Michael Hill International Limited (MHI.NZ)

Friday 20th March 2015

Michael Hill International Limited (MHI.NZ) owns the brands “Michael Hill” and “Emma & Roe” and operates a retail jewellery chain of 285 Michael Hill stores and eight Emma & Roe stores in Australia, New Zealand, Canada and the United States as at 31 December 2014. The Company story began in 1979 when Sir Michael and his wife Christine opened their first store in the New Zealand town of Whangarei, some 160 kilometers north of Auckland. Since then, growth has been guided by a unique retail jewellery formula. Through dramatically different store designs, a product range devoted exclusively to jewellery and development of high impact advertising, the Company rose to national prominence. In 1987, the Company was listed on the New Zealand Stock Exchange, the same year the Group expanded into Australia. In 2002, the Michael Hill Group expanded into North America, opening its first stores in Vancouver, Canada. The Canadian presence now includes stores in British Columbia, Alberta, Manitoba, Saskatchewan and Ontario. In September 2008, the Group entered the United States market and now has 8 stores in Illinois, Ohio and Minnesota. 2014 saw the opening of the first Emma & Roe store, following a successful trial during the preceding 18 months in five South East Queensland outlets under the trading name ‘Captured Moments’. These stores carry unique jewellery collections consisting of bracelets and charms, along with matching jewellery. The two brands are viewed as being complementary within the jewellery sector, with the Michael Hill brand continuing to focus on diamonds, bridal and fine jewellery. As at 31 December 2014, the Group operates 52 Michael Hill stores in New Zealand, 166 in Australia, 59 in Canada, and eight stores in the USA. In addition, there are seven Emma & Roe stores in Australia and one in New Zealand. Around the world, the Group employs approximately 2,400 permanent employees in retail sales, manufacturing and administration roles.

Michael Hill International Limited announced an after tax profit of AU$ 23.697m for the six months ended 31 December 2014, up 45.9% compared to last year’s AU$ 16.245m.

Divisional Performance For Period Ending 31 Dec 2014

Australia

The Australian retail segment revenue decreased by 1.9% to $168.540m for the six months, with an operating surplus of $31.504m, an increase of 8.6% on the previous corresponding period. Same store sales decreased 1.9% for the six months. The operating surplus as a percentage of revenue was 18.7% (16.9% last year). The Australian market has continued to be challenging due to lower consumer confidence, especially in regions where the resource sector is prevalent. Costs have been a focus over the period and this has assisted with delivering an improved result. Two new stores were opened in Australia during the period, giving a total of 166 stores operating at 31 December 2014.

New Zealand

The New Zealand retail segment revenue increased 3.8% to NZ$ 63.238m for the six months, with an operating surplus of NZ$13.960m, up 12.9% on the corresponding period last year. Same store sales in local currency during the six months increased by 4.2%. The operating surplus as a percentage of revenue was 22.1% (20.3% last year). The improved performance of the New Zealand segment is a continuation of the turnaround in this business which commenced in 2013/14. No stores were opened or closed during the period giving a total of 52 stores operating at 31 December 2014.

Canada

The Canadian retail segment revenue increased by 18.4% for the six months to CA$ 44.854m, with an operating surplus of CA$ 5.139m compared to CA$ 2.854m for the previous corresponding period. Same stores sales increased 4.3% for the six months. The operating surplus as a percentage of revenue was 11.5% (7.5% last year). The Canadian segment continues to grow and improve due to the maturing of this business, which has now reached a critical mass allowing increased marketing spend and brand awareness. Six new stores were opened and one closed during the period, giving a total of 59 stores operating at 31 December 2014.

USA

The US retail segment increased its revenue by 18.1% to US$ 5.942m for the six months, and there was an operating loss of US$ 0.565m for the period (a loss of US$0.559m last year). Same stores sales in local currency increased 9.1% for the six months. The continued improvement in this test market is encouraging and 2 further stores will be opened in the second half to expand the trial. No stores were opened or closed during the period giving a total of eight stores operating at 31 December 2014.

Outlook

MHI Board stated that “While first half results were satisfactory, they should be viewed in context with the downturn in consumer confidence in our biggest market, Australia. Also of special note was the recent launch of our rebranding campaign “We’re for Love” which will lead to a repositioning for our Michael Hill brand. This campaign will involve significant investment in the second half of the financial year.”

Read the research report on IRG Online Library shop.sharechat.co.nz

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