Michael Hill profit falls 5 per cent

Jeweller Michael Hill International today revealed a 5 per cent fall in first half profit, as sales in its key market, Australia, over the crucial Christmas period disappointed.

MHI reported a net after tax profit for the six months to December 31 of $11.7m.

The result -- MHI's first under new international reporting standards -- was 5.3 per cent lower than the same period a year earlier, but was at the higher end of a revised profit range of $10.5-$11.5m flagged to the market last month.

Shares in MHI were trading down 2c at $6.68 on the news, having been sold off sharply in the past month following the January 10 profit warning.

The jewellery retailer said it would pay an interim dividend of 9 cents per share on April 3.

Today's result was based on total operating revenue of $164m, up 6 per cent on the same period last year.

The biggest downward pull on the result was Australia, where same store sales declined 2.4 per cent.

MHI generates more than two-thirds of its revenue from Australia, about one-third from New Zealand and about 4 per cent from Canada.

A change in accounting treatment -- in line with the new reporting rules -- whereby annual bonuses were now accrued at the half year resulted in a reduction in group profit by about $700,000. Previously bonuses were accrued at the end of the financial year.

In contrast, MHI's New Zealand operations increased revenue by 0.1 per cent to $49m, while same store sales for the six month period rose 1.5 per cent.

Earnings before interest and tax (ebit) fell to $6.6m from $7m, however, and ebit as a percentage of revenue decreased from 14.4 per cent to 13.4 per cent.

MHI had 47 New Zealand stores as at December 31.

The jewellery retailer's Australian division improved its revenue by 6 per cent to $107m for the six month period, but ebit fell to $11.9m from $13m.

MHI opened 12 new stores in Australia during the first half, taking its tally to 114.

Its Canadian division posted a 60.8 per cent rise in revenue to $7.5m. In Canadian dollars total revenue improved 55.2 per cent and same stores sales increased 6.3 per cent.

The division posted a small operating profit during the period, compared with a $220,000 loss a year ago.

Three new stores opened during the period, taking MHI's Canadian stores to 10.

The group reported net operating cash flows of $15.95m for the six months, compared with $7.6m the previous year.

MHI said it would continue its philosophy of "controlled profitable growth", with further new stores planned for all three countries as opportunities arose.

The directors remained confident about the continued growth and profitability of the group.

- NZPA