Michael Hill profit slumps
A tax settlement in Australia has made a dent in the profit of listed jeweller Michael Hill this year.
The company booked a profit after tax of A$25 million (NZ$27.4m), down 22 per cent, for the year to June.
During the year the company paid A$5.99m to resolve a dispute with the Australian Taxation Office arising from an intellectual property transfer in 2008.
Another A$2.31m was paid into a tax pool in relation to an ongoing dispute with Inland Revenue.
Shares in Michael Hill fell 5 cents to $1.25 about noon today.
Morningstar analyst Nachi Moghe said the doubling of Michael Hill's tax bill had clearly had an impact on the result, compounded by "sluggish" sales in its main markets.
"Their trading in New Zealand is going backwards; sales have fallen," he said.
"Australia's also kind of flat on a same-store basis.
"The only thing that's positive for them is Canada, which has gone up quite significantly, but Canada's still quite small."
Despite the fall in profit, the company had a near 10 per cent rise in revenue of A$483.9m.
Operating profit was A$455.2m, up 8.9 per cent, and same-store sales across the group were up 5 per cent.
New Zealand, which provides a fifth of the group's sales, saw same-store sales fall 1.9 per cent and revenue decline 1.5 per cent to NZ$109.6m.
Its operating surplus was virtually flat at NZ$22.1m.
Australia, which accounts for nearly two-thirds of the firm's sales, saw same-store sales edge up 0.8 per cent.
Revenue rose 4.4 per cent to A$302m and operating surplus rose 10 per cent to A$46.7m.
Company chairman Michael Hill said the directors were pleased with the bottomline growth in Australia after difficult trading the year before.
They were also pleased with the recovery of the New Zealand business as a new management team settled in, focusing on improving sales and controlling costs.
Canadian revenue grew 30.4 per cent to C$69m (NZ$74.6m), with an operating surplus of C$3.8m, compared with C$1.1m for the previous corresponding period.
Canadian same-stores sales rose 10 per cent, compared with 1.7 per cent the year before, and the company said it was gaining brand awareness in that market.
Michael Hill continued to test the United States market, where it has eight stores and is targeting the bridal sector.
This was a key reason for its reduced operating cashflow, which was $14.6m from $41.6m the previous year.
In the year ahead, the company said, it would continue to refine its recent investment in inventory management systems and would ramp up its work on selling online.
The flat trading conditions kept Michael Hill's dividend unchanged at NZ6.5c, including a NZ4c final dividend.