Harvey Norman Reports $654.69m Profit Before Tax Excluding Adjustments

• Profit before tax excluding adjustments up 10.9%
• System sales revenue grows 3.1% to $9.64 billion
• International retail profit surges, UK expansion costs weigh
• Property segment delivers 3.7% profit growth with $5 billion portfolio
• Fully franked final dividend of 13 cents declared

Profit Growth Driven by International Retail and Property

Harvey Norman Holdings Limited (ASX:HVN) posted a solid full-year result for FY26, with profit before tax (PBT) excluding the net impact of AASB 16 leases, property revaluations, and a pecuniary penalty rising 10.9% to $654.69 million. The reported PBT was $790.29 million, up 4.9%, reflecting the combined effect of strong operating earnings and one-off costs. Profit after tax attributable to shareholders increased 2.0% to $528.46 million, while basic earnings per share edged up to 42.41 cents.

The company’s system sales revenue grew 3.1% to $9.64 billion, supported by a 2.4% rise in Australian franchisee sales to $6.58 billion and a 4.5% increase in overseas company-operated sales to $3.05 billion. This growth was underpinned by strong demand in technology-led categories, including AI-enabled devices, and contributions from new stores opened internationally.

Franchising Operations Stable; International Retail Accelerates

The franchising segment in Australia remained resilient, delivering a PBT of $345.18 million, essentially flat versus FY25, with a margin of 5.24%. Franchise fees, rent, and financial accommodation income rose, offsetting softer trading conditions in the second half. The segment’s 195 franchised complexes and 549 independent franchisees continue to be a core foundation of the business.

Internationally, the company’s retail operations posted a 23.4% jump in PBT to $135.72 million. Established markets like New Zealand (+31.2%), Ireland (+36.2%), Singapore and Malaysia (+8.3%), and Slovenia and Croatia (+38.8%) delivered strong earnings growth. However, the United Kingdom segment remains in an investment phase, reporting a loss of $31.21 million due to costs associated with expanding the store network and category breadth, including the opening of the second English store at Gracechurch in April 2026.

Property Portfolio Underpins Earnings and Balance Sheet

The property segment contributed $333.49 million in PBT, up 3.7%, supported by a global property portfolio valued at approximately $5 billion. The portfolio includes 99 franchised complexes in Australia and 29 international retail properties. Net property revaluation increments of $156.75 million were recognised in the income statement, reflecting continued rental growth, low vacancy rates, and strong occupier demand. The company remains Australia’s largest single owner of large-format retail properties.

Harvey Norman’s balance sheet remains a key strength, with total assets increasing 5.7% to $8.85 billion and net assets rising 2.0% to $4.94 billion. The net debt to equity ratio rose to a still conservative 18.81%, reflecting ongoing investment in strategic property acquisitions and capital projects. Operating cash flows remained robust at $537.22 million despite a $157 million decline from the prior year, impacted by timing of working capital and increased payments to suppliers and employees.

Dividend and Outlook

The board declared a fully franked final dividend of 13.0 cents per share, payable on 12 November 2026 to shareholders on the register as of 7 October 2026. This brings total dividends for FY26 to 27.5 cents per share, up from 26.5 cents in FY25, representing approximately 65% of profit after tax and non-controlling interests.

Looking ahead, the company plans to open one new franchised complex in Australia during FY27 and relocate four others to newly constructed freehold properties. International expansion continues with new store leases signed in Malaysia and Singapore, a new flagship store planned for Zagreb in 2028, and further store openings anticipated in the UK and Ireland. Despite a challenging second half in FY26 due to geopolitical tensions, inflationary pressures, and cautious consumer spending, Harvey Norman’s diversified earnings streams and strong asset backing position it well for sustainable growth.

Governance, Remuneration and Compliance

The company’s remuneration framework links executive rewards to financial and non-financial performance, with adjustments made following a Federal Court judgment that imposed a $35 million pecuniary penalty related to ASIC proceedings. Penalties reduced short-term incentive payments and long-term incentive awards for key executives, reflecting a commitment to strengthening compliance culture.

Harvey Norman also reported progress on sustainability initiatives, including climate-related financial disclosures aligned with Australian standards. The company has begun integrating climate risk assessments into its strategy, focusing on energy efficiency, renewable energy installations, and operational resilience across its retail and property portfolios.

With a broad international footprint spanning eight countries and over 300 company-operated and franchised stores, Harvey Norman continues to leverage its integrated retail, franchise, property, and digital system to navigate market challenges and capitalize on growth opportunities.

Bottom Line?

Harvey Norman’s FY26 results highlight resilient franchising, accelerating international retail profits, and a robust property portfolio, but watch how UK expansion costs and regulatory compliance shape future earnings.

Questions in the middle?

• How will Harvey Norman’s UK expansion evolve beyond the current investment phase and impact profitability?
• What specific sustainability targets will the company adopt following its initial climate-related disclosures?
• How will the company’s compliance culture and governance change in response to the ASIC proceedings and Federal Court penalty?