Gerry Harvey does not get nearly scrutiny for a billionaire who counts colorful types such as John Singleton as close friends. Crikey’s Neal Woolrich gives him that scrutiny.

But the big news from this AGM was Gerry Harvey’s bitch-slap to the face of Professor Alan Fels, an almighty spray which was incited by Crikey’s correspondent asking an innocuous question about why Harvey Norman’s legal fees were so much higher in 2001 compared to 2000. More on that later.

Gerry sauntered into the ASX Auditorium about 7 minutes after the scheduled opening of the AGM, but there was nothing tardy about his performance from then. He put his head down, read straight from a script and managed to pass motions on the accounts and the re-election of three directors in the blinking of an eye.

Gerry announced that he had “nothing further to add to my chairman’s report in the annual review” and promptly moved on to the official business of the meeting.

As each item of official business was announced Gerry would read out “do I have a shareholder to move the motion?”

A fellow director, singing from the same hymn sheet, would then chime in with “I move the motion, chairman”.

“Do I have a seconder?” Gerry would ask.

“I second the motion, chairman,” another director would solemnly intone.

Gerry would then ask the meeting “is there any discussion on the motion” and without looking up from the script declare “no. I will then put the motion to a vote. All those in favour please raise your hands.” Gerry would take a look at the show of hands, ask for the no votes and promptly declare the motion carried.

As each motion was passed in this manner first the accounts, then the re-election of three directors the chuckles from the audience increased. A seasoned observer was overheard to tell a colleague “Gerry likes to get his meetings over and done with quickly”. No kidding!

Within about 3 minutes this poor excuse for an AGM was declared closed by the chairman. Gerry later apologised for dragging the AGM out, having “stumbled over a few words”.

Now while this was an amusing sight to observe, Harvey Norman didn’t have the best of years in 2001 so it was an affront to any shareholders who may have had legitimate concerns to raise at the AGM.

Net profit was down 4.7% to $105 million in difficult trading conditions, although Harvey expected a strong Christmas period. He once again hoped for a hot summer to boost air conditioner sales.

Thankfully Gerry’s disdain for protocol extended to questioning, with Crikey’s proxy-less observer being allowed the floor when Gerry did call for questions and give observers more than a nano-second to put a paw in the air and get his attention.

Before calling for questions, Gerry gave a bit more of a background into the company’s progress, mentioning the various stores that had opened up around the world, including the showpiece of retail shopping in downtown Ljubljana, Slovenia (pop. 280,000).

Never heard of it? Me neither.

A shareholder with a thick eastern European accent informed the meeting that this wasn’t the cultural or financial epicentre of Europe and it was a curious place for the company to begin its grand European expansion plans. Still, Gerry Harvey’s detractors have called him a fruitloop before and I’m not game to doubt his plans.

Gerry also spoke glowingly about the Domayne store in Auburn, which he promised would give eastern suburbs and north shore residents a reason to make the trek out west. One suspects the prospect of battling Parramatta Road gridlock on a weekend would not fill too many of the good burghers of the eastern suburbs or north shore with great enthusiasm.

By this stage the meeting was looking like petering out around the 20 minute mark, and Gerry remarked that Kerry Packer had tried to gazump his proud record of ridiculously short AGMs. This prompted Crikey’s correspondent to take the floor and do his best.

Although I didn’t have a proxy, a hand in the air was sufficient to take the floor, which I did for a good 15 minutes or so. With the help of some others, we managed to drag the meeting out to about 45 minutes in total and give the Packers bragging rights over steamtrain Gerry for having the most placid shareholder group in Australia.

I first offered my commiserations to Gerry for blowing a million dollars on his punt on the Australian dollar somebody needed to take a stand for the little Aussie battler and it was a shame to see Gerry come a cropper. He joked that he should have done it through the company rather than personally and I said “I’m sure the shareholders would be happy with that”.

I also congratulated the company on its restraint in executive remuneration. Their highest executive pay package is $300,000, which is a refreshing change from most listed public companies in this country.

I asked a couple of questions about their under-performing segments the “financial services” and Singapore segments in particular were far less profitable on a comparative basis to other business or geographical segments.

Gerry explained that financial services (i.e. customer credit) was a necessary evil that the company had to provide in order to get customers through the door. Gerry claimed that they were the first retailer to offer interest-free purchase plans and the like, but when finance companies started cutting in on their turf, margins declined.

Singapore was a bit of a concern and he made a few prickly comments about the way things are in Singapore, but he is hopeful of the business picking up. He encouraged everyone at the meeting to visit the Singapore store as it was a beauty. I volunteered for a company sponsored fact-finding mission but Gerry put the kibosh on that by saying that I’d have to shell out for it from my own pocket.

I also asked Gerry whether the company’s traditionally high level of trade receivables was a worry in the current economic climate and whether they were concerned about a possible rise in bad debts. Gerry was confident this wouldn’t be a big issue in the coming year.

My main bugbear with the Harvey Norman accounts was the fact that the fees paid to their main legal advisers had gone up by almost 50% during the year to $1.2 million (up from $845,000 in 2000). My concern was that a partner in the law firm was a director of the company and the same law firm had been Harvey Norman’s solicitors since 1982. While not questioning the quality of the legal advice provided, I asked the chairman to explain the dramatic increase and whether the legal services were regularly put out to tender.

