Michael Hill International Limited/Announcement

Preliminary Final Report

Full Year Results26 August 2018MHJConsumer Discretionary

ABN25610937598
Appendix 4E
Results for announcement to the market
Year ended report 30 June 2018
Reporting period
Reporting period:12 months ending 30 June 2018
Previous reporting period:12 months ending 30 June 2017
Results for announcement to the market
$'000
Revenue from ordinary activitiesUp4.4% to575,549
Earnings before interest and taxation (EBIT) from continuing
operations*Down19.5% to50,147
Normalised EBIT before one-off items*Down16.6% to40,106
Net profit after tax (from ordinary activities) for the period
attributable to membersDown85.9% to4,610
* EBIT and Normalised EBIT are Non-IFRS Information and are unaudited. Please refer to Non-IFRS Information on page 10 of
the Directors Report for an explanation of Non-IFRS information and a reconciliation of EBIT from continuing operations and
Normalised EBIT.
Brief explanation of figures reported above to enable the figures to be understood
This report is based on the consolidated financial statements which have been audited and an unqualified opinion
given. For commentary on the results, please refer to the attached full financial report for all other disclosures in
respect of the Appendix 4E.
Dividends
Amount per
security
Franked
amount per
security
Interim dividend (cents per share)2.50-
Final dividend (cents per share)2.50-
Record date for determining entitlements to the final dividend is 14 September 2018. The payment date is 28
September 2018.
20182017
Net tangible assets
Net tangible asset backing per ordinary security
$0.46
$0.50
Emma Hill
Chair

Brisbane
24 August 2018
Webcast scheduled to take place at 1.00pm (AEST) on Monday 27 August 2018. Please use the following link to
register.
https://edge.media-server.com/m6/p/jzp4h9s6
Media & Investors:
Phil Taylor
Chief Executive Officer
+61 7 3114 3500
www.michaelhill.com.au
www.emmaandroe.com.au
http://investor.michaelhill.com

ABN 25 610 937 598

Michael Hill International Limited
ABN 25 610 937 598
Directors’ report and annual financial report - 30 June 2018
Contents
Page
Corporate directory1
Directors' report2
Principal activities2
Dividends2
Significant changes in the state of affairs2
Likely developments and expected results of operations2
Review of operations3
Environmental regulation11
Information on Directors11
Company secretary14
Meetings of directors15
Remuneration report (audited)15
Insurance of officers and indemnities32
Non-audit services33
Auditor's independence declaration33
Rounding of amounts33
Financial statements35

DISCLAIMER
Certain statements in this announcement constitute forward-looking statements. Forward-looking statements are
statements (other than statements of historical fact) relating to futureevents and the anticipated or planned
financial and operational performance of Michael Hill International Limited and its related bodies corporate (the
Company). The words “targets,” “believes,” “expects,” “aims,” “intends,” “plans,” “seeks,” “will,” “may,” “might,”
“anticipates,” “would,” “could,” “should,” “continues,” “estimates” or similar expressions or the negatives thereof,
identify certain of these forward-looking statements. Other forward-looking statements can be identified in the
context in which the statements are made. Forward-looking statements include, among other things, statements
addressing matters such as the Company’s future results of operations; financial condition; working capital, cash
flows and capital expenditures; and business strategy, plans and objectives for future operations and events,
including those relating to ongoingoperational and strategic reviews, expansion into new markets, future product
launches, points of sale and production facilities.
Although the Company believes that the expectations reflected in these forward-looking statements are
reasonable, such forward-looking statements involve known and unknown risks, uncertainties and other
important factors that could cause theCompany’s actual results, performance, operations or achievements or
industry results, to differ materially from any future results, performance, operations or achievements expressed
or implied by such forward-looking statements.
Such risks, uncertainties and other important factors include, among others: global and local economic
conditions; changes in market trends andend-consumer preferences; fluctuations in the prices of raw materials,
currency exchange rates, and interest rates; the Company’s plans or objectives for future operations or products,
including the ability to introduce new jewellery and non-jewellery products; the ability to expand in existing and
new markets and risks associated with doing business globally and, in particular, in emerging markets;
competition from local, national andinternational companies in the markets in which the Company operates; the
protection and strengthening of the Company’s intellectual property rights, including patents and trademarks; the
future adequacy of the Company’s current warehousing, logistics and information technology operations;
changes in laws and regulations or any interpretation thereof, applicable to the Company’s business; increases to
the Company’s effective tax rate or other harm to the Company’s business asa result of governmental review of
the Company’s transfer pricing policies, conflicting taxation claims orchanges in tax laws; and other factors
referenced to in this presentation.
Should one or more of these risks or uncertainties materialise, or should any underlying assumptions prove to be
incorrect, the Company’s actual financial condition, cash flows or results of operations could differ materially from
that described herein as anticipated,believed, estimated or expected.
The Company does not intend, and do not assume any obligation, to update anyforward-looking statements
contained herein, except as may be required by law. All subsequent writtenand oral forward-looking statements
attributable to us or to persons acting on the Company’s behalf are expressly qualified in their entirety by the
cautionary statements referred toabove and contained elsewhere in this announcement.

Michael Hill International Limited
Corporate directory
Directors
E J Hill
B.Comm., M.B.A.
Chair
Sir R M Hill
K.N.Z.M.
GWSmith
B.Comm., F.C.A., F.A.I.C.D.
RIFyfe
J S Allis
Company Secretary
K A Hammond
LLB (Hons), BA, GradDipLegPrac
Principal registered office in Australia
Metroplex on Gateway
7 Smallwood Place
Murarrie QLD 4172
Australia
GPO Box 2922
Brisbane QLD 4001
Australia
Telephone +61 7 3114 3500
Fax +61 7 3399 0222
Share registrar
Computershare Investor Services Pty Ltd
Level 1
200 Mary Street
Brisbane QLD 4000
1300 552 270 (within Australia)
+61 3 9415 4000 (outside of Australia)
Auditor
Ernst & Young
Level 51
111 Eagle Street
Brisbane QLD 4000
Solicitors
HopgoodGanim Lawyers
Level 8
Waterfront Place
Brisbane QLD 4000
Bankers
Australia and New Zealand Banking Group Limited
ANZ Banking Group (New Zealand) Limited
Bank of Montreal
Bank of America N.A.
Website
www.michaelhill.com.au
www.emmaandroe.com.au
investor.michaelhill.com
Email
inquiry@michaelhill.com.au
1

Michael Hill International Limited
Directors' report
30 June 2018
The Directors present their report on the consolidated entity (referred to hereafter as the ‘Group’) consisting of
Michael Hill International Limited ACN 610 937 598 (‘Michael Hill International’ or the ‘Company’) and all
controlled subsidiaries for the year ended 30 June 2018.
Principal activities
The Group operates predominately in the retail sale of jewellery and related services sector in Australia, New
Zealand and Canada.
During the year, the Group exited its US operations and is in the process of exiting the Emma & Roe brand.
These segments have been reclassified as discontinued operations for the2017 and 2018 financial year. There
have been no other significant changes inthe nature of the Group's activities during the year.
Dividends
Dividends paid to members during the financial year were as follows:
2018
$'000
2017
$'000
Final ordinary dividend for the year ended 30 June 2017 of AU 2.5 cents (2016-
AU 2.5 cents) per fully paid share paid on 29 September 2017 (2016 - 6 October
2016)
9,685
9,578
Interim ordinary dividend for the year ended 30 June 2018 of AU 2.5 cents (2017
- AU 2.5 cents) per fully paid share paid on 29 March 2018 (2017 - 31 March
2017)
9,686
9,686
The Directors have declared the payment of a final dividend of AU 2.5 cents per
fully paid ordinary share* (2017 - AU 2.5 cents). The final dividend will be
unfranked for Australian shareholders and fully imputed for New Zealand
shareholders. The aggregate amount ofthe proposed dividend expected to be
paid on 28 September 2018 out of retained earnings, but not recognised as a
liability at year end, is
9,686
9,686
* This will not be declared as conduit foreign income, therefore Australian withholding tax will be deducted from
the dividend payment for foreign (non-Australian tax resident) shareholders.
Significant changes in the state of affairs
During the year the Group exited its loss making retail operations in the USand is in the process of exiting the
Emma & Roe brand. Assets in both segments were impaired as appropriate. As at 30 June 2018, all US stores
have been closed. Of the 30 Emma and Roe stores, 24 stores were closed as at 30June 2018. The closure
programme for the final six Emma & Roe stores is still in progress. Impairedassets on hand relating to the Emma
& Roe closures will be disposed of when it is determined they will not be redeployed.
Likely developments and expected results of operations
Information on likely developments in the Group’s operations and the expected results of operations have been
included in the Operational Review and Outlook sections of this report.
2

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Review of operations
In Australian dollars, the Group hasreported operating revenue from continuing operations of $575.5m,
producing earnings before interest andtax ('EBIT') for continuing operations of $50.1m. The Group reported a net
profit after tax ('NPAT') from continuing operations of $34.8m for the 2018 financial year, and a statutory net profit
after tax of $4.6m. Normalised EBIT for the Group was $40.1m for the year. Normalised EBIT excludes one off
costs, including Emma & Roe and US closure costs and significant items per the Non-IFRS Information note on
page 10.
* EBIT and Normalised EBIT are Non-IFRS Information and are unaudited. Please refer to Non-IFRS Information
on page 10 of the Directors Report for an explanation of Non-IFRS information and a reconciliation of EBIT from
continuing operations and Normalised EBIT.
Cash, Cash flow and Dividends
The Group has an equity ratio of 50.4% at 30 June 2018 (52.0% in 2017), and a working capital ratio of 2.6:1
(3.0:1 in 2017). Net operating cash flows were $54.9m compared to $39.8m the previous year. Net debt at 30
June 2018 was $28.0m compared to $39.4m at 30 June 2017.
The Group remains in a strong financial position to continue to invest in improvements to its systems,
infrastructure and capabilities, and position the business for future growth opportunities.
Despite the one off costs and operating losses associated with the discontinued Emma & Roe and US
operations, which impacted statutory profit after tax, the Group's debt levels reduced with higher operational cash
flows. Accordingly, for shareholders, the dividend for the year was maintained at AU 5.0 cents (2017 - AU 5.0
cents) per share. There will be a finaldividend of AU 2.5 cents per share payable on 28 September 2018. The
final dividend will be unfranked for Australian shareholders and fully imputed for New Zealand shareholders.
Operational Review
The Group achieved the following key outcomes for the 2018 financial year:
•Revenue from continuing operations increased 4.4% to $575.5m
•Statutory net profit after tax for the Group of $4.6m ($34.8m profit aftertax from continuing operations)
•Same store sales from continuing operations were up 0.4%
•Online sales grew by 57.4% to $10.3m
•Canadian segment continues to gain market share with same store sales increase of 3.8% and a record
EBIT for the year of CA$14.6m
•EBIT from continuing retail segments (Australia, New Zealand, Canada) of $89.1m down 1.6% from prior
year of $90.5m.
•Branded collection sales increased to 18.0% of total product sales, up from 14.2% on the prior year
•Sale of Professional Care Plans ('PCP') amounted to $35.7m for continuing operations, increasing
deferred revenue on the balance sheet from PCP sales to $80.0m
•Gross margin increased in all continuing retail segments (Australia +0.7%, New Zealand +0.3%, Canada
+1.1%), offset by stock provisions, including for Emma & Roe, leaving gross margin for the Group flat on
prior year at 63.7%
•Dividend of 5.0 cents in line with prior year
•Net operating cash inflow was$54.9m, up on $39.8m in prior year
•Net debt of $28.0m down from $39.4m
•EBIT before one-off itemsof $40.1m, down from $48.1m
•One off costs including write-down and disposal of assets and lease settlement costs relating to US and
Emma & Roe exits amounting to $25.5m. Significant items include a $1.4m employee benefits
revaluation.
•17 Michael Hill stores were opened and five were closed within our three core markets during the year.
24 Emma & Roe stores and 9 stores in the US were closed. There was a total of 312stores trading as at
30 June 2018, including 6 Emma & Roe stores.
3

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Review of operations (continued)
Operational Review (continued)
2017-18 was a year of recalibration and repositioning which saw the Group undertake a strategic review.
Despite significant investment into the US business, the Group's lack of scale combined with the competitor
dynamic and sector outlook in that market led to the conclusion that we would not generate an adequate return
on further investment in the business, and the decision was made in January2018 to close all US stores.
The decision was also made to close the Emma & Roe brand, which had failed to meet performance projections.
This followed an in-depth review and analysis of the global jewellery market and emerging trends which identified
an opportunity to reposition the Emmaand Roe brand, however it was determined that this was not an immediate
strategic priority. The Emma & Roeproposition remains a compelling opportunity to be explored at the
appropriate time.
The Group’s operational results were impacted materially due to a combination of closure costs for the US and
Emma & Roe businesses and performancedeterioration in these segments once closure was announced.
Revenue from continuing operations grew 4.4%, with same store sales up 0.4%. Canada produced pleasing
same store sales growth of 3.8% and a record EBIT result. New Zealand had solid same store sales growth of
2.3% and EBIT slightly down on last year, while Australia did not meet performance projections with flat sales
and a decline in EBIT contribution.
Gross margin grew across all continuing retail segments (Australia +0.7%, New Zealand +0.3%, Canada +1.1%)
as a result of our proprietary collection strategy commanding a premium.
During the 2017-18 year the Group implemented a new Point of Sale system, with all 171 Australian stores
changed over during the 12 months, with New Zealand and Canadian stores to be completed in the first quarter
of 2018-19. This was a major investment for the business and is a key enableras part of a larger strategic
roadmap for the Group’s information systems. The Group is undertaking a staged program of investment in its
finance, human resourcing, customerexperience and inventory management systems and supporting cloud
based infrastructure.
PCP revenue has again provided strong cash flow for the Group. The PCP program is designed to provide a
comprehensive suite of care services to our customers so they can maintaintheir jewellery in pristine condition.
Total sales from these plans for continuing operations amounted to $35.7m, and at 30 June 2018 there was
$80.0m of deferred PCP revenue held on the statement of financial position. $31.9m in PCP revenue was
recognised for continuing operations in the 2017-18 year, down 0.6% on theprevious year.
In-house credit now represents 28.0%of Canadian sales. The North American loan book was $20.5m at 30 June
2018 compared to $17.7m at 30 June 2017, with bad debts running at 4.7% of in-house credit sales for the year,
which is in alignment with expectations for credit default rates. The US book is being closely monitored as the US
book winds down following US store closures. While US default rates have lifted, this was anticipated, it is being
managed and an uptick in default rates has been provided for.
The Group's e-commerce platform continues to support the retail segmentswell with revenue increasing by
57.4%, driven by increased visitation and higher online conversion. e-commerce sales now represent over 1.8%
of the Group's total revenue.
As at 30 June 2018, the Group operated Michael Hill e-commerce sites in all of the countries we operate in and
an Emma & Roe e-commerce site in the Australian market which is expected to operate for at least part of the
coming financial year, to facilitate stock clearance for that brand.
4

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Review of operations (continued)
Operational Review (continued)
There were 306 Michael Hill stores and 6 Emma & Roe stores trading as at 30 June 2018.
Review of 2017-2018 Priorities
Same stores sales growth in all markets and for
both brands of above 2%
Same stores sale growth of 0.4% occurred within
the Michael Hill segments of Australia, New
Zealand and Canada. Below target Australian
performance prevented attainment of our 2% goal.
Open at least 10 new Michael Hill stores across all
markets
17 new Michael Hill stores were opened during the
year, well ahead of our original goal.
Continue to review the Emma & Roe brand and
adjust the brand and offering
A review of the Emma and Roe business in early
2018 lead to the decision to close the brand.
To reduce the US operating losses and develop a
viable model
A decision to exit the US market was announced
during the year and all stores have now been
closed
Branded collection sales to reach 18%Michael Hill branded collections sales reached
18.0% of total sales.
Improved inventory management delivering
increase in GMROI (gross margin return on
investment) and stock turn
GMROI was 1.48, up on prior year of 1.42. This
was a pleasing improvement achieved through a
combination of inventory range refinement and
improved margin management. Stock turn was 1.11
for the year, in line with prior year.
Continue to develop the e-commerce business and
grow to 2% of Group revenue
e-commerce sales grew 57.4% to $10.3m,
amounting to 1.8% of total sales for the financial
year. The business continued to plan and invest in
better online capabilities, which will reap benefits in
the years ahead when fully evolved.
Continued information systems investment to
migrate the organisationonto a highly integrated
ERP environment
There was a continued investment in technology
and key systems during the period consistent with
the approved roadmap for our IT systems. New IT
systems and investment in the development of
future systems amounted to $6.5m during the year.
Segment Results
The operational segments reported below reflect the performance of the Michael Hill and Emma & Roe retail
operations in each geographic segment, including the discontinued operations of Emma & Roe and Michael Hill
United States. The operational segments include trading activity from our online presence and our North
American in-house credit function.The segments exclude revenue and expenses that do not relate directly to the
relevant Michael Hill or Emma & Roe retail segments, and are treated as unallocated. These predominately relate
to corporate costs and Australian based support costs, but also include the manufacturing activities, warehouse
and distribution, interest and company tax.
The Michael Hill United States and Emma& Roe segments were classified as Discontinued Operations during
the year following the announcement of their planned closure. As a result,the Michael Hill United States and
Emma & Roe segments were removed fromthe Group’s total segment result reported in the consolidated
financial statements.
The results below are expressed in local currency.
5

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Review of operations (continued)
Michael Hill Australia
OPERATING RESULTS (AU $000)20182017201620152014
Revenue325,709321,981309,457294,442298,474
Gross profit206,303201,707194,152183,582187,381
Gross profit as a % of revenue63.3%62.6%62.7%62.3%62.8%
EBIT48,62151,68849,97545,93347,493
As a % of revenue14.9%16.1%16.1%15.6%15.9%
Number of stores171166168167164
The Australian retail segment revenue increased by 1.2% to $325.7m, with same store sales 0.9% down on prior
year. A focus by management on margin management helped gross profit grow from 62.6% to 63.3% during the
year. However, rising costs combined with a challenging retail environment resulted in EBIT reducing to $48.6m.
A decision was made during the year to split the management of the large Australian segment into two
businesses each led by a Retail General Manager with their own regional management teams.
Seven stores were opened in Australia during the period as follows:
• Belmont Forum, Western Australia
• DFO Essendon, Victoria
• DFO Moorabbin, Victoria
• George Street Sydney CBD, New South Wales
• Mandurah, Western Australia
• Mildura, Victoria
• Palmerston, Northern Territory
Two stores closed during the period. There were 171 stores trading at 30 June 2018. The Group plans to expand
its store footprint by four new storesduring the 2018-19 year. It is anticipated there will be store closures
occurring in the coming year as part of the Group’s active management of itsstore portfolio.
Michael Hill New Zealand
OPERATING RESULTS (NZ $000)20182017201620152014
Revenue125,239121,970122,903113,983109,693
Gross profit77,67375,20475,89570,48867,799
Gross profit as a % of revenue62.0%61.7%61.8%61.8%61.8%
EBIT27,80027,83627,13623,54522,102
As a % of revenue22.2%22.8%22.1%20.7%20.1%
Number of stores5252525252
FX rate for profit translation1.091.061.091.071.10
The New Zealand retail segment revenue increased 2.7% to NZ$125.2m for the12 months, and the segment
achieved a solid EBIT result of NZ$27.8m, in line with the prior year. The focus on this mature market has been
to improve store locations where possible, build average store sales through a broadening of our product offer
and improving our online sales channel.
Two stores were opened in New Zealand as follows:
• Silverdale, Auckland
• Victoria Street, Wellington
Two stores closed during the period. There were 52 stores trading at 30 June2018. There are currently plans to
open one new store during 2018-19.
6

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Review of operations (continued)
Michael Hill Canada
OPERATING RESULTS (CA $000)20182017201620152014
Revenue130,762112,72195,42379,09769,025
Gross profit81,57669,07859,25248,68942,466
Gross profit as a % of revenue62.4%61.3%62.1%61.6%61.5%
EBIT14,60512,3868,9296,0413,923
As a % of revenue11.2%11.0%9.4%7.6%5.7%
Number of stores8376676054
FX rate for profit translation0.981.000.970.970.98
The Canadian retail segment revenue increased by 16.0% for the twelve months to CA$130.8m, with same store
sales increasing 3.8% and gross margin lifting to 62.4%. The Canadian segment continues to show good growth
as we achieve scale and increase market share with EBIT increasing to a record CA$14.6m, 11.2% of revenue.
While sales did slow during the 2017-18 year, in the second half in particular, the Company is confident that
continued growth can be achieved in the coming year.
Eight stores were opened in Canada during the period, as follows:
• Conestoga Mall, Ontario
• Edmonton Outlet, Alberta
• Fairview Mall, Ontario
• McAllister Place, Ontario
• Orchard Park Mall, British Colombia
• Park Place, Alberta
• Regent Mall, New Brunswick
• Vaughan Mills, Ontario
One store closed during the period. There were 83 stores trading at 30 June 2018. There is potential for up to
100 stores in Canada, and the Group plans to open at least five stores duringthe 2018-19 year, subject to
availability of suitable sites.
Michael Hill USA
OPERATING RESULTS (US $000)20182017201620152014
Revenue9,32012,49814,20311,2909,994
Gross profit5,4207,5648,3636,5355,971
Gross profit as a % of revenue58.2%60.5%58.9%57.9%59.7%
EBIT(9,840)(3,821)(2,599)(1,916)(2,283)
As a % of revenue(105.6%)(30.6%)(18.3%)(17.0%)(22.8%)
Number of stores-91098
FX rate for profit translation0.780.750.730.830.92
.
Included in EBIT figures above:
Impairment and disposal of assets2,775595
Lease settlement and onerous lease
provision3,95871
The Group exited the US operations during the year and closed all stores. Nostores were trading as at 30 June
2018.
7

