revenue ($AUD M)
Fonthill, Ireland
• Opened on 22 July 2022
• Located in Fonthill Retail Park, Dublin
*
Aggregated overseas retail PBT result ($AUD M)
*The FY23 overseas retail PBT result would have been $168.81M if the
intercompany brand licence fees and the Irish VAT payment were excluded
1 Utama, Malaysia
• Opened on 22 November 2022
• Located in 1 Utama Shopping Centre, Selangor
Rijeka, Croatia
• Opened on 19 April 2023
• Located in Galerija Bakar, Rijeka
Masterton, NZ
• Opened on 20 June 2023
• Located in Masterton, north of Wellington
Annual Report 2023 Operating and Financial Review
Annual Report 2023 Operating and Financial Review
13
13
Operating and Financial Review
| Segment Analysis: Overseas Company-Operated Retail (continued)
New Zealand
New Zealand Flagship
Wairau Park, Auckland (Launched Jun 2018)
45
Stores
2019 2020 2021 2022 2023
2019 2020 2021 2022 2023
Revenue ($AUD M) Year ended 30 June
Profit result ($AUD M) Year ended 30 June
New Zealand
45 Harvey Norman® Company-Operated Stores
In New Zealand, macroeconomic headwinds and inflationary
pressures have persisted for over 18 months, and the economy
is navigating a deliberate, policy-induced deceleration
following strong post-pandemic recovery. Throughout FY23,
the decline in business and consumer confidence intensified as
household budgets were squeezed further due to mounting
costs of living, mortgagees rolling onto higher interest rates
and a tight rental market, adversely affecting discretionary
spending across most business sectors. The rapid fall in
property prices has continued to reduce household equity,
resulting in consumers being more cautious about investing in
their homes. On the upside, the NZ labour market remains
strong, with low unemployment and stable wages growth, and
household savings are still at high levels.
All key categories were affected from the decline in consumer
discretionary spend and reduced store foot traffic. In local
currency, sales for the 45 company-operated stores and outlets
were NZ$1.10 billion for FY23, a decrease of NZ$95.24 million
or –8.0% from NZ$1.19 billion in FY22. When translated to
Australian dollars, the decline in sales was $113.98 million, or
–10.2%, to $1.01 billion for FY23, from $1.12 billion in FY22
due to a devaluation of 2.4% in the NZ dollar relative to the
AUD this year.
1H23 sales declined by $57.57 million or –9.8% relative to
1H22 as the previous period benefitted from elevated sales
during the lockdowns as consumers worked and studied from
home, and the surge post-lockdown due to pent-up demand.
2H23 declined by $56.41 million or –10.6% relative to 2H22.
NZ sales are still ahead of pre-pandemic levels, growing by
NZ$100.64 million or 10.1% in local currency (or a $70.01
million, or 7.5%, increase in AUD) compared to FY19.
In local currency, the retail profit for FY23 was NZ$88.18
million, a decrease of NZ$49.49 million, or –36.0%, from
NZ$137.67 million in FY22. When translated to Australian
dollars, the retail result was $80.69 million for FY23, down by
$48.38 million, or –37.5%, from $129.08 million in FY22. 1H23
was down by $22.33 million or –33.0%, whereas 2H23 was
down by $26.05 million or –42.4%.
The fall in retail profit for FY23 was as a result of a decrease in
sales turnover, a contraction in gross margin due to
discounting and the normalisation of operating costs.
Operating expenses for FY23 were inclusive of intercompany
licence fees payable under the revised global transfer pricing
policy that was adopted this year. The intercompany brand
licence fee in FY23 was comparable with prior years.
Our brand remains strong and our business continues to
retain its market leader position in the home and lifestyle
market.
Our NZ balance sheet is strong, supported by a substantial
property portfolio valued at $427.80 million as at 30 June
2023. With sufficient cash reserves and no debt, our NZ
operations are strategically poised to capitalise on potential
opportunities and leverage any improvements in the trading
landscape in New Zealand.
In May 2023, a joint venture was established for the purchase
of the Westgate Lifestyle Centre for NZ$43 million and we
opened our 45th store in Masterton on 20th June 2023.
We intend to open one new company-operated store in NZ in
FY24.
14
Annual Report 2023 Operating and Financial Review
Singapore &
Malaysia
Singapore Flagship
Millenia Walk (Launched Dec 2015)
Malaysia Flagship
Ikano, Kuala Lumpur (Launched Nov 2017)
28
Stores
Malaysia
12
Stores
Singapore
2019 2020 2021 2022 2023
2019 2020 2021 2022 2023
Revenue ($AUD M) Year ended 30 June
Profit result ($AUD M) Year ended 30 June
Singapore and Malaysia
This segment is comprised of 12 Harvey Norman® stores in
Singapore, 28 Harvey Norman® stores in Malaysia and the
Space Furniture® branded lifestyle stores in Singapore and
Malaysia.
Malaysia | Sales Revenue
28 Harvey Norman® Company-Operated Stores
In Malaysia, sales for the 28 Harvey Norman® company-
operated stores for FY23 were S$265.67 million, an increase of
S$7.72 million, or +3.0%, from S$257.94 million in FY22. When
translated to Australian dollars, sales were $289.18 million, an
increase of $27.81 million, or +10.6%, assisted by a 7.42%
appreciation in the SGD relative to the AUD this year.
Compared to pre-pandemic sales in FY19, the increase was
$92.06 million or +46.7%, delivering a 4-year CAGR of 10.1%.
The rise in sales is partially attributed to the new store at 1
Utama Shopping Centre, Selangor that opened on 22
November 2022 and a full year’s contribution of the Pavilion
Bukit Jalil store that opened in December 2021. Last year, sales
were negatively impacted in 1H22 by prolonged COVID-
closures, followed by severe floods in the Klang Valley causing
damage and disruption to the main warehouse and decreasing
sales at our flagship store at Ikano, Kuala Lumpur. This resulted
in 1H23 sales being up by S$23.48 million, or +21.0%, on 1H22.
There was a sharp acceleration in sales in 2H22 due to pent-up
demand and government initiatives to stimulate consumer
spending and promote unrestricted trade after the lockdowns.
Sales moderated in 2H23 off an elevated base in 2H22,
decreasing by S$15.76 million, or –10.8%.
Amid rising prices and cost of living pressures in Malaysia, the
Harvey Norman® brand is strong and continues to gain a loyal
customer base, especially in the mid-to-premium market.
Estimated population growth in Malaysia, the emerging middle-
class and the anticipated growth in the local economy continues
to underpin our vision to expand from 28 stores to 80 stores by
the end of 2028. 10 of these stores are on track to open in
FY24, with 7 sites confirmed and 3 sites currently in progress. A
further 12 sites are anticipated to open during FY25. The store
that was planned to open in Malaysia in 2H23 will open in early
FY24.
Singapore | Sales Revenue
12 Harvey Norman® Company-Operated Stores
In Singapore, business and consumer sentiment started to
normalise and was gradually returning to pre-pandemic levels,
with the resumption of international travel and new housing
projects that were previously delayed due to the pandemic
being completed and furnished during FY23.
While the national GST increase from 7% to 8% effective from 1
January 2023 had led to a surge in sales towards the end of
1H23, it had the effect of slowing down consumer spending in
2H23. Rising global inflation, increases in living costs, and
discounting have contributed to a decline in sales during 2H23.
Despite the closure of 2 small company-operated stores this
year, sales for the 12 Harvey Norman® company-operated
stores in FY23 were S$344.53 million, an increase of S$6.57
million, or +1.9%, from S$337.96 million in FY22. Compared to
pre-pandemic sales in FY19, the increase was S$10.43 million
or +3.1%.
When translated to Australian dollars, sales were $375.02
million, an increase of $32.57 million, or +9.5% from $342.44
million in FY22. Compared to pre-pandemic retail sales in
FY19, the increase was $33.05 million or +9.7%
Retail – Singapore and Malaysia:
Sales & Segment Result
Aggregated sales revenue for the Harvey Norman® and Space
Furniture® brands in Asia totalled S$626.93 million in local
currency for FY23, increasing by S$13.84 million, or +2.3%,
from S$613.09 million in FY22. On translation to Australian
dollars, aggregated sales revenue for Asia was $682.42 million,
an increase of $61.19 million or +9.9%. Compared to pre-
pandemic aggregated sales in FY19, the increase was $126.95
million or +22.9%, a 4-year CAGR of 5.3%.
The increase in overall sales has been eroded by higher
operating expenses in Asia, driven by the re-alignment to pre-
pandemic cost levels in the current environment.
Operating expenses for FY23 are inclusive of intercompany
brand licence fees payable under the revised global transfer
pricing policy that was adopted in Malaysia and Singapore this
year. The profitability of the Asian segment was reduced by
$11.35 million due to the intercompany brand licence fees
payable under this policy.
The segment profit result of the Harvey Norman® and Space
Furniture® brands in Asia was $40.07 million for FY23, a
decrease of $5.30 million, or –11.7%, from $45.36 million in
FY22. If the intercompany brand licence fees were excluded
from the result, the Asian segment would have generated a
result of $51.41 million, an increase of $6.05 million or 13.3%,
from FY22.
Annual Report 2023 Operating and Financial Review
15
Operating and Financial Review
| Segment Analysis: Overseas Company-Operated Retail (continued)
2
Stores
Northern
Ireland
Ireland &
Northern Ireland
Ireland Flagship
Tallaght, Dublin (Launched Jul 2017)
Northern Ireland Flagship
Boucher Rd, South Belfast (Launched Nov 2015)
16
Stores
Ireland
2019 2020 2021 2022 2023
2019 2020 2021 2022 2023
Revenue ($AUD M) Year ended 30 June
Profit result ($AUD M) Year ended 30 June
Ireland
16 Harvey Norman® Company-Operated Stores
Northern Ireland
2 Harvey Norman® Company-Operated Stores
In Northern Ireland, the fundamental issues affecting consumer
and business confidence remain, with no government in place
and lack of political leadership in Northern Ireland resulting in
the deferral of major infrastructure decisions. Mounting cost of
living pressures, the war in Ukraine, steep rises in energy prices
and the ongoing impact of Brexit continues to dampen sales
and profitability in the region.
Sales in local currency decreased to £10.68 million in FY23,
down by £2.51 million or –19.0%, from £13.20 million in FY22.
When translated to Australian dollars, sales for FY23 decreased
by $5.10 million, or –21.1%, to $19.09 million, from $24.19
million in FY22. FY22 benefited from higher sales following the
extensive COVID lockdowns in the second half of FY21.
The difficult trading conditions in Northern Ireland has resulted
in a loss of $2.09 million for FY23, compared to a profit of $1.33
million for FY22.
In Ireland, the inflationary macroeconomic environment
worsened throughout FY23 and the sharp rises in housing and
energy prices, combined with successive interest rate hikes, has
amplified the cost of living pressures and subdued consumer
and business sentiment since the beginning of the year.
Sales in local currency increased to €406.87 million in FY23, up
by €6.88 million or +1.7%, from €399.98 million in FY22, mainly
due to the contribution of the 16th Irish store which opened at
Fonthill, Dublin on the 22nd July 2022. When translated to
Australian dollars, sales for FY23 increased by $10.78 million, or
+1.7%, to $631.88 million, from $621.09 million in FY22. When
compared against the pre-pandemic sales of $351.59 million in
FY19, there has been substantial growth by $280.29 million, or
79.7%, with a 4-year CAGR of 15.8%.
The furniture and bedding categories were cycling strong sales
in FY22 due to the pent-up demand and deferral of purchases
following lockdowns in the 2nd half of FY21. The supply chain
constraints and high delivery costs experienced last year have
hampered sales and eroded margins in FY23. Improvements
were implemented to streamline the supply chain and ordering
processes to maintain an appropriate and balanced level of
inventory to meet anticipated demand.
There was a slight uptick in total revenues in Ireland and
operating costs have increased as marketing, warehouse,
distribution and restructuring costs have normalised following
the removal of COVID restrictions and the drive to grow sales.
The new store at Fonthill, Dublin also contributed to the rise in
operating costs.
For the abundance of precaution, an amount of €7.65 million,
or $11.88 million in AUD, was recorded as an expense and paid
to the Revenue Commissioners in 2H23 on account of a VAT
issue. The Irish business adopted a conservative approach in
estimating the amount to be paid and, as of the date of this
report, the amounts paid are under review.
The operating expenses for FY23 were inclusive of intercompa-
ny brand licence fees payable under the revised global transfer
pricing policy that was adopted this year. The profitability of
the Irish segment was reduced by $4.04 million due to the
intercompany brand licence fees payable under this policy.
The retail profit for FY23 was $12.76 million, a decrease of
$32.07 million, or –71.5%, from $44.83 million in FY22. If the
VAT payment and intercompany brand licence fees were
excluded from the result, the Irish segment would have
generated a result of $28.68 million, a decrease of $16.15
million or –36.0%, from FY22.
16
Annual Report 2023 Operating and Financial Review
Slovenia &
Croatia
Slovenia Flagship
Ljubljana (Launched Jun 2017)
Croatia Flagship
Zagreb (Launched Oct 2018)
Slovenia
5
Stores
3
Stores
Croatia
2019 2020 2021 2022 2023
2019 2020 2021 2022 2023
Revenue ($AUD M) Year ended 30 June
Profit result ($AUD M) Year ended 30 June
Slovenia
5 Harvey Norman® Company-Operated Stores
Croatia
3 Harvey Norman® Company-Operated Stores
In Slovenia, our 5 retail stores have delivered steady and strong
sales growth during the initial three quarters of FY23. Sales
declined in 4Q23 as rising interest rates, inflationary pressures
and higher energy prices took effect, lowering household
disposal incomes and reducing foot traffic in-store.
In Croatia, the third store at Rijeka was opened on 19th April
2023, as planned, boosting sales in the fourth quarter of FY23.
The two existing stores at Zagreb and Pula showed moderate
growth this year on the back of elevated sales last year as the
world returned to normality following the pandemic.
Slovenian retail sales in local currency increased to €96.07
million for FY23, up by €4.40 million or +4.8%, from €91.67
million in FY22. When translated to Australian dollars, sales
were $149.19 million for FY23, growing by $6.85 million or
+4.8%, from $142.34 million in FY22. When compared against
FY19, sales are substantially above pre-pandemic levels
increasing by $33.50 million or +29.0%, a 4-year CAGR of 6.6%.
Margins have held steady, slightly improving on prior year,
however, this has been offset by an increase in operating costs,
including higher personnel costs, rent, utilities, delivery and
marketing expenses. The rise in operating expenses for FY23
can also be attributed to higher intercompany brand licence
fees payable under the revised global transfer pricing policy
that was adopted this year. The profitability of the Slovenian
segment was reduced by $2.49 million due to the intercompany
brand licence fees payable under this policy.
The solid growth in sales offset by higher operating costs
delivered an overall retail profit of $9.97 million in FY23,
a $2.46 million decrease or –19.8%, from $12.43 million in
FY22. Compared to the pre-pandemic profit of $6.88 million in
FY19, the increase was $3.09 million or +45.0%, representing a
4-year CAGR of 9.7%. If the payment of the intercompany
brand licence fees were excluded from the result, the Slovenian
segment would have generated a result of $12.46 million, an
increase of $0.03 million or 0.3%, from FY22.
However, the economic situation in Europe remains
challenging, with the ongoing geopolitical issues, the war in
Ukraine and rising inflation dampening consumer sentiment.
The change in local currency from Kuna to Euro took effect
from 1 January 2023, contributing to a surge in cash sales in
November and December 2022.
Retail sales for FY23 were €33.69 million, an increase of €3.44
million or +11.4%, from €30.26 million in FY22. When
compared to FY19, sales were well-above pre-pandemic levels,
increase by €12.86 million or +61.7%. In Australian Dollars,
sales were $52.33 million for FY23, increasing by $5.35 million
or +11.4%, from $46.98 million in FY22. When compared
against FY19, the increase was $19.10 million or +57.5%.
The business incurred significant costs to open the Rijeka store
including higher marketing expenses to drive sales revenue
during a difficult quarter. Operating costs in the Zagreb and
Pula stores have also risen due to the inflationary environment
and in line with the sales growth of those stores.
Heightened operating costs eroded the sales gains, resulting in
a loss in Croatia of $2.34 million in FY23 compared to a loss of
$1.03 million in FY22.
Annual Report 2023 Operating and Financial Review
17
Operating and Financial Review
Operating and Financial Review
Review of the Property Segment
Strategic ‘Large-Format’ Retail Property
Portfolio
Property ownership is not only a vital component of our integrated
system and a key competitive advantage — it also provides
multifaceted advantages, reinforcing our balance sheet and
financial standing, operational capabilities delivering stable income
streams and strategic agility by providing us access to additional
capital to adapt to evolving business needs.
Our consolidated balance sheet is anchored by a strong freehold
property portfolio totalling $4.05 billion as at 30 June 2023,
surpassing the $4 billion milestone for the first time. This is
comprised of tangible, freehold investment properties in Australia
of $3.44 billion, Ireland of $31.00 million and New Zealand of $9.59
million; and freehold owner-occupied properties in New Zealand,
Singapore, Slovenia, Australia and Ireland of $569.45 million in
aggregate. Our property segment assets also include joint venture
assets of $1.90 million. The freehold property segment comprises
53% of our total $7.67 billion total asset base.
The Australian ‘Large-Format’ Retail
(LFR) Market
We have 197 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. 96 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.
Our Australian freehold investment property portfolio has grown to
$3.44 billion as at 30 June 2023, rising by $252.66 million or 7.9%
during FY23. $120.20 million of the increase is attributed to capital
appreciation in property fair values during the current year and
$132.47 million relates to capital additions and refurbishments.
The majority of the increase in property fair values was recorded in
1H23 which rose by $107.66 million, while 2H23 only increased
marginally by $12.54 million.
Throughout the pandemic and up to 1H23, we have reported on
the resilience of the large-format retail (LFR) market in Australia,
buoyed by strong consumer household spending, the significant
uptick in new dwellings and renovations and the high levels of
investor demand for quality LFR property assets. The LFR tenants
and the LFR sector was one of the main beneficiaries of pandemic-
inspired homemaker investments and renovation activity.
drove the $934.06 million or 37.2% increase in the value of the
Australian investment property portfolio since the end of FY19.
The marginal increase in property fair value for 2H23 is in contrast
to the revaluation results of other listed real estate investment trusts
(REITS). This contrast is due to the assets held by the consolidated
entity being in a different asset class to assets held by other REITS
that hold assets such as offices or traditional retail shopping
centres. Unlike these other asset classes, the LFR property sector
continues to experience strong tenant demand and historically high
occupancy rates resulting in solid rental growth.
There continues to be solid demand for high-quality, prime-grade
LFR assets in desirable locations with a diverse tenancy mix. The
LFR Centres within our Australian investment property portfolio are
well-located throughout metropolitan cities and large regional
areas and are built and refurbished to a high standard. As at 30
June 2023, our LFR centres accommodate a complementary mix of
over 470 third-party tenants that are diversified across a variety of
different categories including Food, Lifestyle & Other Service
Retailers, 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.
While new dwelling approvals and home construction loans have
experienced a downturn in FY23, leading to a decline in housing
starts, it is important to note that a significant backlog of work was
accumulated during the pandemic from the successful uptake of
the HomeBuilder Program. The delivery of this Program is still
pending realisation due to capacity constrains within the
construction industry. This backlog forms a steady foundation for
substantial dwelling completions in FY24, which is expected to
benefit LFR tenants and LFR property fair values.
Projections of sustained population growth, driven by rising net
migration, may further constrain the limited supply of new housing
and new LFR centres. This is expected to amplify demand in
upcoming periods. Harvey Norman®, Domayne® and Joyce
Mayne® franchisees service the Homemaker category and are well
placed for any growth that may arise from new housing
commencements and net migration increases.
Overall, our LFR Centres have performed well in FY23 amid the
sharp deterioration in macroeconomic conditions and subdued
investor sentiment since the end of FY22. Vacancy rates in our LFR
Centres continue to be at record lows, increasing rental spreads
due to competition amongst retailers for limited space. Market
rentals are strong, creating an increasing revenue stream for the
property segment. The tight labour market on the back of low
unemployment levels is expected to support income growth and
soften any potential decline in record household savings levels.
18
18
Annual Report 2023 Operating and Financial Review
Annual Report 2023 Operating and Financial Review
Harvey Norman® Port Stephens
opened March 2023
Operating and Financial Review | Segment Analysis: Property Segment (continued)
Overseas Property Portfolio
Globally, we have 111 company-operated stores across 7
countries. 27 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
$596.65 million, increasing in value by $76.16 million or 14.6%
during the year.
The increase can be attributed to the new store at Masterton,
New Zealand that opened on 20 June 2023 with a fair value of
$20.46 million as at balance date, and increases in existing
properties in New Zealand by $34.73 million due to additions
and refurbishments during FY23, offset by a net reduction in fair
values in New Zealand due to falling property prices. In previous
periods, we had reported a property that was held for sale in
Singapore. This property is no longer held for sale and is valued
at $12.24 million within the overseas property portfolio.
Total Property Portfolio and the
Performance of the Retail Property
Segment
Retail property segment revenue has decreased to $423.13
million for FY23, down by $71.27 million, or –14.4%, from
$494.39 million in FY22. This was primarily due to a reduction in
the net property revaluation increment by $94.93 million to
$118.75 million for FY23, compared to $213.68 million in net
increments for FY22. This was offset by an increase in rent and
outgoings received from freehold properties by $19.59 million or
8.3%, partially due to rent waivers of $10.76 million provided to
franchisees occupying owned properties last year due to the
lockdowns, and higher market rentals and very low vacancy rates
during FY23.
Property-related operating costs have normalised throughout
FY23 increasing by $23.55 million during the year, consistent
with the rise in revenues (excluding net property revaluation
adjustments).
The property segment result was $271.66 million for FY23, a
decrease of $94.82 million or –25.90% from $366.48 million in
FY22. Excluding net property revaluations for both periods, the
property segment result would have been equivalent to the prior
year, being $152.91 million for FY23 compared to $152.80
million for FY22, a marginal increase of $0.11 million or 0.1%.
PROPERTY
SEGMENT ASSETS $4.05bn
FY22
FY19
+8.5%
(up $317.01m)
+35.7%
(up $1,066.95m)
Surpassed $4bn milestone
for the first time
PROPERTY
SEGMENT
REVENUES
FY22
$423.13m
FY19
1H23 vs 1H22 2H23 vs 2H22
-14.4%
(down $71.27m)
+27.4%
(up $90.97m)
-0.6%
(down $1.60m)
-29.6%
(down $69.67m )
PROPERTY
SEGMENT PBT
$271.66m
FY22
FY19
1H23 vs 1H22 2H23 vs 2H22
-25.9%
(down $94.82m)
+32.7%
(up $66.98m)
-5.8%
(down $11.45m)
-49.4%
(down $83.37m )
NET PROPERTY
REVALUATION
ADJUSTMENTS
$118.75m
FY22
FY19
1H23 vs 1H22 2H23 vs 2H22
-44.4%
(down $94.93m)
+68.9%
(up $48.45m)
-17.4%
(down $22.49m)
-85.9%
(down $72.44m )
Harvey Norman® Masterton, New Zealand opened June 2023
Annual Report 2023 Operating and Financial Review
19
Appendix 4E 30 June 2023
Operating and Financial Review
Operating and Financial Review | Segment Analysis: Property Segment (continued)
Review of the Property Segment
The below table shows the composition of freehold property segment assets as at 30 June 2023, the number of owned property
assets and the increase in fair value recognised in each country.
Composition of freehold property segment assets
June 2023
(1) Investment Properties (Freehold)
− Australia
− New Zealand
− Ireland
$3,443.01m
$9.59m
$31.00m
Total Investment Properties (Freehold)
$3,483.59m
(2) Owner—Occupied Land & Buildings
− Australia
− New Zealand
− Singapore
− Slovenia
− Ireland
Total Owner-Occupied Land & Buildings
(3) Joint Venture Assets
$13.38m
$418.21m
$26.38m
$85.25m
$26.22m
$569.45m
$1.90m
Total Freehold Property Segment Assets
$4,054.94m
# of owned
retail
property
assets
# of owned
other
property
assets
Net increase /
(decrease)
in fair value
(decrease)
in Fair value
(equity)
96
-
-
96
-
20
-
5
2
27
-
123
44
2
1
47
1
1
2
-
-
4
7
$120.20m
($1.44m)
-
$118.75m
-
-
-
-
-
-
-
-
-
-
-
-
($22.22m)
($0.67m)
-
($1.05m)
($23.93m)
-
58
$118.75m
($23.93m)
Net Property Revaluation Adjustments
For the year ended 30 June 2023, the freehold investment property portfolio in Australia has recorded $120.20 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 solid performance of the Home and Lifestyle categories
resulting in firmer capitalisation rates for high quality LFR properties supported by 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 FY23, there were 72 valuations of freehold investment properties in Australia representing a total of 48.84% of the value of
freehold investment properties independently externally valued this year, and 51.4% 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 2023 financial
year, 6 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 6 properties were undertaken to determine the effect of these
factors.
20
Annual Report 2023 Operating and Financial Review
Operating and Financial Review | Leasehold Property Portfolio
Leasehold Property Portfolio | AASB 16 Leases
Right-of-use Assets
Leasehold investment properties (sub-leased or licenced to external parties):
The consolidated entity has a portfolio of property leases primarily for the purposes of being sub-leased, or licenced 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 2023, there were 309 leasehold investment properties. 101 leasehold
investment properties (33% of total) were sub-leased or licenced to Harvey Norman®, Domayne® and Joyce Mayne® franchisees in
Australia for retail purposes, and 208 leasehold investment properties (67% of total) were mainly sub-leased or licenced to Harvey
Norman®, Domayne® and Joyce Mayne® 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 the Leasehold Property Portfolio:
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 portfolio
() Leases of Properties Sub-Leased to External Parties
Right-of-use
asset June 2023
Lease liabilities
June 2023
# of leased
retail property
assets
# of Leased
other property
assets
− Australia
$705.03m
$771.44m
101
208
() Leases of Owner-Occupied Properties and Plant and
Equipment Assets
− Australia
− New Zealand
− Singapore & Malaysia
− Slovenia & Croatia
− Ireland & Northern Ireland
Total Leases of Owner-Occupied Properties and
Plant and Equipment Assets
$39.98m
$54.16m
$104.68m
$121.22m
$255.92m
$202.29m
$27.40m
$29.52m
$118.05m
$150.19m
$546.02m
$557.37m
Total Leasehold Property Portfolio
$1,251.05m
$1,328.81m
-
25
40
3
16
84
185
16
33
21
2
16
88
296
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 2023.
Financial impact of AASB 16 leases:
Leases of owner-
occupied properties
$000
Leases of properties
Sub-leased to
external parties
$000
Total leases
$000
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 FY23
(excluding variable lease payments and short-term, low-value leases)
Other adjustments
AASB 16 Incremental (Increase ) / Decrease in PBT for FY23
$69,551
-
$18,594
$88,145
-
$69,551
$102,113
$102,113
$31,700
$50,294
$133,813
$221,958
($86,658)
($110,832)
($197,490)
($1,568)
($81)
-
($1,568)
$22,981
$22,900
Annual Report 2023 Operating and Financial Review
21
Operating and Financial Review | A ‘Customer-Centric’ Strategy
A ‘Customer-Centric’ Strategy
strategies. The company-operated stores overseas have also elevated their capabilities to
on customer-centric
promote and
enhance the brands globally.
The evolution of the connected customer journey has made digital channels increasingly convenient and secure for
customers. The consolidated entity continues to invest in these secure digital channels to increase customer convenience
and protect against cyber-security risks.
Customer First System
The Customer First system, powered by Freshworks, is the cornerstone of the customer contact management platform and is
licensed for use within each franchised complex and by the company-operated stores overseas to improve customer service. There
has been an ongoing process of continuous improvement to enable Harvey Norman® to enhance the customer-centric omnichannel
strategy and improve the customer journey. The Customer First system remains agile and adaptable, always aligning with evolving
customer requirements. This dynamic approach enables the delivery of exceptional and consistent service to every customer,
regardless of their location or interaction point with the brands.
LiveChat - Local People Real Passion
Connecting customers via LiveChat and messaging platforms to help remove the friction in the journey from online to offline is
critical to success. Livechat can significantly benefit franchisees and company-operated stores by offering quick, customised
customer service. The immediate interaction with customers enables efficient resolution of their issues and queries, potentially
leading to higher sales. Livechat uses data insights to localise and personalise the Harvey Norman® customer experience, resulting
in a deeper customer understanding and the ability to offer bespoke products and services. Harvey Norman® was an early adopter
of LiveChat and Messaging in Australia to address online customer inquiries, with its AI-driven chatbots on various online messaging
platforms consistently improving over the past year. Both franchisees and company-operated stores aim to make their customers'
lives easier by respecting their preferences and schedules and appearing on their preferred messaging channels. Given the large
number of daily conversations happening on digital messaging platforms, customer service is readily available on platforms like
Apple Business Chat, WhatsApp, Facebook Messenger, and SMS. With the automation of customer service through AI chatbots,
Harvey Norman® can manage round-the-clock customer queries, like order updates and store timings, freeing up LiveChat and
Messaging agents to focus on providing expertise and addressing specific customer product needs.
Attraqt Search for Harvey Norman New Zealand, Ireland, Singapore and Malaysia
Recently, Harvey Norman launched Attraqt Search in New Zealand. Attraqt is an AI-powered personalisation and merchandising
platform that helps Harvey Norman deliver a personalised shopping experience that drives sales and improves customer
satisfaction. By using AI and data analytics, Harvey Norman® can optimise the merchandising, search capabilities, improve the user
experience for customers, leading to higher conversion, increased revenue and growth. Following the success of Attraqt Search in
New Zealand, this has now been rolled out to our other overseas markets in Ireland, Singapore and Malaysia.
Loqate address validation
During FY23, we have implemented Loqate address validation onto the Harvey Norman website in New Zealand. Loqate is a
comprehensive location data platform that specialises in providing accurate and reliable address verification, geocoding, and
geolocation services. Loqate is well-suited for today’s mobile user as it is a highly intuitive service that uses AI and fuzzy logic to
enhance the online shopping experience by reducing address errors and turning what could have once been failed deliveries into
happy customers.
