Listed jewellery retailer Michael Hill International produced
a ''stunning financial result'' in difficult circumstances,
Craigs Investment Partners broker Chris Timms said yesterday.
MHI reported operating earnings of $63.2 million for the year
ended June, up 8.6% on the 58.2 million reported in the
previous corresponding period.
Before-tax profit was up nearly 12% to $47 million and the
reported profit was up 9.6% to $40 million. Operating cash
flow was in line with last year at $52.34 million. Net debt
of $21 million was also in line with the previous period.
Mr Timms said the dividend increased by a cent over the year
and that was a story everyone liked. MHI's share price rose
3% after the company reported to the NZX.
''Michael Hill has a business model that can work in tough
times and generate profit growth. They are not loaded down
with debt and are naturally progressive.''
The company did not have a large online presence, preferring
to open stores in high-volume pedestrian traffic precincts,
Mr Timms said.
People buying items such as diamond rings like to look at
items, touch them and try them on.
''Once you get the diamond ring on a finger, it can be hard
to get it off,'' he said.
Chairman Sir Michael Hill outlined some tax issues facing the
company relating to the way the group valued and financed the
sale of intellectual property from one of its New Zealand
companies to one of the Australian companies.
In New Zealand, the Inland Revenue Department questioned the
manner in which the transaction was financed. The Australian
Taxation Office queried the value at which the intellectual
property was transferred.
''The group does not agree with the positions advanced by
either the IRD or ATO and believes the tax treatment and
values it has adopted are correct.''
Discussions continued with both IRD and ATO within their
dispute process frameworks. In New Zealand the amount in
dispute was $24.6 million.
Sir Michael said directors were pleased that all segments of
the group were able to improve their results in the financial
year, despite continued pressure on the retail sector.
Revenue growth continued to be difficult to achieve in all
markets, especially over the second half of the financial
''A focus on improving the existing business will continue
during 2013-14 as well as continued store openings when
suitable sites become available,'' he said.