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Review of operations (continued)
Emma & Roe
OPERATING RESULTS (AU $000)2018201720162,015
Revenue16,93415,4489,5394,879
Gross profit11,21610,2016,6633,374
Gross profit as a % of revenue66.2%66.0%68.9%69.2%
EBIT(21,790)(7,051)(2,418)(2,884)
As a % of revenue(128.7%)(45.6%)(25.3%)(59.1%)
Number of stores629168
.
Included in EBIT figure above:
Impairment and disposal of assets7,412
Lease settlement and onerous lease provision6,037
Emma & Roe reported sales of $16.9m for the year. Emma & Roe results during the second half of the year were
impacted by the announcement to reduce thebrand’s store footprint by 24 stores, with 5 closing in April and 19
closing in June. The closure programme for the final six Emma & Roe stores isstill in progress.
Strategic Update
In the latter half of the year, a detailed strategic review was conducted. The purpose of the review was to identity
performance improvement opportunities for the Group within the context of the rapidly changing retail
environment and changes in how customers shop.
Five strategic shifts have been identified, designed to reposition Michael Hill from a traditional retailer to a
differentiated omni-channel brand.
Implementation of these changes is intended to increase market share through improved customer engagement
across all channels and increased frequency of visit.
The five key strategic shifts are:
1.
Omni-channel:
Building capability to deliver a seamless customer experience.
Evolving our online experience, including integration of digital and social channels with our store
network, to enable a seamless experience for customers where and when theyengage with us.
2.
Customer loyalty:
Building data capability to better service customers.
Using data driven customer insights to deliver tailored customer experiences to drive brand
loyalty and advocacy.
3.
Unique branded collections:
Escalate our growth of branded collections.
Through enhanced designer capability,create unique branded collections to meet growing
customer demand for differentiated products.
4.
Brand position:
Strengthen and grow brand loyalty.
Based on recent brand review, we will reposition our brand in market to meetthe changing
consumer landscape.
5.
Operational excellence:
Enhance execution capability and agility.
Build capability and agility throughout the organisation to adapt quickly to a fast changing retail
environment.
8

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Review of operations (continued)
To deliver against this ambition, investment will be made in capability and infrastructure. We will add capability to
the Group through the addition of a Chief Operating Officer and Chief People Officer at the executive level. A
dedicated project management team has beenestablished to execute and manage initiatives in support of the
five strategic shifts identified above. Significant investment is beingmade in additional roles in data and digital,
together with capital investment in enabling systems and infrastructure. This will require the investment of
additional unallocated corporate costs of ~$3m in the coming 2018-19 year, with total planned capex across new
and refurbished stores, IT systems, tools and infrastructure of ~$25m (2017-18: $24.6m).
2018-19 is a foundational year with benefits from these investments to be progressively realised. A differentiated
offer in brand, product and experience would provide a platform to establish new channels and markets if
considered appropriate in the coming years.
Outlook
We are committed to expanding the Michael Hill brand in all three markets ofAustralia, New Zealand and
Canada with plans to open a minimum of 10 new stores in 2018-19 across these three markets, subject to site
availability. With this store growth, underpinned by the five identifiedstrategic shifts, it is planned that our
differentiated offer will deliver growth in all markets and take market share. The business will be focussed on
quality of earnings and continued strong gross margin performance.
In the 2018-19 year we will work to deliver a better quality in-store customer experience. Proprietary branded
collections revenue is planned to continue to grow as we increase investment in these ranges. Branded
collections provide a unique product offering to our customers and in doing so, builds strong brand equity in the
markets we operate in.
While the Australian segment has reached maturity in terms of overall store numbers, it still offers potential for
improved EBIT performance through a combination of increased productivity from the retail teams, improved
margins, property portfolio refinements, online revenue growth, new product collections and an enhanced
customer experience.
The New Zealand business is expected to continue to perform well and will benefit from increased online
revenue, extended product offering, improved margins, a continued refinement of the property portfolio and
improved cost efficiencies, together with exploring opportunities to tap into the growing Asian consumer market.
Canada still has opportunities for further store growth and we will continue to work to build its profitability through
its maturing store portfolio, online revenue growth, optimisation of itsin-house credit program, and increased
productivity of its retail teams.
e-commerce revenue is planned to continue to grow steadily in coming yearsas we refine our offer and optimise
the online channels. Further planned investment in our e-commerce capability will take full advantage of this
growth opportunity.
Continued strong operational cash flows enable further debt reduction and capital investment levels to be
maintained, while also leaving the Group well placed to explore opportunities aligned with the five strategic shifts.
9

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Review of operations (continued)
Priorities for 2018-19
Open at least 10 new Michael Hill stores across all markets
Reposition Michael Hill from a traditional retailer to a unique omni-channel retailer.
Branded Collection sales to grow as a percentage of total revenue.
Continued improvement in inventory management to deliver further improvement in GMROI (gross
margin return on investment).
Continue to invest in and develop the e-commerce business.
Risk Management
RiskStrategies and mitigation
Inadequate business continuity program and/or
disaster recovery strategies
The process of updating the Group’s business continuity plan
and disaster recovery processes will continue into the coming
year. Additional internal resource has been put in place and
external consultants continue to be used to help with
penetration testing and to provide other technical
assessments.
Insufficient leadership talent to meet growth
plans
The decision was made recently to appoint a Chief People
Officer to the executive team in an effort to strengthen our
focus on people planning, talent acquisition and development
of this vital resource. We are confident our people and talent
strategies will continue to deliver sufficient quality resource to
the business.
Systems capability does not meet demands of
business
A structured plan of system review involving significant
investment has begun to facilitate the upgrade of our key
business systems.
Risk of a disruptor or new competition entering
our markets
We are committed to improving and differentiating the brand
from our existing competitors to create a point of difference
and acquire market share. This in itself helps mitigate the risk
of other competitors entering our key markets and taking
material market share.
Breach of regulation or law in one of our
jurisdictions in an ever increasingly complex
legal compliance environment.
The Company invests via an in-house legal team who are
focused on compliance in our three markets and by utilising
external legal firms for specialised legal advice when
required.
Inability to adjust to the rapidly changing
consumer segment and retail environment
As mentioned in the strategic update, the Group is in the
process of investing in improved infrastructure and
capabilities with a goal to meet the rapidly changing retail
environment and the consumer of tomorrow.
Non-IFRS Financial Information
This report contains certain non-IFRSfinancial measures of historical financial performance. Non-IFRS financial
measures are financial measures otherthan those definedor specified under all relevant accounting standards.
The measures therefore may not be directly comparable with other companies' measures. Many of the measures
used are common practice in the industry in which MHI operates. Non-IFRS financial information should be
considered in addition to, and is not intended to be a substitute for, or more important than, IFRS measures. The
presentation of non-IFRS measures isin line with Regulatory Guide 230 issued by Australian Securities and
Investments Commission (ASIC) to promote full and clear disclosure for investors and other uses of financial
information, and minimise the possibility of those users being misled by such information.
10

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Non-IFRS Financial Information (continued)
The measures are used by management and Directors for the purpose of assessing the financial performance of
the Group and individual segments. TheDirectors also believe that these non-IFRS measures assist in providing
additional meaningful information on the drivers of the business, performance and trends, as well as the position
of the Group. Non-IFRS financial measures are also used to enhance the comparability of information between
reporting periods by adjusting for non-recurring or controllable factors which affect IFRS measures, to aid the
user in understanding the Group's performance. Consequently, non-IFRS measures are used by the Directors
and management for performance analysis, planning, reporting and incentive setting. These measures are not
subject to audit.
The non-IFRS measures used in describing the business performance include:
• Same store sales
• Earnings before Interest, tax, depreciation and amortisation (EBITDA)
• Earnings before Interest and tax (EBIT)
• Normalised EBIT
• Significant item
Calculation of Normalised EBIT
Normalised EBIT has been calculated as follows:
$000's
EBIT from continuing operations50,147
EBIT from discontinuing operations
(36,937)
Group EBIT
13,210
blank
Add back E&R and US closure costs:
Lease settlements9,833
Impairment and asset disposals11,188
Make good expenses177
Employee redundancies1,743
Provision for stock obsolescence1,600
Other expenses (Including consulting, legal fees, packaging,
stationery, travel)964
blank
Add back significant item:
Revaluation of employee benefits1,391
blank
Normalised EBIT
40,106
Environmental regulation
The Group has determined that no particular or significant environmentalregulations apply to it.
Information on Directors
Information on Directors of Michael Hill International Limited in officeduring the financial year and until the date of
this report are set out below.
11

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Information on Directors (continued)
Emma Jane Hill (Chair) B.Com, M.B.A
Experience and
expertise
Emma was appointed a Director of the Company on 9 June 2016.
Emma has over 30 years’ experience with subsidiaries of the Company commencing
on the shop floor in Whangarei, New Zealand. She held a number of management
positions in the Australian company before successfully leading the expansion of the
Group into Canada as Retail General Manager in 2002.
In 2011 Emma was appointed as Deputy Chair of the listed New Zealand entity and
was appointed by the Board as Executive Chair of that company in December 2015.
Emma holds a Bachelor of Commerce degree and an MBA from Bond University.
Other current
directorships
None
Former directorships in
last 3 years
None
ResponsibilitiesChair
Non-Executive Director
Member People Development and Remuneration Committee
Interests in shares and
options
167,487,526 Ordinary Shares
Sir Richard Michael Hill K.N.Z.M.
Experience and
expertise
Sir Michael was appointed a Director of the Company on 9 June 2016.
Sir Michael is the founder of Michael Hill Jeweller and was appointed as a Director of
Michael Hill New Zealand Limited on 30 March 1990. He had 23 years of jewellery
retailing experience before establishing Michael Hill in 1979, which then listed on the
New Zealand Stock Exchange in 1987. Sir Michael’s visionary leadership has been
the foundation for the Company’s successful international expansion. In2008 he was
recognised as Ernst & Young’s ‘Entrepreneur of the Year’ and in 2011 was appointed
a Knight Companion of the New Zealand Order of Merit for services to business and
the arts.
Sir Michael was appointed Founder President of the New Zealand listed entity in 2015
in recognition of his special connection with Michael Hill for over 35 years.
Sir Michael led the Group as Chairman from 1987 until December 2015.
Other current
directorships
None
Former directorships in
last 3 years
None
ResponsibilitiesNon-Executive Director
Interests in shares and
options
148,330,600 Ordinary Shares
12

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Information on Directors (continued)
Gary Warwick Smith B.Com, F.C.A., F.A.I.C.D.
Experience and
expertise
Gary was appointed a Director of the Company upon incorporation on 24 February
2016.
Gary has had extensive Director experience. He is Chairman of Flight Centre Travel
Group, one of Australia’s top 100 public companies and is a member of their Audit
and Remuneration sub-committee. He isa Chartered Accountant and a Fellowof the
Australian Institute of Company Directors.
He is also a Director of Tourism Events Queensland and Chair of its Audit andRisk
Committee.
Other current
directorships
Flight Centre Travel Group Limited
Tourism Events Queensland
Former directorships in
last 3 years
None
ResponsibilitiesNon-Executive and Independent Director
Chair Audit and Risk Management Committee
Member People Development and Remuneration Committee
Interests in shares and
options
30,000 Ordinary Shares
Robert Ian Fyfe BEng, F.E.N.Z.
Experience and
expertise
Rob was appointed a Director of the Company on 9 June 2016.
Rob served as CEO of Air New Zealand between 2005 and 2012, a period that saw a
resurgence in Air New Zealand to become one of the most recognised and awarded
airlines in the world and one of the best performers in a tough industry.
Prior to Air New Zealand, Rob had gained extensive general management experience
in various retail businesses operating in New Zealand, Australia and GreatBritain.
Other current
directorships
Antarctica New Zealand
Air Canada
Former directorships in
last 3 years
Icebreaker Limited
ResponsibilitiesNon-Executive and Independent Director
Chair People Development and Remuneration Committee
Member Audit and Risk Management Committee
Interests in shares and
options
63,640 Ordinary Shares
13

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Information on Directors (continued)
Janine Suzanne Allis
Experience and
expertise
Janine was appointed a Director of the Company on 9 June 2016.
Janine is the Founder and Executive Director of Retail Zoo Pty Ltd which currently
owns three brands - Boost Juice, Salsa’s Fresh Mex Grill and Cibo. The RetailZoo
network has over 500 stores in 13 countries.
Janine’s strong retail experience was obtained by creating Boost Juice Bars and
turning it into an iconic Australian brand with over 95% awareness rate in the
Australian market. Drive and passion have translated into over $2 billionin global
sales from inception and has earned Janine many accolades, including Telstra
Businesswoman of the Year, Amex Franchisor of the Year and ARA Retailer of the
Year. She was inducted into the Australian Business Women Hall of Fame as well as
BRW listing Janine in the top 15 people who have changed the way we do businessin
the last 20 years.
Janine now shares her knowledge with others, including through her role asa ‘Shark’,
investor and mentor on Channel Ten’s Shark Tank.
Other current
directorships
Retail Zoo Pty Ltd
Former directorships in
last 3 years
None
ResponsibilitiesNon-Executive and Independent Director
Member Audit and Risk Management Committee
Interests in shares and
options
150,000 Ordinary Shares
Company secretary
The Company Secretary is K A Hammond LLB (Hons), BA, GradDipLegPrac. Katherine was appointed to the
position of Company Secretary on 22 January 2018, the same day she joined the Group.
Katherine holds a Bachelor of Laws with Honours and a Bachelor of Arts from the University of Queensland and
is admitted to practice as a Solicitor of the Supreme Court of Queensland. Prior to her appointment as Company
Secretary, Katherine practiced law for 8 years in the areas of mergers & acquisitions, capital markets and
corporate advisory, which includedadvising listed and unlisted entities on governance, compliance and
transactional matters.
Mary-Anne Greaves was appointed as Company Secretary on 11 July 2016 and resigned on 15 December 2017.
Andrew Lowe, Chief Financial Officer, was appointed as Company Secretaryon 15 December 2017 and resigned
as Company Secretary on 22 January 2018,upon the appointment of KatherineHammond.
14

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Meetings of directors
The numbers of meetings of the Company's Board of Directors and of each Board committee held during the year
ended 30 June 2018, and the numbers of meetings attended by each Director were:
Full meetings
Meetings of committees
of Directors
Audit and Risk
Management
People
Development and
Remuneration
ABABAB
E J Hill1313--44
Sir R M Hill
1013----
GWSmith
10132234
RIFyfe
11132244
J S Allis
131322--
A = Number of meetings attended
B = Number of meetings held during the time the Director held office or was a member of the committee during
the year
Committee membership
As at the date of this report, Michael Hill International Limited has an Audit and Risk Management Committee and
a People Development and Remuneration Committee.
Audit and Risk Management CommitteePeople Development and Remuneration
Committee
Gary Smith (c)Rob Fyfe (c)
Janine AllisEmma Hill
Rob FyfeGary Smith
(c) Designates chair of the committee
Remuneration report (audited)
The Directors present the 2018 Michael Hill International Limited remuneration report, outlining key aspects of
our remuneration policy and framework, and remuneration awarded during the 2018 financial year.
Remuneration framework
The information provided in this remuneration report has been audited as required by section 308(3C) of the
Corporations Act 2001.
Principles of compensation
Remuneration is referred to as compensation throughout this report.
Key management personnel ('KMP'), including Directors of the Company andother executives, have authority
and responsibility for planning, directing and controlling the activities of the Group.
For the 2018 financial year, it was determined that the KMP of Michael Hill International were:
• Chief Executive Officer (CEO) - Phil Taylor
• Chief Financial Officer (CFO) - Andrew Lowe (appointed 4 December 2017)
• Chief Information Officer (CIO) - Matt Keays
• Group Executive Supply Chain (GESC) - Galina Hirtzel
• Chief Customer Officer (CB&CO) - Vanessa Brennan (appointed 15 January 2018)
• Group Executive Human Resources (GEHR) - Stewart Silk
15

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Remuneration report (audited) (continued)
Principles of compensation (continued)
Compensation levels for key managementpersonnel of the Group are competitively set to attract and retain
appropriately qualified and experienceddirectors and executives. The People Development and Remuneration
Committee obtains independent advice every three years on the appropriateness of compensation packages of
the Group given trends in comparative companies both locally and internationally, and the objectives of the
Group’s compensation strategy.
The compensation structures explained below are designed to attract suitably qualified candidates, reward the
achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. The
compensation structures take into account the capability and experienceof the KMP, and the KMP's ability to
control the relevant segments performance.
The Executive Remuneration framework consists of:
(1)Total Fixed Remuneration ('TFR') - includes fixed cash remuneration and superannuation component.
(2)Short term incentive ('STI') - on target performance is determined as apercentage of TFR, 70% of the
STI is directly aligned to achieving the Group EBIT return on average totalassets ('ROA') hurdle (15%
ROA) and 30% based on achievement ofindividual performance plans.
(3)Long term incentive ('LTI') - alignment of executive incentives with the long term performance is
achieved by way of a deferred remuneration component. An issue of share rights is made to participants
of the scheme, the quantum being a % of the STI earned.
The current remuneration policy settings for the KMP are as follows:
CEOTFR set at 90% of market median
On target STI set at 75% of TFR
LTI set at 30% of STI achieved
CFOTFR set at 90% of market median
On target STI set at 50% of TFR
LTI set at 30% of STI achieved
CB&COTFR set at 90% of market median
On target STI set at 35% of TFR
LTI set at 30% of STI achieved
CIOTFR set at 90% of market median
On target STI set at 35% of TFR
LTI set at 30% of STI achieved
GESCTFR set at 90% of market median
On target STI set at 35% of TFR
LTI set at 30% of STI achieved
GEHRTFR set at 70% of market median
On target STI set at 35% of TFR
LTI set at 30% of STI achieved
Total fixed compensation
Fixed compensation consists of base compensation as well as leave entitlements and employer contributions to
superannuation funds.
Compensation levels are reviewed annually by the People Development and Remuneration Committee through a
process that considers individual, segment and overall performance of the Group. In addition, external
consultants provide analysis and advice every three years to ensure the Directors’ and senior executives’
compensation is competitive in the market place. A senior executive’s compensation is also reviewed on
promotion.
16

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Remuneration report (audited) (continued)
Performance linked compensation
Performance linked compensation includes both short-term and long-termelements, and is designed to reward
senior executives for meeting or exceeding their financial and personal objectives. The STI is an ‘at risk’ annual
cash payment, while the LTI is a deferred compensation plan providing rights over ordinary shares of the
Company under the rules of the executive incentive plan.
Short-term incentive
The short term incentive scheme is comprised of two components; 70% of the STI for key management
personnel is linked to achievement of the Group's EBIT return on average total assets hurdle (15% ROA) for the
year and 30% is linked to the achievement of key performance indicators ('KPI's') that are agreed in personal
performance plans ('PPP's'), at the start of the reporting period.
The process and scheme provides an ongoing performance management system, along with integrated reporting
for visibility and transparency of progress by each senior executive. Theframework aligns the senior executive
KPIs to delivery of the strategic plan, divisional business plans along with critical operational measures and
leadership measures of each role. The following points outline the framework:
• The policy and framework cascades from the CEO to Group Executives with the intention in 2018-19 to
cascade relevant KPIs further down through the levels of management. Thisaims to ensure key aspects of
the Group’s strategic plan, divisional business plans, along with critical drivers of business outcomes are
clearly identified at each level ofleadership. This includes personal development plans, and leadership
performance.
• The metrics are assessed monthly (on a YTD basis) and along with normal operational metrics, provides the
basis for monthly work in progress ('WIP') reviews.
Long-term incentive
Options were issued under the Executive Incentive Plan (made in accordance with thresholds set in plans
approved by shareholders). The ability to exercise the options is conditional on continuing employment with the
Group. The options issued during the year relates to the entitlements set in the prior years. Options previously
issued are detailed in this report and most recent Appendix 3B.
The Company introduced a deferred compensation plan ('LTI') involving the granting of share rights to eligible
participants in the 2015-16 financial year and was approved by shareholders at the Company’s Annual General
Meeting held on 31 October 2016.
Under the plan, an executive may be granted share rights by the Company. Each share right represents a right to
receive one ordinary share in the Company, subject to the terms and conditions of the rules of the plan. An
allocation of share rights is made to each eligible participant on an annual basis to a value of 30% of the STI
payment earned
1
. The share rights progressively vest
2
over a 3, 4 and 5 year period from the date of issue and
are only retained on exiting the business in the event that the participantis deemed a 'Good Leaver' pursuant to
the LTI plan rules.
FeatureDescription
Opportunity/
Allocation
30% of respective STI which is issued to the Executive by way of share rights
which are granted and vest in 3 tranches. Each right represents a right to acquire
one ordinary share in the Company.
TranchesYear 3 - provided participant remains employed with the Company, 25% will vest
Year 4 - provided participant remains employed with the Company, 25% will vest
Year 5 - provided participant remains employed with the Company, 50% will vest
ExerciseOnce the rights have vested, Participants can exercise them. They can be
exercised by completing and returning to the Company an Exercise Notice.
ExpiryRights will expire on the date 15 years from the grant date
17

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Remuneration report (audited) (continued)
Long-term incentive (continued)
In addition to the share rights issued to the CEO and other eligible senior executives of the Group under the
incentive plan, the CEO was granted share rights as part of the CEO package,which were granted to Mr Taylor
during his tenure as interim CEO between 8 August 2016 and 6 March 2017. An allocation of share rights equal
to 75% of 2016 TFR ($325,500) per annum for 3 years from 1 September 2016 weremade to the CEO. Each
tranche of share rights will vest at adate which is 3 years from the date of issue and are only retained provided
Mr Taylor is employed by the Group at the commencement of the financial yearin which the share right vesting is
scheduled to occur. Termination of employment prior to each corresponding 3 year period will result in all
unvested share rights being forfeited
3
.
1 The number of share rights in each tranche, is based on the prescribed dollar value for each tranche divided by the volume
weighted average share price of Michael Hill International shares over 5 trading days following the Michael Hill International
shares trading on an ex-dividend basis.
2 On vesting each share right represents a right to receive one (1) ordinary share in the Company. No exercise price is payable
upon the exercise of any share rights.
3 The additional share rights component of Mr Taylor's remuneration package is a continuation of the existing plan agreed to
upon Mr Taylor's appointment as interim CEO. As a consequence,the deemed issue date for the second tranche of share
rights was 18 October 2017 and the corresponding vesting date is 1July 2020. The third tranche of share rights is anticipated
to be issued later this year and the corresponding vesting date will be 1 July 2021.
Short-term and long-term incentive structure
The People Development and Remuneration Committee considers that the above performance-linked
compensation structure is generating the desired outcome.
The scheme is already demonstrating a close correlation between executive remuneration, achievement of
budget targets and share price performance as desired.
In 2017-18, the performance linked component of compensation comprises approximately 13% of total payments
to senior executives (2016-17: 7%).
In the current year the Group didn't meet its overall Board targets, and as aconsequence bonuses earned by
KMP's in the current financial year were between 50 and 70% lower than the targeted STI% of TFR.
Remuneration policy and link to performance
Our People Development and Remuneration Committee is made up of two independent non-executive Director's
and the Chair of the Board of Directors. The committee reviews and determines our remuneration policy and
structure annually to ensure it remains aligned to business needs, and meets the Group's remuneration
principles. The Committee also engages external remuneration consultants every three years to assist with this
review.
The People Development and Remuneration Committee is a committee of the Board. It is primarily responsible
for making recommendations to the Board on:
• the over-arching executive remuneration framework
• operation of the incentive plans which apply to the senior executives (the executive team), including key
performance indicators and performance hurdles
• remuneration levels of executives, and
• non-executive Director fees.
18

