Michael Hill first-half profit rises 11.5%, margins shrink in Australia

By Hannah Lynch

Feb, 16 (BusinessDesk) – Michael Hill International Ltd., the listed jewellery chain, posted an 11.5 percent increase in first-half sales as improved returns in New Zealand, Canada and the US made up for shrinking margins in Australia.

Profit rose to $26.3 million for the six months ended Dec. 31, up from $25.6 million in the same period a year earlier, the company said in a statement today. Sales increased 7.3 percent to $289 million. Profit beat brokerage Forsyth Barr’s forecast of $25.7 million.

The company first-flagged its first-half results in January, saying challenging retailing in Australia, its largest market, “has been challenging”, squeezing margins in the second quarter. That contrasts with its results in its most difficult market, the US, where losses in the first half narrowed and sales jumped 18 percent.

Michael Hill lifted its interim dividend to 2 cents a share, more than expected, from 1.5 cents.

“The board is pleased with the progresses of the US operation of the past six months but acknowledges there is still a long way to go before the business is proven up in the US market,” said chairman Michael Hill. “Focus remains on improving both the top line margins in order to grow the bottom line of nine stores over the coming twelve months.”

Shares of Michael Hill last traded at 87 cents and have slipped 2.3 percent in the past 12 months. The stock is rated ‘outperform’ based on a Reuters poll of three analysts.

Sales in the US rose to $6.6 million from $5.6 million, while the operating loss shrank to $1.78 million from $2.8 million.

In Australia, sales rose 5 percent to $189.6 million while the operating surplus fell 2.4 percent to $31.6 million. Same-store sales rose 1.5 percent in Australian dollar terms.

The company opened five new stores in Australian during the period and closed one New South Wales store taking its total to 149.

New Zealand sales were up 8.5 percent to $60.9 million and its operating surplus climbed about 13 percent to $12.2 million.

In Canada, sales increased about 21 percent to $24.6 million and the operating surplus soared 186 percent to $1.5 million.

The company’s professional care plan, that offers maintenance and repairs on jewellery, recorded first-half sales of $14.4 million, of which $1.5 million was included as revenue in its segment figures. The care plans offered are 3-year and lifetime.

(BusinessDesk)

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