Next Generation Commerce Platform
Following a successful rollout in Northern Ireland, our work continues on implementing our next generation cloud commerce
platform to our company-operated locations overseas. This will greatly assist our expansion into existing overseas markets of the
Republic of Ireland, New Zealand, Singapore and Malaysia, whilst improving stability, security, scalability and overall customer
experience. Additionally it will also give access to improved customer insights allowing us to continually monitor and improve the
customer journey to offer an optimal shopping experience to customers.
22
22
Annual Report 2023
Annual Report 2023 Operating and Financial Review
Click & Collect on Microsoft Teams - Continuous Improvements
The Click & Collect service offered by franchisees and company-operated stores is truly world class and hassle-free. Nearly 80% of
orders at Harvey Norman® franchised complexes are prepared within 1 hour, enabling customers to benefit from efficient speed
and customer care powered by Microsoft Teams. Continuous improvements and enhancements have been ongoing for the
Microsoft Teams based system, allowing for updates to be pushed to Click & Collect customers informing them of the status of their
orders, including more precise information regarding pick-up locations. The system incorporates integrated notifications which
enable customers to inform the franchised complex or company-operated store that they are on their way to collect their order with
the touch of an “On My Way” or “Arrived” button on their device. This applies to orders being picked up in-store or delivered
directly to their car. To ensure seamless pick-up, there are designated Click and Collect parking bays and in-store desks. For
customers wishing to have their order delivered to their car, the average delivery time is approximately 7 minutes from arrival.
Customers utilising this system rated Harvey Norman® franchisees in Australia with a CSAT (Customer Satisfaction) score nearing
90%. The recent integration of OpenAI technology into Microsoft Teams will enable Harvey Norman® to further optimise
communication and collaboration processes. Standardising communications on Microsoft Teams offers numerous advantages,
including streamlined collaboration, increased productivity, enhanced communication, and more efficient customer service.
Generative AI and ChatGPT
Generative AI is a rapidly growing branch of AI that can generate new and original content such as images, SEO rich copy, videos,
audio, and more. Generative AI can transform how retail operates in many ways, including an improvement in workflows because of
the speed and scale AI tools can bring to content production and customer relationship management efforts. The Harvey Norman®
websites are utilising Generative AI tools for operational optimisation and efficiency.
• Optimising Operations - Tailored scripts are created with ChatGPT to streamline tasks and reduce manual work.
ChatGPT is also used to translate complex scripts into natural language and for debugging purposes.
• Content Creation & Optimisation Currently exploring AI tools to automate the process of creating accurate, high-quality
product descriptions and informative guides, tone of voice and business goals.
• Generative AI Writing Assistants - to help choose the right tools to meet business needs.
• Creating AI-Generated Buying Guides - to understand content and format possibilities including comparison tables, step-by
-step instructions and comparison quizzes.
• Customer Experience - The Customer Service team has migrated to an updated chatbot platform, enhanced with GPT-
powered features to boost productivity and provide faster, personalised responses to customer enquiries.
• Features available include:
− Rephrase: Replace casual language with more formal alternatives.
− Tone enhancer: Select a tone when rephrasing text. Choose from professional, casual, and friendly tones.
− Quality score: Analyse tickets using AI and view quality scores for individual conversations.
Annual Report 2023 Operating and Financial Review
Annual Report 2023 Operating and Financial Review
23
23
Operating and Financial Review
Operating and Financial Review
Net Debt to Equity Ratio and Cash Flows
Net Debt:
June 23
Net debt of $631.61 m
VS
June 22
Net debt of $450.77 m
Net Debt to Equity Ratio
Across the consolidated entity globally, the total available facilities amounted to $1,185.83 million as at 30 June 2023 compared to
$884.81 million as at 30 June 2022, mainly due to the establishment of Tranche C of the Syndicated Facility Agreement of $200
million in FY23.
[*Total Equity excludes ROU assets, lease
liabilities and acquisition reserve]
accessible financing facilities available. The utilised facilities in FY23 increased by $150.73 million compared to FY22 resulting in a
net debt position of $631.61 million as at 30 June 2023, compared to a net debt position of $450.77 million in the prior year.
Our net debt to equity ratio remains low at 13.85% (Jun-22: 10.31%) compared pre-COVID levels of 19.46% as at 30 June 2019, an
improvement of 561 basis points.
The consolidated entity has sufficient liquidity and our low gearing and strong balance sheet gives us the capacity and ability to
access additional liquidity should we require it.
Solid Cash Flows
Cash and cash equivalents, net of bank overdraft, as disclosed
in the Statement of Cash Flows, decreased by $32.30 million to
$202.06 million as at 30 June 2023, compared to $234.36
million in the prior year.
Cash flows from operating activities increased by $82.96 million
to $680.26 million for FY23, from $597.30million in FY22. This
was primarily attributable to an increase in net receipts from
franchisees by $22.29 million and lower income taxes paid by
$103.52 million, offset by an increase in interest paid by $40.62
million and higher payments to suppliers and employees by
$30.02 million.
Net receipts from franchisees increased by $22.29 million,
despite a reduction in gross revenue received from franchisees
by $130.00 million, as net receipts from franchisees were
affected by the movement in the aggregate amount of financial
accommodation provided to franchisees in FY23 relative to the
movement in FY22. During FY23, the movement in the
aggregate amount of financial accommodation provided to
franchisees decreased primarily due to lower funding
requested by franchisees to fund their inventory purchases.
Income tax paid decreased by $103.52 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.
Payments to suppliers and employees increased by $30.02
million due to higher operating costs attributable to new store
openings and the normalisation of operating costs post-COVID.
Net cash investing outflows increased by $154.69 million
during FY23 primarily due to an increase in payments for the
purchase and refurbishments of freehold investment properties
by $56.64 million and for the purchase of property, plant and
equipment and intangible assets by $92.74 million .
Net cash financing outflows decreased by $53.80 million mainly
attributable to a reduction in dividends paid .
Operating Cash Flows
Substantial improvement in
working capital to deliver
strong operating cash flows
$680.26m
FY22
FY19
1H23 vs 1H22 2H23 vs 2H22
+13.9%
(up $82.96m)
+82.5%
(up $307.41m)
-39.8%
(down $225.09m)
+989.4%
(up $308.05m)
Cash Conversion
Strong cash conversion for FY23
mainly from improvement in
working capital in 2H23
97.4%
1H23
2H23
90.1%
108.4%
[Calculated as: Operating Cash Flows
(excluding interest & tax) ÷ EBITDA
(excluding AASB 16 & net property
revaluations)]
24
24
Annual Report 2023 Operating and Financial Review
Annual Report 2023 Operating and Financial Review
Operating and Financial Review | Review of the Statement of Financial Position
Review of the Financial Position of the Consolidated Entity
Total assets
Total liabilities
Year ended 30 June
2023
2022
$7.67 bn
$7.25 bn
5.9%
from June 22
Year ended 30 June
2023
2022
$3.21 bn
$2.95 bn
8.6%
from June 22
• Total assets increased by $425.43 million or 5.9% from June
2022
• Freehold investment property portfolio increased by
$253.38 million
• Freehold owner-occupied property portfolio increased
by $75.33 million
• Franchisee receivables decreased by $51.92 million or
–5.8% to $841 million as at 30 June 2023
Total assets were $7.67 billion as at 30 June 2023, increasing
by $425.43 million, or 5.9%, from $7.25 billion as at 30 June
2022. When compared to FY19, the increase in total assets
was $2.87 billion or 59.9%, delivering a 4-year CAGR of 12.4%.
The value of the freehold investment property portfolio
increased by $253.38 million, or +7.8%, to $3.48 billion as at
30 June 2023 primarily due to $120.20 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.
Property, plant and equipment assets increased by $112.79
million mainly due to the increase in the freehold owner-
occupied property portfolio of $75.33 million and the fit-out of
four new company-operated stores this year: Fonthill, Ireland
(July 2022), 1 Utama Shopping Centre, Malaysia (November
2022), Rijeka, Croatia (April 2023) and Masterton, New Zealand
(June 2023). Fit-outs of three new franchised complexes in
Australia also contributed to the increase: Manjimup, WA
(November 2022), Port Stephens, NSW (March 2023) and
Renmark, SA (May 2023). The premium refit program for
franchised complexes in Australia is well-underway and there
are currently five refits in progress as at balance date.
Inventories of company-operated stores increased by $21.38
million primarily due to new store openings, coupled with
concerted efforts to maintain balanced and appropriate levels
of inventory in each overseas market.
• Total liabilities increased by $253.06 million or 8.6% from
June 2022
• Interest-bearing loans and borrowings increased by
$150.79 million
Total current trade and other receivables decreased by $72.17
million, or –6.8%, to $993.13 million, compared to $1.07 billion
last year. This reduction is mainly due to a decrease in
receivables from franchisees by $51.92 million, or –5.8%, to
$841.00 million as at 30 June 2023, compared to $892.92
million in the previous year. Despite the moderation of
franchisee sales revenue this year, combined with a rise in
franchisee operating costs which have normalised in the post-
COVID environment, lower financial accommodation was
provided to franchisees in FY23 to fund inventory purchases.
Interest-bearing loans and borrowings increased by $150.79
million mainly due to the higher utilisation of the Syndicated
Facility by $150 million, from $610 million utilised as at 30 June
2022 to $760 million utilised as at 30 June 2023. Total
liabilities were $3.21 billion as at 30 June 2023, rising by
$253.06 million, or 8.6%, from $2.95 billion as at 30 June 2022.
Net assets have increased by $172.37m or 4.0% to
$4.47bn as at 30 June 2023.
When compared to FY19, net assets increased by
$1.27bn or 39.7%.
40% increase in Net Assets from FY19
8.7% 4-Year Net Assets CAGR
Composition of Total Assets of $7.67bn
$705.03m
Investment properties:
Leasehold right of-use- assets
$322.56m
Plant & equipment
$1,080.66m
Receivables
$198.21m
Other
$4,054.94m
Freehold property assets
$546.02m
Property, plant & equipment:
Right-of use assets
$218.75m
Cash
$545.66m
Inventory
Annual Report 2023 Operating and Financial Review
25
Operating and Financial Review
Operating and Financial Review
Outlook
Subsequent to balance date, 2 new Harvey Norman® company
-operated stores were opened in Malaysia located at Shah
Alam, Selangor (opened 24 July 2023) and Kota Kinabalu,
Sabah (opened 28 August 2023), bringing our total number of
stores in Malaysia to 30 as at the date of this report.
have been deferred to the first half of FY25. We are continuing
to pursue retail sites in Croatia and presently intend to open a
further 3 stores in Croatia during FY25. Our first 2 company-
operated stores in Budapest, Hungary are now anticipated to
open during FY25 rather than calendar 2024.
As announced at the 2022 Annual General Meeting of the
Company, we continue to recognise the significant opportunity
to grow to 80 stores in Malaysia by the end of 2028. We are
on track to open a further 8 stores in Malaysia during FY24, of
which leases for 5 of these sites have been confirmed and
executed. This includes the opening of the Pavilion
Damansara Heights store in Kuala Lumpur that was deferred
from 2H23 to 1H24. The remaining 3 sites are currently in
progress. Beyond FY24, we anticipate opening up to 12 new
stores in Malaysia during FY25, with our intention of reaching
the milestone of 50 stores in Malaysia by 30 June 2025, our
largest store network outside of Australia.
In New Zealand, we intend to open 1 new company-operated
store during FY24. Due to the macroeconomic situation in
New Zealand, the other 2 proposed store openings for FY24
In Australia, we anticipate opening 2 new franchised
complexes and relocating 1 franchised complex from a leased
site to a freehold property during the 2024 financial year.
Last year, we announced the recommencement of the
premium refit program and the revised expectations to
complete up to 25 premium refits over the next 5 years.
During FY23, the premium refit of the furniture and bedding
categories of the Fyshwick (ACT) franchised complex was
completed and the premium refits of 5 franchised complexes
are currently underway located at Balgowlah (NSW), Erina
(NSW), Preston (VIC), Penrith (NSW) and Cannington (WA). It is
our present intention to commence a further 4 premium refits
of Australian franchised complexes during FY24.
Retail Trading Update:
Aggregated sales increase / (decrease) in local currencies from 1 July 2023 to 31 July 2023 vs 1 July 2022 to 31 July 2022:
% increase / (decrease)
calculated in local currencies
1 July 2023 to 31 July 2023 vs
1 July 2022 to 31 July 2022
Country
Total %
Comparable %
Australian Franchisees
$ AUD
New Zealand
Slovenia & Croatia
Ireland
Northern Ireland
Singapore
Malaysia
$ NZD
€ EUR
€ EUR
£ GBP
$ SGD
MYR
(-12.3)
(-2.6)
(-11.3)
(-2.1)
(-19.7)
(-1.7)
0.6
(-12.6)
(-4.7)
(-17.5)
(-5.3)
(-19.7)
(-1.0)
(-5.7)
Harvey Norman® Rijeka, Croatia opened April 2023
26
26
Annual Report 2023 Operating and Financial Review
Annual Report 2023 Operating and Financial Review
Operating and Financial Review | Summary of Key Business Risks
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.
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-
Domayne® and Joyce Mayne® brands and
integrated retail, franchise,
intellectual property of the franchisor.
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 $4 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.
Cyber security risk:
Cyber security attacks can take many forms including:
i. Attacks on technology infrastructure which generates
revenue and threaten to perpetually block access to data
unless a ransom is paid (Ransomware); and
ii. 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
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:
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 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:
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
Strategy sets the Harvey Norman® brand apart from
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.
Reduction in the fair value of the property
portfolio and contraction in the large-
format retail (LFR) market:
The commercial property market is cyclical in nature with real
estate values fluctuating over time. The consolidated entity is
exposed to potential reductions in property values within this
sector. There are a number of economic circumstances that
may impact the value of the property portfolio, these include
the interest rate environment.
The consolidated entity has a selective and prudent acquisition
diverse complexes and a solid, complementary tenancy mix in
order to maximise the profitability of the property portfolio.
Counterparty risks of service providers:
This risk relates to the inability of service providers and
counterparties to meet their obligations and commitments,
inclusive of compliance, privacy and data security obligations.
The consolidated entity conducts due diligence on, and closely
monitors and evaluates the performance of, external service
providers to mitigate counterparty risk.
Annual Report 2023 Operating and Financial Review
27
Directors’ Report
Directors’ Report
Comprised of:
Board of Directors
Remuneration Report (Audited)
Sustainability Report
Auditor’s Independence Declaration
Independent Auditor’s Report
Directors’ Declaration
29 - 31
32 - 57
58 - 71
72
73 - 78
79
28
28
Annual Report 2023 Directors’ Report
Annual Report 2023 Directors’ Report
Directors’ Report | Board of Directors
Board of Directors
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.
David Matthew Ackery
Executive Director
Mr. Ackery became a director of the
Company in 2005. He is employed by
Yoogalu and has overall executive
responsibility for the relationship between
each controlled entity in Australia with
relevant electrical, appliance, home
entertainment and technology franchisees.
Gerald Harvey
Executive Chairman
In 1982, Mr. G. Harvey was the co-founder, with
Mr. I.J. Norman, of Harvey Norman®. He
became a director and chairman of Harvey
Norman Holdings Limited (the Company) in
1987, and is employed by Yoogalu Pty
Limited (Yoogalu), a controlled entity of the
Company. Mr. G. Harvey is executive
chairman, or a director, of each member of
the consolidated entity, with a particular
focus on property investments.
Kay Lesley Page
Executive Director and CEO
Ms. Page joined Harvey Norman® in 1983
and became a director of the Company in
1987. Ms. Page is employed by Yoogalu.
Since 1999, Ms. Page has overall Chief
Executive Officer responsibility for each
controlled entity of the Company in
Australia, and is a director of each member of
the consolidated entity. 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 joined Harvey Norman® as a
Financial Controller in 1997. Mr. Mentis
became secretary of the Company in 2006
and a director of the Company in 2007. He
is employed by Yoogalu and, since 2007,
has overall Chief Financial Officer
responsibility for, or is a director of, each
member of the consolidated entity. 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.
John Evyn Slack-Smith
Executive Director and COO
Mr. Slack-Smith was a director of a Harvey
Norman® computer franchisee between
1993 and 1999 and became a director of
the Company in 2001. He is employed by
Yoogalu and has overall executive
responsibility for the operations of each
controlled entity of the consolidated entity
in Australia of which he is a director. Mr.
Slack-Smith is the Chair of the Barker
College Foundation Limited and a Member
of Council at Barker College.
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, FGIA, 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. Mr. Brown is
the Chairman of each of Windgap
Foundation Limited and Sydney High School
Foundation. In 2013 he was awarded the
Medal of the Order of Australia (OAM) for
service to the community, particularly to
people with disability.
Kenneth William
Gunderson-Briggs
B.Bus., FCA, MAICD
Non-Executive Director (Independent)
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 Chair of
the Remuneration Committee on 16
December 2015 and was appointed Chair 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 more than 25 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,
became a member of the Audit & Risk
Committee on 25 November 2020, and
became a member of the Remuneration
Committee 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 financial
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. Since 14 January
2019, Ms Catanzaro has been a Non-
Executive Director of Because Movement
Foundation Limited, a registered
charity. Since 20 August 2023, Ms Catanzaro
has been a Non-Executive Director of the
Museum of Contemporary Art Limited,
where Ms Catanzaro is Chair of the Finance
Committee.
Annual Report 2023 Directors’ Report
29
Directors’ Report
(continued)
Directors’ Meetings
The below 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.
DIRECTOR
Number of
Meetings:
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
Attendance
Full Board
9
Audit & Risk
13
Remuneration
8
Nomination
2
100%
100%
9 [9]
9 [9]
89%
8 [9]
100%
100%
78%
97%
9 [9]
9 [9]
7 [9]
9 [9]
n/a
n/a
n/a
n/a
n/a
n/a
12 [13]
100%
9 [9]
13 [13]
100%
100%
9 [9]
9 [9]
n/a
13 [13]
n/a
n/a
n/a
n/a
n/a
n/a
8 [8]
8 [8]
n/a
8 [8]
n/a
n/a
n/a
n/a
n/a
n/a
2 [2]
2 [2]
2 [2]
n/a
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
414,966,437
20,222,315
1,361,893
901,471
1,367,297
-
205,525,565
10,059
53,426
-
386,100
1,080,700
376,500
376,500
350,500
-
-
-
-
-
644,408,463
2,570,300
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 2,570,300 performance
rights (2022: 2,013,000), being a right to acquire ordinary
shares in the Company at nil exercise price.
• 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.
• On 1 December 2022, a total of 1,106,800 performance
rights under Tranche FY23 of the 2016 LTI Plan were
granted to the executive directors in accordance with the
terms and conditions of the LTI Plan.
On 3 January 2023, a total of 549,500 performance rights
issued on 2 December 2019 under Tranche FY20 of the 2016
LTI Plan, were exercised by the executive directors in
accordance with the terms and conditions of the LTI Plan.
On 22 July 2022, a total of 109,000 performance rights under
Tranche FY19 of the 2016 LTI Plan, were exercised by the
executive directors in accordance with the terms and conditions
of the LTI Plan.
CEO and CFO Certification
The CEO and CFO have provided written statements to the
Board in accordance with section 295A of the Corporations Act
2001 and have also certified to the Board in relation to the year
ended 30 June 2023, 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
L. Catanzaro
M.J. Craven
√
√
(Chair)
√
n/a
√
√
(Chair)
√
n/a
√
√
(Chair)
n/a
√
30
Annual Report 2023 Directors’ Report
Directors’ Report (continued)
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 Company.
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 2023. 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 12.0
cents per share to be paid on 13 November 2023 to
shareholders registered on 16 October 2023 (total dividend,
fully franked, $149,520,798). The following fully franked
dividends of the Company have also been paid, declared or
recommended since the end of the preceding financial year:
2022 Final Fully-franked Dividend
14 November 2022
$218,051,207
2023 Interim Fully-franked Dividend
1 May 2023 $161,980,865
Payment Date
Amount
The total dividend in respect of the year ended 30 June 2023 of
25.0 cents per share (2022: 37.5 cents per share) represents
57.74% (2022: 57.58%) of profit after tax and non-controlling
interests, as set out on page 82 of the financial statements.
Excluding the non-cash net property revaluation increments,
the total dividend in respect of the year ended 30 June 2023 of
25.0 cents per share represents 68.25% (2022: 70.59%) of profit
after tax and non-controlling interests, as set out on page 82 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.
Indemnification of Officers
During the financial year, indemnity arrangements were
continued for officers of each member of the consolidated
entity. An indemnity agreement was entered into between the
Company and each of the directors of the Company named
earlier in this report and with each full-time executive officer,
director and secretary of all group entities. Under the
agreement, the Company has agreed to indemnify those
officers against any claim or for any expenses or costs which
may arise as a result of work performed in their respective
capacities.
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 2023.
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. 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 and the acquisition reserve recognised in equity.
As at 30 June 2023, the consolidated entity had unused,
available financing facilities of $339.94 million out of total
approved financing facilities of $1,185.83 million. This has
resulted in a net debt to equity ratio of 13.85% as at 30 June
2023, compared to a net debt to equity ratio of 10.31% as at 30
June 2022.
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 twelve 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 2023 Directors’ Report
31
Directors’ Report
Remuneration Report
Audited
This remuneration report for the year ended 30 June 2023 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.
Table of Contents
Letter from the Chair of the Remuneration Committee
1
Introduction
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 plan
7 Performance and executive remuneration outcomes in FY23
8 Executive contractual arrangements
9 Non-Executive Director remuneration arrangements
10 Relationship between remuneration and the performance
11 Compensation of key management personnel
12 Additional disclosures relating to options, performance rights and shares
13 ‘Take-Home Pay’ for KMP Directors
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
33
36
36
38
39
39
41
43
50
50
51
52
54
56
56
56
57
32
Annual Report 2023 Remuneration Report (Audited)
Directors’ Report | Remuneration Report (Audited)
Letter from the Chair of the Remuneration Committee
Dear 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.
Remuneration Highlights at a Glance
• Results improved in comparison to pre-COVID FY19
− Reported PBT of $776.08 million, down from FY22 and FY21 records, up $201.52 million (35%) on pre-COVID FY19
− PBT return on net assets of 17.4% for FY23, with a 3-year rolling average return of 22.3%
• High correlation of remuneration outcomes with Company performance
• Risk managed in accordance with the risk management framework and risk appetite
• Independent expert continues to find that the level, mix, and structure is reasonable
• The remuneration outcomes remain reasonable
• Short-term incentive (STI) financial targets are informed by analyst consensus forecasts
Outcomes
• Executive directors achieved 59.8% of their 2023 STI maximum targets compared to 87.8% for FY22
• Return on Net Assets (RONA) of 15.96% for the year (FY22: 24.24%) resulted in
• The total compensation for Key Management Personnel (KMP) Directors was $489,746 or 3.8% lower than the previous year
• The total “take-home” pay for KMP Directors was $1.36 million or 11.3% higher than the 2022 financial year due to timing of
remuneration receipts between the financial years.
• The total “at risk” compensation expense for FY23 was $1.06 million (-18.5%) lower than the “at risk” expense in FY22.
• Each of the executive directors increased their significant shareholdings in the Company, so that the value of each respective
shareholding at year-end exceeded the amount of their respective total fixed remuneration (TFR). There is clear alignment of
executive management with shareholders.
Annual Report 2023 Remuneration Report (Audited)
33
Directors’ Report | Remuneration Report (Audited) (continued)
Letter from the Chair of the Remuneration Committee (continued)
• The continuing significant shareholdings of the executive
directors align with long-term interests of shareholders.
• The remuneration mix is reasonable.
• The STI framework is reasonable.
• The remuneration should continue to be positioned around
the level that reflects the financial accountability and
operational scope of the positions relative to the benchmark
peer group, which was around the 75th percentile of the
benchmark peer group.
The conclusions reached by the Committee, informed by the
independent expert review, were that:
• The level of fixed remuneration was reasonable.
• 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 remain reasonable
Evaluation of Performance of Executive
Directors
An appraisal of the performance of each executive director and
the executive director team was undertaken following the end
of the 2023 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 2023 was fair and reasonable and was in line
with performance.
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 outcome of the “at risk”
remuneration in respect of the 2023 STI Plan and the LTI Plan
were 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.
CONCLUSION: Remuneration was fair and reasonable and in
line with performance
Improving the Framework for
Remuneration in 2023
ACTION: Changes implemented for FY23
• Fixed Remuneration: The fixed remuneration for executive
directors increased between 3% to 6% during the year,
being the first increase of fixed remuneration for executive
directors since 2014.
The Design of Executive Director
Remuneration for Another Year of
Uncertainty
At the beginning of the 2023 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, each of whom are employed by Yoogalu
Pty Limited (Yoogalu) (a controlled entity of the Company):
• Consensus forecasts of market analysts informed the setting
of the levels for the Short-Term Incentive (STI) Plan.
• The maximum outcomes for the STI Plan remained capped.
• The performance conditions for the STI Plan were based on
financial outcomes as to 70%, non-financial performance
conditions as to 30% and malus penalty provisions up to
30% in the assessment of 100% achievement.
• The outcomes for the Long-Term Incentive (LTI) Plan were
subject to the achievement of Return on Net Assets (RONA)
over a 3-year period, consistent with prior years.
• The maximum outcomes for the LTI Plan remained capped.
CONCLUSION: High correlation of remuneration outcomes
with performance
Assessment of Conduct
Each participating executive director is subject to an over-riding
non-financial performance condition that the executive directors
managed risk in accordance with the risk management
framework and risk appetite of each member of the
consolidated entity. The Company recognises the critical
connection between conduct and reward. The assessment of
conduct is informed by the fundamental principles of:
• obeying the law
• acting fairly
• not to mislead or deceive
• provide goods and services that are fit for purpose
• delivery of goods and services with reasonable care and skill
CONCLUSION: Risk was managed in accordance with the risk
management framework and risk appetite
Benchmarking for Reasonableness
An independent remuneration expert was engaged to review
the level and reasonableness of remuneration of the executive
directors during 2023. This included analyses and comparison
of alternate peer groups, such as those used for internal
analysis and by proxy advisors in their prior assessments of
executive remuneration. It also included the remuneration
structure and the components including the level of ‘at risk’
remuneration.
The critical findings of the independent remuneration expert
review were as follows:
• The overall remuneration opportunity remains within a
reasonable range given executive tenure and position
responsibilities.
34
Annual Report 2023 Remuneration Report (Audited)
Letter from the Chair of the Remuneration Committee (continued)
Improving the Framework for
Remuneration in 2023 (continued)
• Short-Term Incentives: The 2023 STI Pool increased by
$0.50 million (12.5%). This was the first increase in the Pool
since FY21 (11.1%). The average annual growth in net assets
of the consolidated entity from FY20 was 11.2%
• Long-Term Incentives (approved at 2022 AGM): The
number of performance rights granted to each executive
director was increased with the setting as a proportion of the
fixed remuneration base. Once vested, the value of the
performance rights is maintained over the longer period for
exercise recognising the value of dividends produced as well
as share price changes.
These changes align the components of the remuneration
opportunities for executive directors, increasing the “at risk”
proportion.
Financial Settings for the 2023 STI Plan
ACTION: Financial targets informed by analyst consensus
forecasts
The minimum financial performance conditions (entry-level to
the 2023 STI Plan) was set at APAT of $415 million (FY22 $429
million), the 100% achievement level at APAT of $518 million
(FY22 $536 million), with a maximum over-achievement level at
APAT of $575 million (FY2021 $595 million).
The levels were set by the Committee with reference to analyst
consensus forecasts compiled by Visible Alpha from each of
Goldman Sachs, CLSA, Macquarie, Jardin, JP Morgan,
Marquee, UBS, Barrenjoey, Jeffries, Evans & Partners
and Citi, updated in November 2022.
Achievement up to the 100% target, and between the 100%
target and the over-achievement target remained on a straight-
line basis, subject to achieving the entry threshold.
Remuneration Outcomes
The financial achievements of the consolidated entity for the
2023 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 Chair
Annual Report 2023 Remuneration Report (Audited)
35
Directors’ Report | Remuneration Report (Audited) (continued)
01
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.
Each KMP is employed by Yoogalu and the remuneration details of each KMP during the 2023 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
Executive Chairman
Executive Director & Chief Executive Officer
Executive Director & Chief Operating Officer
Executive Director
Executive Director, Chief Financial Officer & Company Secretary
Full financial year
Executive Directors
Gerald Harvey
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Non-Executive Directors
Maurice John Craven
Luisa Catanzaro
Senior Executives
Thomas James Scott
Gordon Ian Dingwall
Emmanuel Hohlastos
Glen Gregory
Darren Salakas
Richard Beaini
Carene Myers
Christopher Herbert Brown OAM
Non-Executive Director
Michael John Harvey
Non-Executive Director
Kenneth William Gunderson-Briggs
Non-Executive Director (independent)
Non-Executive Director (independent)
Non-Executive Director (independent)
General Manager—Property
Chief Information Officer
General Manager—Home Appliances
General Manager—Technology & Entertainment
Resigned 17 October 2022
General Manager—Technology & Entertainment
KMP from 10 October 2022
General Manager—Audio Visual
General Manager—Small Appliances
Full financial year
Full financial year
Term as KMP
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
02 Remuneration Principles and Strategy
The executive remuneration strategy in 2023 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 each
member of the consolidated entity. In applying these principles to each member of 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.
b. Business savvy requires a deep understanding of one or more of the sectors of retail, property, franchising and digital.
c. An owner orientation or perspective of an owner requires the individual to either have:
i. "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
ii. 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.
d. 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.
e. Interest in and time to do the job means:
i. the person has an executive role, meaning that the person's career is based on job performance at the Company; or
ii. 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.
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Annual Report 2023 Remuneration Report (Audited)
02 Remuneration Principles and Strategy (continued)
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 2023 aligns with the strategic direction
and links remuneration outcomes to performance.