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Remuneration report (audited) (continued)
Remuneration policy and link to performance (continued)
Their objective is to ensure that remuneration policies and structures are fair and competitive and aligned with the
long-term interests of the Company.
The Corporate Governance Statement provides further information on the role of this committee. The ASX
Corporate Governance Principles andRecommendations rules and principles may materially differ from NZX's
Corporate Governance rules and NZX Code.
In particular, the Board aims to ensure that remuneration practices are:
• competitive and reasonable, enabling the Company to attract and retain key talent
• aligned to the Company's strategic and business objectives and the creation of shareholder value
• transparent and easily understood, and
• acceptable to shareholders.
Figure 1: Remuneration framework
ElementPurposePerformance
metrics
Potential valueChanges for FY
2019
Total fixed remuneration
(TFR)
Provide competitive
market salary
including
superannuation and
non-monetary
benefits
All executives are
reviewed in line with
personal
performance plans
Positioned at a
percentage of
median market rate
Reviewed in line
with market
STIReward for in-year
performance
70% of the target
STI is calculated on
a return on total
assets basis. 30%
of the target STI is
based on a range of
KPI's
CEO: 75% of TFR
CFO: 50% of TFR
Execs: 35% of TFR
Nil
LTIAlignment to
long-term
shareholder value
NilCEO: 30% of STI
CFO: 30% of STI
Execs: 30% of STI
Nil
Balancing short-term and long-term performance
Annual incentives are set between 35%and 75% of TFR, in order to drive performance without encouraging
undue risk-taking.
Long-term incentives are assessed over a 3 to 5 year period and are designedto promote long-term stability in
shareholder returns and talent retention.
The actual remuneration mix for FY 2018 is shown in figure 2 below and targetremuneration mix for 2019 is in
figure 3 below. It reflects the STIopportunity for the 2018-19 year that will be available if the performance
conditions are satisfied at target,and the value of the LTI rights and options granted for the year, as determined
at the grant date.
19

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Remuneration report (audited) (continued)
Remuneration policy and link to performance (continued)
Assessing performance and claw-back of remuneration
The People Development and Remuneration Committee is responsible for assessing performance against KPIs
and determining the STI and LTI to be paid.
In the event of serious misconduct or a material misstatement in the Company’s financial statements, the People
Development and Remuneration Committee can cancel or defer performance-based remuneration.
Consequences of performance on shareholder wealth
In considering the Group’s performance and benefits for shareholder wealth, the People Development and
Remuneration Committee have regard to the following indices in respect ofthe current financial year and the
previous four financial years.
20182017201620152014
$'000
$'000$'000$'000$'000
NPAT4,610 32,648 19,577 27,754 25,041
NPAT from continuing operations34,818 44,132 26,330 33,219 28,171
EBIT*13,210 48,11747,058 42,061 42,151
EBIT from continuing operations*50,147 62,332 54,424 48,558 45,212
Normalised EBIT*40,10648,117 47,058 42,061 42,151
Dividends payments ($'000)19,371 19,264 17,490 23,176 22,336
Share price as at 30 June (NZ$ 2016to 2014)$.97$1.11$1.14$1.06$1.24
Return on shareholders equity17.8%22.7%14.1%18.0%15.9%
Return on average total assets9.1%11.4%7.2%9.6%8.9%
* EBIT and Normalised EBIT are Non-IFRS Information and are unaudited. Please refer to Non-IFRS Information
on page 10 of the Directors Report for an explanation of Non-IFRS information and a reconciliation of EBIT from
continuing operations and Normalised EBIT.
EBIT and ROA hurdles are considered the primary financial performance targets in setting the STI. Profit
amounts for 2014 to 2018 have been preparedin accordance with the requirements of the Corporations Act
2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting
Standards Board. This also complies with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board.
The overall level of compensation takes into account the performance of the Group over a number of years.
Other benefits
Key management personnel do not receive additional benefits, such as non-cash benefits, otherthan statutory
superannuation, as part of the terms andconditions of their appointment.
Loans to key management personnel
The Company does not provide loans to KMP’s or other senior executives.
Service contracts
It is the Group’s policy that service contracts for KMPs, excluding the chief executive officer, are unlimited in term
but capable of termination on three months’ notice and that the Group retains the right to terminate the contract
immediately, by making payment equal to three months’ pay in lieu of notice.
22

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Remuneration report (audited) (continued)
Service contracts (continued)
The Group has entered into a service contract with four KMPs that are capable of termination on three months’
notice. The Group retains the right to terminate a contract immediately bymaking payment equal to three months’
pay in lieu of notice. The KMPs are also entitled to receive on termination of employment their statutory
entitlements of accrued annual and longservice leave, together with any superannuation benefits.
The Group has entered into a service contract with two KMPs that are capableof termination on six month's
notice. The Group retains the right to terminate a contract immediately bymaking payment equal to six months'
pay in lieu of notice. The KMP is also entitled to receive on termination of employment their statutory entitlements
of accrued annual and long service leave, together with any superannuation benefits.
CEO Contract
The Group has entered into a service contract with the CEO, Phil Taylor who was appointed CEO on 6 March
2017 after a period as Interim CEO following the resignation of the former CEO, Mike Parsell on 8 August 2016.
The service contract does not containany probationary period or fixed term.
The remuneration payable to Mr Taylor is as follows:
(a) Annual base salary - $707,594 (inclusive of the statutory superannuation contributions but excluding leave
provisions).
(b) Short terms incentives (STI) - 75% of base salary payable in cash on performance of agreed Group profit
targets based on a return on asset formula (70% of STI) and other agreed annual key indicators (30% of STI).
(c) Deferred compensation plan (LTI) - an allocation of share rights on an annual basis to a value of 30% of the
STI payment earned in the preceding year
1
. The share rights progressively vest
2
over a 3 to 5 year period from
the date of issue and are retained on exiting the business in the event that Mr Taylor is deemed a 'Good Leaver'
pursuant to the LTI plan rules.
(d) Interim CEO engagement package - an allocation of share rights equal to75% of 2016 TFR ($325,500) per
annum for 3 years from 1 September 2016. Each tranche of share rights will vest at a date which is 3 years from
the date of issue and are retained provided Mr Taylor is employed by the Group at the commencement of the
financial year in which the share right vesting is scheduled to occur. Termination of employment prior to each
corresponding 3 year period will result in all unvested share rights beingforfeited
3
.
Either party may terminate the engagementon six months' notice. Otherwise, the Group may terminate Mr
Taylor's position for serious misconduct or professional negligence.
Mr Taylor will be restrained for up to 18 months following the cessation of his engagement with the Group from
soliciting business, customers, suppliers or employees of the Group.
The service contract outlines the components of compensation but does notprescribe how compensation levels
are modified year to year. The People Development and Remuneration Committee reviews compensation levels
each year to take into account cost-of-living changes, any change in the scope of the role performed by the
senior executive and any changes required to meet the principles of compensation policy.
1 The number of share rights in each tranche is based on the prescribed dollar value for each tranche divided by the volume
weighted average share price of Michael Hill International shares over 5 trading days following the Michael Hill International
shares trading on an ex-dividend basis.
2 On vesting, each share right represents a right to receive one (1) ordinary share in the capital of the Company. No exercise
price is payable upon the exercise of any share right.
3 The additional share rights component of Mr Taylor's remuneration package is a continuation of the existing plan agreed to
upon Mr Taylor's appointment as interim CEO. As a consequence,the deemed issue date for the second tranche of share
rights is 18 October 2017 and the corresponding vesting date is 1 September 2020.
23

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Remuneration report (audited) (continued)
Service contracts (continued)
Director consulting agreement
Michael Hill Group Services Pty Limited ACN 134 562 440, a subsidiary of Michael Hill International Limited
(MHIL), has entered into a consultancy agreement (Consultancy Agreement) with Robert Ian Fyfe. Mr Fyfe is a
non-executive Director of MHIL. Details of the Consultancy Agreement were disclosed to the ASX and NZX on 31
August 2017. The Board (with Rob abstaining) formed the view that the Consultancy Agreement is on arm’s
length commercial terms.
Under the Consultancy Agreement, Mr Fyfe provides mentoring support to the CEO, Phil Taylor. Mr Taylor was
appointed to the role of CEO following a long and successful career with Michael Hill, as CFO leading the global
finance team. The Board identified anopportunity to expand Mr Taylor’s leadership capability to ensure that Mr
Taylor is well equipped for the significant leadership responsibilitiesand challenges as CEO.
Mr Fyfe is a very well regarded business leader, with deep CEO and leadership experience including having
successfully led Air New Zealand with over 11,000 employees. Over many years during Mr Fyfe’s tenure, Air
New Zealand was recognised globally for, its brand, marketing, service culture and overall business performance.
Combined with Mr Fyfe’s understanding of the Michael Hill business, the Board recognised that he is well
positioned to provide Mr Taylor with tailored leadership mentoring.
Mr Fyfe typically spends one to two days with Mr Taylor every six weeks wherehe observes Mr Taylor’s
management practices and provides Mr Taylor with feedback and suggested techniques and styles that Mr
Taylor may adopt to enhance the effectiveness of his management and leadership.
The mentoring also enables the Board to gain greater insight into the leadership culture, strengths and
challenges.
Mr Fyfe’s mentoring is non-prescriptive and Mr Fyfe does not participate in management decisions. Mr Fyfe and
the Board consider that Mr Fyfe maintains an ability to bring independent and critical assessment of Mr Taylor’s
performance as CEO.
The income derived by Mr Fyfe (or entities Mr Fyfe controls) under the Consultancy Agreement accounts for less
than 10% of Mr Fyfe’s aggregate annual income for FY18. For FY18, a total amount of $84,000 was paid
pursuant to the Consultancy Agreement; this comprised an amount of $64,000 paid to Rob Fyfe and an amount
of $20,000 paid to The People Shop Ltd. The Board anticipates that less than$100,000 will be paid pursuant to
the Consultancy Agreement for FY19 and will be paid to The People Shop Ltd.
Services from remuneration consultants
The People Development and Remuneration Committee engaged a remuneration consultant during the 2016
financial year to review the amount and elements of the key management personnel remuneration and provide
recommendations in relation thereto.It is the committee's intention to engage consultants every 3 years to review
and advise on executive remuneration.
Non-executive Directors
Total compensation for all non-executive Directors, last voted upon by shareholders on 29 June 2016, is not to
exceed $840,000 per annum and is set basedon advice from external advisorswith reference to fees paid to
other non-executive Directors of comparable companies. Directors’ basefees are presently $96,805 per annum.
Where a Director serves as Chair on the People Development and Remuneration Committee they are entitled to
an additional payment of $20,000 per annum. Where a Director serves as Chair on the Audit and Risk Committee
they are entitled to an additionalpayment of $30,000 per annum. All non-executive Directors enter into a service
agreement with the Company in the form of a letter of appointment. The letter summarises the board policies and
terms, including remuneration, relevant to the office of Director.
The Board Chair receives up to twice the base fee. Non-executive Directorsdo not receive performance-related
compensation. Directors’ fees cover all main board activities and membership of committees.
24

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Remuneration report (audited) (continued)
Non-executive Directors (continued)
Non-executive directors are not provided with retirement benefits apartfrom statutory superannuation.
Directors and KMPs remuneration
Details of the nature and amount of each major element of remuneration of each Director of the Company, and
other key management personnel of the consolidated entity are:
25

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Remuneration report (audited) (continued)Directors and KMPs remuneration (continued)
Short-term
Long-
term
Post-
employment
Share-based
payments
Salary &
fees
STI cash
bonus Other
(a)
Total
Long
service
leave
Superannuation
benefits
Termination
benefits
Options
and rights
Total
Proportion of
remuneration
performance
related
Value of
options as
proportion of
remuneration
$$$$$ $$$$ % %
Non-executive DirectorsEmma Jane Hill2018
193,610
-
- 193,610
-
-
-
- 193,610
-%
-%
2017
190,000
-
- 190,000
-
-
-
- 190,000
-%
-%
Sir Richard Michael Hill2018
96,805
-
- 96,805
-
-
-
- 96,805
-%
-%
2017
95,000
-
- 95,000
-
-
-
- 95,000
-%
-%
Gary Warwick Smith2018
115,804
-
- 115,804
-
11,001
-
- 126,805
-%
-%
2017
104,072
-
- 104,072
-
10,928
-
- 115,000
-%
-%
Robert Ian Fyfe2018
116,805
- 84,000 200,805
-
-
-
- 200,805
-%
-%
2017
115,000
-
- 115,000
-
-
-
- 115,000
-%
-%
Janine Suzanne Allis2018
96,805
-
- 96,805
-
-
-
- 96,805
-%
-%
2017
95,000
-
- 95,000
-
-
-
- 95,000
-%
-%
Total Directors' remuneration2018
619,829
- 84,000 703,829
-
11,001
-
- 714,830
-%
-%
2017
599,072
-
-
599,072
-
10,928
-
-
610,000
-%
-%
KMPsPhil Taylor, CEO(Formerly Interim CEO and CFO)2018
720,306 119,407
- 839,713 20,625
19,427
- 313,940 1,193,705
10.00%
26
.30%
2017
691,733 167,267
- 859,000 112,205
30,627
- 227,332 1,229,164
13.61%
1
8.49%
26

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Remuneration report (audited) (continued)Directors and KMPs remuneration (continued)
Short-term
Long-
term
Post-
employment
Share-based
payments
Salary &
fees
STI cash
bonus Other
(a)
Total
Long
service
leave
Superannuation
benefits
Termination
benefits
Options
and rights
Total
Proportion of
remuneration
performance
related
Value of
options as
proportion of
remuneration
$$$$$ $$$$ % %
Andrew Lowe, CFO(Appointed 4 December 2017)2018
180,200 47,320
- 227,520
2,890
15,981
-
2,979 249,370
18.98%
1.19%
Vanessa Brennan, CCO(Appointed 15 January 2018)2018
192,980 70,000
- 262,980
2,976
17,018
-
4,113 287,087
24.38%
1.43%
Matt Keays, CIO2018
324,316 30,802
- 355,118
5,596
25,000
- 14,461 400,175
7.70%
3.61%
2017
311,000 39,150
- 350,150
5,764
29,760
- 12,122 397,796
9.84%
3.05%
Galina Hirtzel, GESC2018
281,606 24,609
- 306,215
6,243
23,355
- 34,682 370,495
6.64%
9.36%
2017
274,083 29,321
- 303,404
7,818
28,235
- 37,956 377,413
7.77%
10.06%
Stewart Silk, GEHR2018
216,018
6,830
- 222,848
5,462
22,443
- 32,689 283,442
2.41%
11.53%
2017
216,847 24,023
- 240,870
4,114
27,640
- 36,281 308,905
7.78%
11.75%
Mike Parsell, CEO(Resigned 8 August 2016)2018
-
-
-
-
-
-
-
-
-
-%
-%
2017
61,037
-
- 61,037 (3,984)
38,623 1,603,742
- 1,699,418
-%
-%
Anna Shaw, CMO(Resigned 22 March 2017)2018
-
-
-
-
-
-
-
-
-
-%
-%
2017
304,022 68,000
- 372,022
-
29,498
-
- 401,520
16.94%
-%
Total KMPs' remuneration2018
1,915,426 298,968
- 2,214,394 43,792
123,224
- 402,864 2,784,274
10.
74%
14.47%
2017
1,858,722
327,761
-
2,186,483
125,917
184,383
1,603,742
313,691
4,414,216
7.43%
7.11%
27

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Remuneration report (audited) (continued)Directors and KMPs remuneration (continued)
Short-term
Long-
term
Post-
employment
Share-based
payments
Salary &
fees
STI cash
bonus Other
(a)
Total
Long
service
leave
Superannuation
benefits
Termination
benefits
Options
and rights
Total
Proportion of
remuneration
performance
related
Value of
options as
proportion of
remuneration
$$$$$ $$$$ % %
Total Directors' and KMPs' remuneration2018
2,535,255 298,968 84,000 2,918,223 43,792
134,225
- 402,864 3,499,1
04
8.75%
11.80%
2017
2,457,794
327,761
-
2,785,555
125,917
195,311
1,603,742
313,691
5,024,216
6.52%
6.24%
Notes in relation to the table of Directors' and KMPs' remuneration:a. The amount of $200,805 in respect of Robert Ian Fyfe’s salary & fees compri
ses an amount of $116,805 in respect of director fees and an amount of $84,00
0 in respect of services provided
pursuant to a consultancy agreement (Consultanc
y Fees); the Consultancy Fees comprised an am
ount of $64,000 paid to Rob Fyfe and an amount of $20,000 p
aid to The People Shop Ltd. Further
details regarding the consulting agreement are set out
in the Service contracts section above on page 22.
b. The short-term incentive bonus is for performance during the respecti
ve financial year using the criteria set out on page 17 of the Remuneration rep
ort. The amount was determined on 24 August
2018 after performance reviews were completed and approved by the People Development and Remuneration Committee.c. The fair value of options is calculated at the date of grant using the Bi
nomial option-pricing model and allocated to each reporting period evenly ov
er the period from grant date to vesting date.
The value disclosed is the portion of the fair value of th
e options recognised as an ex
pense in each reporting period.
d. Mike Parsell's termination benefits were appr
oved by shareholders and the Board on 31 October 2016.
28

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Remuneration report (audited) (continued)
Analysis of bonuses included in remuneration
Details of the vesting profile of the short-term incentive cash bonuses awarded as remuneration to each Director
of the Company, and other key managementpersonnel are detailed below.
Target bonus
available
Included in
remuneration
Amounts
forfeited Vested in year
Short-term incentive bonus$(a)$(b)%
KMPs
Phil Taylor530,595159,209371,386100
Andrew Lowe169,00050,700118,300100
Vanessa Brennan150,50070,00080,500100
Matt Keays118,47035,54182,929100
Galina Hirtzel106,99532,09974,896100
Stewart Silk85,37125,61159,760100
(a) Amounts included in remuneration for the financial yearrepresent the amount related to the financial year based on
achievement of personal goals and satisfaction of specified performance criteria. The People Development and Remuneration
Committee approved these amounts on 23 August 2018.
(b) The amounts forfeited due to the performance or service criteria not being met in relation to the current financial year.
Additional statutory information
Equity instruments
All options refer to options over ordinary shares of Michael Hill International Limited, which are exercisable on a
one-for-one basis under the Executive Incentive Plan.
Options and rights over equity instruments issued as compensation
Details of tranches issued over ordinary shares in the Company that were issued as compensation to each key
management person during the reportingperiod under previously granted options and details on options that
vested during the reporting period are as follows:
Number of
options issued
during 2018
Option issue
date
Fair value at
grant date per
option
Exercise
price per
option Expiry date
Number of
options vested
during 2018
KMPs
Galina Hirtzel100,000 5 Oct 2017NZ$0.148 AU$1.44 30 Sep 2027-
Stewart Silk100,000 5 Oct 2017NZ$0.148 AU$1.44 30 Sep 2027-
All options expire on their expiry date or within 3 months of termination ofthe individual's employment. The
options are exercisable 5 years from release date. The options are conditional on continuing service. For options
issued in the current year, theearliest exercise date is 30/9/2022.
Modification of terms of equity-settled share-based payment transactions
No terms of equity-settled share-based payment transactions (includingoptions and rights granted as
compensation to a key management person) have been altered or modified by the issuing entity during the
reporting period or the prior period. The exercise price of any future option grants will be set by using the same
method, with reference to the Australian Securities Exchange ('ASX'). Upon exercise of any option previously
granted with a NZ$ exercise price, the $ exercise price will be converted toAU$ with reference to the Reserve
Bank of Australian foreign exchange rate on that date.
29

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Remuneration report (audited) (continued)
Additional statutory information (continued)
Equity instruments (continued)
Unissued shares
As at the date of this report, there were 3,800,000 unissued ordinary shares under options. Option holders do not
have any right, by virtue of the option, to participate in any share issue ofthe Company or any related body
corporate.
Analysis of options and rights over equity instruments granted as compensation
Details of vesting profiles of the options issued as remuneration to each key management person of the Group
are detailed below. When exercisable, each option is convertible into oneordinary share of Michael Hill
International Limited. The vesting conditions are set out in note 20(a).
Options
issuedNumber Issue date*
Exercise
price $
% expired in
year**
% exercisable
in year
Financial
years in
which option
vests
Financial
years in
which option
exercisable
KMPs
Phil Taylor750,000 Nov 2007 NZ$1.25100%100% 2008-2012 2013-2018
150,000 Nov 2009 NZ$0.94-100% 2010-2014 2015-2020
150,000 Sep 2010 NZ$0.88-100% 2011-2015 2016-2021
150,000 Sep 2011 NZ$1.16-100% 2012-2016 2017-2022
150,000 Sep 2012 NZ$1.41-100% 2013-2017 2018-2023
150,000 Sep 2013 NZ$1.82-- 2014-2018 2019-2024
750,000 Dec 2013 NZ$1.82-- 2014-2018 2019-2024
Total2,250,000
SPACE
Galina Hirtzel 500,000 Dec 2013 NZ$1.82-- 2014-2018 2019-2024
100,000 Sep 2014 NZ$1.63-- 2015-2019 2020-2025
100,000 Sep 2015 NZ$1.14-- 2016-2020 2021-2026
100,000 Sep 2016 AU$2.12-- 2017-2021 2022-2027
100,000 Oct 2017 AU$1.442018-2022 2023-2028
Total900,000
SPACE
Stewart Silk500,000 Dec2013 NZ$1.82-- 2014-2018 2019-2024
100,000 Sep 2014 NZ$1.63-- 2015-2019 2020-2025
100,000 Sep 2015 NZ$1.14-- 2016-2020 2021-2026
100,000 Sep 2016 AU$2.12-- 2017-2021 2022-2027
100,000 Oct 2017 AU$1.44-- 2018-2022 2023-2028
Total900,000
* The issue date refers to the date of the tranches prescribed in the optionsagreement.
** The percentage forfeited in the year represents the reduction from the maximum number of options available to
vest due to performance criteria not being achieved.
Analysis of movements in options
The movement during the reporting period, by value, of options over ordinary shares in the Company held by
each key management person is detailed below.
30

