Michael Hill annual profit rises 67%, boosted by Australia, NZ, Canada

Monday 21st August 2017

Michael Hill International, the jewellery retailer founded by its namesake, boosted annual profit by two thirds as its Michael Hill chain grew steadily in its main markets of Australia and New Zealand and recorded stronger growth in Canada. Still, it posted wider losses in its troubled US business and its fledgling Emma & Roe chain.

Profit rose to A$32.6 million, or 8.45 cents per share, in the 12 months ended June 30, from A$19.6 million, or 5.09 cents, a year earlier, the Brisbane, Australia-based company said in a statement. Revenue increased 5.8 percent to A$583 million. When store changes were excluded, same-store sales lifted a more modest 1.6 percent.

The jewellery retailer opened 26 stores during the year, of which 13 were Michael Hill and 13 Emma & Roe stores, and it closed seven, taking the total in the group to 332.

The company said the past year was solid, "achieved on the back of steady performances by our Australian and New Zealand businesses, and a strong performance by our Canadian business."

The company's Michael Hill stores in Australia lifted earnings before interest and tax by 3.4 percent to A$52.4 million as revenue advanced 4 percent to A$322 million. The profit margin, measured as ebit as a percentage of revenue, slipped to 16.3 percent from 16.4 percent, which the company said was "particularly pleasing against a backdrop of a challenging retail environment". It closed five uneconomic stores and opened three, taking the total to 166.

In New Zealand, the Michael Hill brand closed one store and opened another, leaving total store numbers unchanged at 52. Ebit lifted 2.6 percent to $28 million even as sales edged down 0.8 percent to $122 million, as the company improved its focus on variable expenses such as advertising, wages and credit. The profit margin improved to 23 percent from 22.2 percent.

Michael Hill's Canadian unit boosted ebit 38 percent to C$12.6 million while revenue jumped 18 percent to C$112.7 million, as it traded with an additional nine stores, taking the total to 76. Its profit margin lifted to 11.1 percent from 9.5 percent.

The company said its Canadian unit is achieving scale and gaining market share and it's confident the trend will continue in the coming year with its plan to open seven more stores.

However Michael Hill's US business deteriorated during the year, posting a wider ebit loss of US$3.8 million from US$2.6 million the year earlier, as revenue fell 12 percent to US$12.5 million. The retailer wrote down its US business by US$1.3 million, reflecting a write down of assets and lease exit costs at its Easton Centre store in Ohio, which was closed in June 2017, taking total store numbers to nine, and also the impairment of the fitout and onerous lease provision at its Roosevelt Fields store in New York, which is not performing to expected levels. Canadian head Brett Halliday now heads the US business as North American President and is reviewing the US business and making adjustments to the model as required, it said.

The company's Emma & Roe brand, which sells charm bracelets and accessories, increased revenue 62 percent to A$15.1 million as it opened 13 new stores, taking total store numbers to 29. However same-store sales slipped 2.1 percent to A$7.2 million and the business posted a wider ebit loss of A$6.9 million from A$2.4 million as expenses lifted 89 percent to A$16.9 million.

"Revenue targets weren’t achieved in 2016-17 year and as a result, losses have exceeded expectations for the year," the company said. "We are continuing to review the Emma & Roe model based on customer responses and insights, with a view to making adjustments to the brand offering during 2017-18."

The company will pay a final dividend of 2.5 Australian cents per share on Sept. 29, taking the total annual dividend to 5 Australian cents.

Dual-listed Michael Hill shares last traded at $1.33 on the NZX, and have shed 12 percent the past year.

(BusinessDesk)

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