KEY POINTS:
Michael Hill
The jewellery chain Michael Hill International (MHI) has seen its share price leap over the past week after it confirmed plans to move into Britain or the United States. Its expansion into Canada seems to be slowly working and cynics may have to eat their words. MHI has a very successful, if low key, formula for international expansion that has already worked extremely well in Australia. In the six months to December 31, 2006, MHI showed it was far from mature, despite its long track record, when it delivered net profit of $15.3 million, up 31 per cent on the previous year. Same-store sales during the six months increased by 7.6 per cent. This is a first-class retailer with true geographic spread. While expansion into Britain and US is a very different proposition from Canada, MHI is very well managed and has a strategy for limiting risks. The shares are now at a peak but then, quality is never cheap.
Wesfarmers
In the past year, the Australian conglomerate Wesfarmers (Au:WES) has gone somewhat off the boil with some investors blaming new management for not keeping up the high rate of acquisitions that was the hallmark of previous management. WES' ability to integrate business into its own successful culture was a key to its success. However, with the deal this week to acquire part of the giant Coles Group, WES would have silenced the critics. Wesfarmers and its partners, Pacific Equity Partners, Macquarie Bank and British private equity group Permira, have acquired an 11.3 per cent stake in Coles, Australia's second-largest retailer, and now are preparing to launch Australia's biggest takeover bid yet at A$19.6 billion. Wesfarmers wants outright control of Target and Officeworks. But it will share the Coles and Bi Lo supermarkets, fuel and convenience stores, bottle shops and K-mart with the private equity firms.
* Views in this article are those of IRG and not the Weekend Herald
