Harvey Nichols owner sees profits slide 75%Tuesday, 23 June 2009
Although the Group’s operations made a positive start to the year, the global credit crisis around the world resulted in a sharp decline in consumer sentiment. This slowdown affected consumers around the world, and regional markets were particularly affected due to their reliance on both domestic and international consumers.
Despite the economic slowdown, the Group’s established businesses performed satisfactorily. However, the Group’s earnings for the financial year ended 31st March, 2009 were significantly reduced as a result of losses arising from the impairment of fixed assets of the Group’s recent investments in retail stores. These impairment losses are non-cash in nature and do not affect the Group’s cash flow. Consequently, the Group’s balance sheet and net cash position continue to be extremely strong.
"We will keep a prudent strategy under the bad economic conditions to ensure controllable cost and healthy inventory situation," said group executive chairman Dickson Poon, who noted its established businesses had performed "satisfactorily".
Net profit fell to HK$51.37m ($6.63m) from HK$210.58m a year earlier, mainly due to the impairment loss on the invested retail property and rising taxation expenses. Excluding the impact of the impairment losses, operating profit fell 10% to HK$203.3m.
The company had made a provision of HK$116.12m for the unrealised loss in a recent investment in retail stores. Revenues for the year, however, rose 2.4% to HK$3.84bn but sales in April and May declined because of the swine flu outbreak, Poon admitted.
Geographically, Hong Kong represented 55% of sales, China 20%, Taiwan 16% and the rest of South East Asia 9%. As of March, the company controlled 70 retail units in Hong Kong, 268 on the mainland, 114 in Taiwan, three in Macau and 40 in Singapore, Malaysia and the Philippines.
The company, which operates the Harvey Nichols, Seibu, Vertu and Alexandre de Paris brands, said the departure of Polo and Ralph Lauren from 2010 would not have an immediate impact on the group. As the business returns in-house, Dickson brokered a combination of an additional year's operating profit and a cash receipt of $18.2m "ensuring that there will be no negative financial impact on the group in the immediate future", it noted in a statement.