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Michael Hill half-year net profit up 7.2%

Thursday 17th February 2011

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Jeweller Michael Hill International (MHI) reported a 7.2% lift in half year net profit to $23.9 million, even as the company noted the general retail climate remained cautious.

Revenue from ordinary activities for the six months to the end of December was up 9.9% from a year earlier to $269.1 million.

An unchanged interim dividend of 1.5c per share is to be paid.

Chairman Sir Michael Hill said the company's directors were particularly satisfied with the improvement in sales in North America, where same store sales in local currency rose 25.4%.

"The general retail climate remains cautious in all markets and recent adverse climatic events in Australia will make the third quarter difficult in this key market," Sir Michael said.

The company was forecasting full year earnings before interest and tax (ebit) of $45 million, compared to $36.2 million a year earlier.

"The group's philosophy of controlled profitable growth will continue and further new stores are being evaluated in all markets," Sir Michael said.

Revenue in MHI's Australian operations was up 6.1% in the latest half year from a year earlier at A$140.9 million (NZ$187.3 million), with ebit up 3.7% to A$25.3m. Same store sales rose 5.7% in local currency.

The opening of three new stores in Australia in the period took the total there to 144.

In this country same store sales rose 6.2%, with revenue up 7.1% to $56.1 million for the six months and ebit up 16.2% to $10.9 million. One new store opened in New Zealand took the total in this country to 54.

In Canada, same store sales in local currency rose 15.1% for the half year, with revenue up 23.5% to C$20.1 million (NZ$27 million), and an operating surplus of C$423,000 from C$150,000 a year earlier.

Additional marketing was carried out in Canada to attract stronger foot traffic and a rise in sales on finance plans which had an associated cost, Sir Michael said.

With the opening of one new store, MHI had 30 Canadian stores.

In the US, revenue was US$4.2 million (NZ$5.6 million), while the operating loss was lower at US$2.1 million from US$2.9 million a year earlier.

The strategy of reducing US operations from 17 stores to nine had achieved the planned improvements, with all nine stores now refurbished to the latest design, Sir Michael said.

Hill family interests are seeking to lift their interest in MHI to 50.2% from 47.6% before announcing the partial takeover in December. On Monday the family interests had 78% of the 8.9m shares needed to declare the offer unconditional.



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