Company Profile Gerry Harvey Chairman Gerry Harvey Gerry Harvey is an entrepreneur, one of Australia’s best-known retailers, a family man, breeder of race horses and Chairman of Harvey Norman Holdings Limited, the owner of the iconic retail brand names: Harvey Norman, Domayne and Joyce Mayne. As retail entrepreneur, Gerry Harvey has achieved success not once but twice. He and business partner, Ian Norman started out in 1961 to establish the Norman Ross chain of stores which, by 1982, totalled 42 throughout New South Wales and Queensland. In 1982 Gerry and Ian Norman sold Norman Ross. October 1982 saw Gerry and Ian start Harvey Norman with one store in Auburn, Sydney. During the next fi ve years Gerry expanded the business to total 13 stores across New South Wales. The company fl oated in 1987 and this was the springboard for massive growth. Harvey Norman attributes its outstanding performance over the past 30 years to a successful integrated retail, franchise and property system. As at 31 December 2011, there were 216 franchised complexes throughout Australia trading under 3 brand names: Harvey Norman (185 complexes), Domayne (16 complexes) and Joyce Mayne (15 complexes). The retail offering in offshore markets has rapidly expanded over the past few years with 73 company-owned stores located in New Zealand (31 stores), Ireland (14 stores), Northern Ireland (2 stores), Singapore (13 stores), Malaysia (7 stores) and Slovenia (5 stores). In October 2011, we entered into the Croatian market and opened our fi rst store at Zagreb, the capital of Croatia. Harvey Norman has capitalised on its dominant market position, strong fi nancial stewardship and low gearing to seize opportunities in the marketplace. Harvey Norman acquired the assets of 28 Clive Peeters and Rick Hart stores in July 2010 and subsequently converted 19 of the former Clive Peeters stores to Harvey Norman and 2 to Joyce Mayne. This acquisition and subsequent rebranding, has bolstered our dominance in the local market. Gerry personally owns around 30 per cent of Harvey Norman Holdings Ltd and his retailing genius has laid the foundations and culture that is now driving the business forward. A major contributing factor to the success of the retail home and offi ce-wares company is Gerry’s retailing savvy. He understands market trends, has the tools, the timing and the business acumen to successfully respond to demands in the marketplace. One trend that Gerry picked perfectly was the home computer market. The computer phenomenon was established in 1987 as part of electrical sales. Today the computers and communications concept represents almost 30 per cent of retail sales by Harvey Norman franchisees and is a separate category in its own right. Gerry has been quoted as saying: “I’ve never been afraid to try something new.” It is a tribute to Gerry’s entrepreneurial spirit that he gives a good idea room to grow. If the idea shows promise and is paying its way, he’ll provide the resources for it to bloom. In a similar way that’s how he manages his staff. He gives you a desk and the resources and says: “go to it”. When staff need advice or want to chat, it’s very common for them to tap on his open offi ce door and ask: “Do you have a minute?” It’s rare for him to decline. Gerry remains, despite his personal success, approachable and down-to-earth. May 2012 Company Profile Harvey Norman – The Company Harvey Norman Holdings Limited is a public company that is listed on the Australian Stock Exchange, whose principal activities primarily consist of an integrated franchising, retail and property enterprise. Australian Franchise System Harvey Norman operates predominantly under a franchise system in Australia and consistently delivers an unparalleled retail offering to Australian consumers with an extensive product range, cutting-edge technology and market leadership in key product categories. Harvey Norman Holdings Limited grants franchises to independent business operators under three leading brand names: Harvey Norman, Domayne and Joyce Mayne. The franchisees sell products in the following categories: electrical goods, furniture, computerised communications, bedding and manchester, small appliances, carpets and fl ooring. Harvey Norman: The Harvey Norman brand name is a retail icon throughout Australia with 185 franchised complexes throughout the local market. The consolidated entity has the capacity and ability to take advantage of market opportunities utilising our low gearing. Our brands are market leaders in the core audio visual and technology segment. Domayne: The retail chain Domayne was launched in May 1999 and currently has 11 stores in NSW, 1 store in ACT, 2 stores in Queensland and 2 stores in Victoria. Domayne offers a contemporary range of furniture, bedding, computer and electrical products. Joyce Mayne: The retail brand was acquired in