news: dn 11c vital cfo gone. why????

Harvey Norman's finance chief says his previous experience as a self-employed accountant serves him well at the retailing giant

By Bernard Kellerman
CFO. 01 April 2005


John Skippen
Photo: Rob Homer At first glance, Harvey Norman's John Skippen, appears to have one of the toughest chief financial officer roles in the country. He plays a crucial part in running a company some analysts regard as complex and hard to understand, and must contend with a share price that frequently seems to reflect their uncertainty. He works on takeovers almost single-handedly and has a famously outspoken billionaire chairman who owns 30% of the company, and who is not afraid of taking the fight to corporate regulators such as the Australian Competition & Consumer Commission. And his company insists that having independent board members does not necessarily lead to good, fast decisions, at least as far as its business is concerned.

Much of the perceived complexity of the business lies in the way it manages its two greatest assets - property and people. Harvey Norman's total property interests, including joint ventures and overseas businesses, tip the scale at slightly more than $1 billion, compared with total assets of $2.3 billion. The company's web site indicates that the size of the property portfolio will double in the next four or five years.

Skippen insists, however, that Harvey Norman should not be seen as a property business, with a few retail operations. He prefers to describe the group as primarily an entrepreneurial retail business. He points out that it provides finance for its franchisees and runs its own consumer finance network.

It is not difficult to understand why some regard the business as complicated. Each of its 162 Australian stores has between one and 12 franchisees, each with one product category on one site. They are separate businesses within the walls of Harvey Norman properties, totalling about 537 "Harvey Norman entrepreneurs". There are now several dozen stores opened or opening soon in New Zealand, Singapore, Malaysia, Ireland and Slovenia, with plans to expand further into Scotland and Eastern Europe. Each store will own its site where possible.

"The business is actually quite a simple and efficient operation, but people read complexity into it," Skippen says. "We receive franchise fees from retail operations [in Australia and New Zealand], and retail in our own right outside Australia. Wherever possible we aim to own the property where the Harvey Norman stores operate. Wherever possible we'd like to maximise our franchise fees, but not to the detriment of individual franchisees.