Michael Hill International: Tall Tales & Rumours

A little birdy told me something interesting this morning that got my mind in an overactive and speculative mood.

The move by the Hill family earlier this week to take a larger share of Michael Hill International [MHI.NZX] got me a bit hot under the collar but I put a question to an accountant client of mine this morning and asked him what he thought of the move.

He told me that when a large holder of such a stake in a business consolidates its shareholding and seeks to increase it, it is more likely an indication that the protagonist is trying to make the shareholding more attractive to a possible buyer, rather than wanting to take control of the company themselves.

My source told me when he was a director at Whitcoulls and Graehme Hart was running the show this was the approach Hart took before he sold the company to Blue Star Group.

Of course this is just more idyll speculation on my part but after thinking about the scenario it makes more sense than the reason the Emma Hill gave for wanting to take a mere 2.1% more in the company:

"...the family wants to take advantage of a depressed share price to take control. We've always wanted to buy a bigger stake in the company, and we think the stock is undervalued right now. It is just opportunistic with the right price coming at the right time."

If that is indeed the case why not pitch for a bigger stake than 2.1% more. Why not go for gold if the share price is such a bargain? (which it is I might add).

I am not saying that the Hill's are going to sell their stake any time soon but my accountant friend's thoughts should be considerd by the market because I think there is some merit in what he told me.

That is just between you and me though.


Disc I own MHI shares in the Share Investor Portfolio


Michael Hill International @ Share Investor

Hill Family makes Claytons Takeover bid for Michael Hill International
Michael Hill International Ltd: 2010 Full Year Profit Analysis
Long Term View: Michael Hill International Ltd
Michael Hill International: 2010 half year profit commentary
Michael Hill Makeover kicks off
Michael Hill International: 2009 full year profit commentary
Toughen Up: What I have learned from the hard times
Stock of the Week: Michael Hill International
Michael Hill TV3 60 Minutes Interview
Long VS Short: Michael Hill International
Marketwatch: Michael Hill International
Michael Hill's profit shines
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Why did you buy that stock? [Michael Hill International]
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MHI profit sparkles

Discuss MHI @ Share Investor Forum

Download MHI Company Reports


Buy Toughen Up: What I've Learned About Surviving Tough Times



Toughen Up - Fishpond.co.nz


c Share Investor 2010

Hill Family makes Claytons Takeover bid for Michael Hill International

The announcement today that the Hill family, the largest shareholder of the publicly listed Michael Hill International [MHI.NZX] is looking to consolidate and increase its family shareholding in the company from 48% to 50.1% of the company is a significant move by the family and ditto has significance for shareholders, for a number of reasons.

At 50.1 % the family would have majority control as a voting block to look after themselves rather than other shareholders. I am not saying the will put that in practice but majority holding will mean they can if they wish to do so.

The possible move to a 50.1% shareholding would also require an exemption to the Takeovers Act that normally requires offers for additional shares at this shareholding level be made to all shareholders.

This move is also contrary to the move made by the company to split the shares at the end of 2007 to increase liquidity in the trading of the shares on the stockmarket.

You can look at this move in two ways.

Firstly that it is a positive move by the family that they see value in the company at current share prices and are willing to stump up some cash to buy a bigger stake in the company. A good move when the company is under some pressure from a retail slump and the shares are trading at a good discount to the long-term outlook for the company.

Secondly, and a view that I tend to lean towards, is that the move is a rather cynical one because it is going to impact negatively on minority shareholders because the family will have more control over the company without having to make an offer to all shareholders for full control and they are seeking an exemption through the NZX and a vote put to shareholders at the November 5 annual meeting to achieve their purpose.

Michael Hill International has thus far proven a good corporate citizen and has treated MHI shareholders in a fair and balanced manner in terms of business operations and has been a good long-term investment for shareholders.

Should this claytons move to take over the company by the Hill family and its interests be accepted by the NZX and its operations and then voted approval by shareholders (it must be kept in mind that the family already has a 48% voting block and it wont take too many minority shareholders to vote in their favour or opt not to vote at all for their plan to realise gold) without a full offer made to take the company over, then the small shareholder is going to get shafted again.