July 1998 with 7 stores of which six were converted to Domayne in May 1999. As at 31 December 2011, there were 15 Joyce Mayne stores, 7 in New South Wales and 8 in Queensland. The consolidated entity is actively looking for additional key sites to expand the Joyce Mayne brand into other regions. The Culture of the Franchise System: The culture of the company is multi-faceted and diffi cult to defi ne because of the nature of the franchise system. Often a company will take in facets of the personality at the top and to a point that is also true of Harvey Norman. The founders of the company, Gerry Harvey and Ian Norman, are entrepreneurs and that spirit is embedded in the franchise operators. However, that is where the likeness to other companies ends because if you were to go from franchise to franchise, you would fi nd a different style of management with each franchise operator and, therefore, a slight difference in culture. As most of the franchise operators live close to their stores, they tend to develop close ties to their local community. Many franchisees have children in the local schools, as well as family living close by. The very nature of the franchise system means a portion of the franchisee’s earnings and turnover is spent in the local community. An example of this is when a customer purchases an air-conditioner. The unit is delivered from the store to the customer, in most cases by a local transport company, and is installed by a community-based installer. The franchise operators support their local sporting clubs, schools and charities and they work closely with the local media and businesses. May 2012 Company Profile Overseas Markets Harvey Norman Holdings Limited’s retail operations in overseas markets differs to that of the Australian franchised system as the retail complexes are wholly-owned or controlled stores trading predominantly under the Harvey Norman brand name. New Zealand: The fi rst wholly-owned store in New Zealand commenced trading in July 1997 and as at 31 December 2011 there were 28 Harvey Norman stores in the New Zealand market. Harvey Norman continues to capitalise on its dominant brand position in New Zealand and continues to capture market share. The Norman Ross brand was launched in the New Zealand market as a discount retailer of electrical and computer goods and as at 31 December 2011 there were 3 Norman Ross stores. New Zealand retail sales revenue amounted to $283.84 million for the half year ended 31 December 2011 which represented approximately 35.2% of total consolidated sales revenue. The New Zealand segment result before tax was $20.56 million for the half year ended 31 December 2011 which represented approximately 12.6% of the total segment result of the consolidated entity. Ireland: The decision was taken by the Board to assess the viability of opening stores in either the United Kingdom or Ireland. After consultation with suppliers and assessment by various members of the Board, it was decided that the fi rst stores would be opened in the Republic of Ireland. The fi rst store was opened in Dublin in the suburb of Swords in August 2003. As at 31 December 2011 there were 14 Harvey Norman stores in Ireland and 2 stores in Northern Ireland. The Board remains committed to the operations in Ireland and Northern Ireland for the long-term. Harvey Norman / Pertama Singapore: The consolidated entity holds a controlling interest in Pertama Holdings Limited, Singapore, a company listed on the Stock Exchange of Singapore. The principal activities of Pertama are retail, wholesale and export sales of homewares and electrical goods in Singapore and Malaysia. A joint venture vehicle named Harvey Norman Ossia (ASIA) Pte Limited holds approximately 50.2% of a Singapore publicly listed company known as Pertama Holdings Limited (“Pertama”). A subsidiary of Harvey Norman Holdings Limited owns 60% of the joint venture vehicle and this subsidiary directly holds approximately 33.8% of the shares in Pertama. Harvey Norman Holdings Limited effectively owns approximately 63.4% of Pertama as at 31 December 2011. Pertama, trading as Harvey Norman, operates 13 retail outlets in Singapore and 7 retail outlets in Malaysia. Harvey Norman opened the fi rst signature store in Millenia Walk shopping centre, Singapore on 1 May 2001. This 80,000 ft2 Harvey Norman store was decided upon after an extensive search for retail space. This store is the blueprint for future large format stores in Asia. Pertama plans to expand the Harvey Norman retail business in Malaysia and has identifi ed strategic growth opportunities. Pertama’s market share in Malaysia is rapidly growing with the opening of 5 retail stores within the last 2 years. The “Space” brand name is another retail offering by the consolidated entity in Singapore and Malaysia, with an emphasis on premium, designer furniture and homewares.