Objective of the consolidated entity in 2023
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 2023
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 2023 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
The remuneration offering is competitive for companies of a similar
sector, size and complexity
Longer-term remuneration
encourages retention and
multi-year performance focus
Component
Vehicle
Purpose
Link to Performance
Fixed remuneration
Short-term incentive
(STI)
Comprises base salary,
superannuation
contributions and other
benefits
To provide competitive fixed
remuneration set with
reference to role, market and
experience
Consolidated entity and individual performance are considered
during the annual remuneration review
Paid as cash as a
performance cash
incentive (PCI), subject to
minimum shareholding
of individual Executive
Directors
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.
c. The STI pool in respect of 100% achievement level is subject to
performance criteria as to:
i. 70% subject to financial conditions;
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. Financial achievement calculated over the 100% achievement
level is subject to financial conditions only.
e. 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.
f.
If shares held are less than the benchmark, benefits
are to be provided in the form of shares.
Where Annual Profit
After Tax (APAT) is
calculated as follows:
Long-Term Incentive
(LTI)
Annual Net Profit After Tax (APAT), excluding the after-tax effect of property revaluation increments or decrements
and the after-tax effect of the net impact of AASB 16 Leases
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 2023, 2024 and 2025
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 achievement 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
and the net impact of AASB 16 Leases)
Net Assets (excluding non-controlling interests) at the close of the preceding financial year
Annual Report 2023 Remuneration Report (Audited)
37
Directors’ Report | Remuneration Report (Audited) (continued)
03 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 2023, 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 and the long-term
incentives, and the reasonableness of the remuneration framework. The Remuneration Committee comprises three NEDs, two of
whom are independent NEDs. Further information on the Remuneration 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. 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 STI and LTI Plans
The Remuneration Committee continued to apply the following settings to the remuneration framework for the executive directors:
• Consensus forecasts of market analysts to establish the entry point, the full achievement and the over-achievement levels for the
Short-Term Incentive (STI) Plan.
• Capped maximum outcomes for the STI Plan.
• The performance conditions for the STI Plan 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 subject to achievement over a 3-year period, and not specifically weighted
in respect of any year.
• Capped maximum outcomes for the LTI Plan.
Evaluation of Performance of Executive Directors
An appraisal of the performance of each executive director and the executive director team was undertaken following the end of the
2023 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 FY23 financial result was fair and reasonable
and was in line with performance.
The appraisal considered matters in respect of performance, including:
• The actions of the executive directors in protecting the business and reacting to the changes in market demand, including across
the key functions of franchising, physical stores, on-line presence, supply chain management, logistics, marketing and
advertising, government relations and property across the eight separate countries; and
• The management of risks to the business which included employee and stakeholder welfare.
The Remuneration Committee views the outcome of the 2023 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 the management of the integrated retail, franchise, property and digital business.
No Unfair Benefit
Both the annual STI Plan and the ongoing LTI Plan have provisions to prevent an ‘unfair benefit’ being obtained by any participant in
respect of fraud or breach of obligation.
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Annual Report 2023 Remuneration Report (Audited)
04 Remuneration Mix—Target
For the 2023 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 FY23, 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, and a reasonableness review, to ensure that the overall remuneration and the remuneration framework is
reasonable. 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 positions.
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;
b. 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. 75th
of the peer group size); and
c. Target total remuneration to provide the opportunity for executive directors to earn top quartile rewards for outstanding
performance.
Remuneration levels are considered annually, with consideration of market data and the performance of each member 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 75th
remuneration expert.
) advised by the independent
The following chart and table summarises the maximum remuneration mix of the executive directors.
CEO
39%
23%
38%
Within Target Range
Executive Chairman
51%
49%
Within Target Range
Other Executive Directors
39% - 43%
37%
20% - 24%
Within Maximum Range
Fixed Remuneration
Maximum STI
Maximum LTI
Relationship to Benchmark Peer Group
Executive Directors: Maximum Remuneration for FY23
Fixed Remuneration % of Total
Maximum STI % of Total
Maximum LTI % of Total
Executive Directors
Kay Lesley Page
Gerald Harvey
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
$2,170,000
$775,000
$1,320,000
$1,320,000
$1,010,000
39%
51%
43%
43%
39%
$1,305,000
23%
$2,124,144
-
-
$758,592
$1,125,000
$1,125,000
$945,000
37%
37%
37%
28%
$632,880
$632,880
$632,880
$4,781,376
$6,595,000
42%
$4,500,000
Maximum Total
Remuneration
$5,599,144
$1,533,592
$3,077,880
$3,077,880
$2,587,880
$15,876,376
38%
49%
20%
20%
24%
30%
The remuneration expert was commissioned to review the level and reasonableness of the remuneration set for executive directors.
The independent remuneration expert found the remuneration framework, the level of the remuneration and the remuneration mix
to be reasonable. The maximum STI opportunity for the CEO has increased to equate to 60% (2022: 55%) of the fixed
remuneration. For the other executive directors, the maximum STI opportunity is between 85% and 94% (2022: 80% and 88%) of
the fixed remuneration. There is no STI opportunity for the Executive Chairman. The maximum LTI opportunity for the CEO and
Executive Chairman has been increased to equate to 100% (2022: 80%) of the fixed remuneration. For the other executive
directors, the maximum LTI opportunity is between 48% and 63% (2022: 40% and 52%) of the fixed remuneration.
05 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 Yoogalu,
which is an objective appraisal of the Performance Report and documents the findings of the audit of the Performance Report.
Annual Report 2023 Remuneration Report (Audited)
39
Directors’ Report | Remuneration Report (Audited) (continued)
05 Details of the Short-Term Incentive (STI) Plan (continued)
2023 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
How is the STI delivered?
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.
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.
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.
b.
If the executive director is over the Benchmark Shareholding Level, the STI reward will be paid in cash.
The policy remains valid in the event of a new executive director, or if a present executive director wishes to sell-down.
When is the STI paid?
The payment of the 2023 STI Plan PCI to an executive director under the 2023 STI Plan is to be made on 29 September 2023,
or as soon as reasonably practicable after that date, subject to the satisfaction of 2023 STI Plan Performance Conditions and
2023 STI Plan Service Conditions.
What is the 2023 STI
opportunity?
Executive directors, excluding the Executive Chairman, have a maximum STI opportunity of between 60% to 94% 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 2023, the 100% STI Pool for the 2023 STI Plan PCI was $3,650,000 allocated as follows:
1. Kay Lesley Page $1,058,500;
2. John Evyn Slack-Smith $912,500;
3. David Matthew Ackery $912,500; and
4. Chris Mentis $766,500
The maximum over-achievement pool for allocation was $850,000, with the maximum STI pool being $4,500,000. The over-
achievement pool was allocated in proportion to the 100% STI Pool.
What are the STI
performance
conditions for FY23?
Actual STI payments awarded to each executive director depend on the extent to which specific measures, targets, initiatives
and conditions for the 2023 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 2023 STI Plan Performance Conditions are as follows:
a. Financial Condition as to 70% entitlement to the 100% STI Pool;
b. Non-Financial Conditions as to 30% entitlement to the 100% STI Pool;
c. Malus reductions of up to 30% for non-achievement of certain other non-financial performance conditions; and
d. Financial Condition as to the Over-Achievement Pool.
Business as usual measures are included in the malus conditions. The financial and critical non-financial measures, as well as
the malus measures, must be met for the STI conditions to be achieved.
(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 adjusted for the after-tax effects of net
property revaluation adjustments and the net impact of AASB 16
Leases, and provides a basis for comparing profitability year-on-year.
The Financial Condition was calculated in respect of the year ended
30 June 2023 and was achieved at the following levels:
• Entry Level at APAT of $415 million, equating to 50% entitlement
of the STI subject to the financial condition;
• 100% Level at APAT of $518 million, equating to 100%
entitlement of the STI subject to the financial condition (i.e., 70%
entitlement to the 100% STI pool = $2.555 million);
• Over-Achievement Level at APAT of $575 million, equating to
100% entitlement of the 100% STI Pool subject to the financial
condition (i.e., 70% entitlement to the 100% STI pool = $2.555
million) and 100% entitlement to the Over-Achievement Pool
Amount of $0.85 million, resulting in a total Over-Achievement
entitlement of $3.405 million;
• Straight-line sliding scale for achievement of the 100% level,
subject to achieving the Entry Level threshold; and
The Non-Financial Conditions were assessed in respect of the following:
• Compliance Framework improvements equating to 33.33% entitlement of the STI
subject to the non-financial conditions (i.e., 10% entitlement to the STI pool =
$0.365 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 = $0.730 million).
Full achievement of the non-financial conditions will equate to 30% entitlement to the
STI pool i.e., a total of $1.095 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:
• Work, health & safety governance framework = 7.5% of the 30%
• Sustainability governance = 7.5% of the 30%
• Cyber security global security improvement program & policies = 6% of the 30%
• Tax governance, policies and documentation of tax reviews = 5% of the 30%
• Straight-line sliding scale for achievement between the 100%
• Franchisor operations—documentation, risk management plans and
Level and the Over-Achievement Level.
recommendations = 4% of the 30%
The Financial Condition settings were determined in line with
internal expectations and consensus forecasts of external market.
analysts.
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 $1.095 million.
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Annual Report 2023 Remuneration Report (Audited)
05 Details of the Short-Term Incentive (STI) Plan (continued)
How is performance
assessed?
In respect of the 2023 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.
To determine whether an individual is eligible for the 2023 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 Chair 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 2023.
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 2023 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 2023 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.
06 Details of the Long -Term Incentive (LTI) Plan
There were four (4) active tranches of the 2016 LTI Plan in the 2023 financial year. The FY20 Tranche was issued in FY20 and was
measured over 2020, 2021, and 2022. The FY21 Tranche was issued in FY21 and was measured over 2021, 2022 and 2023. The
FY22 Tranche was issued in FY22 and is measured over 2022, 2023 and 2024.
The FY23 Tranche was issued in FY23 as follows:
Tranche FY23 of the 2016 LTI Plan
Tranche FY23 of
the 2016 LTI Plan
LTI grants are made annually to Executive Directors in order to align remuneration with the creation of sustainable
shareholder value over the long-term.
Who participates?
Executive Directors which have an impact on the performance of the consolidated entity against the relevant long-term
performance measures.
How is the LTI
delivered?
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. At
subsequent annual general meetings of the Company, shareholders had permitted the further grant of separate tranches of
performance rights in respect of the 2019, 2020, 2021 and 2022 financial years to Executive Directors. Shareholders at the AGM
held on 24 November 2022 permitted the grant of Tranche FY23 of performance rights to Executive Directors in the 2023 financial
year, subject to the terms and conditions of the 2016 LTI Plan.
Executive
Tranche FY23
G. Harvey
K.L Page
J.E. Slack-Smith
D.M. Ackery
C. Mentis
Total
175,600
491,700
146,500
146,500
146,500
1,106,800
Tranche FY23
Key Dates
Grant date
Vesting date
1 December 2022
31 December 2025
First exercise date
1 January 2026
Last exercise date
31 October 2037
What is the LTI
opportunity issued in
FY23?
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 along with additional dividend equivalent shares. Executive directors have a maximum LTI opportunity of between 47%
and 98% of fixed remuneration. A total of performance rights under Tranche FY23 of the 2016 LTI Plan were granted to executive
directors on 1 December 2022. The performance rights were independently valued by Mercer Consulting (Australia) Pty Limited at
grant date, with a fair value of $4.32 per entitlement share based on a share price of $4.32 as at grant date.
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. Subject to the satisfaction of the financial performance condition and service conditions of the 2016 LTI Plan,
the total fair value of Tranche FY23 performance rights amounted to $4,781,376 in aggregate.
Annual Report 2023 Remuneration Report (Audited)
41
Directors’ Report | Remuneration Report (Audited) (continued)
06 Details of the Long -Term Incentive (LTI) Plan (continued)
Tranche FY23 of the 2016 LTI Plan
What are the
performance
conditions for
Tranche FY23 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 FY23 of the 2016 LTI Plan is based on RONA, where Tranche FY23
RONA means the fraction: Tranche FY23 Aggregate APBT ÷ Tranche FY23 Aggregate Net Assets, expressed as a percentage.
Where:
• Tranche FY23 Financial Years means the financial years ending 30 June 2023, 2024 and 2025;
• Tranche FY23 Aggregate APBT means the aggregate amounts of the annual net profit before income tax of the
consolidated entity for each of the Tranche FY23 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 and the net
impact of AASB 16 Leases;
• Tranche FY23 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 2022, 2023 and 2024 as described in the annual report of the consolidated entity in
respect of each of the Tranche FY23 Financial Years.
Tranche FY23 RONA Achieved
Tranche FY23 % of Performance Rights that will become exercisable
Less than 16%
16%
21%
NIL
50%
100%
RONA is a key financial metric link to performance. Full vesting of the Performance Rights is conditional upon achievement of RONA
of at least 21%. If an amount of 16% 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 achievement of RONA in the range of 16% to 21%. Achievement between the
levels will be calculated on a straight-line basis.
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 FY23 of the 2016 LTI Plan
measured over the period for financial years ending 30 June 2023, 30 June 2024 and 30 June 2025.
When does the LTI
vest?
Performance rights granted under Tranche FY23 of the 2016 LTI Plan will vest on 31 December 2025, subject to meeting the financial
performance conditions and service conditions, and will be capable of exercise between 1 January 2026 and 31 October 2037.
How are potential LTI
awards treated on
termination?
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). 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?
Dividends will not be paid on unvested Performance Rights. If exercised, each vested Performance Right will convert into one share.
In addition, on exercising the vested Performance Rights, the participant will receive a Dividend Equivalent Amount in relation to
those exercised Performance Rights, delivered as additional Shares which are equal in value to the amount of dividends that would
have been paid to the Participant and re-invested into Shares based on the close price on the ex-dividend date as if the Participant
had been the owner of Shares from the grant date until the date of exercise. The Board retains a discretion to make a cash equivalent
payment instead of an allocation of Shares.
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Annual Report 2023 Remuneration Report (Audited)
07 Performance and Executive Remuneration Outcomes in FY23
7a. Actual Remuneration Earned by Key Management Personnel (KMP) in FY23
The compensation expensed in respect of KMP in FY23 is set out in Table 1 (for directors) and Table 2 (for senior executives) on
pages 52 and 53 of this report. This provides shareholders with a view of the remuneration earned by KMP for performance in the
2023 financial year and the value of any LTIs expensed during the financial year.
The 'take-home pay' for KMP directors, representing the benefits paid to each director during the year ended 30 June 2023, or as
soon as practicable after that date, is set out in Section 13 of the Remuneration Report on page 56.
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 2023
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 each member of the consolidated entity, the longevity of the executive directors in their respective roles and
the assessment of opportunity costs in respect of replacement;
b. Be in line with the remuneration policies of the Company for executive directors so as to position fixed remuneration at around
the 75th percentile of the peer group; and
c. Target total remuneration to provide the opportunity for executive directors to earn top quartile rewards for outstanding
performance.
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 each member of the consolidated entity, 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 FY2023, the Remuneration Committee proposed an
increase in the level of fixed remuneration for the executive directors. This proposed increase in total fixed remuneration was the
first increase since the 2014 financial year and was between 3% and 6% based on the level for the prior 10 years. The fixed
component of the remuneration of executive directors is disclosed in Table 1 on page 52 of this report.
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 $3,650,000 (2022: $3,250,000). The pool for over-achievement was $850,000 (2022: $750,000). The maximum aggregate
pool for allocation was $4,500,000 (2022: $4,000,000). 70% of the 100% STI was dependent on the satisfaction of financial
performance conditions (based on APAT) and 30% was measured against the achievement of non-financial measures. The Over-
Achievement Pool was subject to the financial performance condition only.
Actual performance against those measures is as follows for the 2023 financial year:
• 91.1% achievement of the 70% Financial Condition (score of 63.77 out of 70) of the 100% STI pool = $2,327,532
• 0% achievement of the Over-Achievement Pool subject to the Financial Condition (score of 0 out of 20) = $0
• 33.33% achievement of the 30% Non-Financial Conditions (score of 10 out of 30) = $365,000
• 0% reduction for malus penalties of up to -30% of the STI Pool (score of 30 out of 30) = reduction of $0
The total 2023 STI Plan payable in respect of the 2023 financial year is $2,692,532 (2022: $3,512,500). This represents a total
achievement of 73.8% of the 100% Level (2022: 100%) or 59.8% of the maximum Over-Achievement Level (2022: 87.8%), as shown
in the tables below.
Financial Conditions of the 2023 STI Plan
ACHIEVEMENT OF 70% FINANCIAL CONDITION
Calculation of FY2023
APAT
Annual Net Profit After Tax (APAT) excluding the after-tax effects of property revaluation increments or
decrements and the net impact of AASB 16 Leases
= $471.88 million for FY23
Directors
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
100% Level
2023 STI PCI
$1,058,500
$912,500
$912,500
$766,500
$3,650,000
% Financial
Conditions
2023 STI PCI
Financial Condition
% Financial
Condition Satisfied
2023 STI PCI
Payable
70%
70%
70%
70%
$740,950
91.1% (63.77 out of 70)
$638,750
91.1% (63.77 out of 70)
$638,750
91.1% (63.77 out of 70)
$536,550
91.1% (63.77 out of 70)
$2,555,000
$674,984
$581,883
$581,883
$488,782
$2,327,532
Annual Report 2023 Remuneration Report (Audited)
43
Directors’ Report | Remuneration Report (Audited) (continued)
07 Performance and Executive Remuneration Outcomes in FY23 (continued)
Directors
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
ACHIEVEMENT OF 120% OVER-ACHIEVEMENT POOL
120% Level
2023 STI PCI
% Financial
Conditions
2023 STI PCI
Financial Condition
% Financial Condition
Satisfied
2023 STI PCI
Payable
$246,500
$212,500
$212,500
$178,500
$850,000
100%
100%
100%
100%
$246,500
0% (0 out of 20)
$212,500
0% (0 out of 20)
$212,500
0% (0 out of 20)
$178,500
0% (0 out of 20)
$850,000
-
-
-
-
-
APAT for the 2023 financial year was $471.88 million (2022: $668.79 million) resulting in 91.1% achievement of the financial
conditions for the STI 100% Pool (level required $518 million), and nil achievement of the financial conditions in respect of the Over-
Achievement Pool (level required $575 million).
Non Financial Conditions of the 2023 STI Plan
ACHIEVEMENT OF 30% NON-FINANCIAL CONDITIONS
For 2023, 30% of the 100% opportunity pool i.e., $1,095,000 was subject to non-financial performance measures as to:
• Compliance framework improvements equating to 33.33% (10% entitlement to the STI pool = $365,000); and
• Digital innovations equating to 66.67% (20% entitlement to the STI pool = $730,000)
Directors
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
100% Level
2023 STI PCI
% Non-Financial
Conditions
2023 STI PCI
Non-Financial
% Non-Financial
Condition Satisfied
2023 STI PCI
Payable
$1,058,500
$912,500
$912,500
$766,500
$3,650,000
30%
30%
30%
30%
$317,550
33.33% (10 out of 30)
$273,750
33.33% (10 out of 30)
$273,750
33.33% (10 out of 30)
$229,950
33.33% (10 out of 30)
$1,095,000
$105,850
$91,250
$91,250
$76,650
$365,000
The Remuneration Committee had regard to certificates and reports from employees of Yoogalu, other Board committees and
management, including the Individual Director Assessment Reports and Internal Audit Reports, and noted that 33.33% of the non-
financial performance hurdles for the 2023 STI Plan were achieved, equating to a score of 10 points out of 30 points.
Achievement of the Non-Financial Performance Conditions for the 2023 STI Plan are set out in the following table:
Measure
Initiative
Primary Weighting Achievement Commentary
ASSESSMENT OF NON-FINANCIAL CONDITIONS OF THE 2023 STI PLAN
10%
100%
Full achievement
Score
10%
Compliance
Framework
Improvements
Establish compliance framework for Australian
franchised complexes, Australian wholly-
owned subsidiaries and overseas company-
operated stores.
Digital
Innovations
Upgrade the operational and digital platform
of the Australian Marketplace Franchisee and
develop the global digital strategy for
eCommerce including the Marketplace
Franchisee.
20%
0%
Delayed execution due to resourcing
availability and project timelines being reset.
0%
Total
30%
10%
44
Annual Report 2023 Remuneration Report (Audited)
07 Performance and Executive Remuneration Outcomes in FY23 (continued)
Malus Reduction in Respect of 2023 STI Plan
Malus (financial penalty) provisions to reduce the overall achievement of the 100% STI pool by up to 30% i.e. $1,095,000, in respect of:
MALUS REDUCTIONS OF UP TO 30% OF THE 2023 STI
• Work, health & safety governance framework = 7.5% of the 30%
• Sustainability governance = 7.5% of the 30%
• Cyber security global security improvement program and policies = 6% of the 30%
• Tax governance, policies and documentation of tax reviews = 5% of the 30%
• Franchisor operations—documentation, risk management plans and recommendations = 4% of the 30%
Directors
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
100% Level
2023 STI PCI
Maximum % Malus
Reductions
2023 STI PCI Malus
Reductions
% Malus Reductions
(Score)
Reduction in 2023
STI PCI Payable
$1,058,500
$912,500
$912,500
$766,500
$3,650,000
-30%
-30%
-30%
-30%
($317,550)
-0% (30 out of 30)
($273,750)
-0% (30 out of 30)
($273,750)
-0% (30 out of 30)
($229,950)
-0% (30 out of 30)
($1,095,000)
-
-
-
-
-
There was no malus reduction for FY23.
Directors
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
SUMMARY OF TOTAL ACHIEVEMENT OF 2023 STI
100% POOL AMOUNT
OVER-ACHIEVEMENT POOL
Financial
Non-Financial
Malus
Financial
TOTAL 2023 STI
$674,984
$581,883
$581,883
$488,782
$105,850
$91,250
$91,250
$76,650
$2,327,532
$365,000
-
-
-
-
-
-
-
-
-
-
$780,834
$673,133
$673,133
$565,432
$2,692,532
Service Conditions of the 2023 STI Plan
The 2023 STI Plan Service Conditions will be deemed to be satisfied, if and only if, as at the relevant payment date (29 September
2023):
•
•
•
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 2023 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 2023 STI Plan held shares in the Company of a value that was in excess
of the Benchmark Shareholding Level. The STI benefit under the 2023 STI Plan is to be paid in cash.
Annual Report 2023 Remuneration Report (Audited)
45
Directors’ Report | Remuneration Report (Audited) (continued)
07 Performance and Executive Remuneration Outcomes in FY23 (continued)
7d. Actual Performance Against Long Term Incentive (LTI) Measures for Tranche FY23 of the 2016 LTI Plan
A total of 1,106,800 performance rights were granted to executive directors on 1 December 2022. The performance rights were
independently valued by Mercer Consulting (Australia) Pty Limited at grant date, with a fair value of $4.32 per entitlement share
based on a share price of $4.32 as at grant date. Subject to the satisfaction of the financial performance condition and service
conditions of the 2016 LTI Plan, the total fair value of Tranche FY23 performance rights amounted to $4,781,376 in aggregate.
The Remuneration Committee had regard to certificates and reports from employees of Yoogalu, other Board committees and
management and Internal Audit Reports, and has estimated, based on the available evidence in respect of the 2023 financial year,
the financial performance condition for Tranche FY23 of the 2016 LTI Plan may not be achieved by the end of the vesting period
and it may not be probable for the estimated fair value of the performance rights to meet the performance condition.
The probability of nil vesting has been estimated based on the calculation of Tranche FY23 RONA for the 2023 financial year of
15.96%. The financial condition of the Tranche FY23 requires a minimum RONA of 16% to be achieved for 50% of Performance
Rights to vest. No Performance Rights will vest if the RONA is less than 16%. Therefore the 15.96% RONA for FY23 would result in a
nil vesting for year 1 of the three-year measurement period, but is available for re-measurement during the 2024 and 2025 financial
years. No amount has been recognised as remuneration to executive directors and no expense has been recognised in the income
statement in FY23 in respect of Tranche FY23.
ACHIEVEMENT OF 100% FINANCIAL CONDITION FOR TRANCHE FY23 OF 2016 LTI PLAN
CALCULATION OF
FY23 RONA:
Directors
Gerald Harvey
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
FY23 APBT
(net profit excluding property revaluations and the net impact of AASB 16 Leases)
FY22 Net Assets (excluding non-controlling interests)
$ 680.23 MILLION
$4,261.03 MILLION
= 15.96% RONA
Number of
Performance Rights
Fair Value
Per Right
Fair Value of
Performance Rights
Probability of
Vesting %
Estimated Value of
Tranche FY23 2016
LTI Plan to Vest
Tranche FY23
LTI Plan Expense
in FY23
175,600
491,700
146,500
146,500
146,500
1,106,800
$4.32
$4.32
$4.32
$4.32
$4.32
$758,592
$2,124,144
$632,880
$632,880
$632,880
$4,781,376
0%
0%
0%
0%
0%
0%
-
-
-
-
-
-
-
-
-
-
-
-
Subject to the satisfaction of the financial performance condition and service conditions of the 2016 LTI Plan, Tranche FY23 will vest
on 31 December 2025.
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 31 October 2037 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.
7e. Reassessment of Tranche FY22 of the 2016 LTI Plan Performance Conditions and Expense Recognised in
FY23
In the 2022 financial year, a total of 914,000 performance rights were granted to executive directors on 30 November 2021 under
Tranche FY22 of the 2016 LTI Plan. The performance rights were independently valued by Mercer Consulting (Australia) Pty Limited
at a fair value of $4.12 per entitlement share, based on a share price of $5.07 as at grant date, resulting in a total fair value of
Tranche FY22 of $3,765,680. Tranche FY22 of the 2016 LTI Plan will be measured over a three-year period for financial years
ending 30 June 2022, 30 June 2023 and 30 June 2024.
In the 2022 Remuneration Report, it was reported that the estimated achievement of Tranche FY22 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 FY22 performance rights will
meet the performance condition. The probability of 100% vesting had been estimated based on the calculation of Tranche FY22
RONA for the 2022 financial year of 24.24%.
46
Annual Report 2023 Remuneration Report (Audited)
07 Performance and Executive Remuneration Outcomes in FY23 (continued)
The financial performance condition of Tranche FY22 is subject to reassessment during each of the Tranche FY22 Financial Years
being the financial years ending 30 June 2022, 2023 and 2024. A reassessment of the Tranche FY22 Aggregate APBT and Tranche
FY22 Aggregate Net Assets for the 2022 and 2023 financial years has resulted in a revised RONA for the two-year aggregated
period of 19.90%. The revised RONA of 19.90% has resulted in a reduced probability of vesting of 89%. Full vesting of the
Performance Rights is conditional upon achievement of RONA of at least 21%. If an amount of 16% 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
achievement of RONA in the range of 16% to 21%. Achievement between the levels will be calculated on a straight-line basis.
The cumulative expense in respect of Tranche FY22, as assessed in the 2023 financial year at a reduced probability of vesting of
89%, was $3,351,456. The total value of Tranche FY22 expense recognised in the 2023 financial year was $1,006,324, relating to
the recognition of the Tranche FY22 expense on a straight-line basis for FY23 of $1,084,530, less an adjustment of ($78,206) due to
the reduced probability of vesting from reassessment.
REASSESSMENT OF 100% FINANCIAL CONDITION FOR TRANCHE FY22 OF 2016 LTI PLAN
Calculation of Aggregated
RONA for Tranche FY22
Financial Years
(FY22 and FY23)
Directors
Gerald Harvey
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
Tranche FY22 Aggregated APBT (2022 + 2023)
Tranche FY22 Aggregated Net Assets (2020 + 2021)
$1,617.03 MILLION
$8,125.86 MILLION
= 19.90% RONA
Probability
Vesting % in
FY22
Tranche FY22
Estimated Fair
Value in FY22
Revised
Probability
Vesting in FY23
Revised Estimated
Tranche FY22 Fair
Value in FY23
Adjustment
due to
Reassessment
Tranche FY22 LTI
Plan Expense
in FY23
100%
100%
100%
100%
100%
$597,400
$1,672,720
$498,520
$498,520
$498,520
$3,765,680
89%
89%
89%
89%
89%
$531,686
($65,714)
$1,488,721
($183,999)
$443,683
$443,683
$443,683
($54,837)
($54,837)
($54,837)
$159,647
$447,011
$133,222
$133,222
$133,222
$3,351,456
($414,224)
$1,006,324
7f. Reassessment of Tranche FY21 of the 2016 LTI Plan Performance Conditions and Expense Recognised in
FY23
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 was measured over a three-year period for financial years ending
30 June 2021, 30 June 2022 and 30 June 2023.
In the 2022 Remuneration Report, the probability of vesting was reassessed, and 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. This reassessment was based on a 2-year
aggregated RONA, being the Tranche FY21 Aggregate APBT and Tranche FY21 Aggregate Net Assets for the 2021 and 2022
financial years. The reassessment in 2022 resulted in a revised 2-year aggregated RONA of 27.00%.
The financial performance condition of Tranche FY21 was subject to reassessment during each of the Tranche FY21 Financial Years
being the financial years ending 30 June 2021, 2022 and 2023. A final reassessment of the Tranche FY21 Aggregate APBT and
Tranche FY21 Aggregate Net Assets for the 2021, 2022 and 2023 financial years has resulted in a revised RONA for the three-year
aggregated period of 22.93%. A revised aggregated RONA of 22.93% for the Tranche FY21 Financial Years has resulted in the
actual achievement of 100% of the Tranche FY21 performance rights. This revised achievement calculation of 100% is consistent
with the previous probability of vesting of 100% as calculated in FY22.
The cumulative expense in respect of Tranche FY21 has been reassessed in FY23 as $2,115,575, consistent with the amount
reported in the 2022 Remuneration Report. The total value of Tranche FY21 expense recognised in FY23 was $687,609, relating to
the recognition of the Tranche FY21 expense on a straight-line basis for FY23. FY23 was the final year of measurement for Tranche
FY21 with the performance rights scheduled to vest at 31 December 2023.