This was Gerry’s cue to launch an almighty bollocking of the ACCC and Alan Fels. The ACCC’s barney with the company relates to “bait advertising” allegedly conducted by Harvey Norman the practice of getting customers into the store with advertised bargains which are not reasonably available. Genial Gerry turned as nasty as you are likely to see him, although he was still reasonably good-humoured about the whole thing, which obviously browned him off.

“To accuse us of bait advertising is just blatantly bloody stupid. I’m still pursuing it. We’re not going to roll over. As far as we’re concerned, it’s victimisation. If Fels himself hasn’t got a vendetta against us, I can guarantee you some of his staff have.”

Gerry mentioned that he’d had discussions with Felsy who was a “nice, quiet, polite” bloke but like most “nice, quiet, polite” blokes he didn’t get things done.

He asked the meeting what would they do if they knew they were right but were still being pursued “you wouldn’t roll over, would you?!” Them’s fightin’ words!

Gerry reminded the meeting that the ACCC was “wasting your money” (as taxpayers) on their pursuit of the company.

It’s quite refreshing to see this sort of candour from a company chairman, who as a group tend to tread cautiously when making political comments at their AGMs, but one would query whether this sort of grandstanding will help Harvey Norman in their battle with the ACCC.

After the lengthy blast from the chairman, I reminded Gerry that he hadn’t answered my question about the ongoing relationship with the company’s legal advisers. Gerry advised that the esteemed firm of Messrs Gillis Delaney Brown charged below market rates and none of the big firms could match them on price, so a tender process was unnecessary.

But if they were having such difficulty in getting the ACCC off their case, isn’t that all the more reason to be shopping around for other lawyers?

I wound up by asking Gerry to get his advertisers to turn down the volume on those bloody annoying Harvey Norman ads that blast out of the idiot box. Gerry suggested I turn down the volume on my set, but he didn’t seem to get my point that it was a problem of relativity the Harvey Norman ads are about 102% louder than anything else on TV.

After I was finished, another attendee asked why there was no Harvey Norman store on the north shore apart from Chatswood. This wound Gerry up even further, who proceeded to blast the NSW Government, north shore councils and planning authorities for not allowing any stores on the north shore.

The chairman also took the opportunity to have a couple of swings at Coles Myer. When one attendee congratulated Harvey on the continuity of the board, he proudly listed each board member’s service record and noted that “when one goes off you don’t whip off to Coles Myer to get one of their people, 05 for obvious reasons!”

He also mentioned that his questioning of the credentials of Dennis Eck whom Harvey described as “a bit of a lightweight” prompted a phone call from Stan Wallis, who asked “mate, would you lay off Dennis Eck?”

Harvey didn’t, and was proved right, which Coles Myer shareholders will undoubtedly be ecstatic about.

Another shareholder questioned whether there was any plan to spin the group’s substantial property assets into a trust or another vehicle to free up funds. Harvey argued that property was and will continue to be an integral part of the business and if they can run the property portfolio themselves, it is far cheaper than letting someone else do it for them. He noted the stamp duty costs, advisers’ fees and administration costs that would arise if they attempted to divest the company of their property assets. He then took a swipe at professional advisers who would advocate such a move, joking that of course they would recommend it, because it gives them another chance to gouge a few more dollars out of their client!

After Sideshow Gerry was all over, the meeting was wrapped up after about 45 minutes perhaps the longest Harvey Norman AGM in history, although pedants might argue that the meeting was over when Gerry muttered “I declare the meeting closed” all of three minutes into the meeting.

Harvey Norman’s proven track record is probably the reason for their lack of shareholder participation at the company’s AGM. But the lack of press prodding in the past was exposed when the AGM proved how easily Gerry Harvey could be called upon to provide controversial grabs about the ACCC and north Sydney planning laws.

It is not as though either of these are new issues. The ACCC investigation harks back to June 2000, while Harvey moaned that he’d been trying to set up shop in the northern suburbs for the past 20 years.

Perhaps the press should get on Gerry’s case a bit more vigorously to get hot issues like these out into the open.

ends

We sent this piece to subscribers and received this reply from a subscriber:

Why Harvey Norman is in Ljubljana

I’ve been to Ljubljana and toured through most of Slovenia about 4 times. Great place – actually my favourite country in Europe as it beautiful, with a bit of everything from Swiss style alps to Italian style Adriatic coast. All jammed in to a country probably a 1/4rd the size of Victoria and at 1/4 the cost.

As former East Euro countries go, it does have the best living standard and wealth. Its pretty much the Switzerland or Austria of Eastern Euro. I used to go there as a cheaper alternative to the real thing and Piran was the closest beach to Budapest, when I was living there for 5 years. Ljubljana is a lovely small city/town in the centre – quaint is probably the best word, a bit like Hobart.

My misty eyed memories aside – I’d have to say it is an interesting choice to set up a flag ship. Then again, it might be a good way of getting a toe in the water as a proving ground with a fairly affluent Euro city but with few other competitors around. For all we know the demographics may match Paris. A bit like how products are often tested in NZ before being launched in Oz.

Other markets are already very competitive – Even Budapest (2mil people) has most of the Euro majors food and wharehouse stores from France, Germany, Sweden, Austria and UK.

It will be interesting to see what he does next in Euro…

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