I will be voting against the Hill's proposal and I urge other MHI shareholders to do the same.


Disc I own MHI shares in the Share Investor Portfolio


Michael Hill International @ Share Investor

Michael Hill International Ltd: 2010 Full Year Profit Analysis
Long Term View: Michael Hill International Ltd
Michael Hill International: 2010 half year profit commentary
Michael Hill Makeover kicks off
Michael Hill International: 2009 full year profit commentary
Toughen Up: What I have learned from the hard times
Stock of the Week: Michael Hill International
Michael Hill TV3 60 Minutes Interview
Long VS Short: Michael Hill International
Marketwatch: Michael Hill International
Michael Hill's profit shines
Michael Hill takes on the windy city
Why did you buy that stock? [Michael Hill International]
MHI has defined growth strategy
MHI profit sparkles

Discuss MHI @ Share Investor Forum

Download MHI Company Reports


Buy Toughen Up: What I've Learned About Surviving Tough Times



Toughen Up - Fishpond.co.nz


c Share Investor 2010

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

Long Term View: Michael Hill International Ltd
Michael Hill International: 2010 half year profit commentary
Michael Hill Makeover kicks off
Michael Hill International: 2009 full year profit commentary
Toughen Up: What I have learned from the hard times
Stock of the Week: Michael Hill International
Michael Hill TV3 60 Minutes Interview
Long VS Short: Michael Hill International
Marketwatch: Michael Hill International
Michael Hill's profit shines
Michael Hill takes on the windy city
Why did you buy that stock? [Michael Hill International]
MHI has defined growth strategy
MHI profit sparkles

Discuss MHI @ Share Investor Forum

Download MHI Company Reports


Buy Toughen Up: What I've Learned About Surviving Tough Times



Toughen Up - Fishpond.co.nz


c Share Investor 2010

Long Term View: Michael Hill International Ltd

In this series of posts I am going to be looking at stocks listed on the NZX in relation to their returns to shareholders over the life of their listing -what shareholders would now see in their back pockets if they had invested in the company IPO. The calculation of returns includes dividends and tax credits.

Michael Hill International [MHI.NZ] has been a spectacular investment for those who have been shareholders since its listing in July 1987 at 65c and even better for its founder Michael Hill who established the company with one store in 1979. We will use financial data from 1996 to make our comparison. (Figures for 1987-1996 are not easily obtainable so annual and overall returns are likely to be higher)

With $1.85c in net dividends (excluding the NZX listed period 1987-1990. No data can be easily found for dividends) and 30% more in tax credits (see chart above) plus 5 share splits; two 11:10 in 1990, one 11:10 in 1991, one 11:10 in 1992 and one 10:1 in 2007 gives MHI a slightly more than 1415% return (see chart below for the share price percentage gain against the average of all NZX indexes - does not include dividends and tax credits in its calculation) over the nearly 20 year listing of MHI (again, the period between 1987 and 1990 is excluded because no share price or dividend details are available so the return will be higher than stated here for this period), an approximate annual net return of over 70%.

This is approximately a 470% better return when compared to the average of all NZX indexes.



Disc I own MHI shares in the Share Investor Portfolio


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Michael Hill International @ Share Investor

Hill Family makes Clayton's Takeover bid for Michael Hill International
Michael Hill International: 2010 half year profit commentary
Michael Hill Makeover kicks off
Michael Hill International: 2009 full year profit commentary
Toughen Up: What I have learned from the hard times
Stock of the Week: Michael Hill International
Michael Hill TV3 60 Minutes Interview
Long VS Short: Michael Hill International
Marketwatch: Michael Hill International
Michael Hill's profit shines
Michael Hill takes on the windy city
Why did you buy that stock? [Michael Hill International]
MHI has defined growth strategy
MHI profit sparkles

Discuss MHI @ Share Investor Forum

Download MHI Company Reports


Buy Toughen Up: What I've Learned About Surviving Tough Times



Toughen Up - Fishpond.co.nz


c Share Investor 2010