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Remuneration report (audited) (continued)
Additional statutory information (continued)
Equity instruments (continued)
Analysis of movements in options (continued)
Value of options
issued in the year
Value of options
exercised in year
Phil Taylor--
Andrew Lowe--
Vanessa Brennan--
Matt Keays--
Galina HirtzelNZ$14,790-
Stewart SilkNZ$14,790-
Share rights
The number of share rights issued to KMPs and senior executives during the last financial year (including the
interim CEO engagement package) was 536,551share rights. Of these, sharerights issued to KMPs are set out
below (including the CEO engagement package).
KMP
No. of share
rights issued
Fair value per
share right $
Phil Taylor358,5701.05
Andrew Lowe--
Vanessa Brennan--
Matt Keays11,2101.05
Galina Hirtzel8,3951.05
Stewart Silk6,8781.05
Reconciliation of options and share rights held by KMP
The table below shows a reconciliation of options held by each KMP during the 2018 financial year. All vested
options were exercisable.
2018
Balance at the start of
the year
Balance at the end of
the year
KMP
VestedUnvested
Issued as
compen-
sation
VestedExercisedForfeited
Vested and
exercisable
Un-vested
PTaylor2,250,000----(750,000)1,500,000-
GHirtzel-800,000100,000----900,000
S Silk-800,000100,000----900,000
---------
TOTAL2,250,0001,600,000200,000--(750,000)1,500,0001,600,000
No options were exercised during the period.
No amounts are unpaid on any shares issued on the exercise of options.
31

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Remuneration report (audited) (continued)
Additional statutory information (continued)
Reconciliation of options and share rights held by KMP (continued)
Figure 11: Share rights
This table below details share rights that were issued, vested and forfeited during the year for each KMP.
Name
Balance
at start
of the
year
Issued
during
year
VestedForfeited
Balance
at end of
year
(unvested)
NumberNumberNumberNumberNumber
PTaylor263,593358,570--622,163
M Keays24,05111,210--35,261
GHirtzel21,8248,395--30,219
S Silk18,4846,878--25,362
-
TOTAL327,952385,053--713,005
* Share rights relating to the current reporting period are anticipated tobe granted in late 2018. The number of shares will
depend on the Michael Hill International Limited’s share price over the five days prior to the grant date.
(i) Voting of shareholders at last year's annual general meeting
Michael Hill International Limited received more than 99.92% of “yes” votes on its remuneration report for the
2017 financial year. The Company did notreceive any specific feedback at the AGM or throughout the year on its
remuneration practices.
Insurance of officers and indemnities
Insurance of officers
The Company’s Constitution provides that it may indemnify any person who is, or has been, an officer of the
Group, including the Directors, the Secretaries and other officers, against liabilities incurred whilst acting as such
officers to the extent permitted by law. The Company has entered into a Deedof Indemnity, Insurance and
Access with each of the Company’s Directors, Company Secretary and certain other officers. No Director or
officer of the Company has received benefits under an indemnity from the Company during or since the end of
the year.
The Company has paid a premium for insurance for officers of the Group. Thisinsurance is against a liability for
costs and expenses incurred by officers in defending civil or criminal proceedings involving them as such officers,
with some exceptions. The contract of insurance prohibits disclosure of the nature of the liability insured against
and the amount of the premium paid.
Indemnity of auditors
To the extent permitted by law, the Company has agreed to indemnify its auditor, Ernst & Young, as part of the
terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified
amount). No payment has been made to indemnify Ernst & Young during or sincethe financial year.
32

Michael Hill International Limited
Directors' report
30 June 2018
(continued)
Non-audit services
The following non-audit services were provided by the entity's auditor, Ernst & Young Australia. The Directors are
satisfied that the provision of non-audit services is compatible with thegeneral standard of independence for
auditors imposed by the CorporationsAct 2001. The nature and scope of eachtype of non-audit service provided
means that auditor independence was not compromised.
Ernst & Young Australia received or are due to receive the following amounts for the provision of non-audit
services:
2018
$
2017
$
Ernst & Young firm:
Advisory fees
170,231
7,416
Total remuneration for non-audit services
170,231
7,416
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of theCorporations Act 2001is
set out on page 34.
Rounding of amounts
The Company is of a kind referred to in ASIC Legislative Instrument 2016/191, relating to the 'rounding off' of
amounts in the Directors' report. Amounts in the Directors' report have been rounded off in accordance with the
instrument to the nearest thousand dollars, or in certain cases, to the nearest dollar.
This report is made on 24 August 2018 in accordance with a resolution of Directors as required by section 298 of
the Corporations Act 2001.
E J Hill
Chair
Brisbane
24 August 2018
33

Michael Hill International Limited
ABN 25 610 937 598
Annual financial report - 30 June 2018
The Directors present the financial statements of Michael Hill International Limited for the year ended 30 June
2018.
Page
Financial statements
Consolidated statement ofcomprehensive income36
Consolidated statementof financial position37
Consolidated statement of changes in equity38
Cash flow statement39
Notes to the consolidated financial statements40
Directors' declaration93
35

Michael Hill International Limited
Consolidated statement of comprehensive income
For the year ended 30 June 2018
Notes
2018
$'000
2017
$'000
Revenue from continuing operations
4
575,549
551,099
Other income5(a)
1,064
1,640
Cost of goods sold
(208,657)
(200,093)
Employee benefits expense
(151,939)
(141,755)
Occupancy costs
(58,074)
(53,900)
Marketing expenses
(31,433)
(26,081)
Selling expenses
(26,708)
(24,647)
Impairment of property, plant and equipment
(348)
(36)
Impairment of other assets8(c)
(134)
-
Onerous lease provision
(6)
-
Depreciation and amortisation expense5(b)
(18,694)
(17,427)
Loss on disposal of property, plant and equipment
(522)
(557)
Other expenses
(29,941)
(25,896)
Finance costs5(b)
(2,690)
(3,164)
Profit before income tax47,467
59,183
Income tax expense6
(12,649)
(15,051)
Profit from continuing operations34,818
44,132
Profit/(loss) from discontinued operations14
(30,208)
(11,485)
Profit for the year4,610
32,647
Other comprehensive income
Item that may be reclassified subsequently to profit or loss
Cash flow hedges9(b)
996
(256)
Currency translation differences arising during the year9(b)
320
(2,542)
Blank
Other comprehensive income for the year, net of tax
1,316
(2,798)
Total comprehensive income for the year
5,926
29,849
Total comprehensive income for the year is attributable to:
Owners of Michael Hill International Limited
5,926
29,849
Total comprehensive income for the year attributable to owners of Michael
Hill International Limited arises from:
Continuing operations
36,134
41,334
Discontinued operations
(30,208)
(11,485)
5,926
29,849
Cents
Cents
Earnings per share for profit attributable to the ordinary equity
holders of the Company, attributable to continuing operations:
Basic earnings per share22
8.99
11.43
Diluted earnings per share22
8.98
11.42
Earnings per share for profit attributable to the ordinary equity
holders of the Company:
Basic earnings per share22
1.19
8.46
Diluted earnings per share22
1.19
8.45
The above consolidated statementof comprehensive income should be read in conjunction with the
accompanying notes.
36

Michael Hill International Limited
Consolidated statement of financial position
As at 30 June 2018
Notes
2018
$'000
2017
$'000
ASSETS
Current assets
Cash and cash equivalents7(a)
7,220
5,676
Trade and other receivables7(b)
25,381
24,219
Inventories8(a)
192,074
203,853
Derivative financial instruments11(a)
245
-
Current tax receivables8(e)
-
888
Other current assets8(f)
3,688
3,945
Total current assets
228,608
238,581
Non-current assets
Trade and other receivables7(b)
2,665
2,371
Property, plant and equipment8(b)
66,666
79,436
Deferred tax assets8(d)
61,895
57,893
Intangible assets8(c)
12,626
8,784
Other non-current assets8(f)
2,888
2,057
Total non-current assets
146,740
150,541
Total assets
375,348
389,122
LIABILITIES
Current liabilities
Trade and other payables7(c)
49,339
47,918
Derivative financial instruments11(a)
390
1,141
Current tax liabilities8(g)
2,696
-
Provisions8(h)
9,386
4,670
Deferred revenue8(i)
26,476
25,924
Total current liabilities
88,287
79,653
Non-current liabilities
Borrowings7(d)
35,213
45,034
Provisions8(h)
4,907
6,235
Deferred revenue8(i)
57,720
56,017
Total non-current liabilities
97,840
107,286
Total liabilities
186,127
186,939
Net assets
189,221
202,183
EQUITY
Contributed equity9(a)
10,266
10,015
Reserves9(b)
1,829
281
Retained profits9(b)
177,126
191,887
Total equity
189,221
202,183
The above consolidated statement offinancial position should be read in conjunction with the accompanying
notes.
37

Michael Hill International Limited
Consolidated statement of changes in equity
For the year ended 30 June 2018
Attributable to owners of
Michael Hill International Limited
Notes
Contributed
equity
$'000
Share based
payments
reserve
$'000
Foreign
currency
translation
reserve
$'000
Cash flow
hedge
reserve
$'000
Retained
profits
$'000
Total equity
$'000
Balance at 1 July 2016
3,7672,1882,827(884)178,503
186,401
Profit for the year---- 32,648
32,648
Currency translation differences--(2,542)--
(2,542)
Currency forward contracts---(834)-
(834)
Interest rate swaps
---578-
578
Total comprehensive income for
the year
--(2,542)(256)32,64829,850
Transactions with members in
their capacity as owners:
Dividends paid13(b)(i)---- (19,264)
(19,264)
Option expense through share based
payments reserve9(b)-55---
55
Issue of shares to employees on
exercise of options4,825----
4,825
Transfer option reserve to contributed
equity on exercise of options712(712)---
-
Transfer option reserve to contributed
equity on forfeiture of options711(711)---
-
Share rights expense through share
based payments reserve
-316---
316
6,248(1,052)--(19,264)
(14,068)
Balance at 30 June 2017
10,0151,136285(1,140)191,887202,183
Profit for the year----4,6104,610
Currency translation differences--320--320
Currency forward contracts---336-336
Interest rate swaps
---659-659
Total comprehensive income
for the year
--3209954,6105,925
Transactions with members in
their capacity as owners:
Dividends paid13(b)(i)---- (19,371)(19,371)
Option expense through share
based payments reserve9(b)-42---42
Share rights expense through
share based payments reserve-442---442
Transfer option reserve to
contributed equity on expiration of
options
251(251)----
251233--(19,371)(18,887)
Balance at 30 June 2018
10,2661,369605(145)177,126189,221
The above consolidated statement of changes in equity should be read in conjunction with the accompanying
notes.
38

Michael Hill International Limited
Consolidated cash flow statement
For the year ended 30 June 2018
Notes
2018
$'000
2017
$'000
Cash flows from operating activities
Receipts from customers (inclusive of GST and sales taxes)
671,165
649,041
Payments to suppliers and employees (inclusive of GST and sales taxes)
(570,280)
(534,444)
100,885
114,597
Interest received
10
16
Other revenue
1,078
791
Interest paid
(2,794)
(3,106)
Income tax paid
(6,448)
(9,179)
Inland revenue tax settlement
-
(21,842)
Net GST and sales taxes paid
(37,838)
(41,525)
Net cash inflow from operating activities
10(a)
54,893
39,752
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
549
289
Payments for property, plant and equipment8(b)
(17,890)
(27,294)
Payments for intangible assets8(c)
(6,665)
(5,851)
Net cash (outflow) from investing activities
(24,006)
(32,856)
Cash flows from financing activities
Proceeds from issues of shareson exercise of options9(a)
-
4,825
Proceeds from borrowings
116,500
136,750
Repayment of borrowings
(126,500)
(132,250)
Dividends paid to Company's shareholders13(b)
(19,371)
(19,264)
Net cash (outflow) from financing activities
(29,371)
(9,939)
Net increase (decrease) in cash and cash equivalents1,516
(3,043)
Cash and cash equivalents at the beginning of the financial year
5,676
8,853
Effects of exchange rate changes on cash and cash equivalents
28
(134)
Cash and cash equivalents at the end of the financial year7(a)
7,220
5,676
The above consolidated cash flow statement should be read in conjunction with the accompanying notes.
39

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
1 Corporate Information
The consolidated financial statements of Michael Hill International Limited and its subsidiaries (collectively, the
Group) for the year ended 30 June 2018 were authorised for issue in accordance with a resolution of the
directors on 24 August 2018. Michael Hill International Limited (the Company or Parent) is a for profit company
limited by shares incorporated in Australia. The Company listed on the Australian Securities Exchange ('ASX') on
7 July 2016 as its primary listing, and maintains a secondary listing on theNew Zealand Stock Exchange ('NZX').
2 Summary of significant accounting policies
(a) Basis of preparation
The financial report is a general purpose financial report, which has beenprepared in accordance with the
requirements of the CorporationsAct 2001, Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards Board.
The financial report is presented in Australian dollars and all values arerounded to the nearest thousand ($'000),
except when otherwise indicated.
The financial statements have been prepared on a historical cost basis, except for derivative financial instruments
that have been measured at fair value. The consolidated financial statements provide comparative information in
respect of the previous period.
(i) Compliance with IFRS
The consolidated financial statements of the Group comply with International Financial Reporting Standards
(IFRS) as issued by the InternationalAccounting Standards Board (IASB).
(b) Principles of consolidation and equity accounting
Subsidiaries
Subsidiaries are all entities (including special purpose) over which theGroup has control. Control is achieved
when the Group is exposed, or has rights,to variable returns from its involvement with the investee and has the
ability to affect those returns throughits power to direct the activitiesof the investee. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date
that control ceases.
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost
of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities
incurred or assumed at the date of exchange. Identifiable assets acquiredand liabilities and contingent liabilities
assumed in a business combination aremeasured initially at their fair values at the acquisition date, irrespective
of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the
Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than
the fair value of the net assets of the subsidiary acquired, the differenceis recognised directly in the statement of
comprehensive income. Investments in subsidiaries are accounted for at cost in the individual financial
statements of Michael Hill International Limited. Refer to note 15(a).
Intercompany transactions, balancesand unrealised gains on transactions between Group companies are
eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of
the impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary
to ensure consistency with thepolicies adopted by the Group.
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision makers. The chiefoperating decision makers, who are responsible for allocating resources
and assessing performance of the operating segments, have been identified as the Executive Management team.
40

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
2 Summary of significant accounting policies (continued)
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group's entitiesare measured using the currency of the
primary economic environment in which the entity operates ('the functional currency'). The Group financial
statements are presented in Australian dollars, which is the Group's presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at
the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end of monetary assets and liabilities denominated in foreign
currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow
hedges and qualifying net investment hedgesor are attributable to part ofthe net investment in a foreign
operation.
(iii) Group companies
The results and financial position of all the Group entities (none of whichhave the currency of a hyperinflationary
economy) that have a functional currency different from the presentationcurrency are translated into the
presentation currency as follows:
• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the
statement of financial position;
• income and expenses for each statement of profit or loss and statement of comprehensive income are
translated at average exchange rates, unless this is not a reasonable approximation of the cumulative effect
of the rates prevailing on the transaction dates, in which case income and expenses are translated at the
dates of the transactions; and
• all resulting exchange differencesare recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and
of borrowings and other financial instruments designated as hedges of such investments, are recognised in other
comprehensive income.
(e) Revenue recognition
(i) Sales of goods - retail
Sales of goods are recognised when a Group entity delivers a product to the customer. Retail sales are usually
by cash, payment plan or credit card. The recorded revenue is the gross amount of sale (excluding taxes),
including any fees payable for the transaction.
It is the Group's policy to sell its products to the end customer with a rightof return. Accumulated experience is
used to estimate and provide for such returns at the time of sale, recognising a Returns provision and
corresponding Returns Inventory.
(ii) Rendering of services - deferred service revenue
The Group offers a professional care plan ('PCP') product which is considered deferred revenue until such time
that service has been provided. A PCP is a plan under which the Group offers future services to customers based
on the type of plan purchased. The Group subsequently recognises the income in revenue in the statement of
comprehensive income once these services are performed. An estimate is used as a basis to establish the
amount of service revenue to recognisein the consolidated statement of comprehensive income.
(iii) Rendering of services - repairs
Sales of services for repair work performed is recognised in the accounting period in which the services are
rendered.
41

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
2 Summary of significant accounting policies (continued)
(e) Revenue recognition (continued)
(iv) Interest revenue from in-house customer finance program
Interest revenue is recognised on the in-house customer finance program when consideration is deferred. It is
calculated as the difference between the nominal cash and cash equivalents received from customers and the
discounted cashflows, on both interest and non-interest bearing products. Interest revenue is brought to account
over the term of the finance agreement, and the rate used for non-interest bearing products is in line with current,
comparable market rates.
(v) Interest income
Interest income is recognised using the effective interest method.
(f) Taxes
Current income tax
The income tax expense or credit for the year is the tax payable on the current year's taxable income based on
the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the
end of the reporting year in the countries where the Group operates and generates taxable income. Management
periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is
subject to interpretation. It establishes provisions where appropriateon the basis of amounts expected to be paid
to the tax authorities.
Current tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive
income or directly in equity, respectively.
Deferred income tax
Deferred income tax is provided in full, using the liability method, on temporary differences between the tax bases
of assets and liabilities and their carrying amounts in the consolidated financial statements.
Deferred tax assets are recognised for deductible temporary differencesand unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and
tax bases of investments in controlled entities where the Parent Entity isable to control the timing of the reversal
of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive
income or directly in equity, respectively.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and
tax liabilities are offset where theentity has a legally enforceable right to offset and intends either to settle on a
net basis, or to realise the asset and settle the liability simultaneously.
Tax consolidation group
Michael Hill International Limited and its wholly-owned Australian controlled entities formed a tax consolidation
group on 29 June 2016. As a consequence, one income tax return is completed for the Australian tax group and
is treated for income tax purposes as one taxpayer.
42

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
2 Summary of significant accounting policies (continued)
(f) Taxes (continued)
Formerly, Michael Hill Jeweller (Australia) Pty Ltd and all wholly-ownedAustralian controlled entities formed the
Australian tax consolidation group which completed one income tax returnand was treated for income tax
purposes as one taxpayer.
The tax balances have been attributed for reporting purposes to each of theentities on the basis of their
individual results. Amounts of tax due to and receivable from the Australian Taxation Office are made by Michael
Hill International Limited as nominated member of the Australian tax consolidated group. The current tax balance
for the Australian tax group has been allocated between the members based on each entity’s current tax
movement for the period. Where tax losses are incurred by Australian tax group members, these are offset within
the group.
(g) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except:
•When the GST incurred on a sale or purchase of assets or services is not payable to or recoverable from
the taxation authority, in which case the GST is recognised as part of the revenue or the expense item or
as part of the cost of acquisition of the asset, as applicable; or
•When receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables
or payables in the statement of financial position. Commitments and contingencies are disclosed net of the
amount of GST recoverable from, or payable to, the taxation authority.
Cash flows are included in the statement of cash flows on a gross basis and the GST components of cash flows
arising from investing or financing activities which are recoverable from, or payable to, the taxation authority, are
presented as operating cash flows.
(h) Leases
Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards
of ownership are classified as finance leases. Finance leases are capitalised at the lease's inception at the fair
value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding
rental obligations, net of finance charges, are included in other short-term and long-term payables. Each lease
payment is allocated between the liability and finance cost. The finance cost is charged to the consolidated
statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on
the remaining balance of the liability for each year. The property, plant and equipment acquired under finance
leases is depreciated over the asset's useful life or over the shorter of the asset's useful life and the lease term.
Leases in which a significant portion of the risks and rewards of ownershipare not transferred to the Group as
lessee are classified as operating leases (note 17). Payments made under operating leases (net of any
incentives received from the lessor) are charged to profit or loss on a straight-line basis over the year of the
lease.
(i) Impairment of assets
At each annual reporting date (or more frequently if events or changes in circumstances indicate that they might
be impaired), the Group assesses whetherthere is any indication that an asset may be impaired. Where such an
indication is identified, the Group estimates the recoverable amount of the asset and recognises an impairment
loss where the recoverable amount is less than the carrying amount. The recoverable amount is the higher of an
asset's fair value less costs to sell and value-in-use.
In addition, at least annually, goodwill and intangible assets with indefinite useful lives are tested for impairment
by comparing their estimated recoverable amounts with their carrying amounts. Where the recoverable amount
exceeds the carrying amount of an asset, an impairment loss is recognised.
The pre-tax discount rates used in determining the recoverable amount ranged between 10.5% and 11.5% (2017:
11.1% and 14.6%), depending on the geographical segment of the assets.
43

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
2 Summary of significant accounting policies (continued)
(j) Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call withfinancial institutions, other
short-term, highly liquid investments with original maturities of threemonths or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts.
Bank overdrafts are shown within borrowings in current liabilities in thestatement of financial position when
utilised.
(k) Trade and other receivables
Trade receivables are amounts due fromcustomers for goods sold or services rendered in the ordinary course of
business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer),
they are classified as current assets. If not, they are presented as non-current assets.
Collectibility of trade receivables is reviewed on an ongoing basis. Trade receivables which are known to be
uncollectible are written off. A provision for impaired receivables is established when there is objective evidence
that the Group will not be able to collect all amounts due according to the original terms of receivables. The
amount of the provision is the difference between the asset’s carrying amount and the present value of estimated
future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables
are not discounted if the effect of discounting is immaterial. The amount of the provision is recognised in the
statement of comprehensive income.
(l) Deferred expenditure
Direct and incremental bonuses associated with the sale of PCPs are deferred and amortised in proportion to the
PCP revenue recognised. Management reviews trends in current and estimated future services provided under
the plan to assess whether changes are required to the cost recognition rates used.
(m) Inventories
Raw materials and finished goods are stated at the lower of cost and net realisable value. Cost comprises direct
materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being
allocated on the basis of normal operating capacity. Costs are assigned toindividual items of inventory on the
basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of
business less the estimated costs of completion and the estimated costs necessary to make the sale.
(n) Discontinued operations
A discontinued operation is a componentof the entity that has been disposed of or is classified as held for sale
and that represents a separate major line of business or geographical areaof operations, is part of a single
co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired
exclusively with a view to resale. The results of discontinued operationsare presented separately in the
statement of profit or loss.
(o) Investments and other financial assets
Classification
The Group classifies its financial assets in the following categories:
• financial assets at fair value through profit or loss,
• loans and receivables,
• held-to-maturity investments, and
• available-for-sale financial assets.
44

