FY23H1 Results

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FY23H1: 27 weeks, FY22H1: 26 weeks


A SX AND NZX ANNOUNCEMENT

FY23H1
RECORD RESULTS

27 February 2023

Michael Hill International Limited (ASX/NZX: MHJ) today announced its financial results for the half year ended 1 January
2023
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.

Key Financial Results

• Group operating revenue increased by 11% to $363.4m (FY22H1: $327.1m).
• Comparable earnings before interest and tax (EBIT) increased by 6% to $54.5m (FY22H1: $51.6m).
• Group gross margin remained steady at 6 5.2% (FY22H1: 65.1%), underpinned by strategic initiatives.
• Strong working capital management resulted in a closing cash position of $78.7m (FY22H1: $99.1m), having
deployed cash to support higher dividends, share buy-back and inventory investment.
• Interim dividend of AU4.0 cents per share declared (FY22H1: AU3.5 cents per share).

Operational Performance

• Loyalty strategy continues to deliver with 82% of sales from members – Brilliance by Michael Hill now over 1.7m
members (FY22H1: 1.0m).
• Rebasing of digital sales – Following last year’s surge in digital sales from closed stores and with a strong consumer
return to physical retail, digital sales declined by 9% on LY, however were up 30% on FY21H1.
• Strategic investment in inventory levels in core ranges to support elevated sales.
• Successful transition to new Global HQ – The new state of the art building is home to the Company’s global
le adership team and functions, high tech distribution centre and reimagined artisanal jewellery workshop.
• New pure-play brand Medley delivers 53% sales growth in the half.
• Three new stores opened and one under-performing store was closed during the half, giving a network total of 282
stores at half year end (FY22: 280).

Outlook

• On the basis that retail trading conditions do not materially deteriorate, it is anticipated the Company’s full year
comparable EBIT will be ahead of prior year.


Commenting on the announcement of the Company’s half year results, Managing Director & CEO Daniel Bracken,
said:

“To deliver record results across sales, gross profit and comparable EBIT for the first half, is a testament to all facets of
the business having aligned to produce these results, demonstrating the traction of our strategic growth initiatives and
reaffirms the success of our brand elevation journey.

“With the impacts from Covid behind us, significant productivity gains on pre-pandemic trade have been delivered across
an optimised store network in all markets. I’m particularly pleased elevated gross margins have been sustained,
supported by the further evolution of our loyalty program, reimagined digital experience, enhanced product offering and
yet another beautifully executed Christmas campaign that truly resonated with our customers.”

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FY23H1 – Group Business Performance

The Group reported comparable earnings before interest and tax (EBIT) of $54.5m for the half year ended 1 January
2023 (FY22H1: $51.6m) an increase of ~$3m (+6%) year-on-year, driven by a combination of strong sales growth and
continued elevated margin.

For the half, the Company delivered record revenue of $363.4m, up ~$30m on the previous best first half in FY20, with
22 fewer stores. The Group year-on-year FY23H1 revenue growth of +11% was off the back of particularly strong
performances from Australia and New Zealand. Strategic initiatives supported elevated group gross margins in -line with
prior year, despite higher input costs.
Throughout COVID we saw an increase in customers embracing our digital channels and delivering significant growth.
In FY23H1 retailers saw consumers return to physical retail where they could engage with team and product directly.
While our digital sales results for the half declined by 9% on last year, they were up 30% on FY21H1 and up 148% on
FY20H1 (pre-COVID). During the half, further progress was also made on our international digital strategy including the
launch of international shipping, and further leveraging of our third party marketplace partnerships in all three
countries. Our digital pure-play Medley delivered 53% growth, as it continues to progress through its start-up phase.
In August, the Company successfully relocated to a new global headquarters housing our upgraded artisanal
manufacturing workshop and support functions. These new premises further enhanced employee engagement and our
ability to attract and retain best-in -class talent. The new HQ also houses new state of the art distribution technology
which delivers greater supply chain accuracy and efficiency for Australian and New Zealand operations. Across the key
Christmas trade period, this facility supported flawless execution of store and e-commerce fulfilment.

