Michael Hill is flush with cash after making A$42.2m more profit

Monday, 23 August 2021

Michael Hill chief executive Daniel Bracken warns that lockdowns here and across the ditch are significant and already denting profit for the current financial year.

Jeweller Michael Hill International made an extra A$42.2 million (NZ$43.3m) in profit last year, and ended the year with no debt and surplus cash.

Profit increased to A$45.3m in the 52 weeks ended June 27, from A$3.1m the previous year, the company said in a statement to the NZX. The gross margin increased to 62.7 per cent from 60.6 per cent.

Michael Hill lifted sales 13 per cent to A$556.5m, even though it lost 10,447 trading days due to extensive temporary store closures in Eastern Canada and sporadic closures across Australia. Digital sales increased 53 per cent to a record A$34.8m, representing 6.3 per cent of total sales, up from 5 per cent the previous year.

The company ended the financial year with a cash surplus of A$72.4m and no borrowings.

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Michael Hill received A$14.6m in government grants from Australia, New Zealand and Canada over the past year, compared with A$17.7m in its 2020 financial year.

The company will pay shareholders a final dividend of 3 Australian cents per share, taking the full-year dividend to 4.5 Australian cents. Its interim dividend cost it A$5.8m, while the final dividend will cost it A$11.6m. It also paid an additional 1.5 Australian cent dividend in January which had been deferred from its 2020 financial year.

The jewellery chain closed five underperforming stores in Australia and one in Canada last year, reducing total store numbers to 285.

Chief executive Daniel Bracken warned that while the company was not expecting to close any stores in New Zealand or Australia that the lockdowns here and across the ditch were significant and already denting profit for the current financial year.

New South Wales is entering its third month of lockdown, with all jewellery retailers closed and the Covid-19 related situation continues to affect company results negatively. New Zealand was put into a level 4 lockdown from midnight Tuesday last week.

Michael Hill has developed virtual consultations and trying on of jewellery.

The company lost 2,755 store trading days during the first seven weeks of this year, resulting in a 2 per cent drop in total store sales for the period, with an estimated loss in earnings of A$5m, Bracken said.

“While I’m delighted to see incredibly strong results from Canada following its full reopening, and the resilience of our New Zealand business, the impact of extensive disruptions in Australia and now New Zealand are very concerning,” Bracken said.

“That being said, our strong financial position provides us with a stable platform to continue our transformation journey, elevate the brand and further explore new opportunities across all channels and markets.”

The company has focused getting up to speed in digital commerce, Bracken said. It has refitted some stores and now offers customers online digital tours, and a ‘real time’ sales guide from that same store.

”We were behind some companies in this area but are now focused and accelerating this aspect of the business,” Bracken said.

Although in-store sales make up the majority, the company is looking to sell more online by linking up with other retailers that sell online.

”We are in the final stages of a partnership with Australian company The Iconic to sell via them and this deal is expected to go live in a few weeks,” Bracken said.

”After Christmas we are looking to explore other companies we can partner with to expand our online selling.

”There is no limit to what we could achieve this way.”

It has just appointed a chief digital officer and has made several other new recruits with Amy Sznicer as chief retail officer and Jo Feeny to chief marketing officer.

The company was started in Whangarei by Sir Michael Hill in 1979. His wife Lady Christine has just designed pieces for the jeweller's August catalogue and Sir Michael is a member of the board. Some gold jewellery is made and designed in New Zealand but 30 per cent is made in Australia. The rest is made in India.