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
2 Summary of significant accounting policies (continued)
(o) Investments and other financial assets (continued)
Classification (continued)
The classification depends on the purpose for which the investments were acquired. Management determines the
classification of its investments at initial recognition and, in the caseof assets classified as held-to-maturity,
re-evaluates this designation at the end of each reporting year. See note 7for details about each type of financial
asset.
(i) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assetsheld for trading. A financial asset is
classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are
classified as held for trading unless they are designated as hedges. Assets in this category are classified as
current assets if they are expected to be settled within 12 months; otherwise they are classified as non-current.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. They are included in current assets, except forthose with maturities greater than 12
months after the reporting period which are classified as non-current assets. Loans and receivables are included
in trade and other receivables in the statement of financial position (note7(b)).
Held-to-maturity investments
Held-to-maturity investments arenon-derivative financial assets withfixed or determinable payments and fixed
maturities that the Group's management has the positive intention and ability to hold to maturity. If the Group
were to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be
tainted and reclassified as available-for-sale. Held-to-maturity financial assets are included in non-current assets,
except for those with maturities less than 12 months from the end of the reporting period, which are classified as
current assets.
Available-for-sale financial assets
Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that
are either designated in this category or not classified in any of the othercategories. They are included in
non-current assets unless the investment matures or management intends to dispose of the investment within 12
months of the end of the reporting period. Investments are designated as available-for-sale if they do not have
fixed maturities and fixed or determinable payments and management intends to hold them for the medium to
long-term.
Impairment
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset
or a Group of financial assets is impaired. A financial asset or a Group of financial assets is impaired and
impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events
that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact
on the estimated future cash flows of the financial asset or Group of financial assets that can be reliably
estimated. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in
the fair value of the security below its cost is considered an indicator that the assets are impaired.
(p) Derivatives and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently remeasured to their fair value at the end of each reporting year. The accounting for subsequent
changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the
nature of the item being hedged. The Groupdesignates certain derivativesas either:
• hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges)
• hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly
probable forecast transactions (cash flow hedges), or
• hedges of a net investment in a foreign operation (net investment hedges).
45

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
2 Summary of significant accounting policies (continued)
(p) Derivatives and hedging activities (continued)
The Group documents at the inception of the hedging transaction the relationship between hedging instruments
and hedged items, as well as its risk management objective and strategy forundertaking various hedge
transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of
whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in
offsetting changes in fair values or cash flows of hedged items.
The fair values of various derivative financial instruments used for hedging purposes are disclosed in note 7(e).
Movements in the hedging reserve in shareholder's equity are shown in note9(b). The full fair value of a hedging
derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more
than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is
less than 12 months. Trading derivatives are classified as a current assetor liability.
(a) Fair value hedge
Changes in the fair value of derivatives that are designated and qualify asfair value hedges are recorded in the
income statement, together with any changes in the fair value of the hedgedasset or liability that are attributable
to the hedged risk. The gain or loss relating to the effective portion of interest rate swaps hedging fixed rate
borrowings is recognised in profit or loss within finance costs, togetherwith changes in the fair value of the
hedged fixed rate borrowings attributable to interest rate risk. The gainor loss relating to the ineffective portion is
recognised in profit or loss within other income or other expenses.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a
hedged item for which the effective interest method is used is amortised toprofit or loss over the period to
maturity using a recalculated effective interest rate.
(ii) Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognised in other comprehensive income and accumulated in reserves in equity. The gain or loss
relating to the ineffective portion is recognised immediately in profit or loss within other income or other expense.
Amounts accumulated in equity are reclassified to profit or loss in the years when the hedged item affects profit
or loss (for instance when the forecast sale that is hedged takes place). The gain or loss relating to the effective
portion of interest rate swaps hedging variable rate borrowings is recognised in profit or loss within 'finance
costs'. The gain or loss relating to the effective portion of forward foreign exchange contracts hedging export
sales is recognised in profit or loss within 'sales'. However, when the forecast transaction that is hedged results in
the recognition of a non-financial asset (for example, inventory or fixedassets) the gains and losses previously
deferred in equity are reclassified from equity and included in the initial measurement of the cost of the asset.
The deferred amounts are ultimately recognised in profit or loss as cost ofgoods sold in the case of inventory, or
as depreciation or impairment in the case of fixed assets.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for
hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised
when the forecast transaction is ultimately recognised in profit or loss.When a forecast transaction is no longer
expected to occur, the cumulative gain or loss that was reported in equity is immediately reclassified to profit or
loss.
(iii) Net investment hedges
Hedges of net investments in foreignoperations are accounted for similarly to cash flow hedges.
Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in other
comprehensive income and accumulated in reserves in equity. The gain or loss relating to the ineffective portion
is recognised immediately in profit or loss within other income or other expenses.
Gains and losses accumulated in equity are reclassified to profit or loss when the foreign operation is partially
disposed of or sold.
46

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
2 Summary of significant accounting policies (continued)
(p) Derivatives and hedging activities (continued)
(iv) Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative
instrument that does not qualify forhedge accounting are recognised immediately in profit or loss and are
included in other income or other expenses.
(q) Property, plant and equipment
All property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure
that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with theitem will flow to the Group and the cost
of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset
is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the
reporting year in which they are incurred.
Depreciation on other assets is calculated using the straight line methodto allocate their cost or revalued
amounts, net of their residual values, over their estimated useful lives (see Note 8(b)).
The assets' residual values and useful lives are reviewed, and adjusted ifappropriate, at the end of each
reporting year.
An asset's carrying amount is written down immediately to its recoverableamount if the asset's carrying amount
is greater than its estimated recoverable amount (note 2(i)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included
in profit or loss. When revalued assets are sold, it is Group policy to transfer any amounts included in other
reserves in respect of those assets to retained earnings.
(r) Intangible assets
Software
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use
the specific software. These costs are amortised over their estimated useful lives (three to five years).
Costs associated with developing or maintaining software programmes arerecognised as an expense as
incurred. Development costs that are directly attributable to the designand testing of identifiable and unique
software products controlled by the Group are recognised as intangible assets when the following criteria are
met:
• it is technically feasible to complete the software so that it will be available for use
• management intends to complete the software and use or sell it
• there is an ability to use or sell the software
• it can be demonstrated how the software will generate probable future economic benefits
• adequate technical, financial and otherresources to complete the development and to use or sell the
software are available, and
• the expenditure attributable to the software during its development canbe reliably measured.
Directly attributable costs that are capitalised as part of the software include employee costs and an appropriate
portion of relevant overheads.
Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset
is ready for use.
47

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
2 Summary of significant accounting policies (continued)
(r) Intangible assets (continued)
Software (continued)
Computer software development costs recognised as assets are amortised over their estimated useful lives (not
exceeding ten years).
(s) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year
which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and
other payables are presented as current liabilities unless payment is notdue within 12 months after the reporting
year. They are recognised initially at their fair value and subsequently measured at amortised cost using the
effective interest method.
Deferred revenue represents lease incentives for entering new lease agreements and revenue from PCPs. The
accounting policy used to recognise the revenue is detailed in note 2(e)(ii).
(t) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the year of the borrowings usingthe effective interest method.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged,
cancelled or expired. The difference between the carrying amount of a financial liability that has been
extinguished or transferred to another party and the consideration paid,including any non-cash assets
transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of
the liability for at least 12 months after the reporting year.
(u) Provisions
Provisions for are recognised when the Group has a present legal or constructive obligation as a result of past
events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be
reliably estimated. Provisions arenot recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is
determined by considering the class of obligations as a whole. A provisionis recognised even if the likelihood of
an outflow with respect to any one item included in the same class of obligations may be small.
Present obligations arising from onerous contracts are required to be recognised and measured as a provision.
An onerous contract is considered toexist where the unavoidable cost of meeting the obligations under the
contract exceed the economic benefits expected to be received from the contract. The Group has recognised a
provision in relation to one contract at our Maryborough location in Australia that was identified as onerous during
the reporting period.
Provisions are measured at the present value of management's best estimate of the expenditure required to
settle the present obligation at the end of the reporting year. The discount rate used to determine the present
value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific
to the liability. The increase in the provision due to the passage of time isrecognised as interest expense.
(v) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits andaccumulating sick leave that are expected
to be settled wholly within 12 months after the end of the year in which the employees render the related service
are recognised in respect of employees’ services up to the end of the reporting year and are measured at the
amounts expected to be paid when the liabilities are settled.
48

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
2 Summary of significant accounting policies (continued)
(v) Employee benefits (continued)
(i) Short-term obligations (continued)
Provisions for employee benefits are measured at the present value of management’s best estimate of the
expenditure required to settle the present obligation at the reporting date.
(ii) Other long-term employee benefit obligations
The liabilities for long service leave and annual leave that are not expected to be settled wholly within 12 months
after the end of the year in which the employees render the related service are measured as the present value of
expected future payments to be made inrespect of services provided by employees up to the end of the reporting
year using the projected unit credit method. Consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are discounted using the
Milliman G100 discount rates at the endof the reporting period. Remeasurements as a result of experience
adjustments and changes in actuarial assumptions are recognised in profit or loss.
The obligations are presented as current liabilities in the statement of financial position if the entity does not have
an unconditional right to defer settlement for at least twelve months after the reporting year, regardless of when
the actual settlement is expected to occur.
(iii) Share-based payments
Employee options
Options are issued to Executives of Michael Hill International Limited inaccordance with the Company's
constitution. The Board of Directors pass a resolution approving the issue of the options. The fair value of options
granted is recognised as an employee benefit expense with a correspondingincrease in equity.
The fair value is measured at grant date and recognised over the period during which the employees become
unconditionally entitled to the options. The fair value at grant date for options issued during 2018 were
independently determined using a Binomial option pricing model, which isan iterative model for options that can
be exercised at times prior to expiry. The model takes into account the grant date, exercise price, the vesting and
performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date
and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for
the term of the option. It also assumes the options will be exercised at the mid-point of the exercise period.
The fair value of options granted is recognised as an employee benefits expense with a corresponding increase
in equity. The total amount to be expensed is determined by reference to thefair value of the options granted:
• including any market performance conditions (eg the entity’s share price)
• excluding the impact of any service and non-market performance vesting conditions (eg
profitability, sales growth targetsand remaining an employee of the entity over a specified time
year), and
• including the impact of any non-vesting conditions (eg the requirement for employees to save or
holdings shares for a specific year of time).
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting
conditions are to be satisfied. At theend of each year, the entity revises its estimates of the number of options
that are expected to vest based on thenon-marketing vesting and service conditions. It recognises the impact of
the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.
Upon the exercise of options, the balance of the share-based payments reserve relating to those options is
transferred to share capital.
(iv) Profit-sharing and bonus plans
The Group recognises a liability andan expense for bonuses and profit-sharing based on a formula that takes
into consideration the profit attributable to the Company's shareholders after certain adjustments. The Group
recognises a provision where contractually obliged or where there is a past practice that has created a
constructive obligation.
49

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
2 Summary of significant accounting policies (continued)
(v) Employee benefits (continued)
(v) Retirement benefit obligations
All Australian and Canadian employeesof the Group are entitled to benefits from the Group's superannuation
plan on retirement, disability or death or can direct the group to make contributions to a defined contribution plan
of their choice. The Group’s superannuation plan has a defined benefit section which receives fixed contributions
from Group companies and the Group's legal or constructive obligation is limited to these contributions.
(w) Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction,
net of tax, from the proceeds.
Where any Group company purchases the Company's equity instruments, for example as the result of a share
buy-back or a share-based payment plan,the consideration paid, including any directly attributable incremental
costs (net of income taxes) is deducted from equity attributable to the owners of Michael Hill International Limited
as treasury shares until the shares are cancelled or reissued. Where such ordinary shares are subsequently
reissued, any consideration received, net of any directly attributable incremental transaction costs and the related
income tax effects, is included in equity attributable to the owners of Michael Hill International Limited.
(x) Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the
discretion of the entity, on or before the end of the reporting year but not distributed at the end of the reporting
year.
(y) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
• the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary
shares
• by the weighted average number of ordinary shares outstanding during thefinancial year, adjusted for bonus
elements in ordinary shares issued during the year and excluding treasuryshares.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account:
• the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares, and
• the weighted average number of additional ordinary shares that would have been outstanding assuming the
conversion of all dilutive potential ordinary shares.
(z) Rounding of amounts
The Company is of a kind referred to in ASIC Legislative Instrument 2016/191, relating to the 'rounding off' of
amounts in the financial statements.Amounts in the financial statementshave been rounded off in accordance
with the instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
50

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
2 Summary of significant accounting policies (continued)
(aa)New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June
2018 reporting periods and have not been early adopted by the group. The Group's assessment of the financial
impact of these new standards and interpretations is set out below.
(i) AASB 9 Financial Instruments: Classification and measurement
AASB 9Financial Instrumentsaddresses the classification, measurement and derecognition of financial assets
and financial liabilities. The standard is applicable to financial yearscommencing on or after 1 January 2018, and
the Group will be adopting the new standard from 1 July 2018. The impairmentmodel under the new Standard is
based on expected credit losses rather than incurred losses under AASB 139. The expected credit loss model
results in early recognition of impairment allowances and likely larger amount of the allowances. The level of
allowances will also be more volatile in the future, as forecasts change. Adopting the expected credit loss model
requires changes in current systems and processes and the use of judgement. Preliminary assessments indicate
that the impact of the standard is not expected to be significant on the consolidated financial position, cash flow
and results of operations. This standard will require additional assessment and disclosure of financial assets and
liabilities held by the Group. The Group will continue to apply the provisions of AASB 139 in relation to open
hedges until they are settled.
(ii) AASB 15 Revenue from Contracts with Customers
AASB 15Revenuedeals with revenue recognition and establishes principles for reportinguseful information to
users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising
from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or
service and thus has the ability to direct the use and obtain the benefits from the good or service. AASB 15
supersedes:
(a)AASB 111 Construction Contracts;
(b)AASB 118 Revenue;
(c)Interpretation 13 Customer Loyalty Programmes;
(d)Interpretation 15 Agreements for the Construction of Real Estate;
(e)Interpretation 18 Transfers of Assets from Customers;
(f)Interpretation 131 Revenue - Barter Transactions Involving Advertising Services; and
(g)Interpretation 1042 Subscriberacquisition costs in the Telecommunications Industry.
The core principle of AASB 15 is that an entity recognises revenue to depictthe transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. This is largely in line with the current accounting policies adopted for
recognition of revenue, as described in note 2(e).
The standard is applicable for financial years commencing on or after 1 January 2018, and the Group will be
adopting the new standard from 1 July 2018.Substantial work has been completed reviewing the Group's
different revenue streams. The revenue from the sale of goods will be recognised at a point in time while the
revenue from sale of PCP will be recognised over time consistent with the current accounting treatment. The
impact of the new revenue standard is notexpected to be significant. The new standard will require certain
disclosure related changes to the 2019 financial statements.
(iii) AASB 16 Leases
AASB 16Leasesaddresses the recognition and measurement of assets and liabilities for all leases with a term of
more than 12 months, unless they are of low value. It also contains the disclosure requirements for lessees and
lessors. AASB 16 supersedes:
(a)AASB 117 Leases;
(b)Interpretation 4 Determining whether an Arrangement contains a Lease;
(c)SIC-15 Operating Leases - Incentives; and
(d)SEC - 27 Evaluating the Substance of Transactions involving the Legal Form of a Lease.
51

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
2 Summary of significant accounting policies (continued)
(aa)New accounting standards and interpretations (continued)
(iii) AASB 16 Leases (continued)
The standard is not applicable until financial years commencing on or after 1 January 2019 but is available for
early adoption provided the new revenue standard, AASB 15 Revenue from Contracts with Customers, has been
applied or is applied at the same date as AASB 16. The Group has not yet determined the timing of adopting
AASB 16 Leases.
The Group will use a modified retrospective adoption approach and expect to elect the package of practical
expedients, including the use of hindsight to determine the lease term. Asthe Group continues to evaluate this
standard and the effect on related disclosures, the primary effect of adoption will be to record right-of-use assets
and corresponding lease obligationsfor current operating leases. The adoption is expected to have a material
impact on the Group's consolidated balance sheet, consolidated cash flowstatement and statement of
comprehensive income.
Management is currently evaluating theanticipated impact on the Group’sconsolidated financial position and
results of operations, the quantitative and qualitative factors that will impact the Group as part of the adoption of
this standard, as well as any changes to its leasing strategy that may occurbecause of the changes to the
accounting and recognition of leases.
The ultimate impact of adopting the new standard will depend on the Group'slease portfolio as of the adoption
date and the final discount rates used.
52

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
Additional Information
This section provides additional information about those individual line items in the financial statements that the
Directors consider most relevant in the context of the operations of the entity, including:
(a) accounting policies that are relevant for an understanding of the items recognised in the financial
statements.
(b) analysis and sub-totals, including segment information
(c) information about estimates and judgements made in relation to particular items.
3 Segment information54
4 Revenue56
5 Other income and expense items56
6 Income tax expense57
7 Financial assets and financial liabilities58
8 Non-financial assets and liabilities63
9 Equity69
10 Cash flow information70
53

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
3 Segment information
(a) Description of segments and principal activities
Management have determined the operating segments based on the reports reviewed by the Board and
Executive team that are used to make strategic decisions. The Board and executive team consider, organise and
manage the business primarily from a brand perspective. For the Michael Hill brand, they also consider, organise
and manage the business from a geographic perspective, being the country of origin where the sale and service
was performed.
During the year, the Company announced the closure of the Emma & Roe brand and the Michael Hill United
States segment. These segments have been substantially closed and consequently these segments have been
classified as a discontinued operation and are therefore not presented inthe segment disclosures for 2018 and
2017.
The amounts provided to the Board and executive team in respect of total assets and liabilities are measured in a
manner consistent with the financial statements. These reports do not allocate total assets or total liabilities
based on the operations of each segment or by geographical location.
The Group's continuing operationsoperate in three geographical segments: Australia, New Zealand and Canada.
The corporate and other segment includes revenue and expenses that do not relate directly to the relevant
Michael Hill retail segments. These predominately relate to corporate costs and Australian based support costs,
but also include manufacturing activities, warehouse and distribution,interest and company tax. Inter-segment
pricing is at arm's length or market value.
Types of products and services
Michael Hill International Limitedand its controlledentities operate predominately in the sale of jewellery and
related services. As indicated above, the Group is organised and managed globally by brand and geographic
areas.
Major customers
Michael Hill International Limitedand its controlled entities sell goods and provide services to a number of
customers from which revenue is derived. There is no single customer from which the Group derives more than
10% of total consolidated revenue.
Accounting policies and inter-segment transactions
The accounting policies used by the Group in reporting segments internally are the same as those contained in
note 2 to the accounts and in the prior period.
54

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
3 Segment information (continued)
(b) Segment results
Segment information
2018
MH
Australia
MH New
Zealand
MH
Canada
Corporate
& other Group
$'000 $'000
$'000
$'000 $'000
Operating revenue325,709115,376 133,0001,464 575,549
Gross profit206,30371,560 82,9676,063 366,893
Gross profit %63.3%62.0% 62.0%-% 63.7%
EBITDA*56,935 28,06319,986 (36,143) 68,841
Depreciation and amortisation(8,314) (2,464) (5,077) (2,839) (18,694)
EBIT*
48,62125,59914,909(38,982)50,147
EBIT as a % of revenue14.9% 22.2% 11.0%-%8.7%
Interest income21-710
Finance costs5910- (2,759) (2,690)
Net profit before tax
48,68225,60914,909(41,733)47,467
Income tax expense
----(12,649)
Net profit after tax
48,68225,60914,909(41,733)34,818
Segment information
2017
MH
Australia
MH New
Zealand
MH
Canada
Corporate
& other Group
$'000 $'000
$'000
$'000 $'000
Operating revenue321,981 115,518 112,930670 551,099
Gross profit201,70771,237 69,2108,853 351,007
Gross profit %62.6% 61.7% 61.0%-% 63.7%
EBITDA*59,454 29,04816,643 (25,386) 79,759
Depreciation and amortisation(7,766) (2,651) (4,195) (2,815) (17,427)
EBIT*
51,68826,39712,448(28,201)62,332
EBIT as a % of revenue16.1% 22.9% 11.0%-% 11.3%
Interest income-1-1516
Finance costs(17)(41)- (3,106) (3,164)
Net profit before tax
51,67126,35612,448(31,292)59,183
Income tax expense
----(15,051)
Net profit after tax
51,67126,35612,448(31,292)44,132
* EBIT and EBITDA are Non-IFRS Information and are unaudited. Please referto Non-IFRS Information on page
10 of the Directors Report for an explanation of Non-IFRS information and areconciliation of EBIT from
continuing operations and Normalised EBIT.
55

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
4 Revenue
2018
$'000
2017
$'000
From continuing operations:
Sales revenue
Revenue from sale of goods and repair services
541,349
517,222
Revenue from professional care plans
31,929
32,131
Interest and other revenue from in-house customer finance program
2,261
1,730
575,539
551,083
Other revenue
Interest income
10
16
Total revenue from continuing operations
575,549
551,099
5 Other income and expense items
(a) Other income
Notes
2018
$'000
2017
$'000
Insurance recoveries
-
2
Net foreign exchange gains11(b)
-
863
Other items
1,064
775
1,064
1,640
(b) Breakdown of expenses by nature
2018
$'000
2017
$'000
Depreciation
Plant and equipment
4,153
3,386
Furniture and fittings
3,619
69
Motor vehicles
145
166
Leasehold improvements
6,668
9,677
Display materials
1,681
1,724
Total depreciation8(b)
16,266
15,022
Amortisation
Software
2,428
2,405
Total depreciation and amortisation
18,694
17,427
56

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
5 Other income and expense items (continued)
(b) Breakdown of expenses by nature (continued)
2018
$'000
2017
$'000
Finance costs
Bank and interest charges
2,762
3,105
Interest expense - make good provision8(h)
(72)
59
Total finance costs
2,690
3,164
Net foreign exchange losses included in other expenses
1,029
-
6 Income tax expense
(a) Income tax expense
Notes
2018
$'000
2017
$'000
Current tax
Current tax on profits for the year
5,723
6,402
Derecognised tax losses
3,651
461
Adjustments for current tax of prior periods
3,908
947
Foreign income tax offsets not recognised
(1,055)
1,055
Total current tax expense
12,227
8,865
Deferred income tax
(Increase) / Decrease in deferred tax assets8(d)
(2,659)
8,125
Tax consolidation cost base adjustments
-
(4,389)
Derecognised tax losses
66
-
Adjustments for deferred tax of prior periods
(3,708)
(291)
Total deferred tax expense/(benefit)
(6,301)
3,445
Income tax expense
5,926
12,310
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Notes
2018
$'000
2017
$'000
Profit from continuing operations before income tax expense
47,467
59,183
Profit from discontinuing operations before income tax expense
(36,934)
(14,226)
10,533
44,957
Tax at the Australian tax rate of 30.0% (2017 - 30.0%)
3,160
13,487
Tax effect of amounts which are not deductible (taxable)
in calculating taxable income:
Non deductible expenditure
163
178
Non-assessable intragroup markups
(551)
(653)
Sundry items
10
89
Tax consolidation cost base adjustments
-
(4,389)
2,782
8,712
57

