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Tuesday 25th August 2009 |
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Michael Hill International, New Zealand’s largest jewellery chain, reported a 176% surge in full-year earnings as its shift to Sydney resulted in a $53 million tax credit.
Net income was $69.5 million, or 18.18 cents a share, in the 12 months ended June 30, up from $25.2 million, or 6.61 cents a year earlier, the Sydney-based company said in a statement. A profit of $72 million was expected, according to Forsyth Barr. Earnings before interest and taxation fell 46% to $20.1 million as the global downturn sapped demand for luxury items.
“New Zealand and Canada felt the impact of the worsening global conditions, however the Australian retail segment was more resilient,” said chairman and founder Michael Hill. “The expansion into the U.S. in September has adversely affected the result for the year.”
The shares gained 7.5% to 69 cents yesterday and have surged some 31% so far this year. The company will pay a final dividend of 1.5 cents a share, down from two cents a year earlier and making 2.5 cents for the year.
“Due to the internal restructuring of the group in December, the company is unlikely to be in a position to impute dividends for the foreseeable future,” Hill said. Australian shareholders received full franking credits.
Since 2003, the jeweller has been shifting its business to Australia, now its largest market, after it negotiated a pricing arrangement with the Australian Taxation Office and Inland Revenue Department. Its Australian subsidiary, Michael Hill Franchise Pty bought the intellectual property from Michael Hill Jeweller System that resulted in it slashing its tax bill.
Two weeks before the Lehman collapse in September, the company acquired 17 stores in Illinois and Missouri from Whitehall Jewelers after the US company filed for Chapter 11 bankruptcy.
Hill defended the sale saying “the decision to enter the US market is viewed by the directors as a long-term strategy.”The US stores, which represent some 3.8% of total revenue, reported a segment loss of $5.3 million. The Canadian business made a loss of $245,000.
The Australian stories boosted earnings 11% to $41 million, while operating profit in the New Zealand business sank 19% to $15 million.
Total sales for the group rose 9.4% to $412 million.
Businesswire.co.nz
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