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Michael Hill lifts profit 9.6 percent as new stores underpin sales growth

Friday 16th August 2013

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Michael Hill International, the jewellery chain that bears its founder's name, lifted annual profit 9.6 percent as sales growth was underpinned by the retailer opening new stores, offsetting flat revenue on a same-store basis.

Net profit climbed to $40 million, or 10.3 cents per share, in the 12 months ended June 30 from $36.5 million, or 9.5 cents, a year earlier, the Brisbane-based company said in a statement. That was just ahead of First NZ Capital's estimate of $39.1 million.

Total revenue rose 7.4 percent to $549.5 million, with an extra $4.2 million recognised in its professional care plan unit, which offers maintenance and repairs on jewellery, after the retailer changed the way it measures usage.

"The year finished slightly up for the group in NZD and all markets finished with positive sales growth in local currency on a same-store basis and it was pleasing that these sales were achieved on a higher margin," chairman Michael Hill said. "The contribution from new stores opened during the year resulted in revenue lifting by 6.8 percent."

Last month the retailer said the fourth quarter had been tough for the jewellery chain with flat revenue growth in its key Australian market and declining sales in its other three.

Sales at its New Zealand stores rose 2.1 percent to $111.4 million for a 2.7 percent gain in earnings to $22.1 million, with Australian revenue advanced 8.4 percent to $361.2 million with an 11 percent lift in earnings to $52.7 million.

The Canadian unit boosted sales 16 percent to $64.1 million and reported a 90 percent boost in earnings to $1.4 million, and the US segment raised sales 3.9 percent to $12.5 million and narrowed the unit's loss to $2.9 million.

The company will continue to open new stores "when suitable sites become available," it said.

Michael Hill's board declared a final dividend of 4 cents per share with no imputation credits for New Zealand shareholders and full franking credits for Australians, payable on Oct. 4 with a Sept. 27 record date. That's up from 3.5 cents a year earlier, and takes the annual payment to 6.5 cents.

The retailer repeated its warning that its 2008 restructuring means it probably won't be able to impute dividends "for some years" for New Zealand shareholders, and Australian investors will only get partially franked returns.

The shares rose 1.6 percent to $1.30 in trading yesterday, and have gained 5.7 percent this year.

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 $41.1 million deferred tax asset resulting from the depreciation of the intellectual property.

Michael Hill's board hasn't provided for either of the tax disputes.

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