Michael Hill posts $40 million profit despite Covid-19 disruption

Despite the positive result, Michael Hill remains cautious of ongoing trading disruption. Photo / Getty Images

Michael Hill International posted a net profit after tax of A$38.9 million ($41.9m) in the six months to December 27, 82 per cent higher than the A$21.4m it posted a year earlier.

Operating revenue in the 26-week period fell almost 3 per cent to A$319m compared with A$329m in FY19.

This could be attributed to 3709 lost store-trading days across its three operating markets, and the closure of 15 underperforming stores, equating to $23m in lost sales, the company said.

Its earnings before interest and tax (EBIT) increased by 66.9 per cent to A$58.9m.

Michael Hill will pay out a dividend of 1.5 cents per share for the period, in line with the payout in the same period last year. The decision to hold the dividend flat reflected "the risks of ongoing trading disruption".

Group digital sales increased by 102 per cent to $18.5m in the six-month period, now representing almost 6 per cent of total sales, while same-store sales increased 6.3 per cent to $312m compared with $293.6m a year earlier.

Daniel Bracken, chief executive of Michael Hill, said the group was pleased with the results given the challenging operating environment due to the coronavirus pandemic.

"I'm particularly pleased with our results given the challenging environment for our business - continuous store closures throughout the half, significant decline in foot traffic in all markets, the material impact of 3709 lost trading days, and not a single day of all stores open. In spite of all these obstacles, to deliver this significant performance improvement is truly outstanding," Bracken said in the market announcement.

Comparable company profits increased by 41 per cent in the period, he said.

"The digitisation and elevation of our brand is clearly resonating with our customers, as are our key strategic initiatives across loyalty, retail fundamentals and product newness," said Bracken.

"Michael Hill is a business that has been focused on transformation, and while the global challenges have significantly impacted operations, and continue to do so on a daily basis, the performance across all metrics proves we have built strong foundations for growth."

Company same-store sales in New Zealand increased by 2.8 per cent to A$68.4m in the period, while same-store sales increased by 12 per cent to A$174m in Australia and 3.6 per cent to A$70.3m in Canada.

The outlook for the second half of the financial year was positive with the company well-placed to continue to drive growth as its navigated "an unpredictable retail landscape", Bracken said.

The second half was off to a strong start with same-store sales for the group up 11 per cent in the first eight weeks, he said.

"The business entered the second half with clear strategic initiatives, strong retail execution and a robust financial position.

"With two new executives joining the Michael Hill leadership team, the company is well placed to continue the transformation and drive the growth agenda."