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
6 Income tax expense (continued)
(b) Numerical reconciliation of income tax expense to prima facie tax payable (continued)
Notes
2018
$'000
2017
$'000
Difference in overseas tax rates
288
(321)
Adjustments for current tax of prior periods
3,908
947
Adjustments for deferred tax of prior periods
(3,644)
(291)
Tax losses not recognised
3,651
2,208
Foreign income tax offset not recognised
(1,055)
1,055
Change in tax rate on deferred tax balance
(4)
-
Income tax expense
5,926
12,310
Income tax expense is attributable to:
Profit from continuing operations
12,649
15,051
Profit from discontinuing operations
(6,723)
(2,741)
5,926
12,310
(16,459)
(57,267)
(c) Tax losses
2018
$'000
2017
$'000
Unused United States tax losses for which no deferred tax asset has been
recognised
32,203
19,524
Potential tax benefit @25.0% (2017 @ 40.0%)
8,051
7,810
Unused New Zealand tax losses for which no deferred tax asset has been
recognised
2,623
1,645
Potential tax benefit @ 28.0%
735
461
The unused tax losses incurred in the United States and New Zealand are available indefinitely for offsetting
against future taxable profits of the countries in which the losses arose.Deferred tax assets have not been
recognised in respect of these losses as it is unknown when the New Zealand losses may be used to offset
taxable profits and the United States losses are not expected to be used.
7 Financial assets and financial liabilities
Notes
Derivatives
used for
hedging
$'000
Financial
assets at
amortised
cost
$'000
Total
$'000
Financial assets
2018
Cash and cash equivalents7(a)
- 7,220 7,220
Trade and other receivables7(b)
- 28,046 28,046
Derivative financial instruments11(a)
245-245
24535,26635,511
58

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
7 Financial assets and financial liabilities (continued)
Derivatives
used for
hedging
$'000
Financial
assets at
amortised
cost
$'000
Total
$'000
2017
Cash and cash equivalents7(a)-5,6765,676
Trade and other receivables7(b)
-26,59026,590
-32,26632,266
Notes
Financial liabilities
2018
Trade and other payables7(c)
- 49,339 49,339
Borrowings7(d)
- 35,213 35,213
Derivative financial instruments11(a)
390-390
39084,55284,942
2017
Trade and other payables7(c)- 47,918 47,918
Borrowings7(d)- 45,034 45,034
Derivative financial instruments11(a)
1,141-1,141
1,14192,95294,093
The Group’s exposure to various risks associated with the financial instruments is discussed in note 11. The
maximum exposure to credit risk at the end of the reporting year is the carrying amount of each class of financial
assets mentioned above.
(a) Cash and cash equivalents
2018
$'000
2017
$'000
Current assets
Cash at bank and on hand
7,220
5,676
Interest rates for the bank accounts have been between 0.00% and 1.15% during the year (2017: between 0.00%
and 1.15%).
(b) Trade and other receivables
2018
2017
Notes
Current
$'000
Non-
current
$'000
Total
$'000
Current
$'000
Non-
current
$'000
Total
$'000
Trade receivables
4,912- 4,912
4,752-4,752
Provision for impairment of
receivables
(819)-(819)
(502)-(502)
11(c)(i)
4,093-4,093
4,250-4,250
59

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
7 Financial assets and financial liabilities (continued)
(b) Trade and other receivables (continued)
2018
2017
Notes
Current
$'000
Non-
current
$'000
Total
$'000
Current
$'000
Non-
current
$'000
Total
$'000
In-house customer finance
17,681 2,864 20,545
15,1572,533 17,690
Provision for impairment of
receivables
(1,231)(199)(1,430)
(956)(162)(1,118)
11(c)(ii)
16,450 2,665 19,115
14,2012,371 16,572
Sundry debtors
4,838-4,838
5,768-5,768
25,3812,66528,046
24,2192,37126,590
Further information relating to loans to related parties and key management personnel is set out in note 19.
(i) Trade receivables
Trade receivables from sales made to customers through third party creditproviders are non-interest bearing and
are generally on a 0-30 day terms.
(ii) In-house customer finance
In October 2012, Michael Hill launched an in-house customer finance program in the Canadian and United States
markets. The terms available to customers range from an interest bearing revolving line of credit through to
interest free terms of between 6 and 24months, although 12 to 18 months is the typical financing period.
The receivables from the in-house customer finance program are comprisedof a large number of transactions
with no one customer representing a significant balance. The finance portfolio consists of contracts of similar
characteristics that are evaluatedcollectively for impairment. The allowance is an estimate of the losses as of the
balance date, and is calculated using such factors as delinquency and recovery rates.
Sundry debtors
Sundry debtors relates to supplier credits, security deposits and other sundry receivables.
Effective interest rates
Other than in-house customer finance,all receivables are non-interest bearing. The majority of in-house
customer finance receivables are also non-interest bearing.
(iii) Impairment and risk exposure
Information about the impairment of trade and other receivables, their credit quality and the Group’s exposure to
credit risk, foreign currency risk and interest rate risk can be found in note 11(b) and 11(c).
Only trade receivables and in-house customer finance contain impaired assets. The remaining classes within
trade and other receivables do not contain impaired assets and are not pastdue. Based on the credit history of
these other classes, it is expected that these amounts will be received when due.
60

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
7 Financial assets and financial liabilities (continued)
(c) Trade and other payables
2018
$'000
2017
$'000
Current liabilities
Trade payables
24,686
27,649
Annual leave liability
8,938
8,571
Accrued expenses
7,154
6,442
Other payables
8,561
5,256
49,339
47,918
Trade payables are unsecured and are usually paid within 30 days of recognition.
The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their
short-term nature.
(d) Borrowings
2018
2017
Notes
Current
$'000
Non-
current
$'000
Total
$'000
Current
$'000
Non-
current
$'000
Total
$'000
Bank loans
-35,21335,213
-45,03445,034
Total secured borrowings
-35,21335,213
-45,03445,034
The Group’s objectives when managing capital are to ensure sufficient liquidity to support its financial obligations
and execute the Group's operational andstrategic plans. The Group continually assesses its capital structure and
makes adjustments to it with reference to changes in economic conditions and risk characteristics associated
with its underlying assets. Accordingly, the Group entered into a three year agreement with ANZ on 26 June 2018
that provides for a $110,000,000 multioption borrowing facility, the availability of which is adjusted throughout the
year in line with business requirements. At balance date, $70,000,000 wasavailable, and of that, $35,213,000
was utilised.
The Group also has access to various uncommitted credit facility lines serving working capital needs that, at
balance date, totalled $1,924,000. Noamounts were drawn under these credit facility lines as at balance date.
(e) Recognised fair value measurements
(i) Fair value hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial
instruments that are recognised and measured at fair value in the financial statements. To provide an indication
about the reliability of the inputs used in determining fair value, the Group has classified its financial instruments
into the three levels prescribed under the accounting standards. An explanation of each level follows underneath
the table.
61

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
7 Financial assets and financial liabilities (continued)
(e) Recognised fair value measurements (continued)
(i) Fair value hierarchy (continued)
Recurring fair value
measurements
At 30 June 2018Notes
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
Financial assets
Derivatives used for hedging
Foreign exchange contracts11(a)
-245-245
Total financial assets
-245-245
Financial Liabilities
Derivatives used for hedging
Interest rate swaps11(a)
-390-390
Total financial liabilities
-390-390
Recurring fair value measurements
At 30 June 2017
Notes
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
Financial assets
Total financial assets
----
Financial Liabilities
Derivatives used for hedging
Foreign exchange contracts11(a)-414-414
Interest rate swaps11(a)
-727-727
Total financial liabilities
-1,141-1,141
There were no transfers between levels during the year.
The Group’s policy is to recognise transfers into and transfers out of fairvalue hierarchy levels as at the end of
the reporting period
Level 1:
The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and
trading and available-for-sale securities) is based on quoted market prices at the end of the reporting period. The
quoted market price used for financial assets held by the Group is the current bid price. These instruments are
included in level 1.
Level 2:
The fair value of financial instruments that are not traded in an active market (for example,
over-the-counter derivatives) isdetermined using valuation techniques which maximise the use of observable
market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value
an instrument are observable, the instrument is included in level 2.
Level 3:
If one or more of the significant inputs is not based on observable market data, the instrument is
included in level 3. This is the case for unlisted equity securities.
62

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
7 Financial assets and financial liabilities (continued)
(f) Changes in liabilities arising from financing activities
(i) Movements
Non-current
interest-
bearing loans
and liabilities
$'000
Total
$'000
Carrying amount at start of year45,03445,034
Inwards cash flows116,500116,500
Outwards cash flows(126,500)(126,500)
Foreign exchange movements
179179
Carrying amount at end of year
35,21335,213
8 Non-financial assets and liabilities
This note provides information about the Group's non-financial assets and liabilities, including:
(a) Inventories
2018
$'000
2017
$'000
Raw materials
10,243
7,870
Finished goods
178,944
191,768
Packaging and other consumables
2,887
4,215
192,074
203,853
All inventories are held at the lower of cost or net realisable value.
(b) Property, plant and equipment
Plant and
equipment
$'000
Fixtures
and fittings
$'000
Motor
vehicles
$'000
Leasehold
improvements
$'000
Display
materials
$'000
Total
$'000
At 1 July 2016
Cost or fair value33,20330,20693072,926 12,767 150,032
Accumulated depreciation
(20,331)(15,443)(396)(36,933)(4,996)(78,099)
Net book amount
12,87214,76353435,9937,77171,933
Year ended 30 June 2017
Opening net book amount12,87214,76353435,9937,771 71,933
Exchange differences(124)(119)(6)(525)(93)(867)
Additions6,8685,03415313,1932,046 27,294
Additions - make good---773-773
Disposals(427)(118)(55)(791)(64) (1,455)
Depreciation charge(4,229)(3,956)(194)(7,089)(1,947) (17,415)
Impairment loss (iii)
(26)(5)-(796)-(827)
Closing net book amount
14,93415,59943240,7587,71379,436
63

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
8 Non-financial assets and liabilities (continued)
(b) Property, plant and equipment (continued)
Plant and
equipment
$'000
Fixtures
and fittings
$'000
Motor
vehicles
$'000
Leasehold
improvements
$'000
Display
materials
$'000
Total
$'000
At 30 June 2017
Cost or fair value37,94434,16979682,602 13,816 169,327
Accumulated depreciation
(23,010)(18,570)(364)(41,844)(6,103)(89,891)
Net book amount
14,93415,59943240,7587,71379,436
Year ended 30 June 2018
Opening net book amount14,93415,59943240,7587,713 79,436
Exchange differences(70)(27)(4)8417-
Additions4,3393,146458,1962,164 17,890
Additions - make good---(1,154)-(1,154)
Disposals(391)(216)(72)(392)(71) (1,142)
Depreciation charge(4,429)(3,925)(148)(7,257)(1,806) (17,565)
Impairment loss (iii)
(1,490)(3,010)-(5,016)(1,283)(10,799)
Closing net book amount
12,89311,56725335,2196,73466,666
At 30 June 2018
Cost38,74434,66756981,642 13,958 169,580
Accumulated depreciation and
impairment
(25,851)(23,100)(316)(46,423)(7,224)(102,914)
Net book amount
12,89311,56725335,2196,73466,666
(i) Impairment loss
As per the Group's accounting policies, the Group impairs assets where therecoverable amount is less than the
carrying amount. The Group has impaired the assets of all Emma & Roe assets,four Michael Hill Australia stores
and two Michael Hill Canada stores. Any assets held at an impaired Emma & Roestore that are able to
redeployed throughout the Group are not impaired. This cost has reported in Other expenses in the statement of
comprehensive income. The segment breakdown of impairment losses recognised during the year is reported at
note 3.
(ii) Revaluation, depreciation methods and useful lives
Depreciation is calculated using thestraight-line method to allocate their cost or revalued amounts, net of their
residual values, over their estimateduseful lives or, in the case of leasehold improvements and certain leased
plant and equipment, the shorter lease term as follows:
• Plant and equipment5 - 6 years
• Motor vehicles3 - 5 years
• Fixtures and fittings6 - 10 years
• Leasehold improvements6 - 10 years
• Display material6 - 10 years
64

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
8 Non-financial assets and liabilities (continued)
(c) Intangible assets
Patents,
trademarks
and other
rights
$'000
Computer
software
$'000
Total
$'000
At 1 July 2016
Cost7916,67516,754
Accumulation amortisation
-(11,193)(11,193)
Net book amount
795,4825,561
Year ended 30 June 2017
Opening net book amount795,4825,561
Exchange differences-(27)(27)
Additions-5,8515,851
Amortisation charge *
-(2,601)(2,601)
Closing net book amount
798,7058,784
At 30 June 2017
Cost7922,47222,551
Accumulation amortisation
-(13,767)(13,767)
Net book amount
798,7058,784
Year ended 30 June 2018
Opening net book amount798,7058,784
Exchange differences-22
Additions-6,6656,665
Impairment charge-(228)(228)
Amortisation charge *
-(2,597)(2,597)
Closing net book amount
7912,54712,626
At 30 June 2018
Cost7928,94129,020
Accumulated amortisation
-(16,394)(16,394)
Net book amount
7912,54712,626
* Amortisation of $2,428,000 (2017: $2,405,000) is included in depreciation and amortisation expense in the statement of
comprehensive income. The amount above also includes amortisation for discontinued operations (see note Discontinued
operations
).
65

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
8 Non-financial assets and liabilities (continued)
(d) Deferred tax balances
(i) Deferred tax assets
2018
$'000
2017
$'000
The balance comprises temporary differences attributable to:
Doubtful debts
555
397
Fixed assets and intangibles
10,508
14,855
Intangible assets from intellectual property transfer
26,438
28,101
Deferred expenditure
(697)
(764)
Prepayments
(6)
(55)
Deferred service revenue
3,850
4,322
Unearned income
1,653
1,201
Provisions
8,628
7,309
Unrealised foreign exchange losses
117
(15)
Sundry items
1,481
200
Inventories
9,368
-
Tax losses recognised
-
2,342
Net deferred tax assets
61,895
57,893
Expected settlement:
Deferred tax assets expected to be recovered within 12 months
23,758
11,846
Deferred tax assets expected to be recovered after more than 12 months
38,137
46,047
61,895
57,893
Movements:
Opening balance at 1 July
57,893
64,074
Credited / (charged) to the income statement
2,660
(8,125)
Tax losses recognised
(2,342)
2,342
Prior year adjustment
3,707
(291)
Foreign exchange differences
(23)
(107)
Closing balance at 30 June
61,895
57,893
(e) Current tax receivables
2018
$'000
2017
$'000
Current assets
Current tax receivables
-
888
66

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
8 Non-financial assets and liabilities (continued)
(f) Other assets
2018
2017
Current
$'000
Non -
current
$'000
Total
$'000
Current
$'000
Non -
current
$'000
Total
$'000
Prepayments
2,889 1,1934,082
3,0891783,267
Deferred expenditure
7991,6952,494
8561,8792,735
3,6882,8886,576
3,9452,0576,002
(g) Current tax liabilities
2018
$'000
2017
$'000
Current tax liabilities
2,696
-
(h) Provisions
2018
2017
Current
$'000
Non-
current
$'000
Total
$'000
Current
$'000
Non-
current
$'000
Total
$'000
Employee benefits (i)
3,555 2,063 5,618
1,8941,9313,825
Returns provision (i)
2,972- 2,972
2,518-2,518
Make good provision (i)
356 2,844 3,200
2234,2464,469
Restructuring costs (i)
1,897- 1,897
---
Diamond warranty (i)
600-600
---
Other provisions (i)
6-6
355893
9,3864,90714,293
4,6706,23510,905
(i) Information about individual provisions and significant estimates
Employee benefits
The liability for long service leave is measured as the present value of expected future payments to be made in
respect of services provided by employees up to the reporting date using the projected unit credit method.
Consideration is given to expected future wage and salary levels, experience of employee departures and
periods of service. Expected futurepayments are discounted using marketyields at the reporting date on
corporate bonds with terms to maturity and currency that match, as closelyas possible, the estimated future cash
outflows.
Provisions are measured at the present value of management's best estimate of the expenditure required to
settle the present obligation at the end of the reporting year.
Returns provision
Provision is made for the estimated sale returns for the Group's return policies, being 30 day change of mind, 12
month guarantee on the quality of workmanship and the 3 year watch guarantee. In addition, all Michael Hill
watches sold before 30 June 2018 includeda lifetime battery replacement guarantee. Management estimates the
provision based on historical sale return information and any recent trends that may suggest future claims could
differ from historical amounts.
67

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
8 Non-financial assets and liabilities (continued)
(h) Provisions (continued)
(i) Information about individual provisions and significant estimates (continued)
Employee benefits - long service leave (continued)
Make good provision
The Group has an obligation to restore certain leasehold sites to their original condition upon store closure or
relocation. This provision represents the present value of the expected future make good commitment. Amounts
charged to the provision represent both the cost of make good costs incurred and the costs incurred which
mitigate the final liability prior to the closure or relocation.
Restructuring
A provision has been raised for the estimated lease surrender and staffingexit costs associated with the six
Emma & Roe stores trading at the end of the year.
Diamond warranty
Provision is made for the estimated costs for the Group's diamond warrantyoffered with the purchase of selected
diamond jewellery lines. Management estimates the provision based on costs incurred in recent years and will
review the adequacy of the provisioneach reporting date as more data becomes available.
Other provisions
Other provisions relate to a provision for an onerous lease.
(ii) Movements in provisions
Movements in each class of provision during the financial year are set out below:
Employee
benefits
$'000
Restructuring
obligations
$'000
Returns
provision
$'000
Make good
provision
$'000
Diamond
warranty
$'000
Other
provisions
$'000
Total
$'000
Carrying amount at the
start of the year3,825-2,5184,469-93 10,905
Additional provisions
recognised2,1421,8972,971(857)6006 6,759
Amounts incurred and
charged(346)- (2,517)(378)-(93) (3,334)
Exchange differences
(3)--(34)--(37)
Carrying amount at end of
year
5,6181,8972,9723,200600614,293
(i) Deferred revenue
2018
2017
Current
$'000
Non-
current
$'000
Total
$'000
Current
$'000
Non-
current
$'000
Total
$'000
Deferred service revenue
24,686 55,276 79,962
24,121 52,989 77,110
Lease incentive income
782 2,230 3,012
1,2112,8274,038
Deferred interest free revenue
1,0082141,222
592201793
26,47657,72084,196
25,92456,01781,941
68

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
9 Contributed equity
(a) Share capital
2018
Shares
2017
Shares
2018
$'000
2017
$'000
Ordinary shares - fully paid
387,438,513
387,438,513
10,266
10,015
Total share capital387,438,513 387,438,51310,26610,015
(i) Movements in ordinary shares:
DetailsNotes
Number of sharesTotal
$'000
Opening balance 1 July 2016383,138,5133,767
Exercise of options - proceeds received9(a)(iii)4,300,0004,825
Transfer option reserve to contributed equity
-1,423
Balance 30 June 2017387,438,51310,015
Options expired9(a)(ii)
-251
Balance 30 June 2018
387,438,51310,266
(ii) Ordinary shares
Ordinary shares entitle the holder to participate in dividends, and to share in the proceeds of winding up the
Company in proportion to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one
vote, and upon a poll each share is entitled to one vote.
(iii) Options
Information relating to the Michael Hill International Employee Option Plan, including details of options issued,
exercised and lapsed during the financial year and options outstanding atthe end of the financial year, is set out
in note 20(a).
(b) Reserves and retained profits
(i) Nature and purpose of other reserves
Cash flow hedges
The hedging reserve is used to record gains or losses on derivatives that are designated and qualify as cash flow
hedges and that are recognised in other comprehensive income, as described in note 2(p). Amounts are
reclassified to profit or loss when the associated hedged transaction affects profit or loss.
Share-based payments
The share-based payments reserve is used to recognise:
• the grant date fair value of options issued to employees but not exercised
• the grant date fair value of shares issued to employees
• the grant date fair value of deferred shares granted to employees but not yet vested
Foreign currency translation
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive
income as described in note 2(d) and accumulated in a separate reserve within equity. The cumulative amount is
reclassified to profit or loss when the net investment is disposed of.
69

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
10 Cash flow information
(a) Reconciliation of profit after income tax to net cash inflow from operating activities
Notes
2018
$'000
2017
$'000
Profit for the year
4,610
32,647
Adjustment for
Depreciation5(b)
17,565
17,415
Amortisation5(b)
2,597
2,601
Impairment - property, plant and equipment
11,029
-
Impairment - other assets
563
-
Non-cash employee benefits expense - share-based payments
484
371
Other non-cash expenses
(78)
897
Net loss on sale of non-current assets
450
1,166
Net exchange differences
966
(908)
Change in operating assets and liabilities:
(Increase) / decrease in trade and other receivables
(1,348)
(579)
(Increase) / decrease in inventories
12,169
(6,073)
(Increase) / decrease in deferred tax assets
(3,968)
6,043
(Increase) / decrease in other current assets
273
1,085
(Increase) / decrease in other non current assets
(826)
118
(Decrease) / increase in trade and other payables
2,258
3,050
(Decrease) / increase in current tax liabilities
3,665
(26,110)
(Decrease) / increase in provisions
2,030
830
(Decrease) / increase in deferred revenue
2,454
7,199
Net cash inflow from operating activities
54,893
39,752
70

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
Risk
This section of the notes discusses the Group’s exposure to various risks and shows how these could affect the
Group’s financial position and performance.
11 Financial risk management71
12 Critical estimates, judgements and errors77
13 Capital management79
11 Financial risk management
The Group's activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk
and price risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the
unpredictability of financial marketsand seeks to minimise potential adverse effects on the financial performance
of the Group. The Group uses derivative financial instruments such as foreign exchange contracts and interest
rate swaps to hedge certain risk exposures. Derivatives are exclusively used for hedging purposes, i.e. not as
trading or other speculative instruments. The Group uses different methods to measure different types of risk to
which it is exposed. These methods include sensitivity analysis in the case of interest rate and foreign exchange
risks and aging analysis for credit risk.
RiskExposure arising fromMeasurementManagement
Market risk -
foreign
exchange
Future commercial transactions
Recognised financial assets and liabilities
not denominated in AUD
Cash flow forecasting
Sensitivity analysis
Forward foreign
exchange contracts
Market risk –
interest rate
Long-term borrowings at variable ratesSensitivity analysisInterest rate swaps
Credit riskCash and cash equivalents and trade
receivables
Aging analysisDiversification of bank
deposits, credit limits
and letters of credit
Liquidity riskBorrowings and other liabilitiesRolling cash flow
forecasts
Availability of
committed credit lines
and borrowing facilities
The Group's overall risk management program includes a focus on financialrisk including the unpredictability of
financial markets and foreign exchange risk.
The policies are implemented by the central finance function that undertakes regular reviews to enable prompt
identification of financial risks sothat appropriate actions may be taken.
(a) Derivatives
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where
derivatives do not meet the hedging criteria, they are classified as ‘heldfor trading’ for accounting purposes. The
Group has the following derivative financial instruments:
2018
$'000
2017
$'000
Current assets
Forward foreign exchange contracts - cash flow hedges ((b)(i))
245
-
Total current derivative financial instrument assets
245
-
Current liabilities
Interest rate swap contracts - cash flow hedges ((b)(ii))
390
727
Forward foreign exchange contracts - cash flow hedges ((b)(i))
-
414
Total current derivative financial instrument liabilities
390
1,141
71

