Hill family urged to repay wage subsidy

The profit was helped by A$15m of wage subsidies from the NZ, Australian and Canadian governments.

Jewellery company Michael Hill International, which received $3.6 million from the Government in Covid-19 wage subsidies and is now forecasting a big rise in firsthalf profit, should pay the money back, according to the head of a financial education firm.

On Friday, Michael Hill said it expected to post a pre-tax profit of between A$56 million (NZ$59m) and A$60m for the six months ended on December 27.

At the higher end of the range, that’s almost double the A$31.6m it reported in the same period a year earlier.

The profit was helped by A$15m of wage subsidies from the New Zealand, Australian and Canadian governments.

Many retailers that qualified for wage subsidies after stores were forced to close during the lockdown have since seen a surge in trading as people who couldn’t travel overseas spent more locally. The rebound and public pressure prompted some, such as Briscoe Group and The Warehouse Group, to repay the money.

But a Michael Hill spokesman said on Friday that the company wouldn’t pay the subsidy back as it had been severely affected by the pandemic and had passed the funds to staff. The company was performing better due to ‘‘a lot of hard work’’ and it was a credit to the team, he said.

However, Guy Dobson, the managing director of Wellingtonbased institutional financial education provider Dynamique, said the money should be paid back. The Government should be first in line because, as a small nation, it could least afford it, he said.

Dobson has 30 years of experience in financial markets and has worked with many of the country’s big investment and banking firms as well as the Reserve Bank.

‘‘If we had a position in Michael Hill, we would sell down our line of stock forthwith as their ethics are not in line with the current climate and our own high standards of corporate performance,’’ Dobson said.

He said Michael Hill chief executive Daniel Bracken had misread public sentiment on the issue, and it could turn out to be a ‘‘slow burn’’ public-relations disaster for the company. In an era increasingly focused on ESG (environmental, social and governance) investing, Michael Hill’s decision reflected badly on boardroom integrity, he said.

At the same time as Michael Hill announced its higher profit, the retailer said it would bring forward payment of a A$5.8m dividend that it had suspended last year due to Covid-19.

Dobson said the dividend should have been deferred further instead of retaining the subsidy, if the company had cash reserves. He called on shareholders to donate any payment they received to charity. The company was founded by Sir Michael Hill in 1979 and the Hill family interests stand to gain about A$2.8m from the dividend payment.