Michael Hill profit edges up

Michael Hill International, the listed jewellery chain, posted an 11.5% increase in first-half sales as shrinking margins in Australia were made up by improved returns in New Zealand, Canada and the US.

Profits rose to $26.3 million for the first six months ended December 31, up from $25.6 million in the same period a year earlier and edging ahead of Forsyth Barr’s forecast of $25.7 million.

Sales increased 7.3% to $289 million.

The company first-flagged its first-half results in January, saying challenging retailing in Australia, Michael Hill’s largest market, “has been challenging”, squeezing margins in the second quarter.

This contrasts with its results in its most difficult market, the US, where losses in the first half narrowed and sales jumped by 18%.

Michael Hill lifted its interim dividend to 2 cents a share from 1.5 cents, more than previously expected.

“The board is pleased with the progresses of the US operation of the past six months but acknowledges there is still a long way to go before the business is proven up ion the US market,” said chairman Michael Hill.

“Focus remains on improving both the top line margins in order to grow the bottom line of nine stores over the coming twelve months.”

New Zealand sales were up 8.5% to $60.9 million and its operating surplus climbed about 13% to $12.2 million.

In Australia, sales rose 5% to $189.6 million while the operating surplus fell 2.4% to $31.6 million. Same-store sales rose 1.5% in Australian dollar terms.

Michael Hill opened five new stores in Australia during the period and closed one New South Wales store, taking its total to 149.

Sales in the US rose to $6.6 million from $5.6 million, while the operating loss shrank to $1.78 million from $2.8 million.

In Canada, sales increased about 21% to $24.6 million and the operating surplus soared 186% to $1.5 million.

The company’s professional care plan, that offers maintenance and repairs on jewellery, recorded first-half sales of $14.4 million, of which $1.5 million was included as revenue in its segment figures.

Michael Hill shares (NZX:MHI) were up 1.15% to 88c in late morning trading.