Annual Report 2023 Remuneration Report (Audited)
47
Directors’ Report | Remuneration Report (Audited) (continued)
07 Performance and Executive Remuneration Outcomes in FY23 (continued)
REASSESSMENT OF 100% FINANCIAL CONDITION FOR TRANCHE FY21 OF 2016 LTI PLAN
Calculation of Aggregated RONA
for Tranche FY21 Financial Years
(FY21, FY22 & FY23)
Tranche FY21 Aggregated APBT (2021 + 2022 + 2023)
Tranche FY21 Aggregated Net Assets (2020 + 2021 + 2022)
$2,653.94 MILLION
$11,572.21 MILLION
= 22.93% RONA
Directors
Gerald Harvey
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
Probability
Vesting % in
FY22
Tranche FY21
Estimated Fair
Value in FY22
Revised
Probability
Vesting in FY23
Revised Tranche
FY21 Fair Value
in FY23
Adjustment
due to
Reassessment
Tranche FY21
LTI Plan Expense
in FY23
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
7g. Vesting of Tranche FY20 of the 2016 LTI Plan Performance Conditions and Expense Recognised in FY23
In 2020, 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 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 2022 Remuneration Report, it was reported that there was 100% actual achievement of Tranche FY20 of the 2016 LTI Plan in
respect of the 2020, 2021 and 2022 financial years and that 100% of the performance rights were scheduled to vest at the end of
the vesting period at 31 December 2022, and were exercisable from 1 January 2023. On 3 January 2023, a total of 549,500
performance rights issued on 2 December 2019 under Tranche FY20 of the 2016 LTI Plan were exercised by the executive directors
in accordance with the terms and conditions of the LTI Plan.
The cumulative expense in respect of Tranche FY20 was $1,906,765 as reported in the 2022 Remuneration Report. The 2022
financial year was the final year of Tranche FY20 measurement. During the 2023 financial year, an expense of $311,565 was
recognised in respect of Tranche FY20 of the 2016 LTI Plan representing the remaining vesting period up to 31 December 2022.
ASSESSMENT OF 100% FINANCIAL CONDITION FOR TRANCHE FY20 OF 2016 LTI PLAN
Calculation of Aggregated RONA for Tranche
FY20 Financial Years (FY20, FY21 & FY22)
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
Directors
Gerald Harvey
Kay Lesley Page
John Evyn Slack-Smith
David Matthew Ackery
Chris Mentis
Total
Actual Achievement
in FY22
Actual Tranche FY20
Fair Value
Tranche FY20 LTI
Plan Expense in FY23
100%
100%
100%
100%
100%
$227,285
$635,010
$378,230
$378,230
$288,010
$37,138
$103,760
$61,803
$61,803
$47,061
$1,906,765
$311,565
48
Annual Report 2023 Remuneration Report (Audited)
07 Performance and Executive Remuneration Outcomes in FY23 (continued)
7h. Summary of Performance and Executive Remuneration Outcomes in FY23
REMUNERATION COMPONENT
Maximum Over
Achievement
Amount Achievement
Score
Amount
Payable
Vesting
Period
2023
Remuneration
Amount
2022
Remuneration
Amount
VALUE OF STI AND LTI DISCLOSED IN 2023 AND 2022 REMUNERATION REPORTS
2023 STI Plan
Financial conditions (70/100)
Over-achievement pool (20/20)
Non-financial conditions (30/100)
Malus Adjustments (up to 30/100)
Total
$2,555,000
$850,000
$1,095,000
-
$4,500,000
91.10%
0%
33.33%
0%
$2,327,532
-
$365,000
-
$2,692,532
1 Year
$2,327,532
-
$365,000
-
$2,692,532
-
-
-
-
-
63.77%
0%
10.00%
0%
73.77%
or 59.8% of
Over-
Achievement
Level
2022 STI Plan
Financial conditions (70/100)
Over-achievement pool (20/20)
Non-financial conditions (30/100)
Malus Adjustments (up to 30/100)
Total
Total Short-Term Incentive PCI
Tranche FY23 of 2016 LTI Plan
Financial conditions (100%)
Non-financial conditions (0%)
Total
Tranche FY22 of 2016 LTI Plan
Financial conditions (100%)
Non-financial conditions (0%)
Total
Tranche FY21 of 2016 LTI Plan
Financial conditions (100%)
Non-financial conditions (0%)
Total
Tranche FY20 of 2016 LTI Plan
Financial conditions (100%)
Non-financial conditions (0%)
Total
Tranche FY19 of 2016 LTI Plan
Financial conditions (100%)
Non-financial conditions (0%)
Total
Total LTI Performance Rights
Total Value of STI and LTI
$2,275,000
$750,000
$975,000
-
$4,000,000
100%
100%
50%
0%
70.00%
20.00%
15.00%
0%
105.00%
$2,275,000
$750,000
$487,500
-
$3,512,500
1 Year
-
-
-
-
-
$2,275,000
$750,000
$487,500
-
$3,512,500
or 87.8% of
Over-
Achievement
Level
$2,692,532
$3,512,500
0%
0%
-
-
-
3.1 Years
(01/12/22 to
31/12/25)
-
-
-
-
-
-
89%
89%
$3,351,455
-
$3,351,455
3.1 Years
(30/11/21 to
31/12/24)
$1,006,324
-
$1,006,324
$710,962
-
$710,962
100%
100%
$2,115,575
-
$2,115,575
3.1 Years
(04/12/20 to
31/12/23)
$687,609
-
$687,609
$687,609
-
$687,609
100%
100%
$1,906,765
-
$1,906,765
3.1 Years
(02/12/19 to
31/12/22)
$311,565
-
$311,565
$618,173
-
$618,173
100%
100%
$1,423,205
-
$1,423,205
3.1 Years
(04/12/18 to
31/12/21)
-
-
-
$232,979
-
$232,979
$2,005,498
$2,249,723
$4,698,030
$5,762,223
$4,781,376
-
$4,781,376
$3,765,680
-
$3,765,680
$2,115,575
-
$2,115,575
$1,906,765
-
$1,906,765
$1,423,205
-
$1,423,205
The total value of STI and LTI expensed in the Income Statement for the 2023 financial year and disclosed in this remuneration
report was $4.70 million compared to $5.76 million expensed in the 2022 financial year, a decrease of $1.06 million or –18.5%,
relative to the previous year.
Annual Report 2023 Remuneration Report (Audited)
49
Directors’ Report | Remuneration Report (Audited) (continued)
08 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 $5,599,144 comprised of:
• fixed remuneration of $2,170,000 per annum;
• maximum STI opportunity in respect of the year ended 30 June 2023 of $1,305,000 (including the over-achievement level); and
• maximum LTI opportunity in respect of the year ended 30 June 2023 of $2,124,144.
• The CEO’s termination provisions are as follows:
CEO’s Termination Provisions
Notice Period
Payment
in Lieu of Notice Treatment of STI on Termination
Treatment of LTI on Termination
Employer initiated-termination
6 months
6 months
Pro-rated for time and performance
Board discretion
Termination for serious misconduct None
None
Unvested awards forfeited
Unvested awards forfeited
Employee-initiated termination
6 months
6 months
Unvested awards forfeited subject to
board discretion
Unvested awards forfeited subject to
board discretion*
Minimum Shareholding Requirement
There are no minimum shareholding requirements imposed on the CEO. There is a Benchmark Shareholding Level in respect of
the 2023 STI Plan to determine whether the reward is to be paid as cash or in shares. The CEO held 20,222,315 shares in the
Company at 30 June 2023 equating to a value of $70.37 million.
Other Executive KMPs
All other Executive KMPs have rolling contracts.
Termination Provisions
Notice Period
Payment
in Lieu of Notice Treatment of STI on Termination
Treatment of LTI on Termination
Employer initiated-termination
6 months
6 months
Pro-rated for time and performance
Board discretion
Termination for serious misconduct None
None
Unvested awards forfeited
Unvested awards forfeited
Employee-initiated termination
6 months
6 months
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.
09
Non-Executive Director Remuneration Arrangements
Remuneration Policy
The Board seeks to set aggregate remuneration at a level that provides each member of 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 the aggregate
NED pool of $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 2023 and 30 June 2022 are
disclosed in Table 1 on page 52 of this report.
50
Annual Report 2023 Remuneration Report (Audited)
10 Relationship between Remuneration and Performance
The graphs below illustrate the performance of the consolidated entity 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.
Reported PBT return on net assets (%) vs
Total remuneration expense*
Total remuneration expense
For directors of the HNHL Board
Reported PBT
return on net assets
Correlation
5-YEAR: 68.9%
3-YEAR: 93.0%
YEAR ENDED 30 JUNE
Total remuneration expense* and
“At risk” remuneration vs NPAT & NCI
Total remuneration expense
For directors of the HNHL Board
“At risk” remuneration
NPAT & NCI
Correlation
Total
remuneration
“At risk”
remuneration
5 year
3 year
88.0%
98.4%
94.1%
99.8%
YEAR ENDED 30 JUNE
Average share price, earnings per share and
dividends paid per share vs “At risk” remuneration
Average
share price
Earnings per
share
Dividends Paid per
share
‘At risk’ remuneration
*For directors of the HNHL Board
Correlation Average share price
Earning per share
Dividends paid
5 year
3 year
94.3%
97.8%
93.2%
99.8%
73.3%
93.0%
Annual Report 2023 Remuneration Report (Audited)
51
YEAR ENDED 30 JUNE
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 2023
Directors of Harvey Norman Holdings Limited:
SHORT-TERM BENEFITS
POST
EMPLOYMENT
LONG TERM
INCENTIVES
OTHER
In $AUD
Salary &
Fees
Performance
Cash Incentive
Other
Short Term (a)
Gerald Harvey
Executive Chairman
2023
2022
739,308
716,032
-
-
10,400
10,400
Kay Lesley Page
Executive Director/CEO
2023
2022
2,120,446
2,048,090
780,834
1,018,625
John Evyn Slack-Smith
Executive Director/COO
2023
2022
1,294,708
1,226,432
David Matthew Ackery
Executive Director
2023
2022
1,276,708
1,208,432
Chris Mentis
Executive Director/CFO
2023
2022
945,834
881,354
Michael John Harvey
Non-Executive Director
2023
2022
54,299
54,545
Christopher Herbert
Brown
Non-Executive Director
Kenneth William
Gunderson-Briggs
Non-Executive Director
2023
2022
144,796
145,455
2023
2022
615,856
341,482
Maurice John Craven
Non-Executive Director
2023
2022
131,222
131,818
Luisa Catanzaro
Non-Executive Director
2023
2022
144,796
145,455
673,133
878,125
673,133
878,125
565,432
737,625
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,000
18,000
-
-
-
-
-
-
-
-
-
-
-
-
Non-
Monetary
Benefits (a)
-
-
24,262
28,342
-
-
-
-
38,874
45,078
-
-
-
-
-
-
-
-
-
-
Super-
annuation
Performance
Rights
Long
Service
Leave (b)
Total
Remuneration
%
earned
at risk
25,292
23,568
25,292
23,568
25,292
23,568
25,292
23,568
25,292
23,568
5,701
5,455
15,204
14,545
25,292
23,568
13,778
13,182
15,204
14,545
278,747
296,208
779,765
828,263
331,421
399,353
331,421
399,353
284,144
326,546
-
-
-
-
21,578
20,441
21,578
20,441
15,764
14,689
1,053,747
1,046,208
26.5%
28.3%
3,730,599
3,946,888
41.8%
46.8%
2,346,132
2,547,919
42.8%
50.1%
2,346,132
2,547,919
42.8%
50.1%
1,875,340
2,028,860
45.3%
52.5%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
60,000
60,000
160,000
160,000
641,148
365,050
145,000
145,000
160,000
160,000
-
-
-
-
-
-
-
-
-
-
Total for the 2023
Financial Year
Total for the 2022
Financial Year
7,467,973
2,692,532
28,400
63,136
201,639
2,005,498
58,920
12,518,098 37.5%
6,899,095
3,512,500
28,400
73,420
189,135
2,249,723
55,571
13,007,844 44.3%
The listed Parent Company, Harvey Norman Holdings Limited, does not have any employees.
a. Short-term benefits includes car allowances paid (Other Short Term) and the cost of fully-maintained motor vehicles (Non-
Monetary Benefits)
b. Table 1 includes the accrual for long service leave entitlements in respect of the years ended 30 June 2023 and 30 June 2022.
52
Annual Report 2023 Remuneration Report (Audited)
11 Compensation of Key Management Personnel (continued)
Table 2: Compensation of Key Management Personnel Expensed for the Year Ended 30 June 2023
Senior Executives of Harvey Norman Holdings Limited:
SHORT-TERM BENEFITS
POST
EMPLOYMENT
OTHER
In $AUD
Salary &
Fees
Performance
Cash Incentive
Other Short
Term
Non-
Monetary
Benefits
Super-
annuation
Termination
Benefits (e)
Long
Service
Leave (f)
Total
Remuneration
%
earned
at risk
Thomas James Scott
GM — Property
2023
2022
669,708
571,285
Gordon Ian Dingwall
Chief Information Officer
2023
2022
547,708
530,000
Lachlan Roach (a)
GM — Home Appliances
2023
2022
-
163,771
Emmanuel Hohlastos
GM — Home Appliances
2023
2022
441,628
428,764
Glen Gregory (c)
GM — Technology &
Entertainment
2023
2022
131,857
463,069
Richard Beaini (b)
GM — Audio Visual
2023
2022
387,725
85,191
Carene Myers
GM — Small Appliances
2023
2022
352,527
301,964
Darren Salakas (d)
GM — Technology &
Entertainment
2023
2022
291,651
-
Total for the 2023
Financial Year
Total for the 2022
Financial Year
2,822,804
2,544,044
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
35,198
34,189
-
-
-
-
-
3,511
-
-
3,548
12,000
-
-
-
-
-
-
25,292
23,568
25,292
23,568
-
11,784
25,292
23,568
-
-
-
-
-
36,447
-
-
11,162
9,521
9,128
8,833
-
1,062
7,360
7,146
706,162
604,374
582,128
562,401
-
216,575
474,280
459,478
7,479
23,568
126,357
-
-
7,718
269,241
506,355
25,292
5,892
25,292
23,568
25,314
-
18,357
-
-
-
-
-
-
-
6,462
327
5,875
5,033
419,479
91,410
418,892
364,754
3,516
-
338,838
-
3,548
60,512
152,296
126,357
43,503
3,209,020
15,511
34,189
135,516
36,447
39,640
2,805,347
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
a. Resigned as General Manager—Home Appliances on 19 November 2021
b. Appointed to General Manager—Audio Visual on 8 April 2022
c. Resigned as General Manager—Technology & Entertainment on 17 October 2022
d. Appointed to General Manager—Technology & Entertainment and is a new KMP effective from 10 October 2022
e. This amount represents the cash payment of employee leave entitlements upon resignation
f. This amount represents the accrual for long service leave entitlements in respect of the years ended 30 June 2023 and 30
June 2022
Annual Report 2023 Remuneration Report (Audited)
53
Directors’ Report | Remuneration Report (Audited) (continued)
12 Additional Disclosures Relating to Options, Performance Rights & 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 2023. There were no movements in option
holdings during the year ended 30 June 2023.
Options Holdings of Key Management Personnel for the Year Ended 30 June 2023:
There were no options held by any director or senior executive during the year ended 30 June 2023.
Table 3: Performance Rights Granted to Executive Directors as Part of Remuneration:
The table below discloses the number of performance rights granted to executive directors as remuneration during the year ended
30 June 2023 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
UNVESTED PERFORMANCE
RIGHTS AT 30 JUNE 2023
(c)
PERFORMANCE RIGHTS
EXERCISED DURING THE
YEAR (d)
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
175,600
$758,592
65,500
$227,285
Kay Lesley
Page
John Evyn
Slack Smith
David Matthew
Ackery
491,700
$2,124,144
183,000
$635,010
146,500
$632,880
109,000
$378,230
146,500
$632,880
109,000
$378,230
Chris Mentis
146,500
$632,880
83,000
$288,010
Total
1,106,800
$4,781,376
549,500 $1,906,765
-
-
-
-
-
-
-
-
-
-
-
-
386,100
$1,608,167
65,500
$227,285
1,080,700
$4,501,414
183,000
$635,010
376,500
$1,551,050
109,000
$378,230
376,500
$1,551,050
218,000
$660,540
350,500
$1,450,950
83,000
$288,010
2,570,300 $10,662,631
658,500 $2,189,075
a. A total of 1,106,800 performance rights under Tranche FY23 of the 2016 LTI Plan were granted to executive directors on 1
December 2022. The performance rights were independently valued by Mercer Consulting (Australia) Pty Limited at grant date
with a fair value of $4.32 per entitlement on 1 December 2022, based on a share price of $4.32 at grant date , resulting in a total
fair value of Tranche FY23 performance rights of $4,781,376 in aggregate.
b. On 31 December 2022, 549,500 performance rights representing 100% of Tranche FY20 of the 2016 LTI Plan vested after all
financial conditions and service conditions were satisfied.
c. As at 30 June 2023, a total of 2,570,300 performance rights were outstanding, unvested and not capable of exercise comprised
of:
i. 549,500 performance rights under Tranche FY21 of the 2016 LTI Plan (FY21);
ii. 914,000 performance rights under Tranche FY22 of the 2016 LTI Plan (FY22); and
iii. 1,106,800 performance rights under Tranche FY23 of the 2016 LTI Plan (FY23).
d. On 3 January 2023, 549,500 performance rights under Tranche FY20 of the 2016 LTI Plan were exercised, reducing the
unexercised performance rights under Tranche FY20 of the 2016 LTI Plan to nil. On 22 July 2022, 109,000 performance rights
under Tranche FY19 were exercised, reducing the unissued ordinary shares under Tranche FY19 of the 2016 LTI Plan to nil.
Table 4: Performance Rights of Key Management Personnel for the Year Ended 30 June 2023
The table below discloses the number of performance rights granted to executive directors as remuneration during the year ended
30 June 2023 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 2023
1 July 2022
Balance at begin-
ning of the year
Granted as
Remuneration
Performance
Rights Exercised
Performance
Rights Lapsed
30 June 2023
Balance at
end of the year
Total
Exercised
Lapsed
Gerald Harvey
276,000
175,600
(65,500)
Kay Lesley
Page
John Evyn
Slack Smith
David Matthew
Ackery
772,000
491,700
(183,000)
339,000
146,500
(109,000)
448,000
146,500
(218,000)
Chris Mentis
287,000
146,500
(83,000)
Total
2,122,000
1,106,800
(658,500)
-
-
-
-
-
-
386,100
65,500
65,500
1,080,700
183,000
183,000
376,500
109,000
109,000
376,500
109,000
218,000
350,500
83,000
83,000
2,570,300
549,500
658,500
-
-
-
-
-
-
54
Annual Report 2023 Remuneration Report (Audited)
12 Additional Disclosures Relating to Options, Performance Rights & Shares (continued)
Apart from the KMPs disclosed above, comprised of the executive directors, each of the non-executive directors or senior
executives did not have any performance rights during the year ended 30 June 2023.
The closing balance of the 2,570,300 performance rights in the Company as at 30 June 2023 is comprised of:
a. 549,500 performance rights under Tranche FY21 of the 2016 LTI Plan (FY20) 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.
b. 914,000 performance rights under Tranche FY22 of the 2016 LTI Plan (FY21) 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.
c. Granted as remuneration during the 2023 financial year: 1,106,800 performance rights under Tranche FY23 of the 2016 LTI Plan
(FY23) at a fair value at grant date of $4.32 to vest on 31 December 2025. The FY23 Tranche is exercisable between 1 January
2026 and 31 October 2037.
Table 5: Shareholdings/Relevant Interests of Key Management Personnel for the Year Ended 30 June 2023
1 July 2022
Balance at Beginning of the Year
On Exercise of
Performance Rights (a)
Net Change Other (b)
30 June 2023
Balance at End of the Year
Gerald Harvey
Kay Lesley Page
John Evyn Slack Smith
David Matthew Ackery
Chris Mentis
Michael John Harvey
393,787,754
20,039,315
1,252,893
683,471
1,244,297
-
Christopher Herbert Brown
205,525,565
Kenneth William
Gunderson-Briggs
Maurice John Craven
Luisa Catanzaro
KMP: Senior Executives
Thomas James Scott
Carene Myers
Darren Salakas
Total
10,059
40,473
-
10,000
3,000
-
65,500
183,000
109,000
218,000
83,000
-
-
-
-
-
-
-
-
21,113,183
-
-
-
40,000
-
-
-
12,953
-
-
-
250
414,966,437
20,222,315
1,361,893
901,471
1,367,297
-
205,525,565
10,059
53,426
-
10,000
3,000
250
622,596,827
658,500
21,166,386
644,421,713
a. On 16 December 2022, the Company announced that 549,500 performance rights, representing 100% of the performance rights
issued in accordance with Tranche FY20 of the 2016 LTI Plan, will vest and become exercisable from 1 January 2023. A member
of the consolidated entity acquired shares in the Company via an ‘on-market trade’ at an average price of $4.16 per share for the
purposes of satisfying the entitlements of each Executive Director to the performance rights in respect of Tranche FY20 of the
2016 LTI Plan.
On 22 July 2022, 109,000 performance rights under Tranche FY19 of the 2016 LTI Plan were exercised. A member of the
consolidated entity had previously acquired 109,000 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.
b. The ‘Net Change Other’ column discloses the number of shares acquired or disposed by each KMP 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.
Annual Report 2023 Remuneration Report (Audited)
55
Directors’ Report | Remuneration Report (Audited) (continued)
13
‘Take-Home Pay’ for KMP Directors
The below table shows the ‘take-home pay’ for each KMP director, representing the benefits paid to each director during the year
ended 30 June 2023, or as soon as practicable after that date.
Total ‘take-home pay’ for the KMP directors amounted to $13.46 million for the year ended 30 June 2023. The total value of
remuneration expensed for KMP directors in respect of the 2023 financial year was $12.52 million (refer to Table 1 on page 52 of
this report). For the 2023 financial year, total ‘take-home pay’ was $0.94 million higher than the value of remuneration expensed to
the income statement mainly due to the higher STI amount paid in FY23 in respect of FY22.
In $AUD
Salary
& Fees
Other
Short
Term
Non-
Monetary
Benefits
Super-
annuation
Short-term
Performance
Cash
Incentive (a)
Exercise of
Tranche
FY19 2016
LTI Plan (b)
Exercise of
Tranche FY20
2016 LTI Plan
(b)
FY23 Total
Take-Home
Pay
FY22 Total
Take-Home
Pay
Gerald Harvey
739,308
10,400
-
25,292
-
Kay Lesley Page
2,120,446
John Evyn Slack Smith
1,294,708
-
-
David Matthew Ackery
1,276,708
18,000
Chris Mentis
945,834
Michael John Harvey
54,299
Christopher Herbert
Brown
Kenneth William
Gunderson-Briggs
144,796
615,856
Maurice John Craven
131,222
Luisa Catanzaro
144,796
-
-
-
-
-
-
-
-
-
227,285
1,002,285
919,645
635,010
3,823,635
3,666,676
378,230
2,576,355
2,474,298
24,262
25,292
1,018,625
25,292
878,125
-
-
25,292
878,125
282,310
378,230
2,858,665
2,191,988
38,874
25,292
737,625
-
-
-
-
-
5,701
15,204
25,292
13,778
15,204
-
-
-
-
-
-
-
-
-
-
-
288,010
2,035,635
1,956,240
-
-
-
-
-
60,000
60,000
160,000
160,000
641,148
365,050
145,000
145,000
160,000
160,000
Total Take-Home Pay
2023 Financial Year
Total Take-Home Pay
2022 Financial Year
7,467,973
28,400
63,136
201,639
3,512,500
282,310
1,906,765
13,462,723
6,899,095
28,400
73,420
189,135
3,767,952
1,140,895
-
12,098,897
a. The short-term incentive of $3.51 million represented the payment of the 2022 STI Plan that was earned in respect of the 2022
financial year, and was paid to Executive Directors in September 2022.
b. The aggregate fair value of the performance rights exercised during the 2023 financial year was $2.19 million, calculated as the
fair value at grant date of $3.47 per right multiplied by 549,500 performance rights exercised for Tranche FY20, and the fair
value as at grant date of $2.59 per right multiplied by 109,000 performance rights exercised for Tranche FY19.
14 Other Matters for Disclosure
The previous AGM of the Company was held on 24 November 2022. The Company received 97.5% support in favour of the votes
cast for Item 2. Adoption of the Remuneration Report.
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 2023 (2022:
nil). There were no loans outstanding from key management personnel and their related parties as at 30 June 2023 (2022: nil).
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Annual Report 2023 Remuneration Report (Audited)
16 Other Transactions & Balances with Key Management Personnel and their Related Parties
CONSONLIDATED
$000
June 2023
$
June 2022
$
i. Lease of business premises from Ruzden Pty Limited
The consolidated entity leases business premises at Bundall, Queensland from Ruzden Pty Limited.
Mr G. Harvey, Ms K.L. Page, Mr M.J. Harvey and I.J. Norman Nominees Pty Limited (C.H. Brown) have
an equity interest in Ruzden Pty Limited. The lease arrangements were approved by shareholders in
the General Meeting held 25 May 1993, and in the General Meeting held 31 August 1999. The lease
is subject to normal commercial terms and conditions. Lease payments and outgoings made by the
consolidated entity to Ruzden Pty Limited were:
5,448,983
5,357,095
ii. Legal fees paid to a director-related entity
Legal fees were paid to the firm of which Mr C.H. Brown is a partner for professional services rendered
to the consolidated entity in the normal course of business.
3,255,548
2,705,847
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 were:
1,128,455
1,917,960
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 2023 was $1.00 million (2022: $1.00 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 $17.10 million by the G.C. Lessee as at 30 June 2023 (2022: $17.80 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 2023 was
$4.16 million (2022: $3.96 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.
Annual Report 2023 Remuneration Report (Audited)
57
Directors’ Report | Sustainability Report
Sustainability Report
FY23 has been a year of maturation for our approach to sustainability, with activities
undertaken throughout the year to provide key information about the preparedness
of each member of the consolidated entity for the changes and challenges ahead.
Subject to the oversight of the Executive Sustainability Committee and with local
initiatives in a number of controlled entities, the Sustainability Framework first
revealed in the FY22 Annual Report informs the activities across the three pillars of
People, Places and Products.
People
Places
Products
We empower our
people through a fair
and inclusive culture
and support our local
community
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
While this report looks back at the challenges and achievements
of FY23, the Executive Sustainability Committee is already looking
beyond FY24 in anticipation of the changing reporting landscape
both in Australia and internationally. It is acknowledged that,
while members of the consolidated entity are in a strong position
to meet these challenges, there is work to be done to close gaps
on some of the expected actions and reporting requirements
anticipated.
Sustainability Governance
Yoogalu Pty Limited (Yoogalu), a controlled entity of the
Company, has established an Executive Sustainability Committee,
which has oversight of the sustainability framework of each
relevant member of the consolidated entity.
Each relevant member of the consolidated entity has established
a sustainability framework and is responsible for monitoring and
measuring its performance against that sustainability framework.
The Executive Sustainability Committee meets regularly to review
the performance of each relevant member of the consolidated
entity in relation to matters relevant to the relevant sustainability
framework and identify areas where additional focus and resource
should be placed.
Where appropriate, the Executive Sustainability Committee seeks
external expertise to review data and assess the sustainability
performance of each relevant member of the consolidated
entity. For example, external assistance was sought in relation to
better understanding alignment to the Recommendations of the
Taskforce on Climate-related Disclosure (TCFD) and readiness to
prepare a Climate Statement. This work will continue throughout
FY24 before publication of an inaugural Climate Statement in line
with expected Federal Government reporting requirements in FY25.
There is a growing awareness of the value of sustainability as a
strategic advantage. A number of relevant controlled entities
have committed to the formalisation of sustainability governance
committees to address sustainability issues in a more coordinated
manner. As these structures mature, the Board, informed by the
Executive Sustainability Committee and with oversight of the
Audit and Risk Committee, will see a more consistent flow of
information about these initiatives.
An example of the success of such a sustainability governance
committee is the establishment of a New Zealand Sustainability
Committee. Established in FY22, the New Zealand Sustainability
Committee has undertaken reviews of the impact on sustainability
of various business operations including energy consumption,
waste management, packaging and supplier approaches to
product production. The initiatives have not only produced
beneficial sustainability related outcomes but have driven
efficiencies and cost savings in the New Zealand business.
These outcomes are consistent with the sustainability purpose
outlined in the FY22 Annual Report:
“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.”
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Annual Report 2023 Sustainability Report
People
Members of the consolidated entity employ globally more than 6,500 employees.
Further to that, approximately 10,000 employees are employed by independent
Harvey Norman®, Domayne® and Joyce Mayne® Franchisee businesses in Australia.
Globally, each member of the consolidated entity seeks to provide customers with an
outstanding shopping experience, delivered by engaged and well-trained employees,
working in a diverse and inclusive environment.
Diversity & Inclusion
The Company and each controlled entity recognises and values
the contribution of people from a range of diverse backgrounds.
That is as much about cultural factors as it is about age, gender,
life experience and ability.
Each relevant member of the consolidated entity provides
opportunities to people of all backgrounds to join the business
and contribute across the range of roles at both store and support
office level. In FY23, gender balance was achieved across both
the global employee teams and the global senior executive
teams. The consolidated entity continues its focus on actively
supporting and building a diverse pipeline of future leaders and
Senior Executive successors from a diverse talent pool of current
employees.
The Board of HNHL has remained unchanged since FY22. The
CEO, Kay Lesley Page, is an Executive Director of the Company,
and is one of only 20 women CEO’s in ASX200 companies.
The breakdown of the HNHL Board and each member of the
consolidated entity as a whole by gender as at the end of FY23 is
as opposite:
Percentage
YoY Change
30-Jun-23
Men
Women
Men
Women
Chair
100%
CEO
100%
Board
80%
20%
Senior Executives
60%
40%
All Employees
55%
45%
-
-
-
-
-
-
-
-
-
-
Annual Report 2023 Sustainability Report
59
Directors’ Report | Sustainability Report (continued)
Gender Balance - Senior Executives
60%
40%
In our FY22 Sustainability Report, we committed to a review of
our Parental Leave Policy. The retention of skilled employees is a
priority. One measure in Australia is the extent to which parents
of any gender can take leave following the welcoming of a new
family member and then return to the workplace and resume
employment. In FY23, we report the following statistics in relation
to parental leave and return to work, reporting a 92% return to
work ratio following parental leave by men and women.
