Michael Hill International has posted a $22.2 million profit after tax for the six months to December and has signalled a slowing in expansion as it scrutinises potential acquisitions more closely.
The $22.2 million after-tax profit is down on last year's $65.4 million result, but that was underpinned by a $52.9 million tax credit at the time.
Tax credit aside, the comparative after-tax profit rose 77% from $12.5 million last year to $22.2 million.
Company chairman Michael Hill said he was satisfied with the improved operating result, especially in such difficult trading conditions, and noted that while the group was evaluating potential for new stores in all its market, "only the very best opportunities will be considered".
"With the global economic outlook still uncertain, a strong focus will remain on improving existing store performance and controlling costs," Mr Hill said in a statement to markets yesterday.
Craigs Investment Partners broker Chris Timms said the $22.2 million profit was a "solid result" in difficult market conditions, with Australian operations the highlight, backed up by "efficient" New Zealand management.
"It's a sound decision not to have `growth-at-all-costs', especially in the US market," Mr Timms said, alluding to the company's exercising care in evaluating new sites for purchase.
While Canada had one-off start-up costs to absorb, Mr Timms said the US market reflected how hard the recession was hitting there, with retailers more badly affected than those in Australia or New Zealand.
"It is positive that there are more New Zealand companies with some operations in Australia which are doing well," he said Mr Hill said New Zealand sales were up 5.5%, having rebounded from a 9.3% decline last year, but retail sales were still difficult to make and margins were still under pressure.
"Additional expense was also incurred due to an increase in the use of finance plans to help generate additional sales revenue," he said.
Mr Hill was pleased with the Australian result, with sales up 3.6%, compared with last year's 1% gain, and its operating surplus, as a percentage of revenue, mirroring last year's 18.5% again.
Canada continued to have difficult trading conditions, and sales were down 5.1%, compared with a 10.7% decline last year, and while revenue was up 16.3%, its operating surplus was less than half the previous year at $C150,000, compared with $316,000.
In the United States, operating losses more than doubled, from $US1.03 million to $2.88 million on revenue of $5.33 million.
"This business is still in its infancy and the management team will continue to focus on adapting our proven retail formula to the US market" Mr Hill said.
Michael Hill International six-month result
242 stores after-tax profit $NZ22.2 million. Revenue up 7.9% at $244.8 million.
New Zealand: 53 stores, revenue up 5.7% to $52.4 million, sales up 5.5%
Australia: 143 stores, revenue up 6.2% to $A132.8 million, sales up 5.6%
Canada: 29 stores, revenue up 16.3% to $C16.2 million, sales down 5.1%
United States: 17 stores, revenue $US5.3 million (Loss $US2.88 million) (No comparisons as it is a new business, 4 months old)
Source: MHI
