Michael Hill warns of lower first half operating profit

By NZPA

Wednesday 12th February 2003

Jeweller Michael Hill International has forecast a slightly lower first half year operating profit around $7.5 million.

The full six month profit to December 31 is not due for release until February 26, but sales figures were given last month

Michael Hill said today its operating profit would be around 10 percent or $800,000 down on the previous corresponding period at $7.5 million.

Its total profit, including gains on the sale of its Australian head office, would be around $8.6 million.

That compared with a profit of $8.7 million in 2001, which included a $408,000 profit on the sale of its New Zealand head office.

Michael Hill said the main factors affecting the fall in operating profit had been the stronger New Zealand dollar, start up costs in Canada and lower than expected sales revenue in November.

The stronger currency accounted for about $490,000 of the fall, and the Canadian operation had made a similar loss.

November's unexpectedly lower sales had cost the company about $1 million. Other incidentals had been higher infrastructure costs as the company expands overseas, and higher operating costs in Australia in some areas.

Despite the small drop in operating profit, the company said it remained confident about the company's long-term future and expansion plans.

Last month the company said its six-month sales revenue had risen 5.3 percent to $121.9 million with New Zealand sales up 6.7 percent and Australian sales up 11.3 percent in Australian dollars or 3.6 percent in local currency. Until then, shares had been trading up to a new high of $6.45, from $4.65 in July.

Today, shares in Michael Hill dropped 10c to $5.55 in mid-morning trading.

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