Men
Women
Female
Male
Total
Gender Balance - All Employees
55%
45%
Men
Women
Gender & Age Balance - All Employees
Men
Women
25 & under
26 - 35
36 - 45
46 - 55
Over 55
Age Balance - Senior Executives
1400
1200
1000
800
600
400
200
0
Take Parental
Leave
Returned from
parental leave
135
61
196
120
60
180
Return rate
89%
98%
92%
Senior managers at our global headquarters, situated at
Homebush West, conducted a review program to work on
diversity strategies and engage a wider group of employees to
provide input to that program. That review identified a range of
areas where performance could be improved which have informed
the development of the refreshed Diversity & Inclusion Framework
and the FY24 Diversity and Inclusion Action Plan, under the four
pillars of Lead, Build, Embed and Belong.
The Human Resources and Health and Safety team are working
through this data and including targets in planned projects.
Staff engagement
Each member of the consolidated entity recognises the
value of an engaged workforce, including the benefits to
productivity, attendance, achievement of team and company
goals and retention. In FY23, employees had the opportunity
to participate in engagement activities focussing on training,
future opportunities within the business and their thoughts on
the working environment, tools provided by relevant controlled
entities and its progress on sustainability matters.
16%
5%
34%
In Australia, the Connect Intranet site is a source of information
for staff. New staff joining the business are also highlighted here,
including a story about one new employee each month, asking
them questions about themselves and their hobbies.
45%
26-35
36-45
46-55
Over 55
Training
Across the business of each relevant member of the consolidated
entity, employees are required to participate in training programs,
with different groups required to undertake targeted training
programs including privacy, sexual harassment, WHS, company
policies and consumer protection. The amount of time invested in
undertaking training is influenced greatly by the role the individual
plays within the business.
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Annual Report 2023 Sustainability Report
Employee health and safety
We care about our people and the communities that we serve
around the world, we continually strive to learn, improve and
positively influence their physical and psychological health
and safety.
During FY23, we continued to work towards this vision through
enhancing our Health and Safety Framework and 2022-2025
Health and Safety Strategy under the four pillars of Leadership,
Governance, People & Culture and Risk Management.
Enhanced governance, planning and reporting has been
implemented within each country in which we operate and
improvements continued to be implemented across our
controlled entities in Australia. A focus on reviewing critical
risks and enhancing controls has been conducted, with the
controlled entities in Australia. Proactive Health & Safety audits
and inspections have been completed in Australia, New Zealand,
Singapore, Malaysia, Slovenia, Croatia, Ireland and Northern
Ireland and enhanced reporting continues through standardisation
of criteria and metrics across the global operations.
A range of training and education opportunities have been
undertaken with leadership teams, management and employees,
to continue encouraging participation as an important foundation
of continuous improvement and safety improvement. In Australia,
a Wellbeing Working Group has been formed to participate
actively in consultation around Wellbeing and Engagement
initiatives.
In FY23, a technology solution was approved that will support
management and reporting of Health & Safety programs across the
global operations, to further enhance capability and performance.
Implementation of this solution will commence in FY24.
In FY23, relevant controlled entities continued to undertake a
range of training opportunities across Health and Safety. Focus
areas included mental health, discrimination, harassment and
workplace bullying, workplace drugs, alcohol and gambling,
identifying hazards and managing risks.
Proactive Prevention, Protection & Care
Leadership
Governance
People
& Culture
Risk
Management
Leaders’
commitment to health
& safety is visible
through their actions
towards achieving
our common vision
Governance
structures drive
accountability and
performance across
all areas of the
organisation.
A consultative
approach with
our people that
prioritises capability
development
and a continuous
improvement safety
culture.
A robust risk
management
approach underpins
the Health & Safety
Management
System enabled by
technology
Health & Safety Framework
Legal & Regulatory Environment
Global Health and Safety Framework
Data Security and Privacy
Each member of the consolidated entity is 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 and provide oversight of privacy and security related activities, comprising senior management of Yoogalu Pty Limited
and representatives from certain controlled entities.
Given the exponential growth in cybercrime and the advent of more rigorous privacy regimes such as General Data Protection
Regulation, having and maintaining an effective and efficient Information Security/Cyber framework is of vital importance.
In FY23, the global data security controls of the consolidated entity continued to be improved as part of an ongoing global
security strategy.
Staff in each of our relevant controlled entities participate in privacy awareness training programs which focus on operational
activities involving privacy compliance risk. Any new software initiative and the renewal of any software subscription is required to
undergo a privacy impact assessment before approval is provided for that initiative.
Annual Report 2023 Sustainability Report
61
Directors’ Report | Sustainability Report (continued)
Community Engagement and Sponsorship
Members of the consolidated entity have invested in the following sponsorships throughout FY23 to bolster engagement with local
communities to continue to enhance and promote the brands.
Women in Sport
Harvey Norman® is one of the largest corporate sponsors of Australian women’s
sport with support that spans over a dozen sports, teams, clubs and individual
athletes, from the juniors through to the elite levels. This sponsorship is
complemented by an extensive investment in broadcast sponsorships aimed at
expanding the audience and fan base of women’s sports.
Ariarne Titmus
Harvey Norman®
Brand Ambassador
& Olympic Gold
Medalist
Amongst the progress made in FY23, the NRL Women’s State of Origin
increased to a two game series with record attendees at both games plus
broadcast audiences of over 650,000. The NRLW expanded to a 10 team
Premiership with the addition of four new teams.
As we head into a Paralympic and Olympic cycle with Paris 2024, Harvey
Norman® will amplify support to ensure our teams, women and men, are able to
perform at their best on a world stage.
Montana Atkinson
Harvey Norman® Brand
Ambassador & Para-swimmer
Alicia Eva
Captain of
the GIANTS
AFLW Team
Sally Fitzgibbons
Harvey Norman® Brand
Ambassador & World
Surf League Surfer
NRL Harvey
Norman National
Championships
2023 Team of the
Tournament
NRLW 2023 /Players
Canberra Raiders: Zahara Temara, Cowboys: Francesca Goldthorp, Titans: Taliah Fuimaono, St George: Tyla Nathan-Wong,
Roosters: Isabelle Kelly, Eels: Kennedy Cherrington , Broncos: Jasmine Fogavini, Tigers: Kezie Apps, Sharks: Emma Tonegato,
Knights: Tamika Upton
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Annual Report 2023 Sustainability Report
Good360 Australia
The past 12 months have seen Australian communities begin the
long recovery from floods and the COVID-19 pandemic directly into
the cost-of-living crisis. Harvey Norman® has continued to sponsor
Good360 Australia and their national network of charities and
disadvantaged schools. During FY23, Harvey Norman® has donated
furniture which was purposefully directed to charities engaged in
Flood Recovery, Domestic Violence, Homelessness, and Youth
Foster Care, addressing some of the most pressing social issues
faced by Australian communities today.
Harvey Norman® Scholarship - Western Sydney
University
Since 2015, Harvey Norman® has created nearly 100 Student
Scholarships at Western Sydney University. 83 students have
graduated to date with another 11 to graduate by the end of
2024. The Scholarship program has supported refugee women,
high achieving women, and women from low socio- economic
backgrounds. Many of these women, predominately from Western
Sydney, have worked hard to overcome social and economic
disadvantage and have found the support of a Harvey Norman®
Scholarship to be life changing for themselves, and their families.
What Ability
Harvey Norman® is proud to sponsor What Ability, an
NDIS registered disability support service that exists to
bring happiness to people living with a disability. What
Ability supports ages 4 to 65 with community-based day
programs and overnight camps across the country.
Currently What Ability has over 600 participants living
with a disability and over 500 registered support workers
including over 80 athletes.
Harvey Norman® supports What Ability’s vision to build an
inclusive world that supports all abilities in all communities.
Our sponsorship includes facilitating camps, in store
experiences, support to families, accessible shopping
times and other exciting opportunities.
Legacy
In 1923, Legacy made a promise to help veterans’ families carry
on with their lives after the loss or injury of their loved one. It was
a simple promise that Legacy keeps today; providing the same
stability, guidance and assistance that a partner would normally
provide to his or her family. In 2023, Legacy is celebrating their
centenary with The Legacy Centenary Torch Relay with Harvey
Norman® coming on board as a ‘Leading Light’ sponsor, providing
funding and technology equipment for the journey. Beginning
in Pozieres, France in the lead up to ANZAC Day in 2023, the
Centenary Torch travelled around the world, stopping at all 45
Legacy Clubs worldwide.
Annual Report 2023 Sustainability Report
63
Directors’ Report | Sustainability Report (continued)
T E A M P A R T N E R
AOC & Paralympics Australia
The Australian Olympic and Paralympic teams are well
advanced in their preparations for the Paris 2024 Olympic
and Paralympic Games. The culmination of years, sometimes
decades of training, it’s an exciting time for all Australians who
reap the benefits of the efforts and tenacity of our athletes.
Harvey Norman® is proud to support the Australian Olympic
Committee for the first time and the extension of the three year
Harvey Norman® sponsorship with Paralympics Australia.
The sponsorship with AOC will assist sending three teams
overseas in the next two years.
• 2023 Australian Pacific Games Team (Solomon Islands)
• 2024 Australian Winter Youth Olympic Team (Gangwon
2024)
• 2024 Australian Olympic Team (Paris 2024)
The multi-faceted sponsorship between Harvey Norman® and
Paralympics Australia will continue to drive the Paralympic
movement through education and breaking down stigmas
surrounding disabilities. We will continue to expand exclusive
content production for profiling athletes and their sports, the
development of internal education modules and ongoing
support for Paralympics Australia’s grassroots Multi-Sport
Days program.
Sydney Kings and Sydney Flames Sponsorship
In FY24, Harvey Norman® will activate a new sponsorship with
the Sydney Kings and Sydney Flames. Together, the focus will be
on developing pathways for young female players and officials,
growing the game in Greater Western Sydney and increasing
participation and access to elite level basketball games in regional
NSW. The aim is to elevate women’s basketball, foster community
engagement and expand pathways through training, education,
employment, and mentorship.
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Annual Report 2023 Sustainability Report
Spark Futbol
For the second year, Harvey Norman® has supported Spark
Futbol as part of the ‘Partnership 4 Purpose’ Program
by donating registration fees and providing financial
relief for players and parents plus assisting with program
development costs. The 2023 Academy Player Development
Accelerator program allows players the opportunity to
reach long term potential and accelerate development as
individuals and groups.
GIANTS – More than Sponsorship
Harvey Norman® is proud to continue its sponsorship with the
GIANTS women’s football program and men’s football program,
focusing on supporting the community and fostering diversity
through grassroots clubs. With shared Western Sydney origins
and common values of inclusion and integrity, Harvey Norman®
and the GIANTS are working together to make a positive impact
across Greater Western Sydney.
Harvey Norman® has worked with the GIANTS to highlight the
profiles of their draftees during the 2023 season, with Harry
Rowston and Nick Madden both being products of the GIANTS
Academy program.
As presenting sponsor of the GIANTS Kids Take Over Round,
Harvey Norman® collaborated with both the GIANTS and What
Ability to deliver unique game day experiences for What Ability
participants at GIANTS Stadium. The participants took part in
pre-game on field experiences such as the coin toss, ball delivery
and guard of honour, then stayed to watch the game with their
support workers and families.
Surfing Australia – Rising 7 Camp
Through the Harvey Norman® sponsorship of Surfing Australia,
a group of seven athletes were chosen as representatives of the
top female talent of their age group. The objective of this camp
was to help High-Performance females in this age group, to
retain them in the pathway as they transition through an often-
challenging period. Hosted by seven time World Champion
Layne Beachley, this camp was about challenging, empowering
and inspiring the next generation of Female surfers. Young Ellie
Harrison took out the title and won $10,000 support from
Harvey Norman® and a year’s mentoring from Layne.
NRL All-Stars
Harvey Norman® has been the proud naming rights sponsor
of the NRL All-Stars since its inception in 2010. In 2023, The
NRL Harvey Norman® All-Stars match was played for the first
time outside of Australia in Rotorua, New Zealand. In the
week leading up to the match the Harvey Norman® Rotorua
store hosted all 80 players from all four teams, the Male and
Female, Indigenous and Maori sides. The afternoon began
with an Indigenous and Maori Cultural performance which
created a powerful atmosphere and a great start to the event.
The local community were able to get up close and personal
with their favourite players while having their team photos
signed as well as the opportunity to have their photo taken
with team members. The event was a huge success with over
300 fans in attendance.
The Men’s Indigenous All-Stars took the Arthur Beetson
Trophy from the Maori All-Stars for the first time in 4 years
with a 28-24 victory in Rotorua, while in the Women’s match
the Maori All-Stars defeated the Indigenous Women’s All-
Stars 16-12.
Annual Report 2023 Sustainability Report
65
Directors’ Report | Sustainability Report (continued)
Harvey Norman® Brand Ambassadors
Ariarne Titmus
Harvey Norman® is proud to continue to support Australian swim champion
Ariarne Titmus from her journey to Tokyo 2020, her success at the 2022
Commonwealth Games, her recent World Championship gold and her ongoing
preparation for Paris 2024.
Since her Olympic debut, Ariarne has achieved Gold Medallist status in multiple
events and the success has continued in her preparation for the 2024 Olympics
achieving gold in both the 400m and 800m at the 2023 World Championship
Trials and the Australian Swimming Championships. Her 400m freestyle win at
the 2023 World Swimming Championships, was feted by media as the ‘race of
the century’ in which Ariarne defeated both recent world record holders in Katie
Ledecky & Summer McIntosh with a new world record to secure her place as the
undisputed champion of middle-distance swimming. This garnered worldwide
media attention and has set the scene for what will no doubt again be the race
to watch at the upcoming Olympics in Paris 2024.
Outside of the pool, Ariarne has established herself as a consummate media
performer and swimming commentator recently co-presenting the 2022 World
Swimming Short Course event for Channel 9. A keen foodie with a passion for
the culinary arts, Ariarne is also a fan of other sports, especially AFL & Tennis.
Ariarne is looking forward to the opportunity to make history in Paris 2024 &
become our greatest ever individual gold medal winner.
Jye Edwards
Harvey Norman® continues to support Paris
2024 hopeful Jye Edwards. Jye is an Australian
middle distance runner who overcame injury
and illness to compete at the Tokyo 2020
Olympic Games.
Jye has also faced injury in his preparations
for Paris 2024 however has since hit his stride,
recently winning the Run the Tan in Melbourne
with a time which puts him at 7th all-time for
the track.
Jye has been training in Europe and will
continue to work towards his goal of
representing Australia for the second time at
the Paris 2024 Olympic Games.
Montana Atkinson
Harvey Norman® continues to support Montana
Atkinson on her journey as she strives to compete at
the Paris 2024 Paralympic Games. Harvey Norman® has
supported Montana since 2022 following on from her
receiving the Champions of Sport award at the 2021
Harvey Norman Gold Coast Women of the Year.
Montana has achieved great success already as a para-
swimmer, setting State Records and winning medals in
multiple events plus being named the Commonwealth
Games Australia Emerging Athlete of the Month in
April 2023 and Swimming Gold Coast Awards’ Female
Para Swimmer of the Year, among other achievements.
Montana’s main goal is to make her Paralympic debut
at Paris 2024.
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Annual Report 2023 Sustainability Report
Places
The Places in which Harvey Norman®
operates are incredibly important to us.
They serve multiple purposes, from a
place of work for the people employed
by the business operating from the
site, to being the place in which we
meet consumers and strive to provide
the best possible experience that
allows customers to engage with and
understand the benefits to them of the
products that are sold there. Each site
then has a responsibility to minimise
the environmental impact of their
operations, whether that is via energy
efficient operations or managing waste
streams generated at the site, through
to engagement with suppliers about the
products that are available to be sold.
The warehouses supporting these sites also play an important
role in controlling the environmental footprint. That can be as
simple as the waste takeback programs operated by sites for used
consumer goods that are included in recycling programs, through
to the efficient planning of delivery schedules to minimise the
usage of fuel in delivery vehicles.
To assist the consolidated entity to obtain advice and provide
influence in areas relevant to the operation of the places,
Harvey Norman® is a member of the following organisations and
associations to support our commitment to environmental and
social responsibility:
• Energy Users Association of Australia
• National Retailers Association
• Australian Bedding Stewardship Council
(founding member and Board representation)
• Consumer Electronics Association
1. Waste and circular economy
Governments and consumers in the countries in which Harvey Norman® operates continue to increase expectations on the makers
and sellers of goods to create and participate in product stewardship programs. Some jurisdictions are moving faster than others to
ban certain items, such as expanded polystyrene, in packaging for products.
Relevant members of the consolidated entity has continued to work with suppliers and recycling / product stewardship schemes
globally to provide consumers with simple solutions to recycle their old products and to divert waste from landfill. Each region
has reported the successful diversion of a substantial portion of their waste streams from landfill and the operation of product
stewardship schemes.
Annual Report 2023 Sustainability Report
67
Directors’ Report | Sustainability Report (continued)
New Zealand
New Zealand sites divert more than 22% of waste collected from landfill, including cardboard, plastic and
polystyrene waste. This figure has remained stable in recent years and is below the outcomes from franchised
complexes in Australia. The New Zealand Sustainability Committee is currently seeking advice from waste
management experts about how to increase this diversion percentage.
Singapore
Singapore continues to participate in the E-waste Extended Producer Responsibility scheme, taking back air
conditioners, fridges, washers and televisions and providing e-waste collection bins in store for mobile phones
and tablets, desktop computers, batteries, light bulbs and computer peripherals.
Malaysia
Company-operated stores in Malaysia report a 45% diversion rate for waste at retail sites, recycling cardboard,
plastic and polystyrene.
Ireland and
Northern Ireland
Our Irish business participates in the Waste Electrical and Electronic Equipment (WEEE) scheme, recycling
kitchen appliances including fridges, washing machines, dishwashers, cookers etc as well as smaller items like
kettles, toasters, blenders, remote controls, batteries or electric toothbrushes, which allows valuable resources
including plastics, metals and glass to be recovered for further use in manufacturing, and ensures hazardous
waste is disposed of safely. Company-operated stores in Ireland also recycled more than 11,000 mattresses in
FY23, partnering with Eco Mattress Recycling and Bounce Back Recycling. For every three mattresses sold by
Harvey Norman in Ireland, one is recycled.
Croatia
Company-operated stores in Croatia divert more than 2/3 of their waste from landfill. Stores collect and recycle
items such as paper, cardboard, wood, damaged goods and construction waste. Municipal waste collections in
Croatia cater for other waste streams such as e-waste and plastics.
Slovenia
Company-operated stores in Slovenia are included within a national program administered by the Slopak
company, which includes programs for recycling products such as electrical and electronic equipment, batteries
and product packaging. Waste stream separation occurs at the store and is collected by waste management
companies.
In Australia, independent franchisee businesses provide a range of recycling services for their customers, particularly for e-waste,
mattresses and polystyrene collected from the packaging of consumer goods.
Mattress recycling by Harvey Norman® and Domayne® independent franchisees resulted in the recovery of 178 tonnes of steel, 37
tonnes of foam and 64 tonnes of timber that may otherwise have gone to landfill.
Franchisee businesses also recycle polystyrene collected from the packaging of consumer goods.
In FY23, independent franchisees in Australia recycled more than 4,000 tonnes of cardboard and paper and more than 11 tonnes of
soft plastics.
During FY23, each independent Harvey Norman®, Domayne® and Joyce Mayne® franchisee made the choice to cease to provide plastic
bags to their customers. By the end of FY24, no customer of a franchisee business in Australia will receive a soft plastic bag with their
purchase of goods. Paper bags are available for customers at each franchised complex.
Climate Change impact and resilience
As an owner of property across many regions and a customer of landlords in many locations, relevant controlled entities regularly
undertake and update risk assessments in respect of our global portfolio of stores, warehouses and support offices. We use scenario
planning and analysis to identify and mitigate flooding, cyclone and bushfire climate change risk.
Our risk assessments also address product and supply chain risk as it relates to climate change. The diverse and geographically
dispersed nature of our business model provides us some insulation from major financial impact from climate risks in our properties and
supply chains, but we remain acutely aware of the constantly changing nature of the impacts of climate change on the world economy.
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Annual Report 2023 Sustainability Report
Risk Description and Impact
Category of Risk
Treatment/Mitigation Plan and Actions
Regulatory Change - Climate Change
Risk Description:
Regulatory changes resulting in increased
reporting and emissions reduction
requirements, posing a risk of non-compliance.
Compliance
Current Control
Mapping current and emerging regulatory changes for
each jurisdiction Harvey Norman® operates.
Implementing a framework to ensure compliance by each
controlled entity with regulatory obligations.
Shifting market sentiment - Climate Change
Risk Description:
In the transition to a low carbon economy,
consumer and investor sentiment shifts
towards more ethical and sustainable products,
resulting in potential reputational risks for the
brand should Harvey Norman® fail to respond
to market signals.
Property risks - Climate Change
Risk Description:
Increased frequency and severity of acute
climate impacts, such as storms, floods and
bushfires, resulting in increased risk of damage
to the consolidated entity’s owned and leased
assets and/or unavailability of insurance / rising
cost of insurance premiums.
Supply Chain risks - Climate Change
Risk Description:
In the transition to a low carbon economy, the
costs of items and materials from suppliers
may significantly increase, resulting in reduced
availability of goods and increased costs
passed through from our suppliers.
Impacts to business operations -
Climate Change
Risk Description:
Physical acute climate impacts such as storms,
floods, bushfires, earthquakes and tsunamis
may disrupt trade and logistics from suppliers
to Harvey Norman® complexes and company-
operated stores.
Carbon Management
Risk Description:
Risks relating to carbon reduction efforts across
our value chain, including interruptions and/
or increased costs within the supply chain,
increased operational costs utilised for energy
efficiency improvements, and carbon-related
liability from imposed mandates or regulations.
Environment
Environment
Current Control
Considering climate change resilience as an active part
of our long-term strategy, planning and business model
discussions.
Enhancing our value creation story, communicating our
climate-related actions and performance to stakeholders.
Creating disaster recovery and business continuity
response and contingency plans.
Current Control
Performing likelihood and consequence assessments of
climate change hazards for future property investments.
Conducting regional climate change risk modeling across
our global property portfolio and implement appropriate
climate change risk mitigation strategies.
Developing environmental and social risk policies for the
Property function specifically.
Monitor insurance availability.
Current Control
Monitoring of unexpected or significant price increases
from suppliers.
Environment
Market trend analysis of sectors most exposed to
transition and physical climate risks.
Suppliers making their own arrangements to mitigate this
risk.
Environment
Current Control
Asset management program including strategic
positioning of suppliers to Harvey Norman® complexes
and company-operated stores.
Awareness raising and climate capability exercises.
Monitor insurance availability.
Current Control
Utilising existing asset management processes to reduce
carbon footprint (e.g., installing solar technologies,
energy efficiency improvements)
Environment
Obtaining Power Purchase Agreements (PPAs).
Purchasing of carbon offsets.
Annual Report 2023 Sustainability Report
69
Directors’ Report | Sustainability Report (continued)
Energy usage and emissions
While energy usage has been tracked extensively in Australia for Harvey Norman®, Domayne® and Joyce Mayne® franchisees,
consumption of energy in other company-owned businesses overseas has been closely tracked for the past four years.
In that timeframe, energy consumption has risen by 13% for company owned operations, driven largely by increases in Malaysia
and Ireland. This has had a limited impact on emissions, mainly due to the Irish business contracting 100% renewable electricity for
that region.
In FY23, the Scope 1 and 2 emissions measured for Harvey Norman® complexes and company-operated stores include fuel use in
company owned vehicles and energy usage at sites. Relevant controlled entities are in the process of setting up further information
capture programs to include emissions from air conditioning for subsequent reporting periods. Relevant controlled entities will
soon have in place improved methods of information capture across all other Scope 1 and 2 emissions sources from international
company owned operations to ensure completeness of data sets and auditability of data, as we do already in Australia.
Solar panels installed on the roof of the Ljubljana store in Slovenia.
The Slovenian business has demonstrated a reduction in
consumption (12%) from the installation of solar arrays on
four (soon to be five) sites.
The solar panel installation program for company owned
property in Australia slowed in FY23, with only one site
and four more arrays added to the program. Production
of energy from installed solar arrays improved with the
reduction in rain across large parts of eastern Australia, with
output growing to 7,800 megawatt hours against last year’s
figure of 6,848 megawatt hours. Average generation per
array also improved to 116.7 megawatt hours, up from 113
megawatt hours per annum.
Ambient lighting
Scope 3 emissions – Space Furniture
Ambient lighting accounts for approximately 30% of electricity
consumption in a typical Harvey Norman® complex or company-
operated store.
In FY23, a global review of the approach to lighting grid
placement and technology was commenced, with a view to
standardising the grid for better lighting efficacy, light colour and
life span, compliant with the BCA standard.
The project has identified options to treat the identified issues,
including discoloration of diffusers and heat, while delivering
a decrease to energy consumption and maintenance costs by
increasing the use of LED fixtures across a broader part of the store.
In FY23, relevant controlled entities commenced the collection
of fuel data from all company owned operations with a view to
more accurately calculating Scope 1 carbon emissions from these
sources.
Relevant controlled entities are preparing to enhance external
climate related financial reporting requirements over the next
few years, with programs underway to commence measurement
of Scope 3 emissions. Under present assumptions, the Scope
3 emissions are likely to comprise most of the carbon footprint
globally, with these emissions embedded in goods purchased
from suppliers and resold at Harvey Norman® complexes and
company-operated stores.
Launched in 1993, Space Furniture® is the leading voice in design
retailing across South East Asia. Five architect-designed showrooms
– Sydney, Melbourne, Brisbane, Singapore and Kuala Lumpur,
feature collections curated to meet the specific needs of design
lovers and the broader requirements of the architecture and
interiors industry, with design scope for residences, multi-residential
developments, hotels, restaurants and workplace interiors.
In FY23, Space Furniture® undertook a project to calculate the
carbon emissions, including Scope 3 emissions across a sub-
section of their overall product supply chain.
For Space Furniture, the process had a very positive outcome,
where not only were the emissions able to be calculated, but
working with the suppliers, Space Furniture® was able to identify
opportunities for consolidation of freight to both reduce emissions
and costs for the business.
Space Furniture® is also working with suppliers to identify
alternative transport channels for goods.
Task Force on Climate related Financial
Disclosures (TCFD)
The Executive Sustainability Committee is closely monitoring
the Australian Federal Government’s consultation process in
relation to mandatory reporting of climate-related financial
information in Australia.
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Annual Report 2023 Sustainability Report
Products
Harvey Norman® takes great pride in the
quality of the products that are sold through
complexes and company-operated stores
representing our brands. We are consistently
mindful of the need to be working with
suppliers to ensure that products offered to
consumers are safe and come from ethical
supply chains, including the sourcing of raw
materials through to manufacture and delivery.
Product safety and sustainability
Packaging / supply chain waste
Most Harvey Norman® complexes and company-operated stores
operate with recycling facilities for packaging associated with
products. Suppliers to Harvey Norman® franchisees and company-
operated stores are making changes to their own product
packaging, targeting the removal of plastics and expanded
polystyrene from product packaging.
Franchised complexes in Australia and company-operated stores
in New Zealand have undertaken reviews of the packaging offered
to consumers in-store or online. Sourcing activities for packaging
product are guided in the Pacific region by the Sustainable
Packaging Guidelines published by the Australian Packaging
Covenant. A relevant controlled entity reports publicly under the
Australian Packaging Covenant and progress over time is able to
be viewed in these documents.
Engagement with suppliers on product
sustainability / safety
There is a significant shift in sentiment from both consumers and
regulators, about product durability, repairability and claims made
about the sustainability credentials of the product. Governments
in the EU particularly, have taken a strong position about
durability and the right to repair products in the electrical and
electronics industries. This will have an impact around the globe
as manufacturers adapt to these requirements.
Furniture and bedding products offered for sale by company
owned stores in New Zealand and franchisees in Australia are
subject to an external quality assurance program that includes
assessment of the compliance of the product with mandatory
safety standards and sourcing of timbers, against the Forestry
Stewardship Council standards. Some suppliers are also now
including recycled textiles as part of their product offering and
these claims are also tested by the quality assurance process.
Human Rights
At the core of our Statement of Values is our commitment to act
with integrity and behave responsibly. This extends beyond our
own business and shapes how we interact with other businesses,
including suppliers. A controlled entity operates a central program
to comply with reporting requirements under the Modern Slavery
laws in Australia. This program enables each controlled entity to
undertake its own due diligence activities with suppliers as part of
any ongoing relationship.
In FY23, a relevant controlled entity has taken a deeper look at
the supply chains of a range of electrical and electronics suppliers,
as well as manchester manufacturers and suppliers globally.
The responses from the suppliers surveyed indicated that there
is a level of recognition of modern slavery issues. Many of the
supplier businesses require an adherence to a supplier Code of
Conduct, which is audited, and others require an audit of the
operations of the supply chain member to prove the correct
treatment of people working in that supply chain.
In addition, relevant controlled entities conducted their own
modern slavery compliance reviews with suppliers, including
engaging with suppliers about recognition of modern slavery
issues and obligations of suppliers within supply chains.
Annual Report 2023 Sustainability Report
71
Directors’ Report
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 2023 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 Declaration 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 2023,
I declare to the best of my knowledge and belief, there have been:
a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
b. No contraventions of any applicable code of professional conduct in relation to the audit; and
c. No non-audit services provided that contravene any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Harvey Norman Holdings Limited and the entities it controlled during the financial year.
Ernst & Young
James Karekinian
Partner
Sydney
29 September 2023
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards
Signed in accordance with a resolution of the directors.
