Tax takes sparkle out of result
Jeweller’s full- year profit falls 30% but revenue up in key markets
ichael Hill International, the jewellery chain business founded by its namesake, posted a 30 per cent decline in annual profit as it accounted for tax adjustments.
Profit fell to A$ 19.6 million in the 12 months ended June 30, from A$ 27.8m the year earlier, the Brisbane- based company said.
The earnings included a A$ 28.8m settlement of a historic tax dispute with New Zealand’s Inland Revenue Department and A$ 19.4m of tax adjustments related to its listing on the ASX. Adjusting for those items, profit increased 4.2 per cent to A$ 28.9m.
The jewellery retailer grew revenue and earnings before interest and tax ( ebit) across its key Australian, New Zealand and Canadian markets. Revenue improved at its fledgling US operations, though its loss widened as it opened a new store, while its emerging Emma & Roe brand boosted revenue and slimmed down its loss.
The 2016 financial year “was a significant year for the group, with a record ebit result being achieved on the back of solid performance by our Australian, New Zealand and Canadian businesses”, the directors said in their report.
The company’s 168 Australian stores increased ebit 9.6 per cent to A$ 50.3m as revenue rose 4.4 per cent to A$ 307.3m. The profit margin expanded to 16.4 per cent from 15.6 per cent in the year- earlier period. It opened three stores and closed two during the year, and plans to open a further three this year.
“This result is particularly pleasing against a backdrop of a continued challenging retail environment, especially in regions impacted by the resources sector downturn,” the company said.
Its 52 New Zealand stores grew ebit 16 per cent to $ 27.3m as revenue rose 7.2 per cent to $ 122.2m, helped by strong consumer demand in Auckland. The profit margin improved to 22.3 per cent from 20.7 per cent.
Michael Hill’s Canadian unit improved ebit 57 per cent to C$ 9.5m while revenue jumped 19 per cent to C$ 94.1m, as it gained market share. The profit margin widened to 10 per cent from 7.6 per cent. Store numbers increased to 67 from 60, and the company plans to open as many as 10 new stores in the coming year.
“The group has several years of new store growth in the Canadian market which will further lift revenues and profits,” it said.
The operating loss in the US widened to US$ 2.3m from US$ 1.9m a year earlier, although revenue increased 24 per cent to US$ 14m. It added one store, taking the total to 10.
“Our US trial continues and while the bottom line slipped on the previous year, some headway was made with real estate and merchandise refinements,” it said, adding that most of the stores were expected to produce positive ebit in the current financial year.
The company has moved its Emma & Roe chain from a trial phase into growth mode, with as many as 12 new stores planned for the current financial year.
The brand, which sells charm bracelets and accessories, doubled its size in the past year, taking the total number of stores to 16. It is eyeing 200 Australasian store locations for the brand, and as many as 100 in Canada.
Emma & Roe’s ebit loss narrowed to A$ 2.4m from A$ 2.9m as revenue jumped 92 per cent to A$ 9.3m.
The group opened 19 new stores in the past year, taking the total to 313.
The company will pay a A2.5c final dividend on October 6.