Harvey Norman denies report it is about to float NZ business

By NZPA

Monday 24th March 2003

Homewares chain Harvey Norman today denied an Australian newspaper report it was considering spinning off its 13-store New Zealand business in the near-term.

The Sydney Morning Herald quoted the company's executive chairman, Gerry Harvey, as saying the company was mulling the move as part of a package to raise funds against its $A800 million ($NZ869 million) property portfolio so it can expand.

Mr Harvey was not immediately available to comment but John Skippen, Harvey Norman's Sydney-based finance director, told NZPA if any float was being considered, it was at least a year down the track.

"It's not our intention to do that," Mr Skippen said, adding that when asked Mr Harvey had commented: "we could do it in one, two, three, four or five years."

"Will it be floated at some time in the future -- highly likely somewhere down the track, but not for some time," Mr Skippen said.

The company said in 1997 when it opened its first store here that it was aiming to have a 20-store chain. Rumours of a spin-off of the New Zealand operations have surfaced frequently since then.

Mr Skippen said the number of stores the company would have here would be a lot more than 20 but they may not all be large format stores the company was talking about in 1997.

Profitability in New Zealand was similar to Australia.

The Sydney Morning Herald report said Harvey Norman was proposing to bundle a selection of its 150 sites in Australia and New Zealand and then approach a credit agency for a rating of the vehicle's investment worthiness. Harvey Norman would then take out mortgages on the properties.

Harvey Norman has spent the past three years talking to its bank, ANZ, about the project, the paper reported. An agreement is expected within the next few months.

Mr Skippen said if the New Zealand operation was spun off, Harvey Norman would retain majority control, although it would operate as a separately listed company.

Harvey Norman pays a Stock Exchange fee for being listed in New Zealand but notes most institutional investors buy in Australia to avoid currency fluctuations.

Its share price has been struggling near four-year lows on broker concern about its exposure to Australia's peaked housing cycle and its rapid expansion programme.

It was trading up one cent today at $A2.08, having traded between $A1.88 and $A3.88 in the past year.

Investors are keen for Harvey Norman to make better use of what they consider to be an undergeared balance sheet.

Harvey Norman is closely linked to New Zealand homewares retail chain Briscoe. It owns 2.5 percent of Briscoe while Mr Harvey owns another 2.5 percent and said he wanted more when Briscoe floated in 2001.

Briscoe owns the Rebel Sport brand in New Zealand while Harvey Norman owns 55 percent of Rebel Sport Australia.

Harvey Norman is pursuing new developments in Slovenia, Dubai and Ireland, as a precursor to the UK.

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