Michael Hill should pay back wage subsidy, financial education specialist says
Monday, 18 January 2021
Jeweller Michael Hill, which received $3.6 million from the Government in Covid-19 wage subsidies and is now forecasting a big rise in first-half profit, should pay the money back, according to the head of a Wellington financial education firm.
On Friday, Michael Hill said it expected to post a pre-tax profit of between A$56m (NZ$59m) and A$60m for the first half of its financial year to December 27. At the higher end of the range, that’s almost double the A$31.6m it reported in the same period a year earlier. The profit was helped by A$15m of wage subsidies from the New Zealand, Australian and Canadian governments.
Many retailers who qualified for Covid-19 wage subsidies after their stores were forced to close during lockdown have since experienced a surge in trading as people who couldn’t travel overseas spent more locally. The rebound and public pressure, has prompted some such as Briscoe Group and The Warehouse Group to pay the money back.
But a spokesman for Michael Hill said on Friday that the company wouldn’t pay the subsidy back, as it was severely impacted by Covid-19 and had passed the funds on to staff, as well as using its own funds to support them.
**READ MORE:
* Michael Hill forecasts higher profit, pays dividend, helped by wage subsidies
* The wage subsidy and retail: Which stores got it and who has paid it back?
* Coca-Cola, McDonald's, Asahi and Tesla – international giants hold on to Covid-19 wage subsidies
* Accounting professor singles out NZX companies which 'morally' shouldn't have taken wage subsidy
**
“I think they feel they have done enough,” he said. The company was performing better due to “a lot of hard work” and it was a credit to the team, he said.
However, Guy Dobson, the managing director of institutional financial education provider Dynamique, said the money should be paid back. The Government should be first in line, because as a small nation, it could least afford it, he said.
Dobson has 30 years of experience in financial markets and has worked with many of the country’s big investment and banking firms including AMP Capital Investors, BNP Paribas, Booster, Kiwibank, Nikko Investment Management, and Westpac, as well as the Reserve Bank and the NZX.
“If we had a position in Michael Hill, we would sell down our line of stock forthwith as their ethics are not in line with the current climate and our own high standards of corporate performance,” Dobson said.
He said Michael Hill chief executive Daniel Bracken had misread public sentiment on the issue, and it could turn out to be a “slow burn” PR disaster for the company.
In the era increasingly focused on environmental, social and governance (ESG) investing, Michael Hill’s decision impacted the firm’s social behaviour and reflected badly on boardroom integrity, he said.
At the same time as Michael Hill announced its higher profit, the firm said it would bring forward payment of a A$5.8m dividend that it had suspended last year due to Covid-19.
Dobson said the dividend should have been deferred further instead of retaining the Covid subsidy, if the company had cash reserves.
He called on shareholders to donate any payment they received to charity.
The jewellery company was founded by Sir Michael Hill in 1979 and the Hill family interests stand to gain about A$2.8m from the dividend payment.
Sir Michael Hill, who features on the NBR Rich List, remains as a director and daughter Emma Hill is chairwoman.
Dobson called for the Hill family to repay the subsidy from their own funds to correct the company’s error of judgment.