KEY POINTS:
Jewellery chain Michael Hill International says its Canadian operations are close to breaking even, helping it to a 33.2 per cent rise in annual net profit.
Strong trading in the first three quarters was also a factor in the company's $21 million bottom line.
Shares in Michael Hill rose a full $1 (11.3 per cent) after the result was announced, closing at $9.80.
The group reported operating revenue of $350.18 million, up 13.2 per cent for the year to June 30, driven by strong first-half sales.
However, Forsyth Barr retail analyst Guy Hallwright said the group had obviously been affected by the slowing retail environment because last-quarter sales were weaker than expected.
"The company's performing well with strong margins in New Zealand but last-quarter sales ended up slower than we thought they'd be. Given we're still going into a tougher retail environment it'll be interesting to see how [the company] gets along."
Canada produced an operating deficit of $5000, compared with one of $957,000 the year before.
Australian-based chief executive Mike Parsell said the company was aiming for Canadian operations to break even this financial year.
The Canadian market was tough because the product ranges were different from those in the Southern Hemisphere, Parsell said.
The North American and Canadian markets require 10-carat gold, while New Zealand and Australia require nine-carat.
"Until we get some size and volume [in Canada] we can't operate at full margins because we're unable to buy in big enough quantities to spread across the 16 [Canadian] stores."
Advertising on Canadian TV, something the company started to do this year, was difficult because of the fragmented nature of television there, he said. "They've got 60 channels so it's hard to reach the audience we're aiming for."
Until this year the company had been using catalogue and newspapers to advertise its products.
The past four years' work on centralising the company's supply chain had started to pay off in the form of higher margins, Parsell said.
Retail revenue for the group increased in all three countries.
Earnings before interest and tax (ebit) in New Zealand were up 33.3 per cent to $13.6 million. The company has 50 stores in New Zealand after opening two this year and closing one. In Canada, retail revenue was up 59.5 per cent to $25 million.
The group's Australian retail segment increased revenue 13.2 per cent to $225.8 million.
Shareholders will receive a fully imputed final dividend of 16c, giving a full-year dividend of 26c, up 13 per cent on the previous year.
