Michael Hill International half year results:
Revenue - $226m up 8.5pc
Pre-tax profit - $17.8m down 37pc
After-tax profit -$65.6m up 236pc
Dividend - 1 cent per share
KEY POINTS:
Michael Hill International today posted a startling after-tax profit of $65.61 million for the six months to December 31, a huge increase on last year's record interim result of $19.5 million.
But the result has been bulked up with a one-off deferred tax credit of $52.94m, which came from selling the intellectual property of the "Michael Hill Jeweller System" from Michael & Co Ltd to its Australian subsidiary, Michael Hill Franchise Pty for $294m.
This allowed it to book a deferred tax asset of $52.942m for future Australian tax deductions. It picked up an additional $260,000 in tax benefits related to the inter-company funding arrangements involved.
But without the tax benefits, Michael Hill reported operating revenue of $226.97m, up 8.5 per cent - though a comparison of sales in the same stores for the same period last year showed a lift of only 0.7 per cent.
The earnings before interest and taxation were only $21.31m, down 30 per cent on the same period last year.
Its net profit before tax was $17.892m, down 37 per cent on the same period last year, and directors declared a 1c/share fully imputed interim dividend, to be paid April 2.
The company complained its margins were hurt by the 30 per cent fall in the exchange rate for the US dollar against the Australian dollar in the last quarter of 2008: its reconciliation of profit showed a $4.274m margin loss on Christmas inventory orders due to the fall in the US dollar.
It was affected by lower margins and several one-off costs associated with United States acquisitions and internal restructuring, including US acquisition costs of $1m, US trading losses over four months of $2.37m, restructuring costs of $1.162m, and its margin losses on exchange rates.
It said that after accounting for these one-off amounts, its "adjusted" profit before income tax would have actually been $26.708m, compared with $28.481m for the same period in 2007.
It said Australian same store sales were up 1 per cent in local currency terms, and the Australian retail revenue lifted 4.7 per cent to A$125.068m ($159m), though the operating surplus fell, as a percentage of revenue from 13.2 per cent to 12.4 per cent.
Five new Australian stores were opened, and the company was "delighted" at the retail performance on that side of the Tasman. Closure of one under-performing store left it with 140 in Australia.
In Canada, its 24 stores lifted revenue by 3.5 per cent to $C13.966m ($22.1m), but in local currency terms sales dropped 10.7 per cent for the six months and there was an operating loss of $C444,000 compared with $C387,000 in the same period last year.
Its 17 US stores, bought in a bankruptcy sale, earned US$4.09m over four months, with an operating loss of US$1.4m.
- NZPA
