Michael Hill International Ltd: 2010 Full Year Profit Analysis

Michael Hill International Ltd [MHI.NZX] delivered a strong 2010 full year profit today.

Underlying net profit of $26. 5 million was up by approx 60% on the 2009 full year profit of approx $16.5 million (excluding the one-off tax gain from 2009 for comparison to the 2010 figure) Significantly though the 2010 profit was just 0.7 million short of the 2008 full year net profit of $25.2 million.

Revenue was up 7.6% to $443,710 million on 2009 revenue of $411.999 million . Significantly half of this increase was from US stores which sales for were not included in 2009 sales figures.

Key Points

- Operating revenue of $443.331m up 7.6% on same period last year
- Same store sales 5.2% up on same period last year
- Net profit after tax of $26.509m. Last year's net profit of $66.788m included a deferred tax credit of $50.197m.
- Net debt of $45.437m at 30 June 2010
- 5 new stores opened during the twelve months and 12 closed including 8 in the US
- Final dividend of 2.5 cents per share up 66.7%


New Zealand and Australian stores did exceptionally well while Canada and the North American units continued to drag on the whole group.

Big losses were incurred in the United States while the Canadian stores increased losses from 2009.

Net debt increased by nearly $10 million to $45.4 million indicating costs involved in the North American market were still making a negative impact on the bottomline.

All important retail margins were under pressure but significantly same stores sales were up by over 5% which in this economic and retail climate is exceptional.

Management at MHI seem a little vague about the coming year for the company - just like most NZX listed companies have been over the reporting season - but what they have indicated is that they are "confident in the continued growth and profitability of the Group".

I am positive too but the reality is that 2011 is going to be just as tough as 2010 (and maybe even tougher) and their North American operations are going to continue to lose money in an otherwise solid Australasian business.

Disc I own MHI shares in the Share Investor Portfolio


Michael Hill International @ Share Investor

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