Shares in Michael Hill International jumped 10 percent after the jeweller reported better than expected first-half earnings and maintained its dividend.

The company said its underlying earnings before interest and tax fell 16 percent to A$29.6 million, due to weak trading performance in the July to October period when it veered away from discounting

However, a “refined approach” to its strategy saw an improvement in November and December. Same-store sales declined by 6.1 percent but the decline was less severe toward the end of the period. 

The Brisbane-based retailer restructured its business last year, quitting the US and exiting its Emma & Roe sub-brand to focus on high-margin sales and make better use of other sales channels, such as online. It also slashed the amount and level of discounting and the frequency of price-based event days as people were deferring purchases to take advantage of those events.

However, it rejigged that strategy in the half after alternative promotions didn’t bring enough customers through the door.

Net profit rose 125 percent to A$19.5 million but that comparison included A$22 million of losses a year earlier on the closure of Emma & Roe and the US businesses. Profit from continuing operations was A$30.7 million in the prior period.

The company, which has stores in New Zealand, Australia and Canada, will pay an interim dividend of 2.5 Australian cents a share, unfranked and fully imputed, it said. 

The dual-listed stock lifted 10.5 percent to 63 cents on the NZX after the result.  

Group operating revenues were down 2.7 percent, as a result of weaker trade during the first four months of the half, it said. Margins were stable in Canada and Australia and rose in New Zealand.

Following an initial review over his first three months, new chief executive Daniel Bracken has identified refinements to the initial restructuring plan. 

“We have identified refinements to the plan and initiatives to strengthen the retailing fundamentals of the business. We recognise that we need to deliver this in a volatile retail environment where some of the challenges experienced in the first half persist,” he said. 

It implemented a cost reduction plan in January aimed at delivering A$5 million in annualised savings and has identified initiatives targeting a further A$5 million in annualised savings. Among other things, it will look to implement productivity improvements in the Canadian market. 

“The company’s margin in Canada remained stable at 61.8 percent. Canada remains a core growth opportunity for the business, and a series of measures to improve productivity and sales are being undertaken to drive performance in the second half,” it said. 

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