Michael Hill International posted a 66 per cent drop in first-half profit, mainly reflecting an NZ$21.1 million of provisions to reposition its Emma Roe chain and to recognise costs of exiting the US market.
The jewellery chain first flagged the provisions two weeks ago. It is exploring options for its US exit, including a sale of the business or through an agreement with landlords of its nine stores, with the process targeted to be completed by June 30.
In the first half, US revenue fell 15 per cent to US$6 million for a loss of US$5.6m on an earnings-before-interest-and-tax basis, including a provision for impairment and onerous leases of US$3.5m.
Emma Roe achieved a 20 per cent gain in sales to A$10.5m but recognised an A$15.2m charge for impairments and onerous leases, resulting in an A$19.6m ebit loss.
Emma Roe is being repositioned as a “demi-fine jewellery” chain, with redesigned stores and a new online offering scheduled for the new financial year. There would be “a material reduction” in the number of stores, the company said.
For the retailer as a whole, profit dropped to A$8.7m in the six months ended December 31, from A$25.8m a year earlier.
Sales from continuing operations rose 4.5 per cent to A$342m. The company opened 14 Michael Hill stores in the first half and same-store sales edged up 0.3 per cent. It now has a total 347 stores including 30 in the Emma Roe chain.
“The company’s core Michael Hill businesses in Australia, New Zealand and Canada performed strongly during the first quarter before experiencing a slowdown in the second quarter,” chief executive Phil Taylor said in a statement.
Total first-half ebit dropped to A$15 million from A$40 million.
Michael Hill will pay an interim dividend of 2.5 Australian cents a share, unchanged from a year earlier.
In its biggest market of Australia, the Brisbane-based company’s revenue rose 1.8 per cent to A$185m although ebit fell 3.2 per cent to A$32.6m.
Michael Hill New Zealand recorded a 4.2 per cent gain in sales to about $70m while ebit fell 4.6 per cent to $15.8m.
Canada was the stand out segment for the retailer. Sales jumped 18 per cent to C$73.7 million while ebit rose by the same amount to C$10.4 million as it opened seven stores to bring its total to 83.
Michael Hill’s dual-listed shares last traded on the ASX at A$1.095 and have dropped 19 per cent in the past 12 months.
