Michael Hill International posted a 66 per cent drop in first-half profit, mainly reflecting A$19.8 million ($21.1m) of provisions to reposition its Emma & Roe chain and to recognise costs of exiting the US market.

The jewellery chain flagged the provisions two weeks ago. It is exploring options for its US exit, including selling the business or through an agreement with landlords of its nine stores. The process is targeted to be completed by June 30.

In the first half, US revenue fell 15 per cent to US$6m ($8.1m) for a loss of US$5.6m on an earnings-before-interest-and-tax (ebit) basis, including a provision for impairment and onerous leases of US$3.5m.

Emma & Roe achieved a 20 per cent gain in sales to A$10.5m but recognised an A$15.2m charge for impairments and onerous leases, resulting in an A$19.6m ebit loss.

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Emma & Roe is being repositioned as a "demi-fine jewellery" chain, with redesigned stores and a new online offering scheduled for the new financial year. There would be "a material reduction" in the number of stores, the company said.

For the retailer as a whole, profit dropped to A$8.7m in the six months ended December 31, from A$25.8m a year earlier. Sales from continuing operations rose 4.5 per cent to A$342m. The company opened 14 Michael Hill stores in the first half and same-store sales edged up 0.3 per cent. It now has a total 347 stores including 30 in the Emma & Roe chain.

"For the period, the group increased its overall revenues and achieved same-store sales growth despite challenging retail conditions and underperformance of the US and Emma & Roe businesses," chief executive Phil Taylor said.

"The company's core Michael Hill businesses in Australia, New Zealand and Canada performed strongly during the first quarter before experiencing a slowdown in the second quarter, in particular, the November trading period, where sales fell short of expectations," he said.

"This challenging November period, combined with a heavier investment in our marketing efforts, resulted in a flat ebit result from the combined three businesses."

Total first-half ebit dropped to A$15m from A$40m.

Michael Hill will pay an interim dividend of 2.5 Australian cents a share, unchanged from a year earlier.

In its biggest market of Australia, the Brisbane-based company's revenue rose 1.8 per cent to A$185m although ebit fell 3.2 per cent to A$32.6m. The company said "challenging November trading period and increased marketing costs impacted bottom line results".

It said the Michael Hill brand is well positioned to take market share in Australia, in what it called "a relatively stagnant category".

Michael Hill New Zealand recorded a 4.2 per cent gain in sales to about $70m while ebit fell 4.6 per cent to $15.8m. It said increased investment in marketing and higher than expected payment plan costs "adversely impacted the segment's bottom line". Its focus in the second half is "on lifting gross margin and achieving cost efficiencies".

Canada was the standout segment for the retailer. Sales jumped 18 per cent to C$73.7m ($79.3m) while ebit rose by the same amount to C$10.4m as it opened seven stores to bring its total to 83 and "captured additional market share from increased awareness and brand credibility".

ECommerce sales surged 73 per cent in the first half to A$5.6m, accounting for just 1.7 per cent of group revenue.

Michael Hill's dual-listed shares last traded on the ASX at A$1.095 and have dropped 19 per cent in the past 12 months.