G.HARVEY
Chairman
Sydney
29 September 2023
K.L. PAGE
Director and Chief Executive Officer
Sydney
29 September 2023
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Annual Report 2023 Directors’ Report
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 2023, 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 2023
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
73
1. Valuation of Freehold Investment Properties and Owner-Occupied Properties
Why significant
Freehold Investment properties and owner-
occupied properties (collectively, “properties”)
represent 53% of the Group’s total assets at
30 June 2023.
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 external independent property
valuations, internal valuations or management
review and are based on market conditions
existing at the reporting date.
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.
How our audit addressed the key audit matter
Our audit procedures included the following:
► Assessed the Group’s accounting policies
with respect to investment properties and
owner-occupied properties for compliance
with Australian Accounting Standards.
► Assessed the work of those responsible for
the internal valuations and the work of the
independent valuation specialists, upon
which the Directors’ valuations are based,
by considering their qualifications,
competence and objectivity.
► For a sample of properties subject to
external independent property valuations,
internal valuations or management review
we:
o Assessed the reasonableness of key
assumptions used in these valuations
with reference to external market
evidence;
o We involved our real estate valuation
specialists to assist with the assessment
of the valuation assumptions and
methodologies used;
o Tested the mathematical accuracy of
both internal and external valuations;
o 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.
74
A member firm of Ernst & Young Global Limited
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Liability limited by a scheme approved under Professional Standards Legislation
2. Recoverability of Receivables from Franchisees
Why significant
At 30 June 2023, the value of receivables due
from franchisees was $840.9 million
representing 11% 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.
How our audit addressed the key audit matter
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
75
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 2023 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.
76
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
► 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
77
Report on the audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 32 to 57 of the directors’ report for the
year ended 30 June 2023.
In our opinion, the Remuneration Report of Harvey Norman Holdings Limited for the year ended 30
June 2023, 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
29 September 2023
78
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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 2023 and of its performance for the
year ended on that date; and
ii. complying with Accounting Standards and the Corporations Regulations 2001; and
b. the financial statements and notes also comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board; and
c. 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
2023.
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
Chairman
Sydney
29 September 2023
K.L. PAGE
Director and Chief Executive Officer
Sydney
29 September 2023
Annual Report 2023 Directors’ Report
79
Annual Report | Financial Statements
Annual Report
30 June 2023
TABLE OF CONTENTS
FINANCIAL STATEMENTS
Statement of Financial Position
Income Statement
Statement of Comprehensive Income
Statement of Changes in Equity
Statement of Cash Flows
NOTES TO THE FINANCIAL STATEMENTS
GENERAL INFORMATION
1
Statement of Significant Accounting Policies
CONSOLIDATED ENTITY PERFORMANCE, ASSETS AND LIABILITIES
2
3
4
5
6
7
8
9
Operating Segments
Revenues
Expenses and Losses
Income Tax
Earnings Per Share
Trade and Other Receivables
Other Financial Assets
Inventories
10 Other Assets
11
Intangible Assets
12 Property, Plant and Equipment
13 Property, Plant and Equipment: Right-Of-Use Assets (ROUA)
14
15
Investment Properties: Freehold
Investment Properties (Leasehold): Right-Of-Use Assets
16 Trade and Other Payables
17
Interest-Bearing Loans and Borrowings
18 Financing Facilities Available
19 Lease Liabilities
20 Other Liabilities
21 Provisions
22 Contributed Equity
23 Retained Profits and Dividends
24 Non-Controlling Interests
25 Reserves
26 Cash and Cash Equivalents
27
Investments Accounted for Using the Equity Method
28 Assets Held for Sale
OTHER DISCLOSURES
29 Employee Benefits
30 Remuneration of Auditors
31 Key Management Personnel
32 Related Party Transactions
33 Commitments
34 Contingent Liabilities
35 Financial Risk Management
36 Derivative Financial Instruments
37 Deed of Cross Guarantee
38 Parent Entity Financial Information
39 Controlled Entities and Unit Trusts
40 Significant Events After Balance Date
OTHER INFORMATION
Shareholder Information
81
82
83
84
86
87
90
94
97
97
100
101
105
106
106
106
107
112
113
116
118
118
120
121
123
123
123
124
124
125
127
128
129
129
130
130
131
131
132
132
138
141
142
143
144
145
80
Annual Report 2023 Financial Statements
Statement of Financial Position As at 30 June 2023
Current assets
− Cash and cash equivalents
− Trade and other receivables
− Other financial assets
− Inventories
− Other assets
− Intangible assets
− Assets held for sale
Total current assets
Non-current assets
− Trade and other receivables
− Investments accounted for using the equity method
− 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
− Intangible assets
− Deferred tax assets
Total non-current assets
Total Assets
Current liabilities
− Trade and other payables
− Interest-bearing loans and borrowings
− Lease liabilities
− Income tax payable
− Other liabilities
− Provisions
Total current liabilities
Non-current liabilities
− Interest-bearing loans and borrowings
− Lease liabilities
− Provisions
− Deferred tax liabilities
− Other liabilities
Total non-current liabilities
Total Liabilities
Net Assets
Equity
− Contributed equity
− Reserves
− Retained profits
Parent entity interests
− Non-controlling interests
Total Equity
Note
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
CONSOLIDATED
June 2023
$000
June 2022
$000
218,750
248,804
993,130
1,065,304
3,845
545,658
68,654
600
-
346
524,274
55,359
280
12,104
1,830,637
1,906,471
87,527
1,904
62,642
892,005
546,019
53,494
1,502
61,073
779,217
472,510
3,483,593
3,230,213
705,034
675,600
57,387
5,083
58,420
7,903
5,841,194
5,339,932
7,671,831
7,246,403
352,716
67,103
151,043
9,497
121,000
37,304
358,341
261,053
139,288
67,830
126,236
37,059
738,663
989,807
783,258
438,522
1,177,765
1,065,340
9,173
495,458
1,025
10,261
446,810
1,539
2,466,679
1,962,472
3,205,342
2,952,279
4,466,489
4,294,124
717,925
298,900
717,925
288,170
3,414,424
3,254,936
4,431,249
4,261,031
35,240
33,093
4,466,489
4,294,124
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
Annual Report 2023
81
Income Statement For the year ended 30 June 2023
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)
The above Income Statement should be read in conjunction with the accompanying notes.
CONSOLIDATED
Note
June 2023
$000
June 2022
$000
3
3
3
4,13,15
4
4,19
27
5
6
6
23
2,776,070
2,807,329
(1,884,104)
(1,871,051)
891,966
936,278
1,171,143
1,301,142
327,988
(58,367)
(395,613)
(298,317)
(671,687)
(109,224)
(91,656)
9,849
397,186
(56,880)
(396,208)
(270,320)
(667,931)
(59,637)
(52,148)
8,961
776,082
1,140,443
(229,239)
546,843
539,520
7,323
(322,564)
817,879
811,527
6,352
546,843
817,879
43.30 cents
65.13 cents
43.23 cents
65.04 cents
25.0 cents
37.5 cents
82
Annual Report 2023
Statement of Comprehensive Income For the year ended 30 June 2023
Profit for the year
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 on financial assets at fair value through other comprehensive income
Other comprehensive income for the year (net of tax)
Note
CONSOLIDATED
June 2023
$000
June 2022
$000
546,843
817,879
30,831
3,684
(1,105)
(23,933)
6,011
(5,740)
9,748
(13,256)
23
(7)
41,967
(4,509)
(2,084)
22,134
Total comprehensive income for the year (net of tax)
556,591
840,013
Total comprehensive income attributable to:
− Owners of the parent
− Non-controlling interests
548,836
831,782
7,755
8,231
556,591
840,013
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
Annual Report 2023
83
Statement of Changes in Equity For the year ended 30 June 2023
Attributable to equity holders of the parent
CONSOLIDATED
$000
Contributed
equity
Retained
profits
Asset
revaluation
reserve
Foreign
currency
reserve
FVOCI
reserve
Cash
flow hedge
reserve
Employee
equity
benefits
reserve
Acquisition
reserve
Non-
controlling
interests
Total
At 1 July 2022
717,925
3,254,936
245,448
27,572
20,490
13
10,921
(16,274)
33,093
4,294,124
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 interest
rate swap contract
Fair value of financial
assets at fair value
through other
comprehensive income
Other comprehensive
income
Profit for the year
Total comprehensive
income for the year
Cost of share based
payments
Utilisation of
employee equity
benefits reserve
Dividends paid
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(17,813)
-
-
-
-
-
-
30,290
-
-
-
-
-
-
-
-
-
(13)
(37)
2,629
(5,740)
-
(17,813)
30,290
(5,740)
2,579
539,520
-
-
-
-
539,520
(17,813)
30,290
(5,740)
2,579
-
-
-
-
-
-
-
-
-
-
-
(380,032)
-
-
-
-
-
-
-
-
-
-
-
-
3,701
(2,287)
-
-
-
-
-
-
-
-
-
-
-
-
-
(109)
(17,922)
541
30,831
-
-
-
-
(13)
(37)
2,629
(5,740)
432
9,748
7,323
546,843
7,755
556,591
-
-
3,701
(2,287)
(5,608)
(385,640)
At 30 June 2023
717,925
3,414,424
227,635
57,862
14,750
2,592
12,335
(16,274)
35,240
4,466,489
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
84
Annual Report 2023
Statement of Changes in Equity For the year ended 30 June 2023 (continued)
Attributable to equity holders of the parent
CONSOLIDATED
$000
Contributed
equity
Retained
profits
Asset
revaluation
reserve
Foreign
currency
reserve
FVOCI
reserve
Cash
flow hedge
reserve
Employee
equity
benefits
reserve
Acquisition
reserve
Non-
controlling
interests
Total
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 comprehensive
income
Profit for the year
Total comprehensive
income for the year
Cost of share based
payments
Utilisation of
employee equity
benefits reserve
Dividends paid
-
-
-
-
-
-
-
-
-
-
-
36,802
-
-
-
-
-
(14,479)
-
-
-
-
-
-
-
-
-
3
13
(2,084)
-
-
-
-
-
-
-
36,802
(14,479)
(2,084)
811,527
-
-
-
16
-
811,527
36,802
(14,479)
(2,084)
16
-
-
(436,102)
-
-
-
-
-
-
-
-
-
-
-
-
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)
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 2023
85
Statement of Cash Flows For the year ended 30 June 2023
Cash flows from operating activities
Net receipts from franchisees
Receipts from customers
Payments to suppliers and employees
Distributions received from joint ventures
GST paid
Interest received
Interest and other costs of finance paid
Interest paid on lease liabilities
Income taxes paid
Dividends received
CONSOLIDATED
Note
June 2023
$000
June 2022
$000
1,209,709
1,187,422
2,969,812
2,968,636
(3,127,122)
(3,097,107)
9,782
(75,877)
15,626
(41,767)
(50,294)
9,210
(93,194)
6,964
(9,702)
(41,738)
(232,705)
(336,225)
3,093
3,034
Net cash flows from operating activities
26(b)
680,257
597,300
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 other investments
Proceeds from insurance claims
(187,660)
(137,798)
10,112
(5,147)
(1,281)
(24)
-
2,500
8,456
(94,918)
(81,155)
4,735
(145)
(950)
-
7,511
-
2,381
Loans granted to joint venture entities, joint venture partners, related and unrelated entities
(22,642)
(16,254)
Net cash flows used in investing activities
(333,484)
(178,795)
Cash flows from financing activities
Lease payments (principal component)
Proceeds from syndicated facility
Dividends paid
(Repayments of) / proceeds from 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
(147,537)
(137,615)
150,000
120,000
(380,032)
(436,102)
(1,506)
20,843
(379,075)
(432,874)
(32,302)
234,358
(14,369)
248,727
Cash and cash equivalents at end of the year
26(a)
202,056
234,358
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
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86
Annual Report 2023
Annual Report | Notes to the Financial Statements
01 Statement of Significant Accounting Policies
(a) Corporate Information
Harvey Norman Holdings Limited (the “Company”) is a for profit company limited by shares incorporated in Australia and
operating in Australia, New Zealand, Ireland, Northern Ireland, Singapore, Malaysia, Slovenia and Croatia whose shares are
publicly traded on the Australian Securities Exchange (“ASX”) trading under the ASX code HVN.
(b) Basis of Preparation
The financial report has been prepared on a historical cost basis, except for 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. 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
2023 were authorised for issue in accordance with a resolution of the directors on 29 September 2023.
(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 2023. For details on the impact of future
accounting standards, refer to page 89.
(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.
Annual Report 2023
87
Annual Report | Notes to the Financial Statements (continued)
01 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 2022. The consolidated
entity has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
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.
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 2023 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.
88
Annual Report 2023
01 Statement of Significant Accounting Policies (continued)
• 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
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
settlement 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 2023. The consolidated entity does not
expect a material impact on the application of the below standards.
Reference
New Standard
Effective Date Application Date
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
1 January 2023
1 July 2023
Assets and Liabilities arising from a Single Transaction
AASB 2022-1 Amendments to Australian Accounting Standards– Initial Application of AASB
1 January 2023
1 July 2023
17 and AASB 9– Comparative information
AASB 2022-6 Amendments to Australian Accounting Standards — Non-current Liabilities with
1 January 2023
1 July 2023
Covenants
AASB 2020-1 Amendments to Australian Accounting Standards — Classification of
1 January 2024
1 July 2024
Liabilities as Current or Non-current
AASB 2014-10 Amendments to Australian Accounting Standards — Sale or Contribution of As-
1 January 2025
1 July 2025
sets between an Investor and its Associate or Joint Venture
Annual Report 2023
89
Annual Report | Notes to the Financial Statements (continued)
02 Operating Segments
2023 Segment Revenue
CONSOLIDATED ($000)
Operating segment
30 June 2023
Franchising operations
− New Zealand (retail)
− Singapore & Malaysia (retail)
− Slovenia & Croatia (retail)
− Ireland & Northern Ireland (retail)
− Other non-franchised retail
Total retail
− Retail property
− Retail property under construction
Total property
Equity investments
Other
Intercompany eliminations
Total segment revenue
Sales of products
to customers
-
1,005,109
682,415
201,518
650,967
246,877
2,786,886
-
-
-
-
3,119
(13,935)
2,776,070
Revenues received
from franchisees and
other income items
1,065,673
31,364
17,578
3,681
8,011
2,228
62,862
423,076
49
423,125
6,761
18,936
(78,226)
Total revenue
by segment
1,065,673
1,036,473
699,993
205,199
658,978
249,105
2,849,748
423,076
49
423,125
6,761
22,055
(92,161)
1,499,131
4,275,201
2022 Segment Revenue
CONSOLIDATED ($000)
Operating segment
30 June 2022
Franchising operations
− New Zealand (retail)
− Singapore & Malaysia (retail)
− Slovenia & Croatia (retail)
− Ireland & Northern Ireland (retail)
− Other non-franchised retail
Total retail
− Retail property
Total property
Equity investments
Other
Intercompany eliminations
Sales of products
to customers
-
1,119,089
621,230
189,319
645,285
242,040
2,816,963
385
385
-
1,872
(11,891)
Revenues received
from franchisees and
other income items
1,193,169
28,218
16,726
3,488
11,363
2,748
62,543
494,007
494,007
3,090
12,830
(67,311)
Total revenue
by segment
1,193,169
1,147,307
637,956
192,807
656,648
244,788
2,879,506
494,392
494,392
3,090
14,702
(79,202)
Total segment revenue
2,807,329
1,698,328
4,505,657
90
Annual Report 2023
02 Operating Segments (continued)
2023 Result
Operating segment
30 June 2023
CONSOLIDATED ($000)
Segment result
before interest,
tax, depreciation &
amortisation
Interest
expense
Depreciation
expense
(excl ROU Assets)
Depreciation &
fair value
remeasurement
of ROU Assets
Impairment&
amortisation
expense
Segment
result
before Tax
Franchising operations
561,355
(37,555)
(27,332)
(105,122)
(17,986)
373,360
− New Zealand (retail)
− Singapore & Malaysia (retail)
− Slovenia & Croatia (retail)
− Ireland & Northern Ireland (retail)
− Non-franchised retail
Total retail
− Retail property
105,718
88,858
14,987
44,589
(2,454)
(4,401)
(6,274)
(1,473)
(9,937)
(3,085)
(8,801)
(7,999)
(2,776)
(7,870)
(2,298)
(11,575)
(34,473)
(2,976)
(15,800)
(1,718)
(247)
(47)
(130)
(318)
(556)
80,694
40,065
7,632
10,664
(10,111)
251,698
(25,170)
(29,744)
(66,542)
(1,298)
128,944
309,382
(25,577)
(10,128)
− Retail property under construction
− Property development for resale
(888)
(92)
(944)
(91)
-
-
Total property
Equity investments
Other
Intercompany eliminations
308,402
(26,612)
(10,128)
6,649
2,799
(194)
(258)
(2,255)
194
-
(4,819)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
273,677
(1,832)
(183)
271,662
6,391
(4,275)
-
Total segment result before tax
1,130,709
(91,656)
(72,023)
(171,664)
(19,284)
776,082
2022 Result
Operating segment
30 June 2022
CONSOLIDATED ($000)
Segment result
before interest,
tax, depreciation &
amortisation
Interest
expense
Depreciation
expense
(excl ROU Assets)
Depreciation &
fair value
remeasurement
of ROU assets
Impairment &
amortisation
expense
Segment
result
before Tax
Franchising operations
718,222
(27,128)
(26,938)
(90,723)
(20,418)
553,015
− New Zealand (retail)
− Singapore & Malaysia (retail)
− Slovenia & Croatia (retail)
− Ireland & Northern Ireland (retail)
− Non-franchised retail
Total retail
− Retail property
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)
− Retail property under construction
− Property development for resale
(852)
(2,582)
(163)
(25)
-
-
Total property
Equity investments
Other
Intercompany eliminations
383,606
(6,721)
(10,179)
8
(1,643)
(79)
(67)
(513)
79
-
(4,669)
-
(261)
(32)
(121)
(242)
(157)
(813)
(229)
-
-
129,077
45,360
11,402
46,159
(4,163)
227,835
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
Annual Report 2023
91
Annual Report | Notes to the Financial Statements (continued)
02 Operating Segments (continued)
2023 Assets & Liabilities
Operating segment
30 June 2023
Segment assets
Intercompany
eliminations
Segment assets
after
eliminations
Segment
liabilities
Intercompany
eliminations
Segment
liabilities after
eliminations
CONSOLIDATED ($000)
Franchising operations
4,527,445
(2,563,703)
1,963,742
1,140,622
(55,703)
1,084,919
− New Zealand (retail)
− Singapore & Malaysia (retail)
− Slovenia & Croatia (retail)
− Ireland & Northern Ireland (retail)
354,949
525,595
103,922
311,667
-
-
(2,256)
-
− Non-franchised retail
197,134
(45,430)
354,949
223,638
(4,878)
218,760
525,595
336,205
(38,433)
297,772
101,666
311,667
151,704
88,405
317,529
(2,491)
(3,579)
85,914
313,950
302,673
(203,082)
99,591
Total retail
− Retail property
1,493,267
(47,686)
1,445,581
1,268,450
(252,463)
1,015,987
3,972,622
(15,620)
3,957,002
2,541,367
(2,010,223)
531,144
− Retail property under construction
− Property development for resale
86,833
12,500
-
-
86,833
12,500
146,916
(134,765)
4,139
(2,190)
12,151
1,949
Total property
4,071,955
(15,620)
4,056,335
2,692,422
(2,147,178)
545,244
Equity investments
54,312
-
54,312
5,377
-
5,377
Other
Total
204,980
(58,202)
146,778
278,727
(229,867)
48,860
10,351,959
(2,685,211)
7,666,748*
5,385,598
(2,685,211)
2,700,387*
2022 Assets & Liabilities
Operating segment
30 June 2022
Segment assets
Intercompany
eliminations
Segment assets
after
eliminations
Segment
liabilities
Intercompany
eliminations
Segment
liabilities after
eliminations
CONSOLIDATED ($000)
Franchising operations
4,282,910
(2,364,206)
1,918,704
1,004,402
(20,975)
983,427
− New Zealand (retail)
− Singapore & Malaysia (retail)
− Slovenia & Croatia (retail)
− Ireland & Northern Ireland (retail)
390,779
487,257
83,447
262,551
− Non-franchised retail
222,281
(32,674)
-
390,779
240,049
(2,200)
237,849
(2,820)
(2,079)
-
484,437
306,712
(43,313)
263,399
81,368
262,551
189,607
68,640
(423)
68,217
252,088
(2,263)
249,825
305,705
(175,728)
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 development 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
Equity investments
Other
Total
3,727,021
11,008
3,738,029
2,465,488
(1,992,785)
472,703
55,890
172,727
-
(55,592)
55,890
117,135
4,458
-
236,460
(208,676)
4,458
27,784
9,684,863
(2,446,363)
7,238,500*
4,884,002
(2,446,363)
2,437,639*
* Segment assets for FY23 and FY22 are exclusive of deferred tax assets. Segment liabilities for FY23 and FY22 are exclusive of income tax
payable and deferred tax liabilities.
92
Annual Report 2023
02 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.
This segment includes any Brand Licence Fees charged by a subsidiary of Harvey Norman Holdings
Limited for access to, and use of, the Harvey Norman®, Domayne® and Joyce Mayne® brand names.
New Zealand
(retail)
Consists of the wholly-owned operations of the consolidated entity in the retail trading operations in New
Zealand under the Harvey Norman® brand name.
Singapore & Malaysia
(retail)
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.
Slovenia & Croatia
(retail)
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.
Ireland & Northern Ireland
(retail)
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.
SIGNIFICANT ACCOUNTING POLICIES
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 2023
93
Annual Report | Notes to the Financial Statements (continued)
03 Revenues
Revenue from contracts with customers and franchisees:
— Sales 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 franchisees (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:
CONSOLIDATED
June 2023
$000
June 2022
$000
2,776,070
2,807,329
36,471
35,095
860,695
1,033,166
3,673,236
3,875,590
283,581
248,650
26,867
19,326
310,448
267,976
117,378
110,072
15,626
3,095
6,963
3,090
136,099
120,125
— Net property revaluation increment on Australian freehold investment properties
120,197
213,684
— Property revaluation decrement 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) Revenue received from franchisees
(c) Revenue and other income items
SIGNIFICANT ACCOUNTING POLICIES
Revenue from Franchisees
(1,447)
3,666
33,002
(5)
-
28,287
155,418
241,966
2,776,070
2,807,329
1,171,143
1,301,142
327,988
397,186
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.
94
Annual Report 2023
03 Revenues (continued)
Operating segment
30 June 2023
Franchising operations
− New Zealand (retail)
− Singapore & Malaysia (retail)
− Slovenia & Croatia (retail)
− Ireland & Northern Ireland (retail)
− Other non-franchised retail
Total retail
− Retail property
Total property
Equity investments
Other
Intercompany eliminations
Total
Operating segment
30 June 2022
Franchising operations
− New Zealand (retail)
− Singapore & Malaysia (retail)
− Slovenia & Croatia (retail)
− Ireland & Northern Ireland (retail)
− Other non-franchised retail
Total retail
− Retail property
Total property
Equity investments
Other
Intercompany eliminations
Total
TYPES OF CONTRACTS $000
Sale of products
to customers
Services
to customers
Franchisee fees
from franchisees
Total revenue
from contracts with
customers & franchisees
-
1,005,109
682,415
201,518
650,967
246,877
2,786,886
-
-
-
3,119
(13,935)
2,776,070
-
15,821
8,083
3,229
8,896
442
36,471
-
-
-
-
-
860,695
-
-
-
-
-
-
-
-
-
-
-
860,695
1,020,930
690,498
204,747
659,863
247,319
2,823,357
-
-
-
3,119
(13,935)
36,471
860,695
3,673,236
TYPES OF CONTRACTS $000
Sale of products
to customers
Services
to customers
Franchisee fees
from franchisees
Total revenue
from contracts with
customers & franchisees
-
1,119,089
621,230
189,319
645,285
242,040
2,816,963
385
385
-
1,872
(11,891)
2,807,329
-
17,737
6,094
2,867
8,017
380
35,095
-
-
-
-
-
1,033,166
-
-
-
-
-
-
-
-
-
-
-
1,033,166
1,136,826
627,324
192,186
653,302
242,420
2,852,058
385
385
-
1,872
(11,891)
35,095
1,033,166
3,875,590
Annual Report 2023
95
Annual Report | Notes to the Financial Statements (continued)
03 Revenues (continued)
Operating segment
30 June 2023
Australia
New Zealand
Asia
Europe
Total revenue
from contracts with
customers & franchisees
PRIMARY GEOGRAPHICAL MARKETS $000
Franchising operations
860,695
-
− New Zealand (retail)
− Singapore & Malaysia (retail)
− Slovenia & Croatia (retail)
− Ireland & Northern Ireland (retail)
− Other non-franchised retail
Total retail
− Retail property
Total property
Equity investments
Other
Intercompany eliminations
-
-
-
-
236,748
236,748
-
-
-
3,119
(3,554)
1,020,930
-
-
-
10,571
-
-
690,498
-
-
-
-
-
-
204,747
659,863
-
860,695
1,020,930
690,498
204,747
659,863
247,319
1,031,501
690,498
864,610
2,823,357
-
-
-
-
-
-
-
-
(9,242)
(1,139)
-
-
-
-
-
-
-
-
3,119
(13,935)
Total
1,097,008
1,022,259
689,359
864,610
3,673,236
Operating segment
30 June 2022
Australia
New Zealand
Asia
Europe
Total revenue
from contracts with
customers & franchisees
PRIMARY GEOGRAPHICAL MARKETS $000
Franchising operations
1,033,166
-
− New Zealand (retail)
− Singapore & Malaysia (retail)
− Slovenia & Croatia (retail)
− Ireland & Northern Ireland (retail)
− Other non-franchised retail
Total retail
− Retail property
Total property
Equity investments
Other
Intercompany eliminations
-
-
-
-
229,836
229,836
385
385
-
1,872
-
1,136,826
-
-
-
12,584
-
-
627,324
-
-
-
-
-
-
192,186
653,302
-
1,033,166
1,136,826
627,324
192,186
653,302
242,420
1,149,410
627,324
845,488
2,852,058
-
-
-
-
-
-
-
-
(11,153)
(738)
-
-
-
-
-
385
385
-
1,872
(11,891)
Total
1,265,259
1,138,257
626,586
845,488
3,875,590
96
Annual Report 2023
04 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 AASB16 depreciation in occupancy expenses above):
− Buildings
− Plant and equipment
Amortisation of:
− Computer software
− Net licence property and other intangible assets
− Other
CONSOLIDATED
June 2023
$000
June 2022
$000
380,651
374,519
2,865
19,472
15,798
3,611
2,950
18,032
15,278
3,089
12,556
10,904
434,953
424,772
50,294
38,053
3,309
41,738
9,444
966
91,656
52,148
36,707
69,551
-
102,113
89,946
34,534
65,870
2,148
87,558
80,210
298,317
270,320
9,558
62,465
17,867
1,017
400
10,179
58,896
20,778
682
-
Total depreciation, amortisation and impairment
91,307
90,535
05
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
CONSOLIDATED
June 2023
$000
June 2022
$000
177,632
252,294
(461)
(1,086)
52,068
71,356
229,239
322,564
Annual Report 2023
97
Annual Report | Notes to the Financial Statements (continued)
05
Income Tax (continued)
(b) Income tax recognised in the Statement of Changes in Equity :
Deferred income tax:
— Net gain on revaluation of cash flow hedges
− Net (loss) / 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:
Accounting profit before tax
At the Australian statutory income tax rate of 30% (2022: 30%)
Adjustments to arrive at total income tax expense recognised for the year:
− Brand licence 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
− Derecognition / (Recognition) of previously unrecognised tax losses
− 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 (%)
CONSOLIDATED
June 2023
$000
June 2022
$000
1,105
(6,011)
(4,906)
7
4,509
4,516
776,082
1,140,443
232,825
342,133
-
(461)
397
1,826
(150)
1,280
1,355
(97)
1,186
(884)
(108)
3,174
(1,086)
196
712
(201)
455
(5,322)
(642)
(571)
(993)
(51)
(7,930)
(15,240)
(3,586)
(19,569)
229,239
322,564
29.54%
28.28%
SIGNIFICANT ACCOUNTING POLICIES
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.
98
Annual Report 2023
05
Income Tax (continued)
(d) Deferred income tax assets and liabilities:
Deferred income tax at 30 June relates to the following:
Deferred tax liabilities:
— Revaluations of freehold investment properties to fair value
STATEMENT OF
FINANCIAL POSITION
DEFERRED TAX EXPENSES
IN THE INCOME STATEMENT
June 2023
$000
June 2022
$000
June 2023
$000
June 2022
$000
(332,596)
(296,796)
35,800
63,442
− Revaluations of owner-occupied land and buildings to fair value
(40,829)
(45,325)
− Non-allowable building depreciation in respect of properties in New Zealand
-
-
-
-
− Reversal of building depreciation expense for freehold investment properties
(160,219)
(144,842)
15,377
-
(1,924)
14,388
− 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
Total deferred tax assets*
Total deferred tax
(1,660)
(2,973)
(1,313)
(1,969)
(17,707)
(10,831)
4,572
2,053
(553,011)
(500,767)
10,522
5,188
31,503
6,944
6,310
590
1,029
550
11,354
8,033
24,452
8,836
7,178
511
946
550
832
2,846
(7,052)
300
868
(79)
(83)
-
(474)
497
(5,172)
300
238
(45)
22
-
62,636
61,860
(490,375)
(438,907)
52,068
71,356
* Of the total deferred tax assets of $62.64 million (2022: $61.86 million), $57.55 million (2022: $53.96 million) was offset with the deferred
tax liabilities in accordance with the deferred income tax accounting policy outlined below.
The consolidated entity has not recognised deferred tax assets relating to tax losses of $108.66 million (2022: $97.64 million) which are
available for offset against taxable profits of the companies in which the losses arose. At 30 June 2023, no deferred tax liability has been
recognised (2022: nil) in respect of the unremitted earnings of certain subsidiaries, associates or joint ventures.
SIGNIFICANT ACCOUNTING POLICIES
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 the
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.
