Sparkle in Michael Hill's eye as shares jump

Sir Michael Hill and his yacht The Beast. Photo / Michael Craig

Michael Hill shares jumped in early morning trading after the retail jeweller announced a positive full-year profit.

The result was despite an ongoing battle against the restraints and difficulties Covid-19 had thrown at the company over the past two years.

Michael Hill International shares jumped 10.3 per cent to $1.28 in early morning trading on the New Zealand stock exchange (NZX).

The Brisbane-based jewellery chain reported a net profit of A$46.7 million (NZ$52.4m) in the 12 months ended June 26, up 13.9 per cent from the previous period.

The jeweller has made a steady recovery since 2020 when it reported a A$3.1m profit, due to the difficulties of the pandemic.

Chief executive Daniel Bracken said he was "absolutely delighted" by the company's results, as the jewellery chain had faced "considerable" disruptions in its first half across Australia and NZ.

"A key highlight was our ability to grow profit faster than sales, with gross margin expansion driven by strategic initiatives across product, stores, digital and loyalty," he said.

"These results demonstrate that we have successfully shifted the emphasis from transformation to growth, as we continue to elevate and modernise the Michael Hill brand."

Revenue rose 7 per cent to A$595.2m and the retailer increased gross margin by 200 basis points to 64.7 per cent.

This was even after losing 10,020 store trading days across the 2022 financial period due to a combination of Government-mandated lockdowns and Covid-19 hitting store teams.

Earnings before interest and tax (Ebit) were A$62.9m, up A$6.3m from the year earlier.

This was driven by a combination of strong sales growth and margin expansion, Bracken said.

Digital sales jumped 23 per cent to A$42m, representing 7.1 per cent of total sales, compared to 6.3 per cent a year earlier.

Bracken said this was helped by the jewellery chain launching "click and collect" in all three of its markets, as well as rolling out "ship from store" across its global network.

Across the regions

Australian same-store sales increased by 4.2 per cent, despite "significant temporary store closures" as well as the closure of four underperforming stores which led to a decline in Australia's retail segment revenue by 2.8 per cent to A$303.4m for the year.

In New Zealand, same-store sales increased by 8.9 per cent, which was a strong result, but temporary store closures throughout the year meant the company saw a decline in retail segment revenue of 1.6 per cent to $125.1m for the year.

In Canada, Bracken said the chain had a "sensational performance" in the 12 months ending 26 June, which had delivered "huge" lifts in sales and margin.

Same-store sales increased by 11.3% and the retail segment's revenue increased by 34.8% to CAD$159.7m (NZ$200m) for the year, which was a record result for Canada.

Dividend and buy-back

The board declared a final dividend of 4 Australian cents per share, payable on Sept 23, taking the total dividend for the year of A7.5 cents per share.

The board also announced the launch of an on-market share buy-back of up to 5 per cent of the company's issued capital, which would be funded from existing cash reserves.

The buy-back is expected to start in September 2022, with the total number of shares to be bought under the buy-back "dependent on business and market conditions", the company told shareholders.