Harvey Norman

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Harvey Norman Holdings Limited
Group case study

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Tutor: Dr. Mahesh Joshi

Group members:
JIN CHEN 3350416
MINGFENG CHI 3316768 JINGHAN REN 3365087

TABLE OF CONTENTS

Executive summary3
Introduction4
Source of Finance and financial segments4
Industry and competitor analysis5
Key highlights of financial and operational performance5
Highlights and change of financial performance5
Highlight of operational performance5
Change in accounting policies6
Assets – PPE and Intangibles6
leased assets and liabilities9
Auditor and auditor report11
Reference13

Executive summary

Harvey Norman Holdings Ltd, a public company, is one of the most successful retail companies in Australia. They use a unique franchise model with granting franchises to independent business operators, and there are approximately 700 franchisees in Australia. As a retailer, their products include electrical, bedding, computers & communications, bathrooms & home improvements, furniture, small appliances, carpet & flooring and lighting. In recent years, the company has begun expanding the international market, and there are an increasing number of Harvey Norman stores in New Zealand, Ireland, Slovenia, Malaysia and Singapore.

The aim of this report is to show an overview of Harvey Norman’s business based on the 2011 Annual Report of Harvey Norman. This report will mainly focus on their core business, industry, operating activities, financial performance, PPE & intangible and leased assets & liabilities. Finally, independent auditor’s report will discuss their compliance with the AASB standard.

COMAPNY

Introduction

Being a leader in retail stores of electrical, computer, furniture, entertainment and bedding goods, Harvey Norman was founded in 1982, Australia.At first, it is only a single store which sells electrical goods and appliances; however, the opening has proved to be a great success. With more and more stores open, Harvey Norman changed its operation into superstore format at the beginning of the 1990s. After that Harvey Norman has been expanding its business globally and keepsincreasing the diversity of its products.In the financial year of 2011, Harvey Norman has gained an after tax net profit of 252.26 million. And this makes it to be ranked at the 126th position out of 2000 large companies in Australia. (IBIS World, 2011)

Source of Finance and financial segments

Harvey Norman Holding LTD generally generates its revenue from those four segments below: • Franchisee: with holding 195 franchise stores in Australia, it contributes the largest part to its company’s sales revenue. This revenue is consisting of the franchise fee and interest of franchise loans. However, due to the downturn of the whole economic environment, the franchisees themselves are struggling to keep their business alive. In my opinion, it is dangerous for Harvey Norman to be too rely on the franchising revenue. • Retail store: excluding the 195 franchise outlets within Australia, the company is running 96 complexes department by the time of 30 of June 2011, which are 26 more than 2010. • Property: the property income Harvey Norman LTD is mainly coming from the rental of the franchisees and some other outlets who are renting their complex. • Other businesses: as a public listed company, Harvey Norman also earns a good amount of revenue from trading its listed securities.

Industry and competitor analysis

As the main services the company is retailing. The industry it involves would be retailing industry of computer and software, household appliances and furniture. However, as the integrating of online services and strength of Australiandollar, the retailing industry has been very much affected. Even the chairman of...
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