Accounting Concepts & Practices -Harvey Norman Holdings Report
Student’s Name:
Institution:
Date:
Contents
Executive Summary 3
Introduction 3
Issue Emerging from the Chairman’s Report 4
Issues Emerging from the Director’s Report 5
Discussion of Corporate Governance Statement 5
Key Financial Ratios 6
An Outlook of Harvey Norman’s Market Value and Investment Opportunities 7
Conclusion and Recommendations 8
Executive Summary
This business report will briefly focus explaining the financial health of Harvey Norman Holdings limited. By highlighting key performance factors and results in the Annual Financial Report for 2013, this business reports will help potential investors make appropriate decisions and put their money in Harvey …show more content…
Apart from showing the share capital ownerships, the Director’s Report major emerging issue is the Financial Review and Operations of Harvey Norman. There is a possible concern that considerable e business risks may affect Harvey Norman performance in the future (Hannelly, 2010). This includes but is not limited to; unfavorable macroeconomic condition overseas such as currency and interest rate risks. As much as the company tries its best to hedge these risks, it compensate for any fall in consumer sentiments by constantly improving the Omni channel Strategy. Furthermore, price deflation has negatively affected potential sales in the IT/AV categories, but the launch of next generation flat screen may correct this. Moreover, with a property value of $2.2bn, the company is exposed to rental and property value reduction within the bulky good sector. Competition and Counterparty risk of service providers is also another issue in the Director’s report. Harvey Norman Holdings has made efforts to address these issues by constantly monitoring and evaluation their operations (Higson, …show more content…
The above financial ratios indicate a boost in performance from 2012 to 2013. However, despite the increased sales Harvey Norman’s stock price has been possibly stagnant. Harvey Norman’s was expected to underperform during the financial period of 2013 due increased competition overseas and cost of maintaining the fairly complex franchise .
With an impressive $2.2bn AUD property portfolio, Harvey Norman definitely has a healthy financial position. Harvey Norman owns 102 outlets out of the 283 under various brand names (i.e. Joyce Mayne, Harvey Norman, Domayne, and Space). Most of the outlets are tenanted by Harvey Norman franchisees. So, let us assume a rough estimate of rent adjusted EBIT could range between $100m and $300m in the years to come, depending on the Australian and overseas subsidiaries economic environment (Higson, 2006).
Obviously, is all assumptions hold, the Company will be most likely pay a lower multiple when EBIT is closer to $300 and higher one when it’s closer to $100. This would suggest a valuation between $1bn and 1.5bn for Harvey Norman’s retail market share. Additively, considering the property value which is between $1.5bn and $2bn and reducing a debt of $659m, we get an equity value of $1.8bn to $2.8bn (or approximately $1.73 to $2.67 per share). This is below the current share price of $3.26. May be it will be okay to assume that retailing profits will rebound in order
Student’s Name:
Institution:
Date:
Contents
Executive Summary 3
Introduction 3
Issue Emerging from the Chairman’s Report 4
Issues Emerging from the Director’s Report 5
Discussion of Corporate Governance Statement 5
Key Financial Ratios 6
An Outlook of Harvey Norman’s Market Value and Investment Opportunities 7
Conclusion and Recommendations 8
Executive Summary
This business report will briefly focus explaining the financial health of Harvey Norman Holdings limited. By highlighting key performance factors and results in the Annual Financial Report for 2013, this business reports will help potential investors make appropriate decisions and put their money in Harvey …show more content…
Apart from showing the share capital ownerships, the Director’s Report major emerging issue is the Financial Review and Operations of Harvey Norman. There is a possible concern that considerable e business risks may affect Harvey Norman performance in the future (Hannelly, 2010). This includes but is not limited to; unfavorable macroeconomic condition overseas such as currency and interest rate risks. As much as the company tries its best to hedge these risks, it compensate for any fall in consumer sentiments by constantly improving the Omni channel Strategy. Furthermore, price deflation has negatively affected potential sales in the IT/AV categories, but the launch of next generation flat screen may correct this. Moreover, with a property value of $2.2bn, the company is exposed to rental and property value reduction within the bulky good sector. Competition and Counterparty risk of service providers is also another issue in the Director’s report. Harvey Norman Holdings has made efforts to address these issues by constantly monitoring and evaluation their operations (Higson, …show more content…
The above financial ratios indicate a boost in performance from 2012 to 2013. However, despite the increased sales Harvey Norman’s stock price has been possibly stagnant. Harvey Norman’s was expected to underperform during the financial period of 2013 due increased competition overseas and cost of maintaining the fairly complex franchise .
With an impressive $2.2bn AUD property portfolio, Harvey Norman definitely has a healthy financial position. Harvey Norman owns 102 outlets out of the 283 under various brand names (i.e. Joyce Mayne, Harvey Norman, Domayne, and Space). Most of the outlets are tenanted by Harvey Norman franchisees. So, let us assume a rough estimate of rent adjusted EBIT could range between $100m and $300m in the years to come, depending on the Australian and overseas subsidiaries economic environment (Higson, 2006).
Obviously, is all assumptions hold, the Company will be most likely pay a lower multiple when EBIT is closer to $300 and higher one when it’s closer to $100. This would suggest a valuation between $1bn and 1.5bn for Harvey Norman’s retail market share. Additively, considering the property value which is between $1.5bn and $2bn and reducing a debt of $659m, we get an equity value of $1.8bn to $2.8bn (or approximately $1.73 to $2.67 per share). This is below the current share price of $3.26. May be it will be okay to assume that retailing profits will rebound in order