Covid 19 coronavirus: Michael Hill profits plunge more than 80% in FY20

Michael Hill's FY20 earnings took a big hit from the coronavirus pandemic. Photo / File

Michael Hill International's full-year profit plunged more than 80 per cent as the Covid-19 pandemic forced its stores to remain closed between five and 13 weeks.

The transtasman jewellery business, which also has stores in Canada, posted A$3.1 million ($3.4m) net profit after tax in the 2020 financial year compared to A$16.5m ($18.1m) a year earlier.

Its earnings before interest and tax totalled A$14.1m in the year to June 28, down from $21.1m in FY19.

No final dividend was declared and its interim dividend payment of A1.5 cents per share has been deferred until the end of next year.

The company's revenue was down largely because stores were closed during Covid but interestingly, revenue rose at stores that were open.

Group operating revenues fell from A$569.5m to A$492.1m in the year and group adjusted same-store sales were up 2.7 per cent to $469.3m.

Digital sales increased 54.7 per cent to a record A$24.7m in the year, up from A$16m in the previous year, representing 5 per cent of total sales. Digital sales accounted for just 2.8 per cent of total sales in FY19.

Michael Hill chief executive Daniel Bracken said before Covid-19 the company had been "gaining positive momentum", but the closure of more than 280 stores in New Zealand, Australia and Canada had materially affected its earnings.

He said the decrease in earnings could largely be attributed to the second half of the financial year, and that the group had reduced the financial impact of store closures by "implementing a lean operating model, ceasing all discretionary spend, and seeking rent abatements from landlords".

Wage subsidies in all three of its markets partially offset the employee benefits paid out during this period, he said.

The decision to defer the interim dividend until September 2021 was made to "protect the company's balance sheet and liquidity", Bracken said.

New Zealand store revenues declined by 11.1 per cent to A$106.7m in the year compared to A$120.1m in FY19.

Australia store revenues declined by 15 per cent to A$266.6m and Canada store revenues declined 16.8 per cent to A$110.8m.

Bracken said the 2021 financial year was off to a good start despite the group facing more store closures in Auckland and Victoria.

"The company has identified a number of growth and margin opportunities to strengthen our business, across product, digital and a true omni-channel offering."

Michael Hill opened one new store in Canada and closed 17 under-performing stores, including three in New Zealand, during the year. It had 290 stores as of June 28.