Declining revenues in New Zealand and Canadian markets have taken the shine off a profit boosted by tax credits at jeweller Michael Hill International.

Tax credits linked to a restructure transferring intellectual property to the company’s Australian subsidiary boosted the company’s net profit by 237% to $65.6 million for the six months to December 31, 2008.

But net profit before tax was down 37% to $17.9 million.

Overall operating revenue was up 8.5% to $226.97 million, but margins were hurt by the fall in the Australian/US exchange rate.

Earnings before interest and tax (ebit) was down 30.8% to $21.3 million.

Directors say the group’s balance sheet remains sound, with an equity ratio of 55% as at December 31.

Retail revenue from the New Zealand market dropped 7.6% to $49.6 million for the six months with ebit dropping 24.8% to $6.8m.

The Australian market was more resilient, increasing revenue 4.7% to $A125m for the six months with ebit down 1.4% to A$15.5m.

Canadian revenue rose 3.5% to $C13.9m but the segment recorded a $C444,000 operating loss in difficult trading conditions.

United States trading was also difficult but Michael Hill directors said they were confident acquisitions in the country were still a good opportunity for the future.

On revenue of $US4.09m for the four months, the division made an operating loss of $US1.4m.

Store growth may slow over the next year as the company says it will be more choosey about taking up opportunities.