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
11 Financial risk management (continued)
(a) Derivatives (continued)
(i) Classification of derivatives
Derivatives are classified as held for trading and accounted for at fair value through profit or loss unless they are
designated as hedges. They are presentedas current assets or liabilitiesif they are expected to be settled within
12 months after the end of the reporting year.
The Group’s accounting policy for its cash flow hedges is set out in note 2(p). For hedged forecast transactions
that result in the recognition of a non-financial asset, the Group has elected to include related hedging gains and
losses in the initial measurement of the cost of the asset.
(ii) Fair value measurements
For information about the methods and assumptions used in determining thefair value of derivatives please refer
to note 7(e).
(b) Market risk
(i) Foreign exchange risk
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities that are
denominated in a currency that is not the entity’s functional currency andnet investments in foreign operations.
The Group operates internationally and is exposed to foreign exchange risk arising from various currency
exposures. Where it considers appropriate, the Group enters into forwardforeign exchange contracts to buy
specified amounts of various foreign currencies in the future at a pre-determined exchange rate.
Foreign exchange forward contracts measured through Other comprehensive income are designated as hedging
instruments in cash flow hedges of forecast purchases in USD. These forecast transactions are highly probable.
The cash flow hedges of the expected future purchases were assessed to be highly effective and a net
unrealised gain of $337,000 (2017: $834,000 loss) is included in Other comprehensive income. Fair value
adjustments are included in Derivative financial instruments.
Exposure
The Group's exposure to foreign currency risk at the end of the reporting year, expressed in transactional
currency, was as follows:
30 June 2018
30 June 2017
USD
$'000
NZD
$'000
CAD
$'000
USD
$'000
NZD
$'000
CAD
$'000
Cash and cash equivalents
65248
254045
Trade receivables
266--
882--
Trade payables
5,81153101
3,69622857
Forward exchange contracts
Buy foreign currency (cash flow hedges)
7,000--
17,000--
Sensitivity
The Group's principal foreign currency exposures arise from trade payables and receivables outstanding at year
end.
Most trade payables are repaid within 30 days so there is minimal equity impact arising from foreign currency
exposures.
72

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
11 Financial risk management (continued)
(b) Market risk (continued)
(i) Foreign exchange risk (continued)
Sensitivity (continued)
Impact on pre-tax profit
Impact on other
components of equity
2018
$'000
2017
$'000
2018
$'000
2017
$'000
USD Trade payables
US/$ exchange rate - increase 10%*
-
-
372
2,011
US/$ exchange rate - decrease 10%*
-
-
(1,542)
(2,458)
*Holding all other variables constant, this represents the impact of the forward exchange contracts held at the end of
the reporting period if the USD exchange rate was to increase or decrease by10%
(ii) Cash flow and fair value interest rate risk
The Group's main interest rate risk arises from long-term borrowings and cash. Borrowings issued at variable
rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair
value interest rate risk. Group policy is to maintain fixed interest coverof between 50% and 100% of core debt up
to 12 months, between 50% and 75% of core debt between 1 and 3 years, and between 25% and 50% of core
debt between 3 and 5 years.
To manage variable interest rate borrowings risk, the Group enters into interest rate swaps in which the Group
agrees to exchange, at specified intervals, the difference between fixedand variable rate interest amounts
calculated by reference to anagreed-upon notional principal amount.
The interest rate derivatives require settlement of net interest receivable or payable each 30 days and are settled
on a net basis.
The exposure of the Group’s borrowing to interest rate changes and the contractual re-pricing dates of the fixed
interest rate borrowings at the end of the reporting year are as follows:
2018
$'000
2017
$'000
Variable rate borrowings
35,213
45,034
35,213
45,034
Instruments used by the group
The cash flow hedges were assessed to be highly effective and a net realisedgain of $659,000 (2017: $578,000
gain) is included in Other comprehensive income. Fair value adjustments are included in Derivative financial
instruments.
The interest rate swaps are designated as cash flow hedging instruments. Changes in the interest paid on the
variable rate fully drawn down advance facility are measured at fair valuethrough Other comprehensive income.
Swaps in place cover approximately 71.0% (2017: 77.7%) of the variable rate principal outstanding.
73

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
11 Financial risk management (continued)
(b) Market risk (continued)
(ii) Cash flow and fair value interest rate risk (continued)
Instruments used by the group (continued)
As at the end of the reporting year, the Group had the following variable rate borrowings and interest rate swap
contracts outstanding:
30 June 2018
30 June 2017
Weighted
average
interest
rate
%
Balance
$'000
Weighted
average
interest
rate
%
Balance
$'000
Bank overdrafts and bank loans
2.97% 35,213
2.50% 45,034
Interest rate swaps (notional principal amount)
3.91%
25,000
3.85%
35,000
Net exposure to cash flow interest rate risk
-%
10,213
-%
10,034
An analysis by maturities is provided in note 11(d) below. The percentage of total loans shows the proportion of
loans that are currently at variable rates in relation to the total amount of borrowings.
Amounts recognised in profit or loss and other comprehensive income
The cash flow hedges were assessed to be highly effective. Fair value adjustments are included in Derivative
financial instruments.
Sensitivity
Profit or loss is sensitive to higher/lower interest income from cash and cash equivalents as a result of changes in
interest rates. Other components of equity change as a result of an increase/decrease in the fair value of the
cash flow hedges of borrowings. All other non-derivative financial liabilities have a contractual maturity of less
than 6 months.
Impact on post-tax profit
Impact on other
components of equity
2018
$'000
2017
$'000
2018
$'000
2017
$'000
Interest rates - increase by 100 basis points (100 bps) *
(102)
(100)
(9)
(16)
Interest rates - decrease by 100 basis points (100 bps) *
102
100
8
16
*Holding all other variables constant, this represents the impact of the interest rate swaps held at the end of the
reporting period and variable borrowings if the interest rate was to increase or decrease by 10%
(c) Credit risk
Credit risk is managed on a Group basis and refers to the risk of a counterparty failing to discharge an obligation.
In the normal course of business, the Group incurs credit risk from trade receivables and transactions with
financial institutions. The Group places its cash and short term depositswith only high credit quality financial
institutions. Sales to retail customers are required to be settled via cash, major credit cards or passed onto
various credit providers in each country.
(i) Impaired trade receivables
A provision for impairment loss is recognised when there is objective evidence that an individual trade receivable
is impaired. An impairment loss of $415,000 (2017: $313,000) has been recognised by the Group. All trade
receivables related to third party credit providers past 90 days have beenimpaired. Receivables past due but not
impaired were $343,000 (2017: $273,000).
74

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
11 Financial risk management (continued)
(c) Credit risk (continued)
(i) Impaired trade receivables (continued)
The ageing of these receivables is as follows:
2018
$'000
2017
$'000
0 - 30 days
3,749
3,977
31 - 60 days
375
295
61 - 90 days
201
73
91 + days
586
407
4,911
4,752
Movements in the provision for impairment of trade receivables that are assessed for impairment collectively are
as follows:
2018
$'000
2017
$'000
At 1 July
502
675
Amounts written off
(415)
(313)
Additional provisions recognised
733
141
Exchange differences
(1)
(1)
At 30 June
819
502
(ii) Credit quality and impaired in-house customer finance
In-house customer finance was established in Canada and the United Statesin October 2012. Customer credit
risk is managed subject to the Group's established policy, procedures andcontrol relating to customer credit risk
management. Credit quality of a customeris assessed based on an extensivecredit rating scorecard and
individual credit limits are definedin accordance with this assessment.
An impairment analysis is performed at each reporting date. The maximum exposure to credit risk is the carrying
value of in-house customer finance program as disclosed in note 7(b)(ii).The Group does not hold collateral as
security. The Group evaluates the concentration of risk with respect to trade receivables as low.
The credit quality and ageing of these receivables is as follows:
2018
$'000
2017
$'000
Performing:
Current, aged 0 - 30 days
19,566
16,786
Past due, 31 - 90 days
460
402
Non performing:
Past due, aged more than 90 days
519
502
20,545
17,690
Movements in the provision for in-house customer finance receivables impairment loss were as follows:
75

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
11 Financial risk management (continued)
(c) Credit risk (continued)
(ii) Credit quality and impaired in-house customer finance (continued)
2018
$'000
2017
$'000
Opening balance
1,118
901
Amounts written off
(2,162)
(2,051)
Additional provisions recognised
2,451
2,299
Exchange differences
23
(31)
1,430
1,118
(d) Liquidity risk
The Group maintains prudent liquidity risk management with sufficient cash and marketable securities and the
availability of funding through an adequate amount of committed credit facilities.
(i) Financing arrangements
The Group’s objectives when managing capital are to ensure sufficient liquidity to support its financial obligations
and execute the Group's operational andstrategic plans. The Group continually assesses its capital structure and
makes adjustments to it with reference to changes in economic conditions and risk characteristics associated
with its underlying assets. Accordingly, the Group entered into an agreement with ANZ on 26 June 2018 that
provides for a $110,000,000 multi option borrowing facility, the availability of which is adjusted throughout the
year in line with business requirements. At balance date, $70,000,000 wasavailable. The Group had access to
the following undrawn borrowing facilities at the end of the reporting year:
2018
$'000
2017
$'000
Floating rate
- Expiring beyond one year (bank overdrafts)
1,924
1,957
- Expiring beyond one year (bank loans)
34,787
24,966
36,711
26,923
(ii) Maturities of financial liabilities
The tables below analyse the Group's financial liabilities into relevantmaturity groupings based on their
contractual maturities for:
(a)all non-derivative financial liabilities, and
(b)net and gross settled derivative financial instruments for which the contractual maturities are essential for
an understanding of the timing of the cash flows.
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months
equal their carrying balances as the impact of discounting is not significant. For interest rate swaps the cash
flows have been estimated using forward interest rates applicable at the end of the reporting year.
76

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
11 Financial risk management (continued)
(d) Liquidity risk (continued)
(ii) Maturities of financial liabilities (continued)
Contractual maturities of financial liabilities
Less
than 6
months
6-12
months
Between
1and2
years
Between
2and5
years
Over 5
years
Total
contractual
cash
flows
At 30 June 2018$'000 $'000$'000 $'000 $'000 $'000
Non-derivatives
Trade payables
49,339---- 49,339
Borrowings
--35,213--35,213
Total non-derivatives
49,339-35,213--84,552
Derivatives
Net Settled (Interest rate swaps)
--30288-390
--30288-390
At 30 June 2017
Non-derivatives
Trade payables47,918---- 47,918
Borrowings
--45,034--45,034
Total non-derivatives
47,918-45,034--92,952
Derivatives
Gross settled (forward foreign exchange
contracts)-414---414
Net Settled (Interest rate swaps)
22-190515-727
22414190515-1,141
12 Significant estimates, judgements and errors
(a) Significant estimates and judgements
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom
equal the actual results. Management also needs to exercise judgement in applying the Group’s accounting
policies. Estimates and judgements are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the circumstances. The
estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year are addressed below.
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at whichthey are granted. The fair value is determined with the assistance of an
external valuer using the Binomial model. The related assumptions are detailed in note Share-based payments.
The accounting estimates and assumptions relating to equity-settled share-based payments would have no
impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact
expenses and equity.
77

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
12 Significant estimates, judgements and errors (continued)
(a) Significant estimates and judgements (continued)
Make good provisions
A provision has been made for the presentvalue of anticipated costs of future restoration of leased store
premises. The provision includes future cost estimates associated with dismantling and closure of stores. The
calculation of this provision requires assumptions such as discount rates, store closure dates and lease terms.
These uncertainties may result in future actual expenditure differing from the amounts currently provided. The
provision recognised is periodically reviewed and updated based on the facts and circumstances available at the
time. Changes for the estimated future costs for sites are recognised in the statement of financial position by
adjusting both the expense or asset (if applicable) and provision. The related carrying amounts are disclosed in
note 8(h) Provisions.
Estimation of useful lives of assets
The estimation of the useful lives ofassets has been based on historical experience, lease terms (for display
assets) and policies (for motor vehicles). In addition, the condition of the assets is assessed at least once per
year and considered against the remaining useful life. Adjustments to useful lives are made when considered
necessary.
Revenue recognition
Professional care plan revenue is recognised as sales revenue in the statement of comprehensive income.
Management judgement is required to determine the amount of service revenue that can be recognised based on
the usage pattern of PCPs and general information obtained on the operation of service plans in other markets.
Those direct and incremental bonuses associated with the sale of these plans are deferred and amortised in
proportion to the revenue recognised. Management reviews trends in current and estimated future services
provided under the plan to assess whether changes are required to the revenue and cost recognition rates used.
Due to management reviews conducted during the year, an adjustment to the revenue recognition pattern has
been deemed necessary. As a result of this, an additional $532,000 has beenrecognised as revenue in the
current financial year. Of this, $59,000 relates to the current financialyear, and $473,000 relates to prior financial
years. The change in estimate will result in lower revenue in future periods by the corresponding amount.
Taxation and recovery of deferred tax assets
The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant
judgement is required in determining the worldwide provision for income taxes. There are many transactions and
calculations for which the ultimate tax determination is uncertain during the ordinary course of business.
Deferred tax assets are recognised for deductible temporary differencesas management considers that it is
probable that future taxable profits will be available to utilise those temporary differences. Management
judgement is required to determine the amount of deferred tax assets that can be recognised.
Impairment of non-financial assets other than goodwill and indefinite life intangibles
The Group assesses impairment of all assets at each reporting date by evaluating conditions specific to the
Group and to the particular asset that may lead to impairment. These include store performance, product and
manufacturing performance, technology and economic environments and future product expectations. If an
impairment trigger exists the recoverable amount of the asset is determined.
Employee benefits
Provisions for employee benefits are measured at the present value of management’s best estimate of the
expenditure required to settle the present obligation at the reporting date.
78

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
13 Capital management
(a) Risk management
The Group's objectives when managing capital are to
• safeguard their ability to continue as agoing concern, so that they can continue to provide returns for
shareholders and benefits for other stakeholders, and
• maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
There are a number of external bank covenants in place relating to debt facilities. These covenants are
calculated and reported to the bank quarterly. The principal covenants relating to capital management are the
earnings before interest and taxation(EBIT) fixed cover charge ratio, the consolidated debt to earnings before
interest, taxation, depreciation andamortisation (EBITDA) and consolidated debt to capitalisation. There have
been no breaches of these covenants or events of review for the current or prior period.
(b) Dividends
(i) Ordinary shares
2018
$'000
2017
$'000
Final dividend for the year ended 30 June 2017 of 2.5 cents (2016 - 2.5 cents)
per fully paid share paid on 29 September 2017 (2016 - 6 October 2016).
9,685
9,578
Interim dividend for the year ended 30 June 2018 of 2.5 cents (2017 - 2.5 cents)
per fully paid share paid on 29 March 2018 (2017 - 31 March 2017).
9,686
9,686
19,371
19,264
(ii) Dividends not recognised at the end of the reporting period
2018
$'000
2017
$'000
Since year end the Directors have declared the payment of a final dividend ofAU
2.5 cents per fully paid ordinary share*(2017 - AU 2.5 cents). The final dividend
will be unfranked and fully imputed.The aggregate amount of the dividend
expected to be paid on 28 September 2018 out of retained earnings, but not
recognised as a liability at year end, is
9,686
9,686
* This will not be declared as conduit foreign income, therefore Australian withholding tax will be deducted from
the dividend payment for foreign (non-Australian tax resident) shareholders.
(iii) Franking and imputation credits
Consolidated entity
2018
$'000
2017
$'000
Franking credits available for subsequent reporting periods based on a taxrateof
30.0% (2017 - 30.0%)
1,822
(2,148)
Imputation credits available forsubsequent reporting periods based on the New
Zealand tax rate of 28.0% (2017 - 28.0%)
23,893
28,424
79

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
13 Capital management (continued)
(b) Dividends (continued)
(iii) Franking and imputation credits (continued)
The dividends paid during the current financial period and correspondingprevious financial period were partly
franked or imputed.
The above franking credit amounts represent the balance of the franking account as at the end of the financial
year, adjusted for franking credits that will arise from the payment and refund of income tax payable.
The above imputation credit amounts represent the balance of the imputation account as at the end of the
financial year, adjusted for imputation credits that will arise from the payment and refund of income tax payable.
As the dividend recommended by the Directors since year end, but not recognised as a liability at year end, will
be unfranked, there will be no reduction in the franking account.
The impact on the imputation credit account of the dividend recommended bythe Directors since year end, but
not recognised as a liability at year end, is estimated to be a reduction in the imputation credit account of
NZ$4,075,000 (2017: NZ$4,051,000). The amount of imputation credits is dependant on the NZD exchange rate
at the time of the dividend.
14 Discontinued operations
(a) Financial performance and cash flow information
Emma & Roe
2018
$'000
2017
$'000
Revenue
16,935
15,448
Expenses
(26,939)
(23,859)
Impairment of other assets
(429)
-
Impairment of property, plant and equipment
(7,038)
-
Store exit costs
(6,038)
-
(Loss) before income tax
(23,509)
(8,411)
Income tax expense
6,737
2,758
(Loss) after income tax of discontinued operation
(16,772)
(5,653)
(Loss) from discontinued operation
(16,772)
(5,653)
Net cash (outflow) from operating activities
(12,656)
(12,092)
Net cash (outflow) from investing activities
(3)
(318)
Net cash inflow from financing activities
12,675
12,411
Net increase in cash generated by the subsidiary
16
1
80

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
14 Discontinued operations (continued)
(a) Financial performance and cash flow information (continued)
Michael Hill United States
2018
$'000
2017
$'000
Revenue
11,845
16,427
Expenses
(16,309)
(21,467)
Impairment of property, plant and equipment
(3,641)
(790)
Store exit costs
(5,333)
-
Other income
13
14
(Loss) before income tax
(13,425)
(5,816)
Income tax expense
(11)
(17)
(Loss) from discontinued operation
(13,436)
(5,833)
Total profit/(loss) from discontinued operations
(30,208)
(11,485)
Net cash (outflow) from operating activities
(1,521)
(858)
Net cash (outflow) from investing activities
(65)
(318)
Net cash inflow / (outflow) from financing activities
987
(470)
Net decrease in cash generated by the subsidiary
(599)
(1,646)
81

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
15 Interests in other entities
(a) Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 2(b):
Name of entity
Country of
incorporation
Ownership interest held
by the group
2018
%
2017
%
Michael Hill Jeweller (Australia) Pty LimitedAustralia
100
100
Michael Hill Wholesale Pty LimitedAustralia
100
100
Michael Hill Manufacturing Pty LimitedAustralia
100
100
Michael Hill Franchise Pty LimitedAustralia
100
100
Michael Hill Franchise Services Pty LimitedAustralia
100
100
Michael Hill Finance (Limited Partnership)Australia
100
100
Michael Hill Group Services Pty LimitedAustralia
100
100
Michael Hill Charms Pty LimitedAustralia
100
100
Michael Hill Online Pty LimitedAustralia
100
100
Emma & Roe Pty LimitedAustralia
100
100
Emma & Roe Online Pty LtdAustralia
100
100
Durante Holdings Pty LimitedAustralia
100
100
Michael Hill New Zealand Limited (formerly known as Michael Hill
International Limited)New Zealand
100
100
Michael Hill Jeweller LimitedNew Zealand
100
100
Michael Hill Finance (NZ) LimitedNew Zealand
100
100
Michael Hill Franchise Holdings LimitedNew Zealand
100
100
MHJ (US) LimitedNew Zealand
100
100
Emma & Roe NZ LimitedNew Zealand
100
100
Michael Hill Online Holdings LimitedNew Zealand
100
100
Michael Hill Jeweller (Canada) LimitedCanada
100
100
Michael Hill LLCUnited States
100
100
16 Contingent liabilities and contingent assets
(a) Contingent liabilities
The Group had contingent liabilities in respect of guarantees to bankers and other financial institutions in respect
of store occupancy agreements and the New Zealand stock exchange at 30 June2018 of $472,000 (30 June
2017 - $461,000).
From time to time, Companies within the Group are party to various legal actions as well as inquiries from
regulators and government bodies thathave arisen in the normal course of business. The Directors have given
consideration to such matters which are or may be subject to claims or litigation at year end and are of the
opinion that that any liabilities arising from such action would not have amaterial effect on the Group's financial
performance.
The Group is not aware of any significant events occurring subsequent to balance date that have not been
disclosed.
(b) Contingent assets
The Group has no material contingent assets existing as at balance date.
82

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
17 Commitments
(a) Operating leases
The Group leases all shops and in addition, various offices and warehousesunder non-cancellable operating
leases expiring within various periods of up to fifteen years. The leases have varying terms, escalation clauses
and renewal rights. On renewal, the terms of the leases are renegotiated.
The Group also leases various plant and machinery under cancellable operating leases. The Group is required to
give six months notice for termination of these leases.
2018
$'000
2017
$'000
Commitments for minimum lease payments in relation to non-cancellable
operating leases are payable as follows:*
Within one year
40,752
42,784
Later than one year but not later than five years
88,701
95,788
Later than five years
24,407
20,195
153,860
158,767
* Includes lease commitments for Emma & Roe stores where storeclosure is still in progress via negotiated outcomes with the
respective landlords.
18 Events occurring after the reporting period
Dividends
On 24 August 2018, the Directors have declared the payment of a final dividend for the year ended 30 June
2018. Refer to note 13(b)(ii) for details.
No other matters or circumstances have occurred subsequent to year end that has significantly affected, or may
significantly affect, the operationsof the Group, the results of those operations or the state of affairs of the Group
or economic entity in subsequent financial years.
83

