Michael Hill lacks sparkle
Jeweller Michael Hill is going back to basics in New Zealand with the focus on growth and glam going to the United States and Canadian businesses.
The NZX-listed jeweller reported a net profit of A$16.2 million (NZ$17.5m) for the six months to December 31, down 26 per cent from the previous corresponding period, due largely to ongoing tax issues.
Michael Hill’s profit before tax for the six months was A$28.5m, up 5.1 per cent compared to a year earlier.
Total operating revenue grew 9.8 per cent to A$271m against total costs of A$242.6m, an increase of 10.4 per cent.
Australian shareholders will receive an interim dividend of 2.5 cents a share, payable on April 1.
However, New Zealand shareholders’ dividends would not be imputed due to the internal restructuring of the group in 2008.
Despite the weak headline numbers, chairman Michael Hill said the board was ‘‘satisfied with the overall performance’’ and remained ‘‘confident in the continued growth and profitability of the group’’.
Revenue for the New Zealand business fell 3.5 per cent to NZ$60.9m during the half year and same-store sales in local currency dropped 4.1 per cent.
One store opened in Ashburton, taking the number of shops in New Zealand to 53 at the end of last year.
Milford Asset Management retail analyst Victoria Harris said overall it was a ‘‘disappointing’’ result. Aside from the A$12.2m tax expense to settle the company’s ongoing dispute with the Australian Taxation Office, its global market performance was ‘‘not impressive’’, Harris said.
And the issue with Inland Revenue in New Zealand was still looming. The tax disputes with the Australian and New Zealand tax authorities relate to the sale and financing of the company’s intellectual property between New Zealand and Australia in 2008.
Harris said the cost related to the tax dispute with IRD was larger than the amount involving the Australian dispute but a figure was not yet available.
Michael Hill was not focusing its attention on its Kiwi business, despite about 40 per cent of total profit before interest and tax coming from its home turf, she said.
‘‘I guess it started when they headquartered their offices in Australia.’’
Michael Hill chief executive Mike Parsell said the soft Kiwi results were caused by ongoing internal issues. However, he said the company had been ‘‘swimming against the tide a little bit’’ in the current retail market.
He said the improving economic situation in New Zealand should help the business. But the company did not have any big plans for the domestic operation.
Once the tax issue was resolved it would be a ‘‘return to basics’’ for New Zealand, Parsell said.
Instead Michael Hill’s American and Canadian arms would be getting the star treatment.
Parsell said he was ‘‘quite pleased’’ with how the bridal range trial, launched in the United States in December, had gone so far.
And while the company was looking at a new marketing approach and rebrand, it would not be bringing back reality TV star Kim Kardashian.
The company’s total store count at December 31 was 279, with 13 stores opening and one closing during the six months.
Parsell said the company still held ambitions of building a global network of 1000 shops but the way customers engaged with stores was changing. More customers were shopping online.
Michael Hill shares closed yesterday at $1.38, down 2c.