Michael Hill to step down from jewellery chain; cuts dividend to fund growth

The founder of the Michael Hill International [NZX: MHI] jewellery business, Sir Michael Hill, is stepping down to make way for his daughter Emma Hill to succeed him in the chair, as the company reduces its dividend to fund growth.

Emma Hill, who first started working for the company on the shop floor 30 years ago at age 13, will step up from her deputy position when her father retires following the annual shareholders' meeting on November 3, Brisbane-based MHI said in a statement. Emma Hill, who has a bachelor of commerce and an MBA, established the company's Canadian business in 2002 and was appointed to the board in 2007.

"Emma has learnt jewellery retailing from the ground up, has worked across the breadth of the business, and across our international marketplace," Mr Hill said, adding he was "thrilled" with the appointment which would see his daughter chair the company over the next period of growth and development. Hill family associates control some 53% of the company.

The retailer, which has expanded from a single store in Whangarei in 1979 to 296 stores across Australia, New Zealand, Canada and the US, increased annual profit 11% to $A27.8 million.

However, it is cutting its annual dividend for the first time in six years as it retains funds to bolster future growth. The 2015 annual dividend will fall to 5c per share, from 6.5c in 2014, the first decline since 2009.

"The reduction in the full-year dividend is a reflection of the flat earnings growth for the year together with the group's growth ambitions," the company said. "The reduction in dividend will allow the group to continue to maintain a sound balance sheet and gearing position going forward."

The company said its balance sheet continued to be sound, with an equity ratio of 53.5% at June 30, from 53.3% a year earlier.

Shares in MHI last traded at 95c and have dropped 19% so far this year.

MHI intends to boost its store numbers in Australia to 175 by the 2018 financial year, from 167 at present. In the year through June, earnings before interest and tax at the Australian unit fell 2.7% to A$45.9 million as revenue declined 1.4% to $A294.4 million.

"The Australian market has continued to be challenging due to lower consumer confidence, especially in regions where the resource sector is prevalent," the company said, adding "significant focus" will be placed on turning the business around this financial year with a focus on costs and the consistent execution of its retail selling system.

In its 52 New Zealand stores, ebit rose 6.7% to $23.5 million as sales increased 3.9% to $114 million, which the company said reflected a turnaround that started in the 2014 financial year. It expects to open an additional store in the 2017 financial year.

Seven new stores
In Canada, the company opened seven new stores, taking the total to 60. Ebit jumped 59% to $C6 million as revenue increased 15% to $C79.1 million. It expects to open eight stores this year, and six in each of the following two years, taking the total to 80 stores by the 2018 financial year. The company has identified 110 suitable store locations in Canada.

It said its Canadian unit had now reached a critical mass allowing increased spending on marketing and brand awareness. While same-store sales growth of 2.5% fell short of expectations, the company remained positive about the market and would continue to support the store growth programme, it said.

Meanwhile, in its fledgling US operation, the company's loss widened to $US1.9 million from $US1.7 million the year earlier, which it said was in line with expectations for what it still considered a test market. The company said 13 percent revenue growth to $US11.3 million was "encouraging". It expects to increase US stores to 19 by the 2018 financial year from nine currently.

The retailer said its Emma & Roe brand is still being tested, with seven stores in Australia and one in New Zealand. No financial details were given for the chain.

(BusinessDesk)