Haley Van Leeuwen.
There was nothing in the Michael Hill International
profit report for the year ended June to change a positive view
on the company, Forsyth Barr broker Haley Van Leeuwen said
The listed jeweller reported operating earnings of $55.2
million for the period, up nearly 9% on the $50.7 million
reported in the previous corresponding period.
Increased depreciation of $13.1 million, up 25%, lowered the
earnings before interest and tax to $42.1 million but it was
still up 4.7% on the previous period.
The profit before tax was $36.8 million, down 2.5%, and the
profit after tax was down 22% to $25 million.
Margins were reduced to 8.7% from 9.1% and a final dividend
of 4c per share was declared.
Mrs Van Leeuwen said the reported profit after tax was in
line with expectations, after adjusting for one-offs.
''The key standout from the result was its Canadian division
with strong same-store sales growth and margin expansions.
''This division appears to have reached the tipping point
with critical store mass to see positive earnings momentum
and strong growth.''
Michael Hill's professional care plans continued to impress
and divisional margins in Australia and New Zealand were
ahead of expectations, she said.
''This is encouraging, given weak same-store growth over the
Net debt was significantly ahead of the previous period,
driven by higher inventory, high levels of capital
expenditure and one-offs relating to tax disputes.
The company had resolved its dispute with the Australian Tax
Office and, as previously flagged, had paid $A6 million
($NZ6.6 million) to the tax office.
That was regarded by Forsyth Barr as a successful outcome,
given Michael Hill was able to continue to report about $2
million in cash tax savings to about 2033.
The agreement left in place the original deferred tax asset
of $50.2 million, Mrs Van Leeuwen said.
Michael Hill remained in discussion with the New Zealand
Inland Revenue Department over the tax issue.
The aggregate amount of the dispute was now $31 million. The
company would also have to pay use of money interest.
Further developments would be followed closely, she said.
No specific guidance or outlook commentary had been given for
the 2015 financial year.
However, store expansion appeared in line with previous
guidance at its annual meeting.
''There is nothing to change our positive view on the
"We have a positive view on outlook, with accelerating growth
driven by footprint expansion and increased traction in
Canada and its professional care plans,'' Mrs Van Leeuwen