Annual Report 2023
99
Annual Report | Notes to the Financial Statements (continued)
05
Income Tax (continued)
SIGNIFICANT ACCOUNTING JUDGEMENTS & ESTIMATES
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.
06 Earnings Per Share
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
CONSOLIDATED
June 2023
$000
June 2022
$000
43.30c
43.23c
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
546,843
817,879
(7,323)
(6,352)
539,520
811,527
NUMBER OF SHARES
June 2023
Number
June 2022
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)
2,103,341
1,738,851
Adjusted weighted average number of ordinary shares used in calculating diluted earnings per share
1,248,109,995
1,247,745,505
(a) Weighted average number of ordinary shares
No new shares issued during the current year, the weighted average number of ordinary shares used in calculating basic earnings per share
for the 2023 financial year was the number of shares on issue as at 30 June 2023.
(b) Effect of dilutive securities
Performance rights pursuant to Tranche FY21, Tranche FY22 and Tranche FY23 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 2023 on page 54 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.
SIGNIFICANT ACCOUNTING POLICIES
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.
100
Annual Report 2023
07 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
Total trade and other receivables (current)
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)
SIGNIFICANT ACCOUNTING POLICIES
Trade and other receivables
CONSOLIDATED
June 2023
$000
June 2022
$000
840,996
892,917
107,211
119,099
2,567
2,669
(4,206)
(3,493)
105,572
118,275
3,125
3,155
368
43,195
(126)
4,407
46,676
(126)
43,437
50,957
993,130
1,065,304
7,080
7,087
549
(5)
7,624
762
42,426
53,793
570
(5)
7,652
537
46,345
19,628
(17,078)
(20,668)
79,141
45,305
87,527
53,494
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 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.
Annual Report 2023
101
Annual Report | Notes to the Financial Statements (continued)
07 Trade and Other Receivables (continued)
SIGNIFICANT ACCOUNTING JUDGEMENTS & ESTIMATES
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
indebtedness of that franchisee to Derni is secured by a security interest over all present and after-acquired property of that franchisee,
pursuant to a General Security Deed (GSD).
The receivables from franchisees balance of $841.00 million as at 30 June 2023 (2022: $892.92 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
franchisee 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 2023 totalling $841.00 million (2022: $892.92 million). Based on the assessment, receivables from franchisees are
current and neither past due nor impaired as at 30 June 2023.
(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 $1.02 million (2022: $0.56 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:
• $83.55 million of the trade receivables balance as at 30 June 2023 (2022: $102.24 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.
• $26.56 million of the trade receivables balance as at 30 June 2023 (2022: $20.48 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 2023 (2022: nil).
• $4.18 million of the trade receivables balance as at 30 June 2023 (2022: $3.47 million) are past due and impaired, and have been
provided for in full as at balance date.
Ageing Analysis Neither past due or impaired 31-60 Days
61-90 Days
+90 Days
31-60 Days 61-90 Days
+90 Days
Total
2023 ($000)
2022 ($000)
83,549
102,238
13,251
8,525
5,274
2,307
8,035
9,647
85
244
146
129
3,951
114,291
3,096
126,186
PAST DUE BUT NOT IMPAIRED
PAST DUE AND IMPAIRED
102
Annual Report 2023
07 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
CONSOLIDATED
June 2023
$000
June 2022
$000
107,211
119,099
7,080
7,087
114,291
126,186
3,469
1,023
48
(358)
4,182
3,560
561
(35)
(617)
3,469
(b) Consumer finance loans and allowance for expected credit loss
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:
• $1.16 million of the consumer finance loans at 30 June 2023 (2022: $1.05 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. $1.93 million of the consumer finance loans balance as at 30 June 2023 (2022: $2.16 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 2023 (2022: $0.03 million) are past due and impaired, and have been provided
for in full as at balance date.
Ageing Analysis Neither past due or impaired 31-60 Days
61-90 Days
+90 Days
31-60 Days 61-90 Days
+90 Days
2023 ($000)
2022 ($000)
1,155
1,053
605
605
501
523
826
1,029
-
-
-
-
29
29
Total
3,116
3,239
PAST DUE BUT NOT IMPAIRED
PAST DUE AND IMPAIRED
Reconciled to:
− Consumer finance loans (current)
− Consumer finance loans (non-current)
Total consumer finance loans
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
(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
CONSOLIDATED
June 2023
$000
June 2022
$000
2,567
549
3,116
29
-
-
29
2,669
570
3,239
21
8
-
29
3,245
843
3,264
594
4,088
3,858
Annual Report 2023
103
Annual Report | Notes to the Financial Statements (continued)
07 Trade and Other Receivables (continued)
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
CONSOLIDATED
June 2023
$000
June 2022
$000
(120)
(81)
(109)
(57)
3,887
3,692
3,125
762
3,887
3,155
537
3,692
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 2023 financial year (2022: nil). The ageing analysis of current and non-current finance lease receivables is as follows:
• $1.17 million of the finance lease receivable balance as at 30 June 2023 (2022: $0.97 million) are neither past due nor impaired.
• $2.72 million of the finance lease receivable balance as at 30 June 2023 (2022: $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 2023 that was past due and impaired (2022: 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 2023 was $139.78 million (2022: $117.06 million) as follows:
• $104.80 million of the non-trade debts receivable balance as at 30 June 2023 (2022: $78.06 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.
• $17.77 million of the non-trade debts receivable balance as at 30 June 2023 (2022: $18.20 million) are past due but not impaired. These
receivables are subject to regular monitoring and periodic impairment testing to ensure that they are recoverable.
• $17.20 million of the non-trade debts receivable balance as at 30 June 2023 (2022: $20.79 million) are past due and
impaired, and have been provided for in full as at balance date.
Ageing Analysis
Neither past due or impaired 31-60 Days 61-90 Days
+90 Days 31-60 Days 61-90 Days
+90 Days
Total
2023 ($000)
2022 ($000)
104,804
78,062
-
-
-
-
17,774
18,200
-
-
-
-
17,204
139,782
20,794
117,056
PAST DUE BUT NOT IMPAIRED
PAST DUE AND IMPAIRED
Reconciled to:
− Non-trade receivables (current)
− Non-trade receivables (non-current)
Total non-trade receivables
Movement in the allowance for expected credit loss for non-trade receivables 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
104
CONSOLIDATED
June 2023
$000
June 2022
$000
43,563
96,219
51,083
65,973
139,782
117,056
20,794
20,896
-
(3,227)
134
-
(363)
(236)
17,204
20,794
Annual Report 2023
07 Trade and Other Receivables (continued)
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 $17.43 million (2022: $25.16
million) in aggregate as at 30 June 2023. The total balance of the allowance for expected credit loss relating to non-trade
receivables from the mining camp joint ventures was $3.23 million as at 30 June 2022. During FY23, the $3.23 million expected
credit loss allowance was reversed in full as the result of the recoverability assessment conducted during the year. No impairment
loss or reversal was recognised in FY22.
08 Other Financial Assets
Current
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)
SIGNIFICANT ACCOUNTING POLICIES
Financial assets at fair value through profit or loss
CONSOLIDATED
June 2023
$000
June 2022
$000
3,845
3,845
34,485
19,827
414
7,916
346
346
30,796
25,095
414
4,768
62,642
61,073
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.
Annual Report 2023
105
Annual Report | Notes to the Financial Statements (continued)
09
Inventories
Current
Finished goods at cost
Provision for obsolescence
Total inventories (current)
CONSOLIDATED
June 2023
$000
June 2022
$000
557,254
534,386
(11,596)
(10,112)
545,658
524,274
SIGNIFICANT ACCOUNTING POLICIES
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.
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
Total net intangible assets (non-current)
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)
CONSOLIDATED
June 2023
$000
June 2022
$000
61,812
52,551
6,842
2,808
68,654
55,359
CONSOLIDATED
June 2023
$000
June 2022
$000
600
280
1,237
69
1,817
66
226,485
247,628
(170,404)
(191,091)
56,081
57,387
56,537
58,420
56,537
61,597
17,462
15,876
(90)
(384)
(17,867)
(20,778)
39
226
56,081
56,537
106
Annual Report 2023
11
Intangible Assets (continued)
SIGNIFICANT ACCOUNTING POLICIES
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.
SaaS arrangements are service contracts providing the consolidated entity with the right to access the cloud provider’s application
software 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.
An intangible asset is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any 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 2023
$000
June 2022
$000
264,814
219,802
304,633
274,319
569,447
494,121
918,494
836,313
(595,936)
(551,217)
322,558
285,096
569,447
494,121
918,494
836,313
1,487,941
1,330,434
(595,936)
(551,217)
892,005
779,217
Annual Report 2023
107
Annual Report | Notes to the Financial Statements (continued)
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
− (Decrease) / increase resulting from revaluation
− Transfers from other asset categories
− Net foreign currency differences arising from foreign operations
Closing balance
Building at fair value:
− Opening balance
− Additions
− Disposals
− (Decrease) / Increase resulting from revaluation
− Transfers from other asset categories
− Depreciation for the year
− Net foreign currency differences arising from foreign operations
Closing balance
Net land and buildings at fair value (a)
CONSOLIDATED
June 2023
$000
June 2022
$000
219,802
185,916
37,651
10,613
(5,340)
28,516
5,898
6,803
-
(5,243)
264,814
219,802
274,319
265,173
46,659
12,353
(3,176)
-
(18,594)
14,699
5,202
-
(8,976)
(10,131)
9,199
(7,775)
304,633
274,319
569,447
494,121
(a) The net book value of land and buildings (other than land and buildings classified as freehold investment properties) would have been
$278.84 million (2022: $201.22 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
836,313
798,335
97,170
73,616
(33,163)
(39,620)
3,139
9,732
15,035
(5,750)
918,494
836,313
551,217
519,577
62,465
58,896
(29,257)
(31,383)
1,330
8,102
10,181
(3,975)
595,936
551,217
322,558
285,096
892,005
779,217
108
Annual Report 2023
12 Property, Plant and Equipment (continued)
SIGNIFICANT ACCOUNTING POLICIES
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.
SIGNIFICANT ACCOUNTING JUDGEMENTS & ESTIMATES
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
The freehold owner-occupied property portfolio is valued by an Independent Valuer at least once every two (2) years on a rotational
basis.
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 2023
109
Annual Report | 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
Warehouse
$000
Retail
$000
Retail
$000
2023
$000
2022
$000
Opening balance
355,598
6,115
78,158
1,847
13,303
Additions
Transfer
Disposals
Fair value
adjustments
Depreciation for
the year
Net foreign
currency
differences
72,634
10,358
(1,809)
(3,116)
(22,218)
-
(60)
-
-
-
-
-
(5,971)
(102)
(2,227)
1,166
-
-
-
-
-
-
-
-
(48)
6,671
115
6,155
148
885
-
-
12,909
25,600
13,500
494,121
451,089
132
20
84,310
22,966
-
-
-
-
11,100
(3,176)
-
-
(668)
(1,048)
-
(23,934)
43,215
-
-
(490)
(138)
(8,976)
(10,131)
2,028
-
16,002
(13,018)
Closing balance
401,789
16,426
82,086
3,161
14,140
12,241
26,222
13,382 569,447
494,121
(b) Fair value measurement, valuation techniques and inputs
Class of
property
Fair value
hierarchy*
Fair value $000
30 June 2023
Valuation Technique
Key unobservable inputs
2023 Range of
unobservable inputs
2022 Range of
unobservable inputs
Retail
Level 3
523,479
(Jun-22: 472,856)
Discounted cash flow
Terminal Yield
Discount Rate
Income capitalisation
Net market rent per sqm p.a
Capitalisation Rate
Direct sale comparison
Price per sqm of lettable area
Discounted cash flow
Terminal Yield
Discount Rate
Warehouse
Level 3
31,828
(Jun-22: 7,962)
Income Capitalisation
Net market rent per sqm p.a
Capitalisation Rate
Office
Level 3
14,140
(Jun-22: 13,303)
Direct sale comparison
Price per sqm of lettable area
Discounted cash flow
Terminal Yield
Discount Rate
Income capitalisation
Net market rent per sqm p.a
Capitalisation Rate
3.1% - 8.3%
5.5% - 8.8%
$23 - $550
4.8% - 9.3%
$10,235
5.3% - 8.0%
6.5% - 7.5%
$98 - $101
5.0% - 7.3%
$816
N/A
N/A
N/A
N/A
3.1% - 7.8%
4.0% - 8.0%
$53 - $550
4.0% - 8.0%
$10,235
5.3%
6.5%
$111
5.0%
N/A
N/A
N/A
N/A
N/A
Direct sale comparison
Price per sqm of lettable area
$12,624 - $16,723
$12,101 - $16,030
Total
569,447
(Jun-22: 494,121)
2
* Level 3 - fair value is estimated using inputs that are not based on observable market data.
110
Annual Report 2023
12 Property, Plant and Equipment (continued)
(b) Fair value measurement, valuation techniques
Terminal yield
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 average result of income capitalisation method,
discounted cash flow method and direct sale comparison method
of valuation was used for the valuation of one (1) warehouse
property in Singapore and the direct sale comparison method was
used for the valuation of the office properties in Singapore. The
income capitalisation method of valuation was used for the
valuation of retail properties in Slovenia and one (1) retail property
in Ireland.
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.
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 adjustments are
made between the comparable 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
Net market rent
Capitalisation rate
Terminal yield
Discount rate
Impact on fair value
for significant
increase in input
Impact on fair value
for significant
decrease in input
Increase
Decrease
Decrease
Decrease
Increase
Decrease
Increase
Increase
Increase
Decrease
Discounted cash flow (“DCF”) method
Price per square metre
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.
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.
(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.
Annual Report 2023
111
Annual Report | Notes to the Financial Statements (continued)
13 Property, Plant and Equipment: Right-Of-Use Assets (ROUA)
CONSOLIDATED
Leasehold properties: (a)
ROUA $000
Plant & equipment:
ROUA $000
Total:
ROUA $000
507,290
36,266
(14,648)
(2,148)
(63,668)
5,125
468,217
3,877
2,652
-
-
(2,202)
(34)
4,293
511,167
38,918
(14,648)
(2,148)
(65,870)
5,091
472,510
CONSOLIDATED
Leasehold properties: (a)
ROUA $000
Plant & equipment:
ROUA $000
Total:
ROUA $000
468,217
128,700
(7,689)
(67,512)
19,862
541,578
4,293
2,033
(7)
(2,039)
161
4,441
472,510
130,733
(7,696)
(69,551)
20,023
546,019
CONSOLIDATED
June 2023
$000
June 2022
$000
39,974
25,792
104,677
118,485
255,915
218,386
27,399
118,054
14,947
94,900
546,019
472,510
As at 1 July 2021
New, modified leases
Leases exited
Impairment
Depreciation
Foreign currency
As at 30 June 2022
As at 1 July 2022
New, modified leases
Leases exited
Depreciation
Foreign currency
As at 30 June 2023
(a) The leasehold properties relate to leases of owner-occupied properties.
Australia
New Zealand
Singapore & Malaysia
Slovenia & Croatia
Ireland & Northern Ireland
Total property, plant and equipment: right-of-use assets
SIGNIFICANT ACCOUNTING POLICIES
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 commencement 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.
112
Annual Report 2023
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 2023
$000
June 2022
$000
3,230,213
2,905,509
134,630
111,020
118,750
213,684
3,483,593
3,230,213
Below is a list of the top 20 freehold investment properties ranked in order of fair value as at 30 June 2023:
Property
Last
independent
valuation
date
Independent
valuation at last
valuation date
$000
Fair value
30 June
2023
$000
Cap rate
30 June
2023
%
Penrith Homemaker Centre - Harvey Norman®, Domayne®
31 Dec 2021
240,000
243,054
Springvale Homemaker Centre - Harvey Norman®, Domayne®
30 Jun 2022
170,000
170,852
Maroochydore Homemaker Centre - Harvey Norman®, Domayne®, Joyce Mayne®
30 Jun 2023
106,000
106,000
Watergardens Homeplace - Harvey Norman®
30 Jun 2023
102,000
102,000
Silverwater Warehouse Complex
The Cambridge Park Centre - Harvey Norman®
Alexandria Complex - Harvey Norman®, Domayne®
Toowoomba Centre Complex - Harvey Norman®
Macgregor Homemaker Centre - Harvey Norman®
31 Dec 2022
31 Dec 2022
99,000
87,250
30 Jun 2022
81,200
31 Dec 2021
71,000
30 Jun 2023
64,600
Perth City West Complex - Harvey Norman®, Domayne® (a)
30 Jun 2022
61,250
Albury Homemaker Centre - Harvey Norman®
Auburn Flagship Store Complex - Harvey Norman®
Auburn Complex - Harvey Norman®, Domayne®
Rutherford (Maitland) Complex - Harvey Norman® , Domayne®
Alexandria Harvey Norman Warehouse Complex
Maribyrnong Complex - Harvey Norman®
30 Jun 2023
59,500
30 Jun 2023
55,500
30 Jun 2022
55,000
31 Dec 2022
31 Dec 2021
31 Dec 2022
54,500
46,600
54,000
Browns Plains Homemaker Centre - Harvey Norman®
31 Dec 2022
53,000
Devonport Homemaker Centre - Harvey Norman®
31 Dec 2021
47,500
Munno Para Shopping City - Harvey Norman®
Bendigo Rocklea Homemakers Centre
Total top 20 freehold investment properties
31 Dec 2022
30 Jun 2023
46,500
46,500
99,133
87,565
83,718
71,283
64,600
62,205
59,500
55,500
55,193
54,524
54,134
54,125
53,363
50,384
46,591
46,500
1,620,224*
5.50%
5.75%
6.25%
5.00%
5.50%
7.75%
4.25%
7.00%
5.75%
6.00%
7.00%
5.75%
4.75%
7.00%
4.75%
6.00%
6.75%
6.25%
6.75%
6.25%
The fair value of the top 20 freehold investment properties amounted to $1.62 billion as at 30 June 2023, representing 46.51% of the total
fair value of freehold investment properties of $3.48 billion. The fair value of the remaining 120 freehold investment properties as at 30
June 2023 totalled $1.86 billion, representing 53.49% of the portfolio as at balance date.
(a) Balances represent the consolidated entity’s 50% ownership interest in the investment property.
* The difference between the fair value of the freehold investment property as at 30 June 2023 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 2023
113
Annual Report | Notes to the Financial Statements (continued)
14
Investment Properties: Freehold (continued)
SIGNIFICANT ACCOUNTING POLICIES
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 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 current year, six
(6) 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
six (6) properties were undertaken to determine the effect of
these factors.
Valuation Methodologies
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 quality of construction
the age and condition of improvements
• recent market sales data in respect of comparable
properties
• current market rental value, being the amount that could be
exchanged between knowledgeable, willing parties in an
arm’s length transaction
•
the tenure of franchisees and external tenants
• adaptive reuse of buildings
• non-reliance on turnover rent
• other specific circumstances of the property
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.
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.
SIGNIFICANT ACCOUNTING JUDGEMENTS
& ESTIMATES
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.
Independent External Valuations
The 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 2023 financial year, seventy-two (72) valuations of
freehold investment properties were performed by an
Independent Valuer: thirty-seven (37) at 31 December 2022 and
thirty-five (35) at 30 June 2023. This represents a total of 51.4% of
the number of freehold investment properties independently
externally valued this year, and 48.8% in terms of the fair value of
the freehold investment property portfolio in Australia subject to
independent external valuation.
114
Annual Report 2023
14
Investment Properties: Freehold (continued)
(a) Reconciliation of investment properties: freehold
New Zealand
Ireland
Australia
Total
Retail
$000
Warehouse
$000
Retail
$000
Retail
$000
Warehouse
$000
Office
$000
2023
$000
2022
$000
Opening balance
6,259
4,640
28,970
2,856,779
290,225
43,340
3,230,213 2,905,509
Additions
Disposals
-
-
-
-
Fair value adjustments*
(496)
(951)
Depreciation for the year
Net foreign currency differences
(57)
112
(5)
87
250
129,971
13,857
26
144,104
115,481
-
-
(519)
2,298
(11,390)
-
62,757
57,440
-
-
-
-
-
-
-
-
(11,390)
(4,066)
118,750
213,684
(581)
2,497
(48)
(347)
Closing balance
5,818
3,771
30,999
3,038,117
361,522
43,366
3,483,593
3,230,213
* Fair value adjustments totalling $118.75 million for the year ended 30 June 2023 are included in other income (2022: $213.68 million).
(b) Fair value measurement, valuation techniques and inputs
Class of
property
Fair value
hierarchy*
Fair value $000
30 June 2023
Valuation Technique
Key unobservable inputs
2023 Range of
unobservable inputs
2022 Range of
unobservable inputs
Net market rent per sqm p.a
$74 - $323
$70 - $326
Retail
Level 3
Metropolitan =
1,870,594
(Jun-22: 1,755,018)
Regional=1,204,340
(Jun-22: 1,136,990)
Total =3,074,934
(Jun-22: 2,892,008)
Income capitalisation
Discounted cash flow
Capitalisation Rate
- Metropolitan
- Regional
Terminal Yield
Discount Rate
4.3% - 9.3%
5.8% - 8.8%
4.5% - 8.8%
5.0% - 9.0%
4.3% - 9.3%
5.8% - 9.3%
4.5% - 9.0%
5.0% - 9.0%
Direct sale comparison
Price per sqm of lettable area
$847 - $5,778
$710 - $5,664
Warehouse
Level 3
365,293
(Jun-22: 294,865)
Discounted cash flow
Terminal Yield
Discount Rate
Income capitalisation
Net market rent per sqm p.a
Capitalisation Rate
$65 - $255
4.8% - 9.0%
4.8% - 7.0%
5.5% - 7.3%
$69 - $160
4.8% - 9.5%
5.0% - 7.0%
5.5% - 7.3%
Direct sale comparison
Price per sqm of lettable area
$766 - $5,009
$709 - $3,151
Income capitalisation
Net market rent per sqm p.a
Capitalisation Rate
$144 - $233
6.5% - 8.0%
$115 - $233
6.5% - 8.0%
Office
Level 3
43,366
(Jun-22: 43,340)
Discounted cash flow
Terminal Yield
Discount Rate
6.5%
7.0%
6.5%
7.0%
Direct sale comparison
Price per sqm of lettable area
$1,695 - $3,545
$1,676 - $3,545
Total
3,483,593
(Jun-22: 3,230,213)
*Level 3 - fair value is estimated using inputs that are not based on observable market data.
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).
Annual Report 2023
115
Annual Report | Notes to the Financial Statements (continued)
14
Investment Properties: Freehold (continued)
(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 $252.89 million for the year ended 30 June 2023 (2022: $231.31
million). Operating expenses, including rates and taxes and repairs and maintenance, recognised in the income statement in relation to
investment properties amounted to $61.70 million for the year ended 30 June 2023 (2022: $55.43 million).
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
CONSOLIDATED
June 2023
$000
June 2022
$000
675,600
620,461
133,086
151,728
(1,539)
(9,031)
(102,113)
(87,558)
705,034
675,600
(a) Fair value measurement, valuation techniques and inputs
Class of
property
Fair value
hierarchy*
Fair value $000
30 June 2023
Valuation Technique Key unobservable inputs
2023 Range of
unobservable inputs
2022 Range of
unobservable inputs
Retail
Level 3
452,207
(Jun-22: 487,593)
Discounted cash flow
Warehouse
Level 3
252,827
(Jun-22: 188,007)
Discounted cash flow
Discount rate
Market rental ranges:
− Gross
− Net
Discount rate
Market rental ranges:
− Gross
− Net
5.99% - 6.64%
4.69% - 5.48%
$60 - $575 per sqm
$50 - $575 per sqm
$25 - $350 per sqm
$80 - $265 per sqm
5.99% - 6.64%
4.69% - 5.48%
$30 - $800 per sqm
$25 - $750 per sqm
$45 - $230 per sqm
$30 - $190 per sqm
Total
705,034
(Jun-22: 675,600)
* Level 3 - fair value is estimated using inputs that are not based on observable market data.
(b) Sensitivity information
Key unobservable inputs
Impact on fair value for significant increase in input
Impact on fair value for significant decrease in input
Discount rate
Market rent ranges
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 $135.54 million for the year ended 30 June 2023 (2022: $117.53 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 $21.22 million for the year ended 30 June 2023 (2022: $27.73 million).
116
Annual Report 2023
15
Investment Properties (Leasehold): Right-Of-Use Assets (continued)
SIGNIFICANT ACCOUNTING POLICIES
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.
The consolidated entity recognises a right-of-use asset in respect
of each subsidiary's right to use each Leasehold Investment
Property for the respective lease term (each an IP Leasehold ROU
Asset) in accordance with the requirements of AASB 16 Leases.
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.
SIGNIFICANT ACCOUNTING JUDGEMENTS
& ESTIMATES
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.
2. 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 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.
3. 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 2023, the discount rates used in re-measuring
investment properties (leasehold): right-of-use assets range from
5.99% to 6.64% (2022: 4.69% to 5.48%).
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.
Annual Report 2023
117
Annual Report | Notes to the Financial Statements (continued)
16 Trade and Other Payables
Trade and other creditors
Accruals
Total trade and other payables (current)
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 2023
$000
June 2022
$000
262,503
258,965
90,213
99,376
352,716
358,341
CONSOLIDATED
June 2023
$000
June 2022
$000
16,694
5,400
14,446
5,400
-
200,000
40,538
36,795
62
20
4,238
171
4,238
154
67,103
261,053
760,000
410,000
23,258
28,522
783,258
438,522
(a) Bank Overdraft
The total bank overdraft of $16.69 million as at 30 June 2023 (2022: $14.45 million) relates to a bank overdraft due by Harvey Norman
Trading (Ireland) Limited to Bank of Ireland (“BOI”) (the “BOI Overdraft Facility”). Harvey Norman Holdings Limited has provided a
Guarantee and Indemnity in favour of BOI in support of the BOI Overdraft Facility at the request of Ireland. The BOI Overdraft Facility is
secured by this Guarantee.
(b) Commercial bills payable
The commercial bills payable form part of facilities granted by ANZ. The payment of each commercial bill is secured by the
securities given pursuant to the Syndicated Facility Agreement (as defined in Note 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.
(c) Syndicated Facility Agreement
On 2 December 2009, the Company, a subsidiary of the Company (Borrower) and certain other subsidiaries of the Company (Guarantors)
entered into a Syndicated Facility Agreement (the Facility or SFA) with certain banks (Financiers and each a Financier). This facility has been
amended from time to time. As at 30 June 2023, the SFA comprised of four (4) Tranches totalling $810 million. The Amending Deed (No.
8) to the Facility, dated 30 November 2021, 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. On 30 November 2022,
the Amending Deed (No. 9) to the Facility was executed with the effect of extending the repayment date of Tranche A2 of the Facility
totalling $200 million to 30 November 2026 and the establishment of Tranche C of the Facility totalling $200 million with a repayment date
of 30 November 2025. The utilised amount of the Facility as at 30 June 2023 was $760 million, repayable as set out below, and was
classified as non-current interest-bearing loans and borrowings.
118
Annual Report 2023
17
Interest-Bearing Loans and Borrowings (continued)
(c) Syndicated Facility Agreement (continued)
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 ($120 million utilised at 30 June 2023)
in respect of Tranche A2 totalling $200 million, on 30 November 2026 ($200 million utilised at 30 June 2023)
in respect of Tranche B totalling $240 million, on 4 December 2025 ($240 million utilised at 30 June 2023)
in respect of Tranche C totalling $200 million, on 30 November 2025 ($200 million utilised at 30 June 2023)
• 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.
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;
ii. 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.
(d) Other Short-Term Borrowings
The consolidated entity has the following short-term borrowings as at 30 June 2023:
• a Floating Rate Loan Facility with the ANZ Bank of $200 million, repayable on 9 September 2023 — unutilised as at 30 June 2023. On 4
September 2023, the maturity date of this facility was extended to 30 November 2023.
• a short-term facility of $18.38 million in New Zealand secured by the securities pursuant to the SFA — unutilised as at 30 June 2023.
• a short-term facility with a limit of $11.13 million in Singapore secured by a corporate guarantee — unutilised as at 30 June 2023.
• a short term facility with a limit of $0.97 million in Malaysia secured by a corporate guarantee — unutilised as at 30 June 2023.
• a total facility with a limit of $30.81 million in Ireland secured by fixed and floating charges over property. This facility was fully utilised as
at 30 June 2023, with $7.56 million classified as current borrowings (2022: $6.80 million) and $23.26 million classified as non-current
borrowings (2022: $28.52 million).
• a total facility with a limit of $54.11 million in Slovenia and Croatia, with a maturity date of 4 December 2023, is secured by the securities
pursuant to the SFA. $28.87 million was utilised as at 30 June 2023 (2022: $26.73 million).
• a total facility with a limit of $5.56 million relates to a revolving credit facility with DBS in Singapore. $4.12 million was utilised as at 30
June 2023 (2022: $2.61 million).
(e) Defaults and Breaches
The Company has not received notice of the occurrence of any Relevant Event from any Financier. During the 2023 and 2022 financial
years, there were no defaults or breaches on any of the interest-bearing loans and borrowings referred to in this note.
SIGNIFICANT ACCOUNTING POLICIES
Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings,
payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are
recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
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.
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.
Annual Report 2023
119
Annual Report | Notes to the Financial Statements (continued)
18 Financing Facilities Available
At balance date, the following financing facilities had been negotiated and were available.
Total facilities:
− Bank overdraft
− Other borrowings
− Commercial bank bills
− Syndicated Facility
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 borrowing
− Syndicated Facility
Total Unused Facilities
CONSOLIDATED
June 2023
$000
June 2022
$000
49,471
45,834
320,957
223,573
5,400
5,400
810,000
610,000
1,185,828
884,807
16,694
40,538
23,258
5,400
14,446
36,795
28,522
5,400
-
200,000
760,000
410,000
845,890
695,163
32,777
31,388
257,161
158,256
50,000
-
339,938
189,644
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.
