Michael Hill shares gain after annual earnings seen up by as much as 5.9%

Michael Hill International [NZX: MHI], the listed jewellery chain shifting its primary listing to Australia, lifted annual earnings by as much as 5.9%, boosting sales across all its territories and opening new Emma & Roe stores.

The shares jumped 15% to $1.31 on the NZX.

Earnings before interest and tax were between $A46 million and $A48 million in the 12 months ended June 30, up from $A42.1 million a year earlier, the Brisbane-based company said in a statement. Annual sales rose 8.9% to $A545.1 million, with its Michael Hill brand increasing revenue 8.1% to $A535.8 million and the Emma & Roe chain almost doubling sales to $A9.3 million. On a same-store basis, sales were up 4.8% across Michael Hill and 34% at Emma & Roe.

Last month, shareholders in the jewellery chain voted in favour of a restructuring plan to shift the assets into a new company incorporated in Australia and listed on the ASX. The deal would align the board, management and business operations in one jurisdiction, while also providing tax benefits of up to $A22 million.

Today's statement shows the company's Michael Hill chain lifted sales in Australia 4.2% to $A307 million, the smallest gain. The New Zealand operations generated a 7% increase in local currency sales, rising 7% to $122 million, while Canada sales rose 19% to $C93.9 million and US revenue was up 24% to $US14 million.

The Emma & Roe chain is only in New Zealand and Australia so far, with Australian sales climbing 90% to $A8.7 million and New Zealand revenue more than doubling to $731,000. Michael Hill plans to open 12 more stores in Australia and four in New Zealand in the coming financial year.

Michael Hill is embroiled in a tax dispute with New Zealand's Inland Revenue over transferring its group intellectual property and franchising operations from New Zealand to Australia in 2008, using an Australian Limited Partnership (ALP) as part of the finance structure. The Court of Appeal last month turned down a bid by the retailer to have the dispute thrown out, and Michael Hill has since said it continues to defend its position, with almost NZ$40 million in dispute.

(BusinessDesk)