Emma Hill, chairwoman of Michael Hill International. Photo / supplied
Michael Hill International's full-year profit tumbled 86 per cent on Emma & Roe and US closure costs but the retailer says its new strategy has it positioned for growth.
The Brisbane-based company said net profit was A$4.6 million ($5m) in the year to June 30 versus A$32.6m in the prior year after it opted to wind up its US stores and close down the Emma & Roe chain.
Those one-off costs - including the write-down and disposal of assets and lease settlement costs - were A$25.5m. Stripping out those costs, earnings before income and tax fell 17 per cent to A$40.1m.
"The period was one of recalibration and repositioning for the group, which included the exit of the US and Emma & Roe businesses. While the cost of exiting these businesses had a material one-off impact on the financial result, Michael Hill is a stronger and more resilient business today with a clear strategy for long-term growth," said chief executive Phil Taylor.
As of June 30, all US stores were closed. Of the 30 Emma and Roe stores, 24 stores were closed by June 30. The closure programme for the final six Emma & Roe stores is still in progress. The company had 321 stores trading on June 30, including those six.
The company, chaired by Emma Hill, said operating revenue from continuing operations lifted 4.4 per cent to A$575.5m while group profit from continuing operations fell 21 per cent to A$34.8m.
ShareClarity managing director Daniel Kieser said the drop in full year earnings was expected given its exit from the US market.
"The large one-off associated with the two discontinued operations is what drove the headline net profit down," Kieser said. "It's always difficult to know if the costs they say were attached to its two discontinued operations are fair and accurate. And that's because it's hard to unpick shared costs, like accounting, that are used across the business.
"The important thing will be next year's result."
The retailer said it will pay a final dividend of 2.5 Australian cents a share on September 28, bringing the full year dividend to 5 Australian cents, unchanged on the year.
Regarding its individual markets, Australia increased revenues 1.2 per cent to A$325.7m.
However, it said "challenging retail conditions remain in Australia", which resulted in a 0.9 per cent decline in same-store sales and 5.9 per cent slide in ebit to A$48.6m.
Michael Hill plans to invest additional capital and management resource into strengthening its Australian operations and said in FY19, the Australian segment offers potential for improved ebit performance.
New Zealand revenue rose 2.7 per cent to $125.2m, with a 2.3 per cent lift in same store sales.
The New Zealand business is expected to continue to perform well and will benefit from increased online revenue, extended product offering, improved margins, a continued refinement of the property portfolio and improved cost efficiencies, together with exploring opportunities to tap the growing Asian consumer market, it said.
Performance in Canada was strong with a 16 per cent lift in revenue to C$130.8m and same store sales growth of 3.8 per cent, it said.
Looking ahead, Michael Hill said it completed the strategic review and identified five key strategic shifts to reposition the company from a traditional retailer to a so-called "differentiated omni-channel brand." The aim of the omni-channel is to ensure that customers have the same shopping experience whether they are on their mobile phone or in a physical shop.
The company is continuing to focus on e-commerce, with online sales increasing 57.4 percent to A$10.3m and now account for 1.8 per cent of total group revenues. It is planning additional investment and said it will aim to "evolve" the online experience by integrating the digital and social channels with the store network.
Total planned capex for the year will be around A$25m.
It also said it is committed to opening a minimum of 10 new stores in the current financial year across the three markets, subject to site availability.
It did not provide guidance for the current year.
The stock last traded at $1.07 and has fallen 18 per cent over the past 12 months.
- additional reporting by NZ Herald.