Friday 15th February 2013
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Michael Hill International, the jewellery chain that bears its founder's name, posted a 5.9 percent gain in first-half profit on Australian sales growth and said it is still battling tax departments on both sides of the Tasman over its 2008 restructuring.
Net profit rose to $27.8 million, or 7.23 cents per share, in the six months ended Dec. 31, from $26.3 million, or 6.85 cents, a year earlier, Brisbane-based company said in a statement. Earnings before interest and tax of $36 million was at the top last month's guidance and in line a Forsyth Barr forecast, and sales rose 8.3 percent to $312.9 million.
"Additional resources were placed into our key Australian market in mid-2012 and this has started to have a positive impact on sales in this key market," chairman Michael Hill said. "The directors remain satisfied with the overall performance of the group and they remain confident in the continued growth and profitability of the group."
Last month Michael Hill said its Christmas trading missed expectations, in a second quarter where its four markets in Australia, New Zealand, Canada and the US all struggled to gain traction.
Retailers have been trying to revive consumer appetite since the global financial crisis, and a consumer confidence survey yesterday showed people were the most upbeat they've been in almost three years.
Michael Hill's Australian stores lifted sales 8.9 percent to $206.4 million for a 12 percent boost in earnings to $35.4 million, while the New Zealand segment increased revenue 3.6 percent to $63.1 million for a 6.2 percent gain in earnings to $12.9 million.
Sales at the Canadian stores jumped 19 percent to $36.2 million for a 22 percent gain in earnings to $1.9 million, while revenue at the US chain increased 1 percent to $6.7 million, narrowing its loss to $1.6 million.
The retailer said it is still at odds with New Zealand's Inland Revenue Department and the Australian Taxation Office over the way it financed a 2008 restructure where the group sold intellectual property from a New Zealand unit to an Australian subsidiary.
The IRD is disputed $24.6 million in deductions claimed by the New Zealand group, while the ATO is at odds with the $41.6 million deferred tax asset resulting from the depreciation of the intellectual property.
Michael Hill hasn't provided for either of the tax disputes.
The board declared an interim dividend of 2.5 cents per share, with no imputation for New Zealand shareholders. Australian shareholders' payment would be fully-franked, though future dividends may only be partially franked.
"Due to the internal restructuring of the group in December 2008, the company is unlikely to be in a position to impute dividends for New Zealand shareholders for some years," Hill said.
The shares gained 0.8 percent to $1.23 in trading yesterday, and have slipped 0.8 percent this year. The stock is rated an 'outperform' by two analyst recommendations compiled by Reuters, with a median target price of $1.24.
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