Michael Hill profits up 7.2pc

Michael Hill and model Danielle Hayes. Photo / Norrie Montgomery

Michael Hill International, the jewellery chain whose founding family is seeking to regain control, posted a 7.2 per cent gain in first-half profit as it tempted consumers in Australia and New Zealand to spend more at its stores.

Net income rose to $23.9 million, or 6.23 cents a share, in the six months ended December 31, from $22.3 million, or 5.82 cents a year earlier, the Brisbane-based company said in a statement. Sales rose 9.9 per cent to $269 million.

The retailer said the general climate for retailing remains "cautious in all markets" and floods and storms in Australia are likely to make for a difficult third quarter in its biggest market.

Still, the company forecast a 24 per cent jump in full-year earnings before interest and tax and said it is "confident in the continued growth and profitability of the group."

Shares of Michael Hill have climbed almost 30 per cent in the past six months and were last at 89 cents. The company relocated to Australia under a restructuring that yielded tax breaks and more recently interests associated with founder Michael Hill's family renewed efforts to lift their stake above 50 per cent.

The Hill family's Durante's holding is offering 90 cents a share to lift its stake to 50.2 per cent from 47.6 per cent.

Income tax paid in the first half barely budged at $5.2 million, even as earnings rose. The company will pay an unchanged interim dividend of 1.5 cents a share.

Michael Hill opened five stores in the first half, bringing its total to 237. Of those, 144, or 61 per cent, of the outlets are in Australia, 54 are in New Zealand, 30 in Canada and nine in the US Same-store sales rose 9.7 per cent.

Sales in Australia rose 6.1 per cent to A$140.9 million and EBIT gained 3.7 per cent to A$25 million. The operating surplus as a percentage of sales slipped to 18 per cent from 18.4 per cent.

New Zealand sales climbed 7.1 per cent to $56 million and EBIT jumped 16 per cent to $9.4 million. Canadian sales rose 24 per cent to C$20 million, yielding an operating surplus of C$423,000, up from C$150,000 a year earlier. Earnings in Canada were trimmed by increased marketing costs and also the cost of increased sales on finance plans, the company said.

In the US, the operating loss shrank to US$2.1 million from $2.89 million on sales of US$4.2 million.

Michael Hill said it is still in talks with the Inland Revenue Department and Australian Tax Office about its 2008 restructuring, including the way it financed the sale of intellectual property to its Australian unit from the New Zealand unit.