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
19 Related party transactions
(a) Subsidiaries
The ultimate parent and controllingentity of the Group is Michael Hill International Limited. Interests in
subsidiaries are set out in note 15(a).
(b) Key management personnel compensation
2018
$
2017
$
Short-term employee benefits
2,214,394
2,186,483
Long-term benefits
43,792
125,917
Post-employment benefits
123,224
184,383
Termination benefits
-
1,603,742
Share-based payments
402,864
313,691
2,784,274
4,414,216
Detailed remuneration disclosuresare provided in the remuneration report on pages 15 to 32.
(c) Transactions with other related parties
The following transactions occurred with related parties:
2018
$
2017
$
Sales and purchases of goods and services
Services rendered for graphic design of the annual and half year reports bya
related party of board members
12,447
12,676
Consulting Agreement with a Director (Robert Ian Fyfe)
84,000
-
All transactions with related parties were in the normal course of business and provided on commercial terms.
Further details regarding the Consulting Agreement with a Director is included within the Director's Report
Service contracts.
20 Share-based payments
(a) Employee Option Plan
Options are granted from time to time at the discretion of Directors to senior executives within the Group. Motions
to issue options to related parties of Michael Hill International Limitedare subject to the approval of shareholders
at the Annual General Meeting in accordance with the Company's constitution.
Options are granted under the plan for noconsideration. Options are granted for a ten year period and are
exercisable at any time during the final five years.
Options granted under the plan carry no dividend or voting rights. When exercisable, each option is convertible
into one ordinary share.
The exercise price of the options previously granted was set at 30% above the weighted average price at which
the Company's shares were traded on the New Zealand Stock Exchange for the calendar month following the
announcement by the Group to the New Zealand Stock Exchange of its annual results.
84

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
20 Share-based payments (continued)
(a) Employee Option Plan (continued)
The exercise price of any future option grants will be set using the same method, with reference to the Australian
Securities Exchange.
Set out below are summaries of options granted under the plan:
2018
2017
Average
exercise price
per share
option
Number of
options
Average
exercise price
per share
option
Number of
options
As at 1 July NZD options
1.47 4,650,000
1.47 12,550,000
Exercised during the year *
--
1.19 (4,300,000)
Forfeited during the year
--
1.81 (3,600,000)
Expired during the year
1.25 (1,250,000)
--
As at 30 June NZD options
1.56
3,400,000
1.47
4,650,000
As at 1 July AUD options
2.12200,000
--
Granted during the year
1.44200,000
2.12200,000
As at 30 June AUD options
1.78
400,000
2.12
20,000
A total of 1,250,000 options expired during the year ended 30 June 2018.
Share options outstanding at the end of the year have the following expiry date and exercise prices.
Grant date
Expiry
date
Exercise
price Share options Share options
30 June 2018 30 June 2017
9 November 200730 September 2017NZ$1.25-1,250,000
22 September 200930 September 2019NZ$0.94100,000100,000
5 November 200930 September 2019NZ$0.94150,000150,000
17 September 201030 September 2020NZ$0.88250,000250,000
16 November 201130 September 2021NZ$1.16250,000250,000
19 September 201230 September 2022NZ$1.41250,000250,000
18 September 201330 September 2023NZ$1.82250,000250,000
29 November 201330 September2023NZ$1.821,750,0001,750,000
10 November 201430 September 2024NZ$1.63200,000200,000
22 January 201630 September 2025NZ$1.14200,000200,000
22 September 201630 September 2026AU$2.12200,000200,000
5 October 201730 September 2027AU$1.44
200,000-
Total
3,800,0004,850,000
The weighted average remaining contractual life of share options outstanding at the end of the period was 5.1
years (2017: 4.4 years).
The range of exercise prices for options outstanding at the end of the year was NZ$0.88 - NZ$1.82 and AU$1.44
- AU$2.12. Refer to the table above fordetailed information on each issue.
The exercise price will be converted to Australian dollars using the Reserve Bank of Australia exchange rate on
the day the option is exercised.
85

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
20 Share-based payments (continued)
(a) Employee Option Plan (continued)
(i) Fair value of options granted
The fair value at grant date for the options issued during the 2018 financial year were independently determined
using a Binomial option pricing model, which is an iterative model for options that can be exercised at times prior
to expiry. The model takes into account the grant date, exercise price, theexpected life, the expiry date, the
share price at grant date, expected price volatility of the underlying share, the expected dividend yield and the
risk-free interest rate for the term ofthe option. The expected life assumes the option is exercised at the
mid-point of the exercise period, and reflects the ability to exercise early and the non-transferability of the option.
The expected price volatility is based on the historic volatility (based on the remaining life of the options),
adjusted for any expected changes to future volatility due to publicly available information.
The model inputs for options grantedduring the year ended 30 June 2018 and 30 June 2017 included:
June 2018June 2017
5 October 2017 22 September 2016
space
Number of options200,000200,000
Dividend yield5.00%5.00%
Expected volatility25%25%
Risk-free interest rate4.78%4.78%
Expected life of options (years)7.57.5
Option exercise priceAU$1.44AU$2.12
Share price at grant dateAU$1.09AU$1.74
Weighted average fair value per optionNZ14.8cNZ15.6c
(b) Share rights
The Company introduced a deferred compensation plan ("LTI") involving the granting of share rights to eligible
participants in 2016 and was approved by shareholders at the Company’s Annual General Meeting held on 31
October 2016.
Under the plan, a senior executive maybe granted share rights by the Company. Each share right represents a
right to receive one ordinary share in the Company, subject to the terms andconditions of the rules of the plan.
An allocation of share rights is made to each eligible participant on an annual basis to a value of 30% of the STI
payment earned in the preceding year. The share rights progressively vestover a 3, 4 and 5 year period from the
date of issue and are only retained on exiting the business in the event thatthe participant is deemed a 'Good
Leaver' pursuant to the LTI plan rules.
During the year, the Board agreed togrant 536,551 share rights to eligibleparticipants of the deferred
compensation plan.
225,875 of the share rights were issued onthe basis that they are divided into three tranches and vest over 3, 4
and 5 years, respectively. 310,676 of the share rights were issued on the basis that 100% will vest if the
participant has been continuously engaged under an engagement arrangement with the Company at grant date,
which is in three years time.
The number of share rights in each tranche is based on the prescribed dollarvalue for each tranche divided by
the volume weighted average share price ('VWAP') of Michael Hill International shares over 5 trading days
following the Michael Hill International shares trading on an ex-dividend basis.
86

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
20 Share-based payments (continued)
(b) Share rights (continued)
20182017
Average
exercise
price per
share right $
Number of
options
Average
exercise
price per
share right $
Number of
options
Outstanding as at 1 July1.66382,551-
Granted1.05536,5511.66382,551
Exercised----
Forfeited----
-
Outstanding at 30 June1.30919,1021.66382,551
(c) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the year as part of employee
benefit expense were as follows:
2018
$'000
2017
$'000
Options issued under employee option plan
42
55
Share rights issued under CEO and LTI plan
442
316
484
371
21 Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the parent entity,
its related practices and non-related audit firms:
(a) Ernst & Young
(i) Audit and other assurance services
2018
$
2017
$
Audit and review of financial statements
411,910
342,651
Total remuneration for audit and other assurance services
411,910
342,651
(ii) Other services
Advisory fees
170,231
7,416
Total remuneration for other services
170,231
7,416
Total remuneration of Ernst & Young Australia
582,141
350,067
Total auditors' remuneration
582
350
87

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
22 Earnings per share
(a) Basic earnings per share
2018
Cents
2017
Cents
From continuing operations
8.99
11.43
From discontinued operation
(7.80)
(2.97)
Total basic earnings per share attributable to the ordinary equity holdersofthe
Company
1.19
8.46
(b) Diluted earnings per share
2018
Cents
2017
Cents
From continuing operations
8.98
11.42
From discontinued operation
(7.79)
(2.97)
Total diluted earnings per share attributable to the ordinary equity holders of the
Company
1.19
8.45
(c) Reconciliation of earnings usedin calculating earnings per share
2018
$'000
2017
$'000
Basic earnings per share
Profit attributable to the ordinary equity holders of the Company used in
calculating basic earnings per share:
From continuing operations
34,818
44,132
From discontinued operations
(30,208)
(11,485)
4,610
32,647
Diluted earnings per share
Profit from continuing operations attributable to the ordinary equity holders of the
Company
From continuing operations
34,818
44,132
From discontinued operations
(30,208)
(11,485)
Used in calculating diluted earnings per share
4,610
32,647
(d) Weighted average number of shares used as the denominator
2018
Number
2017
Number
Weighted average number of ordinary shares used as the denominator in
calculating basic earnings per share
387,438,513
385,963,992
Adjustments for calculation of diluted earnings per share:
Options
500,000
500,000
Weighted average number of ordinaryand potential ordinary shares used asthe
denominator in calculating diluted earnings per share
387,938,513
386,463,992
88

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
22 Earnings per share (continued)
(e) Information concerning the classification of securities
(i) Options
Options granted to employees under the Michael Hill International Limited Employee Option Plan are considered
to be potential ordinary shares and have been included in the determination of diluted earnings per share to the
extent to which they are dilutive. The options have not been included in thedetermination of basic earnings per
share. Details relating to the options are set out in note 20(a).
23 Parent entity financial information
(a) Summary financial information
The individual financial statements for Michael Hill International Limited (the parent) show the following aggregate
amounts:
2018
$'000
2017
$'000
Balance sheet
Current assets
39
4,605
Non-current assets
338,473
329,278
Total assets
338,512
333,883
Current liabilities
3,517
-
Total liabilities
3,517
-
(669,990)
(667,766)
Shareholders' equity
Issued capital
290,408
290,157
Reserves
Acquisition reserve
40,907
40,907
Option reserve
1,370
1,136
Retained earnings
2,310
1,683
334,995
333,883
Profit or loss for the year
20,000
19,275
Total comprehensive income
20,000
19,275
(b) Guarantees entered into by the parent entity
The Parent has issued the following guarantees in relation to the debts of its subsidiaries:
(i)Pursuant to Class Order 2016/785, Michael Hill International Limitedand the subsidiaries listed below
entered into a deed of cross guarantee on 30 June 2016. The effect of the deedis that Michael Hill
International Limited has guaranteedto pay any deficiency in the event ofwinding up of any controlled
entity or if they do not meet their obligations under the terms of overdrafts, loans, leases or other
liabilities subject to the guarantee. The controlled entities have also given a similar guarantee in the
event that Michael Hill International Limited is wound up or if it does not meet its obligations under the
terms of overdrafts, loans, leases orother liabilities subject to the guarantee.
89

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
23 Parent entity financial information (continued)
(b) Guarantees entered into by the parent entity (continued)
(ii)The subsidiaries subject to the deed are: Durante Holdings Pty Ltd, Michael Hill Group Services Pty Ltd,
Michael Hill Jeweller (Australia) Pty Ltd, Michael Hill Manufacturing Pty Ltd, Michael Hill Wholesale Pty
Ltd, Michael Hill Franchise ServicesPty Ltd, Michael Hill Franchise Pty Ltd, Michael Hill New Zealand
Ltd, Michael Hill Jeweller Ltd, Michael Hill Franchise Holdings Ltd, Michael Hill Finance (NZ) Ltd, Michael
Hill Online Pty Ltd, Michael Hill Charms Pty Ltd, Emma & Roe Pty Ltd, Emma & Roe Online Pty Ltd,
Michael Hill Online Holdings Ltd and Emma & Roe NZ Ltd
(c) Contingent liabilities of the parent entity
The Parent entity had contingent liabilities in respect of guarantees to bankers and other financial institutions in
respect of overdraft facilities and fixed assets at 30 June 2018 of $72,000(2016: $72,000).
24 Deed of cross guarantee
Pursuant to ASIC Class Order 2016/785, the Australian wholly-owned subsidiaries listed below are relieved from
the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports and directors'
report in Australia.
The subsidiaries subject to the deed are: Durante Holdings Pty Ltd, Michael Hill Group Services Pty Ltd, Michael
Hill Jeweller (Australia) Pty Ltd, Michael Hill Manufacturing Pty Ltd, Michael Hill Wholesale Pty Ltd, Michael Hill
Franchise Services Pty Ltd, Michael Hill Franchise Pty Ltd, Michael Hill New Zealand Ltd, Michael Hill Jeweller
Ltd, Michael Hill Franchise Holdings Ltd, Michael Hill Finance (NZ) Ltd, Michael Hill Online Pty Ltd, Michael Hill
Charms Pty Ltd, Emma & Roe Pty Ltd, Emma & Roe Online Pty Ltd, Michael Hill Online Holdings Ltd and Emma
& Roe NZ Ltd.
The Class Order requires the Parent Company and each of the subsidiaries toenter into a Deed of Cross
Guarantee. The effect of the deed isthat the Company guarantees each creditor payment in full of any debt in
the event of winding up of any of the subsidiaries under certain provisionsof the Corporations Act 2001. If a
winding up occurs under other provisions of the Corporations Act 2001, theCompany will only be liable in the
event that after six months any creditor has not been paid in full. The subsidiaries have also given similar
guarantees in the event that the Company is wound up.
The above companies represent a Closed Group for the purposes of the Class Order and, as there are no other
parties to the Deed of Cross Guaranteethat are controlled by Michael Hill International Limited, they also
represent the Extended Closed Group.
(a) Consolidated statement of profit or loss, statement of comprehensiveincome and summary of
movements in consolidated retained earnings
Set out below is a consolidated statement of profit or loss, a consolidatedstatement of comprehensive income
and a summary of movements in consolidated retained earnings for the year ended 30 June 2018 of the closed
group consisting of Michael Hill International Limited and the entities noted above.
2018
$'000
2017
$'000
Consolidated statement of profit or loss
90

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
24 Deed of cross guarantee (continued)
(a) Consolidated statement of profit or loss, statement of comprehensiveincome and summary of
movements in consolidated retained earnings (continued)
2018
$'000
2017
$'000
Revenue from sales of goods and services461,319
455,114
Sales to Group companies not in Closed Group
34,803
43,527
Other income
231
1,164
Cost of goods sold
(200,608)
(205,916)
Employee benefits expense
(133,899)
(126,861)
Occupancy costs
(53,293)
(45,394)
Marketing expenses
(26,647)
(22,537)
Selling expenses
(23,788)
(22,454)
Impairment of investment
(14,361)
-
Depreciation and amortisation expense
(14,535)
(14,554)
Loss in disposal of property, plant and equipment
(377)
(322)
Other expenses
(21,854)
(11,767)
Finance costs
(3,003)
(3,550)
Profit before income tax3,988
46,450
Income tax expense
(4,289)
(11,022)
Profit for the year
(301)
35,428
2018
$'000
2017
$'000
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
(4,412)
(4)
Other comprehensive income for the period, net of tax
(4,412)
(4)
Total comprehensive income for the year
(4,713)
35,424
2018
$'000
2017
$'000
Statement of changes in equity
Equity at the beginning of the financial year501,191
479,835
Total comprehensive income / (loss)
(4,713)
35,424
Issue of share capital - exercise of options
-
4,825
Share rights through share based payments reserve
440
316
Option expense through share based payment reserve
45
55
Dividends paid
(19,371)
(19,264)
Total equity at the end of the financial year
477,592
501,191
(b) Consolidated statement of financial position
Set out below is a consolidated statement of financial position as at 30 June 2018 of the Closed Group consisting
of Michael Hill International Limited and the entities noted above.
91

Michael Hill International Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
24 Deed of cross guarantee (continued)
(b) Consolidated statement of financial position (continued)
2018
$'000
2017
$'000
Current assets
Cash and cash equivalents
2,977
1,600
Trade and other receivables
8,070
8,982
Inventories
153,164
152,907
Current tax receivables
(2,095)
1,008
Loans to related parties
237,783
234,510
Other current assets
2,641
2,542
Total current assets
402,540
401,549
Non-current assets
Property, plant and equipment
38,214
47,713
Deferred tax assets
56,776
53,485
Intangible assets
12,525
8,613
Investments in subsidiaries
85,727
102,991
Other non-current assets
2,310
1,634
Total non-current assets
195,552
214,436
Total assets
598,092
615,985
Current liabilities
Trade and other payables
42,557
39,278
Provisions
7,498
4,336
Deferred revenue
19,804
20,135
Total current liabilities
69,859
63,749
Non-current liabilities
Provisions
4,908
6,177
Deferred revenue
45,733
44,868
Total non-current liabilities
50,641
51,045
Total liabilities
120,500
114,794
Net assets
477,592
501,191
Equity
Contributed equity
309,256
309,004
Reserves
(3,651)
528
Retained profits
171,987
191,659
Total equity
477,592
501,191
92

Michael Hill International Limited
Directors' declaration
30 June 2018
Directors' declaration
The Directors declare that:
(a) in the Directors’ opinion there are reasonable grounds to believe thatthe Company will be able to pay its
debts as and when they become due and payable;
(b) note 2(a) confirms that the financial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board;
(c) the financial statements and notes of the Group for the financial year ended 30 June 2018, are in
accordance with the Corporations Act 2001, including:
(i)complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements; and
(ii)giving a true and fair view of the consolidated entity’s financial position as at 30 June 2018 and of
its performance for the financial year ended on that date;
(d) the Directors have been give the declarations by the chief executive officer and chief financial officer
required by section 295A of the Corporations Act 2001; and
(d) as at the date of this declaration, there are reasonable grounds to believe that the members of the
extended closed group identified innote 24 will be able to meet any obligations or liabilities to which they
are, or may become, subject to by virtue of the deed of cross guarantee described in note 24.
This declaration is made on 24 August 2018 in accordance with a resolution of Directors in accordance with
section 295 Corporations Act 2001.
E J Hill
Chair
Brisbane
24 August 2018
93

A member firm of Ernst & Young Global Limited
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Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Independent Auditor's Report to the Members of Michael Hill
International Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Michael Hill International Limited (the Company) and its
subsidiaries (collectively the Group), which comprises the consolidated statement of financial position
as at 30 June 2018, the consolidated statement of comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year then ended, notes to the
financial report, including a summary of significant accounting policies, and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with theCorporations
Act 2001, including:
a)giving a true and fair view of the consolidated financial position of the Group as at 30 June 2018
and of its consolidated financial performance for the year ended on that date; and
b)complying with Australian Accounting Standards and theCorporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in theAuditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of theCorporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in theAuditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.

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Existence of Inventories
Why significantHow our audit addressed the key audit matter
Theexistenceof inventorieswas a key audit
matter due to the size of the recorded asset
(30 June 2018: $192,074,000) which
represents more than 50% of the Group’s total
assets, the nature of the inventory and its
location.
Inventories are primarily kept in the Group’s
retail stores situated in three countries and
the dispatch and manufacturing warehouses.
Inventories comprise a significant number of
physically small but high value items.
The Group accounts for inventories in
accordance with the policy disclosed in Note
2(m) and further disclosure is included in Note
8(a) of the financial report.
Our audit procedures included the following:
•Assessed the effectiveness of controls relevant to the
conduct of physical stocktaking.
•Attended full stock counts at the dispatch and
manufacturing warehouse and at a sample of retail
stores across all countries to assess whether
inventories had been appropriately counted at each
location and whether movements into and out of each
location prior to and subsequent to the counts had
been appropriately recorded.
•Considered the work performed by the Group’s Internal
Audit function in relation to stock counts performed at
the retail stores and considered the impact of their
findings in our audit approach. We assessed whether
their work could be used for the purpose of our audit
which included an assessment of the competence of the
Internal Audit function.
•For the dispatch and manufacturing warehouse stock
counts we selected samples or stock receipts prior to
and after the stock count including transfers to stores,
to assess whether these were appropriately recorded in
the correct period.
•We performed store-by-store inventory analyses of any
unusual fluctuations outside of our set expectations of
the year-end balance compared to prior year.
Professional Care Plan Revenue Recognition
Why significantHow our audit addressed the key audit matter
The recognition ofprofessional care plan
(PCP) revenue was considered a key audit
matter due to the significant degree of
estimation involved in determining the
appropriate revenue recognition pattern for
both the lifetime and 3 year plans offered to
the Group’s customers.
The estimation is based on a combination of
comparative market data and an analysis of
services (through historical repairs data)
made under these plans since inception in
October 2010. The estimation is reviewed by
the Group at least on an annual basis.
As disclosed in Note 12(a) of the financial
report, in respect of the lifetime plans, given
Our audit procedures included the following:
•Considered the Group’s PCP revenue recognition
accounting policies and assessed compliance with the
requirements of Australian Accounting Standards.
•Assessed the effectiveness of controls relating to PCP
revenue recognition.
•We assessed the appropriateness of the balance of the
PCP revenue recognised during the year and the
closing deferred PCP at year end based on the change
in usage pattern.
•Assessed the Group’s calculation supporting the
change in estimate relating to revenue recognition,

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Why significantHow our audit addressed the key audit matter
the infancy of the PCP product, there is
limited customer usage history to reference
and industry information is also utilised. As
such, the determination of the optimal
revenue recognition pattern is judgmental.
The pattern of recognising revenue is
disclosed in Note 2(e)(ii) of the financial
report underrendering of service which is
based on percentage of completion. A change
in estimate in the current year has resulted
from new information that meets the criteria
of a revision in an estimate in accordance with
Australian Accounting Standards has been
reflected in the current year results.
This change in estimate has been disclosed in
Note 12(a) to the financial report.
which includedagreeing assumptions tosamplesof the
underlying PCP repairs usage data.
Michael Hill US and Emma & Roe Brand Closure
Why significantHow our audit addressed the key audit matter
During the year, the Groupmade thedecision
to completely exit its retail operations in the
United States. As part of the Group’s
reprioritising its resources and strategic focus
on the core Michael Hill brand, a decision was
made to close all Emma & Roe stores and its
associated online presence.
These decisions had a significant impact on
the current year operating results of the
Group. The Group has accounted for the
discontinued operations in accordance with
the policy disclosed in Note 2 and further
disclosure is included in Note 14 to the
financial report.
Our audit procedures included the following:
•Agreed the closure costs incurred such as impairment
loss recognised on fixed assets, employee related costs,
lease exit costs and other expenses to appropriate
supporting evidence. Where the costs have been paid
during and subsequent to year end, we have agreed the
costs recorded to the cash payments.
•Assessed whether any remaining Michael Hill US and
Emma & Roe brand inventory was carried at the lower
of cost and net realisable value.
•Assessed whether the discontinued operations were
accounted for and disclosed in accordance with
Australian Accounting Standards.

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Information Other than the Financial Report and Auditor’s Report
The directors are responsible for the other information. The other information comprises the
information included in the Group’s 2018 Annual Report, other than the financial report and our
auditor’s report thereon. We obtained the Directors’ Report that is to be included in the Annual Report,
prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the Annual
Report after the date of this auditor’s report.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report and
our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and theCorporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
•Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.

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•Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
•Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
•Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group
to cease to continue as a going concern.
•Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
•Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.

A member firm of Ernst & Young Global Limited
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Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30
June 2018.
In our opinion, the Remuneration Report of Michael Hill International Limited for the year ended 30
June 2018, complies with section 300A of theCorporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of theCorporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Ernst & Young
Alison de Groot
Partner
Brisbane
24 August 2018

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