Michael Hill posts 5.1% gain in first-half profit as Australia picks up

Michael Hill International [NZX: MHI], the listed jewellery retailer, increased first-half profit 5.1%  as it improved its performance in its key Australian market and boosted margins in New Zealand and Canada.

Profit rose to $A24.9 million, or 6.48c  per share, in the six months ended December 31, from $A23.7 million, or 6.15c, in the year-earlier period, the Brisbane-based company said in a statement. Revenue increased 9.7% to $A310.8 million.

The retailer increased revenue and earnings in Australia, its largest unit, after posting weaker earnings last year. Its New Zealand and Canadian units boosted earnings and profit margins while its US unit was impacted by store changes.

"It was particularly pleasing to see both revenue and earnings before interest and tax growth come from our largest market, Australia, given the continuing lack of consumer confidence in many parts of the country," said chief executive Mike Parsell. "The Australian, New Zealand and Canadian segments performed well during the period and are expected to continue to show strength through the second half."

The company's 166 Australian stores increased ebit 2.9%  to $A32.4 million as revenue rose 4.2% to $A175.6 million. The profit margin slipped to 18.5% from 18.7% in the year-earlier period. Same-store sales grew 3.4% following a 1.9% decline in the year-earlier period.

Its 52 New Zealand stores increased ebit 10% to $15.3 million as revenue rose 6.7% to $67.5 million, aided by a strong Auckland economy. The profit margin improved to 22.7% from 22%.

Michael Hill's Canadian unit improved ebit 47%  to $C7.4 million as revenue jumped 19% percent to $C53.3 million. Store numbers increased to 65 from 59 and the profit margin widened to 13.9%  from 11.3%.

"The Canadian segment continues to grow and improve as it reaches critical mass in the larger provinces in Canada," the jeweller said.

In the US, the first half was impacted by increased marketing spending, the three-month closure of Woodfield Mall in Chicago, and by the costs associated with opening a new store at Roosevelt Fields in New York, the company said.

The operating loss in the US widened to $US1.5 million from $US600,000 in the year-earlier period, although revenue increased 25%  to $US7.4 million. The number of stores increased by two to 10.

"We remain confident of further improving our US model over the coming half year and are committed to continuing testing of our model in this lucrative market," the retailer said.

The company said it will assess its Emma & Roe chain at the end of the financial year and decide whether to proceed with a full expansion. The brand, which sells charm bracelets and accessories, was launched in April 2014 and has 11 stores.

Michael Hill will pay a 2.5c  dividend on April 1, unchanged from the year-earlier period.

Its shares last traded at 95c  and have slid 4%  so far this year.

The stock is rated a 'buy' according to three analyst recommendations compiled by Reuters.

(BusinessDesk)