120
Annual Report 2023
19 Lease Liabilities
Lease liabilities at beginning of the year
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
(a) 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
CONSOLIDATED
June 2023
$000
June 2022
$000
1,204,628
1,178,665
252,935
163,999
50,294
41,738
(197,831)
(179,353)
18,782
(421)
1,328,808
1,204,628
151,043
139,288
1,177,765
1,065,340
1,328,808
1,204,628
54,158
41,108
121,219
136,175
202,286
164,229
29,519
16,871
150,187
127,222
Total lease liabilities of leases of owner occupied properties and plant and equipment assets
557,369
485,605
Leases of properties sub-leased to external parties:
— Australia
Total lease liabilities of leases of properties sub-leased to external parties
Total lease liabilities
(b) The maturity profile of undiscounted lease liabilities is as follows:
Less than 1 year
1 to 2 years
2 to 5 years
Over 5 years
Total undiscounted lease liabilities
771,439
719,023
771,439
719,023
1,328,808
1,204,628
200,902
181,083
190,124
171,699
506,470
452,210
744,156
646,458
1,641,652
1,451,450
(c) Commitments for leases not yet commenced
The consolidated entity had committed to leases which had not yet commenced as at 30 June 2023. These leases are not
included in the calculation of the consolidated entity’s lease liabilities. The estimated undiscounted lease liabilities for these
leases are $8.30 million (2022: $14.15 million).
Annual Report 2023
121
Annual Report | Notes to the Financial Statements (continued)
19 Lease Liabilities (continued)
SIGNIFICANT ACCOUNTING POLICIES
As at 30 June 2023, the incremental borrowing rates applied by
the consolidated entity were as follows:
Location
Australia
New Zealand
Singapore & Malaysia
Slovenia & Croatia
Ireland & Northern Ireland
Lease term
Weighted average incremental
borrowing rate %
4.42%
3.30%
3.35%
3.96%
3.98%
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 2023, 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)
10.87
11.76
6.56
8.38
9.60
As at 30 June 2023, 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 $109.00
million (2022: $84.08 million).
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.
SIGNIFICANT ACCOUNTING JUDGEMENTS
& ESTIMATES
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.
122
Annual Report 2023
20 Other Liabilities
Total unearned revenue (current)
Total unearned revenue (non-current)
21 Provisions
Employee entitlements
Lease makegood
Total provisions (current)
Employee entitlements
Lease makegood
Total provisions (non-current)
SIGNIFICANT ACCOUNTING POLICIES
Provision for employee entitlements
CONSOLIDATED
June 2023
$000
June 2022
$000
121,000
126,236
1,025
1,539
CONSOLIDATED
June 2023
$000
June 2022
$000
35,722
1,582
37,304
2,700
6,473
9,173
37,059
-
37,059
2,546
7,715
10,261
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.
SIGNIFICANT ACCOUNTING JUDGEMENTS & ESTIMATES
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 2022
— Issue of shares
Balance at end of the year
CONSOLIDATED
June 2023
$000
June 2022
$000
717,925
717,925
717,925
717,925
June 2023
Number of shares
June 2023
$000
1,246,006,654
717,925
-
-
1,246,006,654
717,925
Number of ordinary shares issued and fully paid as at 30 June 2023 was 1,246,006,654 (2022: 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.
Annual Report 2023
123
Annual Report | Notes to the Financial Statements (continued)
22 Contributed Equity (continued)
SIGNIFICANT ACCOUNTING POLICIES
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 2022: 17.5 cents (2021: 15.0 cents)
− Interim fully-franked dividend for 2023: 13.0 cents (2022: 20.0 cents)
Total dividends paid
CONSOLIDATED
June 2023
$000
June 2022
$000
3,254,936
2,879,511
539,520
811,527
(380,032)
(436,102)
3,414,424
3,254,936
218,051
186,901
161,981
249,201
380,032
436,102
The final dividend of $218.05 million, fully franked, for the year ended 30 June 2022 was paid on 14 November 2022. The interim dividend
of 13.0 cents per share, totalling $161.98 million fully-franked, for the year ended 30 June 2023 was paid on 1 May 2023. The final dividend
of 12.0 cents per share totalling $149.52 million, fully franked, for the year ended 30 June 2023 will be paid on 13 November 2023 to
shareholders registered at the close of business on 16 October 2023. 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%
579,814
553,700
− Franking credits that will arise from the payment of income tax payable as at the end of the financial year
2,440
49,284
− Franking credits that will be utilised in the payment of the proposed final dividend
Amount of franking credits available for future reporting years
(64,080)
(93,450)
518,174
509,534
24 Non-Controlling Interests
Interest in:
— Ordinary shares
— Reserves
— Retained earnings
Total non-controlling interests
CONSOLIDATED
June 2023
$000
June 2022
$000
1,091
14,910
19,239
1,091
14,478
17,524
35,240
33,093
124
Annual Report 2023
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 2022
245,448
27,572
20,490
13
10,921
(16,274)
288,170
Revaluation of land & buildings
(23,824)
Tax effect of revaluation of land and
buildings
6,011
Currency translation differences
Unrealised loss on financial assets at
fair value through other
comprehensive income
Reverse expired or realised cash flow
hedge reserves
Net loss on forward foreign
exchange contracts
Tax effect of net loss on forward
foreign exchange contracts
Net gain on interest rate swap
contracts
Tax effect of net gain on interest rate
swap contracts
Cost of share based payments
Utilisation of employee equity
benefits reserve
-
-
-
-
-
-
-
-
-
-
-
30,290
-
-
-
-
-
-
-
-
-
-
-
(5,740)
-
-
-
-
-
-
-
-
-
-
-
(13)
(53)
16
3,755
(1,126)
-
-
-
-
-
-
-
-
-
-
-
3,701
(2,287)
-
-
-
-
-
-
-
-
-
-
-
(23,824)
6,011
30,290
(5,740)
(13)
(53)
16
3,755
(1,126)
3,701
(2,287)
At 30 June 2023
227,635
57,862
14,750
2,592
12,335
(16,274)
298,900
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 & 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
Annual Report 2023
125
Annual Report | Notes to the Financial Statements (continued)
25 Reserves (continued)
SIGNIFICANT ACCOUNTING POLICIES
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.
The consolidated entity uses interest rate swap contracts as hedges of its exposure to interest rate risk. The ineffective portion relating to
interest rate swap 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.
SIGNIFICANT ACCOUNTING JUDGEMENTS & ESTIMATES
Equity-settled transactions
The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date when they are granted by using an appropriate valuation model.
126
Annual Report 2023
26 Cash and Cash Equivalents
(a) Reconciliation to the Statement of Cash Flows
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
CONSOLIDATED
June 2023
$000
June 2022
$000
125,195
155,158
93,555
93,646
218,750
248,804
(16,694)
(14,446)
202,056
234,358
(b) Reconciliation of profit after income tax to net operating cash flows
Profit after tax
546,843
817,879
Adjustments for non-cash items:
Net foreign exchange gain
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
(147)
(2,205)
(9,849)
72,023
69,551
(192)
703
(8,961)
69,075
65,870
Fair value re-measurement of investment properties (leasehold): right-of-use assets
102,113
87,558
Amortisation
Impairment of ROU assets
Gain on disposal of leasehold ROU assets and lease liabilities
Revaluation of freehold investment properties
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
SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents
19,284
21,460
-
2,148
(1,568)
(3,428)
(118,750)
(213,679)
7,592
(3,216)
7,326
4,337
60,638
(140,755)
(22,868)
(44,371)
(7,787)
(14,687)
27,305
29,075
(58,330)
(80,201)
(372)
(1,857)
680,257
597,300
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.
Annual Report 2023
127
Annual Report | Notes to the Financial Statements (continued)
27
Investments Accounted for Using the Equity Method
Total investments accounted for using the equity method
Noarlunga
Shopping complex
Perth City West
Shopping complex
Warrawong King St
Shopping complex (a)
Dubbo
Gepps Cross
Bundaberg
QCV
Westgate
Shopping complex
Shopping complex
Land held for investment
Miners residential complex (b)
Shopping complex in New Zealand
CONSOLIDATED
June 2023
$000
1,904
June 2022
$000
1,502
Ownership Interest
Contribution to Profit/Loss
before tax
June 2023
%
June 2022
%
June 2023
$000
June 2022
$000
50%
50%
50%
50%
62.5%
62.5%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
1,776
2,395
1,230
486
3,415
6
-
541
1,698
2,446
1,008
725
3,074
-
10
-
9,849
8,961
(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 31 July 2023.
On 28 July 2023, the maturity date of this finance facility from ANZ was extended to 31 January 2024.
ii. Finance facilities from Network Consumer Finance Pty Limited (“NCF”), a wholly-owned subsidiary of HNHL, for the amount of
$ 18.75 million (2022: $26.47 million) plus interest and costs, subject to bi-annual review.
SIGNIFICANT ACCOUNTING POLICIES
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.
128
Annual Report 2023
28 Assets Held for Sale
The assets held for sale balance of $12.10 million as at 30 June 2022 represented the carrying amount of a warehouse in Singapore that
was held for sale. This asset has been reclassified to property, plant and equipment during the year ended 30 June 2023.
SIGNIFICANT ACCOUNTING POLICIES
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
significant 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 2023
$000
June 2022
$000
23,862
35,722
2,700
24,192
37,059
2,546
62,284
63,797
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 2023 on page 54 of this report for further information.
Grant date
Last Exercise Date
04/12/2018
30/06/2024
02/12/2019
30/06/2025
04/12/2020
30/06/2026
30/11/2021
31/10/2026
01/12/2022
31/10/2037
NUMBER OF PERFORMANCE RIGHTS
OUTSTANDING
NUMBER OF PERFORMANCE RIGHTS
VESTED
2023
-
-
549,500
914,000
1,106,800
2,570,300
2022
109,000
549,500
549,500
914,000
-
2023
-
549,500
-
-
-
2022
549,500
-
-
-
-
2,122,000
549,500
549,500
Annual Report 2023
129
Annual Report | 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
Total payable to overseas member firms of Ernst & Young Australia
Total remuneration payable to Ernst & Young
31 Key Management Personnel
(a) Details of Key Management Personnel
Directors
Title
Gerald Harvey
Executive Chairman
Kay Lesley Page
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
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
Non-Executive Director (Independent)
CONSOLIDATED
June 2023
$
June 2022
$
1,560,046
1,393,689
242,400
168,600
187,880
121,160
1,990,326
1,683,449
945,856
878,417
475,959
232,365
12,269
32,927
1,434,084
1,143,709
3,424,410
2,827,158
Senior Executives
Title
Thomas James Scott
General Manager — Property
Gordon Ian Dingwall
Chief Information Officer
Emmanuel Hohlastos
General Manager — Home Appliances
Glen Gregory
General Manager — Technology & Entertainment
(resigned 17 October 2022)
Richard Beaini
General Manager — Audio Visual
Carene Myers
General Manager — Small Appliances
Darren Salakas
General Manager — Technology & Entertainment
(KMP from 10 October 2022)
(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
Total compensation to Key Management Personnel
Refer to Tables 1 and 2 on pages 52 and 53 of this report for further information.
CONSOLIDATED
June 2023
$
June 2022
$
13,138,905
13,107,159
353,935
324,651
2,005,498
2,249,723
102,423
126,357
95,211
36,447
15,727,118
15,813,191
130
Annual Report 2023
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 2023 were $ 42,791,186 (30 June 2022: $50,751,835).
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 2023 was $4,237,364 (30 June 2022:
$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 57 for further information.
33 Commitments
(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
CONSOLIDATED
June 2023
$000
June 2022
$000
127,777
120,630
87,705
66,820
44,227
27,849
36,208
78,765
64,122
44,459
30,786
42,380
Minimum lease receivables
390,586
381,142
SIGNIFICANT ACCOUNTING POLICIES
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 1 year but not later than 5 years
Total capital expenditure commitments
CONSOLIDATED
June 2023
$000
June 2022
$000
100,002
108,880
12,048
20,051
112,050
128,931
The consolidated entity had contractual obligations to purchase, construct and refurbish property, plant and equipment and investment
properties of $112.05 million (2022 : $128.93 million). The contractual obligations relating to joint venture entities for the year ended 30
June 2023 was $10.46 million (2022: $8.04 million).
Annual Report 2023
131
Annual Report | Notes to the Financial Statements (continued)
34 Contingent Liabilities
i. Guarantees
As at 30 June 2023, 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:
a. Guarantees in the normal course of business relating to lease make-good obligations under certain operating lease
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
b. Indemnities to financial institutions to support bank guarantees in respect of the performance of contracts.
ii. Australian Securities and Investment Commission (ASIC) Proceedings
ASIC has commenced proceedings against Latitude Finance Australia (as first defendant) and Harvey Norman Holdings Limited (HNHL) (as
second defendant) in respect of the promotion of interest free payment methods for customers of franchisees to purchase goods from
franchisees. HNHL believes HNHL has reasonable grounds to defend the allegations. The matter has been listed in the Federal Court NSW
for a liability hearing on 15 April 2024, with the outcome uncertain at the date of this report.
No provision has been made in the financial statements in respect of these contingent liabilities.
SIGNIFICANT ACCOUNTING POLICIES
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 there is only a possible obligation
arising from a past event, where the 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
These include:
Policies
The treasury function of the consolidated entity is responsible for
the management of the following risks:
• market risk;
• credit risk; and
•
liquidity risk.
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.
• 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.
(b) Market Risk
Market risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market
prices. Components of market risk to which the consolidated entity
are exposed are discussed below.
i. Foreign Currency Risk Management
Foreign currency risk refers to the risk that the value of financial
instruments, recognised asset or liability will fluctuate due to
changes in foreign 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.
132
Annual Report 2023
35 Financial Risk Management (continued)
(b) Market Risk (continued)
i. Foreign Currency Risk Management (continued)
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 and Malaysian ringgit. 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
ii. Interest Rate Risk Management
CONSOLIDATED
June 2023
$000
June 2022
$000
22,887
1,258
89
79,146
4,508
346
24,234
84,000
13,715
-
62
13,777
10,457
44,314
16,619
20
60,953
23,047
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 subject
to floating interest rate
$000
1 year or
less
$000
Over 1 to 5
years
$000
More than 5
years
$000
Non-interest
bearing
$000
Total
$000
Floating
Fixed
80,863
93,405
-
-
-
-
-
221
403
-
-
-
-
-
762
-
-
-
-
-
-
-
-
-
44,482
218,750 0.00% - 5.60% 1.50% - 4.39%
2,895
3,116
2,722
3,887
840,996
840,996
114,291
114,291
66,487
66,487
-
-
-
-
-
5.50%
11.00%
-
-
-
76,839
32,480
28,152
1,030
1,281
139,782 2.30% - 5.19% 5.00% - 10.0%
30 June 2023
Cash
Consumer finance
loans
Finance lease
receivables
Receivables from
franchisees
Trade receivables
Other financial assets
Non-trade debts
receivables & loans
Total
157,702
126,509
28,914
1,030
1,073,154
1,387,309
Syndicated Facility &
other short-term
borrowings
Trade creditors
Other loans
Bank overdraft
Bills payable
Total
623,796
-
4,238
16,694
5,400
-
-
-
-
-
200,000
-
-
-
-
650,128
-
200,000
-
-
-
-
-
-
352,716
352,716
-
233
4,471 1.20% - 5.29%
-
-
16,694 2.00% - 6.50%
5,400 1.19% - 3.88%
352,949
1,203,077
-
823,796 1.66% - 6.10%
3.72%*
* Refer to Note 36 Derivative Financial Instruments (c) interest rate swap contracts—cash flow hedges for further details.
Annual Report 2023
-
-
-
-
133
Annual Report | Notes to the Financial Statements (continued)
35 Financial Risk Management (continued)
(b) Market Risk (continued)
ii. Interest Rate Risk Management (continued)
30 June 2022
Principal subject
to floating interest
rate $000
1 year or less
$000
Over 1 to 5
years
$000
More than 5
years
$000
Non-interest
bearing
$000
Total
$000
FIXED INTEREST RATE MATURING IN
AVERAGE INTEREST RATE
Floating
Fixed
Cash
Consumer
finance loans
Finance lease
receivables
Receivables from
franchisees
Trade receivables
Other financial
assets
Non-trade debts
receivables &
loans
115,888
93,599
-
-
-
-
-
-
433
-
-
-
-
-
537
-
-
-
-
-
-
-
-
-
39,317
248,804
0.00% - 2.00% 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%
-
-
-
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 & other
short-term
borrowings
Trade creditors
Other loans
Bank overdraft
Bills payable
675,317
-
4,238
14,446
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
-
-
-
-
-
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 $34.49 million as at 30 June
2023 (2022: $30.80 million). The fair value of the equity investments publicly traded on the NZX was $ 19.83 million as at 30 June 2023
(2022: $25.10 million).
iv. Sensitivity analysis
At the reporting date, the consolidated entity’s exposure to interest rate risk (after taking into consideration the hedge of variable interest
loans), foreign currency risk (after taking into consideration the hedge of foreign currency payables) and equity price risk are not considered
material.
134
Annual Report 2023
35 Financial Risk Management (continued)
(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 & Malaysia
− Slovenia & Croatia
− Ireland & Northern Ireland
Total
CONSOLIDATED
June 2023
$000
June 2022
$000
1,026,451
1,075,160
31,520
16,365
2,083
4,238
20,732
14,984
3,703
4,219
1,080,657
1,118,798
As at 30 June 2023, 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 2023
135
Annual Report | 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 undiscounted cash flows of the financial liabilities
based on the earliest date on which the consolidated entity can be required to pay.
30 June 2023
Less than 1 year
$000
1 to 2 years
$000
2 to 5 years
$000
Over 5 years
$000
Non derivative financial assets:
− Cash and cash equivalents
− Receivables from franchisees
− Trade and other receivables
− Other financial assets
Derivative financial assets:
− Interest rate swap contracts
− Forward currency contracts
218,750
840,996
163,130
-
3,755
90
-
-
-
-
10,770
59,424
-
-
-
-
-
-
-
-
17,422
62,642
-
-
Total
$000
218,750
840,996
250,746
62,642
3,755
90
Total financial assets
1,226,721
10,770
59,424
80,064
1,376,979
Non derivative financial liabilities:
− Trade and other payables
− Interest-bearing loans and
borrowings
Derivative financial liabilities:
− Forward currency contracts
Total financial liabilities
Net maturity
30 June 2022
Non derivative financial assets:
− Cash and cash equivalents
− Receivables from franchisees
− Trade and other receivables
− Other financial assets
Derivative financial assets:
− Forward currency contracts
352,716
115,769
62
468,547
758,174
248,804
892,917
179,940
-
346
-
-
54,035
813,761
-
54,035
(43,265)
-
813,761
(754,337)
-
-
-
-
352,716
983,565
62
1,336,343
80,064
40,636
-
-
-
-
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:
− Forward currency contracts
Total financial liabilities
Net maturity
358,341
275,423
20
633,784
688,223
-
7,641
-
7,641
6,630
-
463,219
-
463,219
(421,946)
-
-
-
-
65,153
358,341
746,283
20
1,104,644
338,060
136
Annual Report 2023
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 2023
Financial Assets:
− Listed investments
− Interest rate swap contracts
− Forward currency contracts
Total financial assets
Financial Liabilities:
− Forward currency contracts
Total financial liabilities
30 June 2022
Financial Assets:
− Listed investments
− Forward currency contracts
Total financial assets
Financial Liabilities:
− Forward currency contracts
Total financial liabilities
Quoted market price
(Level 1)
$000
Market observable inputs
(Level 2)
$000
54,312
-
-
54,312
-
-
55,891
-
55,891
-
-
-
3,755
90
3,845
62
62
-
346
346
20
20
Total
$000
54,312
3,755
90
58,157
62
62
55,891
346
56,237
20
20
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. Interest rate swap contracts are measured at the present value of future cash
flows estimated and discounted based on the applicable yield curves derived from quoted interest rates. These instruments are included in
level 2.
(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.
Annual Report 2023
137
Annual Report | Notes to the Financial Statements (continued)
35 Financial Risk Management (continued)
(f) Capital Risk Management Policy (continued)
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 subsidiaries within the consolidated entity 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 2023, the consolidated entity had unused, available
financing facilities of $339.94 million out of total approved financing facilities of $1,185.83 million. The net debt to equity ratio as at 30 June
2023 was 13.85% (30 June 2022: 10.31%).
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 2023
$000
June 2022
$000
850,361
699,575
(218,750)
(248,804)
631,611
450,771
4,560,517
4,371,925
13.85%
10.31%
(a) For the purpose of calculating the net debt to equity ratio, total equity excludes the negative acquisition reserve of $16.27 million
(2022: $16.27 million), the right-of-use assets in respect of property, plant and equipment leases of $546.02 million (2022: $472.51
million) and investment properties (leasehold): right-of-use assets of $705.03 million (2022: $675.60 million) and the lease liabilities
recognised under AASB 16 Leases of $1,328.81 million (2022: $1,204.63 million).
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 future cash flows of the hedging derivative are only due beyond 12 months and as a current
asset or liability if the future cash flows of the hedging derivative are due in less than 12 months.
Current assets
Foreign currency contracts—held for trading*
Foreign currency contracts—cash flow hedges
Interest rate swap contracts—cash flow hedges
Current liabilities
Foreign currency contracts—held for trading*
Foreign currency contracts—cash flow hedges
CONSOLIDATED
June 2023
$000
June 2022
$000
90
-
3,755
9
53
327
19
-
20
-
* The consolidated entity has entered into forward currency contracts which are economic hedges but do not satisfy the
requirements of hedge accounting.
138
Annual Report 2023
36 Derivative Financial Instruments (continued)
(a) Forward currency contracts-held for trading
Currency
Euro (0-12 months)
US Dollar (0-12 months)
Total
Average Exchange Rate
2023
2022
CONSOLIDATED
2023
62.02
66.54
2022
65.91
72.35
Buy
$000
3,898
4,402
8,300
Sell
$000
-
-
-
Buy
$000
3,794
6,127
9,921
Sell
$000
-
-
-
These contracts are fair valued by comparing the contracted rate to the market rates at balance date. All movements in fair value are
recognised in the income statement in the period they occur. The net fair value gain on forward currency contracts during the year ended
30 June 2023 was $0.08 million for the consolidated entity (2022: net fair value gain of $0.31 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 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 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
2023
2022
CONSOLIDATED
Currency
Euro (0-12 months)
2023
60.06
2022
66.16
Buy
$000
3,447
Sell
$000
-
Buy
$000
4,580
Sell
$000
-
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 2023, the hedges were 100%
effective (2022: 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
(Loss) / Gain recognised in other comprehensive income
Closing balance
CONSOLIDATED
June 2023
$000
June 2022
$000
Increase/Decrease
13
(13)
(37)
(37)
(3)
3
13
13
Annual Report 2023
139
Annual Report | Notes to the Financial Statements (continued)
36 Derivative Financial Instruments (continued)
(c) Interest rate swap contracts-cash flow hedges
Under a interest rate swap contract, the consolidated entity agrees to exchange the difference between fixed and floating rate interest
amounts calculated on agreed notional principal amounts. Such contract enables the consolidated entity to mitigate the risk of changing
interest rates on the cash flow exposures on the issued variable rate debt held.
At 30 June 2023, the consolidated entity had an interest rate swap contract in place with a notional amount of AUD $200 million (2022: nil)
whereby the consolidated entity receives a variable rate of interest at a rate equal to the Australian 3 month BBSY on the notional amount
and pays a fixed rate of interest rate of 3.72%. The swap is being used to hedge exposure to changes in the interest rate of its variable rate
secured loan with an interest rate equal to the Australian 3 month BBSY plus a margin. The consolidated entity has established a hedge ratio
of 1:1 for the hedging relationships as the underlying risk of the interest rate swap is identical to the hedged risk component as the terms of
the interest rate swap match the terms of the underlying variable rate loan (i.e. notional amount, maturity, payment and reset dates) and is
considered to be highly effective. The interest rate swap is settled on a net basis every quarter. During the year the hedge was 100%
effective, therefore any gain or loss on the contract attributable to the hedged risk was taken directly to other comprehensive income and
reclassified to profit and loss when interest expense is recognised.
Movement in the interest rate swap contract cash flow hedge reserve:
Opening balance
Transferred to interest expense
Gain recognised in other comprehensive income
Closing balance
CONSOLIDATED
June 2023
$000
June 2022
$000
Increase/Decrease
-
-
3,755
3,755
-
-
-
-
140
Annual Report 2023
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
CONSOLIDATED
June 2023
$000
June 2022
$000
73,284
111,103
967,869
1,047,828
3,845
153
256,249
255,147
600
280
23,074
28,471
1,324,921
1,442,982
2,220,177
1,894,719
302,743
330,645
94,590
40,462
169,388
177,099
56,492
56,984
2,843,390
2,499,909
4,168,311
3,942,891
113,661
164,343
5,673
205,554
26,361
7,001
30,814
86,710
28,346
51,048
32,341
50,560
270,220
532,192
760,000
410,000
168,335
175,813
2,404
2,252
135,761
115,387
1,066,500
703,452
1,336,720
1,235,644
2,831,591
2,707,247
Annual Report 2023
141
Annual Report | 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
Guarantees
CONSOLIDATED
June 2023
$000
June 2022
$000
717,925
717,925
16,724
11,887
2,097,500
1,977,859
(558)
(424)
2,831,591
2,707,247
589,994
823,728
(90,321)
(121,760)
499,673
701,968
1,977,859
1,711,993
499,673
701,968
(380,032)
(436,102)
2,097,500
1,977,859
PARENT ENTITY
June 2023
$000
June 2022
$000
18
1
3,030,987
2,947,077
3,031,005
2,947,078
4,870
51,303
151,699
136,595
156,569
187,898
717,925
717,925
2,156,511
2,041,255
2,874,436
2,759,180
495,288
614,873
495,288
614,873
The Parent Company is party to a Deed of Cross Guarantee (“Deed”) with the following controlled entities:
• Arisit Pty Limited
• Harvey Norman Stores (N.Z.) Pty Limited
• Contemporary Design Group Pty Limited
• Network Consumer Finance Pty Limited
• Derni Pty Limited
• Generic Publications Pty Limited
• Harvey Norman Big Buys 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.
142
Annual Report 2023
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 Company incorporated in Australia.
2 Company is a member of the "Closed Group" relieved under the Class Order described in Note 37.
3 Harvey Norman Big Buys Pty Limited holds 99.02% of the shares in the KEH Partnership.
4 Company incorporated in New Zealand.
5
Shares held by Harvey Norman Limited.
6 Company incorporated in Singapore.
7
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.
8 Harvey Norman Ossia (Asia) Pte Limited holds 49.38% of the shares in Pertama Holdings Pte Limited.
9
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.
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Annual Report | 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 Cannington Trust
Calardu Perth City West Trust
Calardu Caringbah (Taren Point) Trust
Calardu Preston Trust
Calardu Alexandria DM Trust
Calardu Devonport Trust
Calardu Rosebery Trust
Calardu Alexandria WH Trust
Calardu Frankston Trust
Calardu Rutherford Trust
Calardu Auburn No. 1 Trust
Calardu Gepps Cross Trust
Calardu Silverwater Trust
Calardu Auburn No. 2 Trust
Calardu Geraldton Trust
Calardu Springvale Trust
Calardu Auburn No. 4 Trust
Calardu Hoppers Crossing Trust
Calardu Taylors Beach Trust
Calardu Auburn No. 5 Trust
Calardu Loganholme Trust
Calardu Taylors Lakes Trust
Calardu Auburn No. 6 Trust
Calardu MacGregor Trust
Calardu Toowoomba Trust
Calardu Auburn No. 7 Trust
Calardu Malaga Trust
Calardu Toowoomba No. 1 Trust
Calardu Auburn No. 8 Trust
Calardu Maribyrnong Trust
Calardu Toowoomba No. 2 Trust
Calardu Ballina No. 1 Trust
Calardu Maroochydore Trust
Calardu Tweed Heads No. 1 Trust
Calardu Bendigo Trust
Calardu Brookvale Trust
Calardu Midland Trust
Calardu Wodonga Trust
Calardu Munno Para Trust
Harvey Norman Discounts No. 1 Trust
Calardu Browns Plains No. 1 Trust
Calardu Noarlunga Trust
Harvey Norman No. 1 Trust
Calardu Cairns Trust
Calardu Penrith Trust
Lamino Investments No. 2 Trust
Calardu Cambridge Trust
Calardu Penrith No. 1 Trust
The Calardu Trust
Calardu Campbelltown Trust
Calardu Penrith No. 2 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.
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Annual Report 2023
Shareholder Information
Distribution of shareholdings as at 27 September 2023
Size of holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Number of shareholders with less than a marketable parcel
Ordinary Shareholders
14,780
14,426
4,614
4,102
206
38,128
1,819
Voting rights
All ordinary shares issued by Harvey Norman Holdings Limited carry one vote per share.
Twenty largest shareholders as at 27 September 2023
Number of
Ordinary Shares
Shareholder
414,966,437 Mr. Gerald Harvey
205,525,565 Mr. Christopher Herbert Brown
Percentage of
Ordinary Shares
33.304%
16.495%
138,064,373 HSBC Custody Nominees Limited
11.081%
70,031,186
Citicorp Nominees Pty Limited
58,592,289 Ms. Margaret Lynette Harvey
5.620%
4.702%
48,064,691
J P Morgan Nominees Australia Limited
3.858%
20,222,315 Ms. Kay Lesley Page
20,063,673
Enbeear Pty Limited
1.623%
1.610%
15,132,380
BNP Paribas Nominees Pty Limited
1.215%
14,009,641 National Nominees Limited
1.124%
8,070,000
BKI Investment Company Limited
0.648%
5,213,182
Argo Investments Limited
3,335,180 Ms Jacqueline Galbraith
0.418%
0.268%
2,522,476
Peter & Lyndy White Foundation Pty Ltd 0.202%
2,033,309
Omnilab Media Investments Pty Ltd
0.163%
1,367,297 Mr. Chris Mentis
1,361,893 Mr. John Evyn Slack-Smith
1,297,486 Mr. Arthur Brew
1,143,295
Eastcote Pty Ltd
1,061,450 Mr. Graeme Harvey
1,032,078,118
0.110%
0.109%
0.104%
0.092%
0.085%
82.831%
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145