In order to support the continued evolution of the brand, further strategic lift in ATV and record sales for the half, the
Company made considered investments in inventory. This investment strategy followed supply chain disruption in the
prior year, and was focused on core ongoing product ranges. Stock holdings closed for the half at $198.2m.

Having invested in core inventory and deployed cash to support capital management initiatives, including higher
dividends and the share buy-back program, the Company delivered a healthy closing cash position of $78.7m and nil
debt.

During the half, t he Company opened three new stores (AU:2, CA:1) and closed one under-performing store in Australia,
resulting in 282 stores at half year end (FY22: 280).

Segment Performance

The half delivered strong performance in each of the markets, producing a record group H1 revenue result.

Australia

Retail segment revenue increased by 18.0% to $190.6m for the half. For a more meaningful comparison, due to
store closures in the prior year, revenue was up 8.8% on FY21H1.

As well as a strong sales performance, the segment maintained an elevated gross margin for the half of 64.4%
(FY22H1: 64.7%), and 450bps growth on pre-pandemic levels.

During the half, two new stores opened, and one under-performing store closed, resulting in 148 stores at the end
of the half (FY22: 147).

New Zealand

Retail segment revenue increased by 13.8% to NZ$76.3m for the half. For a more meaningful comparison, due to
store closures in the prior year, revenue was up 10.0% on FY21H1.

Gross margin for the half was 62.6% (FY22H1: 63.5%), with 380bps growth on pre-pandemic levels. Given the uplift
in the security incidents experienced by Auckland retailers through the half, additional investment in security was
required to protect our team and stores, which had a direct impact on earnings.

At half year end, there were 48 stores (FY22: 48).

Canada

For the half, retail segment revenue was CA$92.1m, flat on last year and up 22.4% on FY21H1. This result is a credit
to the segment considering last year was a record performance, driven by significant pent-up demand following
seven months of store closures in Eastern Canada.

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In addition to strong sales performance, the segment maintained an elevated gross margin for the half of 64.3%
(FY22H1: 64.6%), with an impressive 610bps growth on pre-pandemic levels, validating that the strategic changes
made are driving the results.

During the half, one new store was opened, resulting in 86 stores at the end of the half (FY22: 85).

Capital Management
Taking into consideration the Company’s performance and strength of the balance sheet, the Board has decided to
declare an increased interim dividend of AU4.0 cents per share (FY22H1: AU3.5cps), unfranked, fully imputed with
conduit foreign income. The record date for the dividend will be Friday 10 March 2023 with payment on Friday 24 March
2023.
In addition to the above, the Company retains sufficient balance sheet strength and cash reserves for deployment into
new earnings accretive growth initiatives. These cash reserves and an undrawn debt facility reaffirm the Company’s
ability to pursue acquisition opportunities in the fine jewellery sector in our existing markets, which meet our strategic
and investment criteria.
The on-market share buy-back commenced during the half, with the Company acquiring 8.6m shares at a cost of $10.2m,
representing 2.2% of share capital. The Board retains the discretion to resume buy-back activity.

Strategy Update – Framework underpinned by growth initiatives

The Company’s strategic transformation and further elevation of the brand have continued, with an overarching
emphasis on sales and margin growth. The strategic framework underpins the future growth of the business, is
customer-led and continually evolving and adapting to meet consumer demands:



The strategic framework encompasses a number of growth initiatives covering both short and long-term horizons:

Organic Growth Initiatives
• Brand and product elevation, driving ATV growth
• Leveraging of loyalty program through advanced data insights and tailored communications
• Retail productivity and investment in refreshing the store network across all markets

Digital Growth Initiatives
• Expansion of core direct-to-consumer channels and ramping up our virtual selling capabilities
• Marketplaces – growth in existing & new geographies
• International shipping
• Digital expansion in to Quebec
• Pure-play Medley growth

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New Revenue Streams
• Launching a circular economy offering, encompassing:
- digitally-enabled recycling platform
- launching a diamond upgrade program
- reimagining and expansion of jewellery repair business
• Development of a new digitally-le d bespoke diamond jewellery brand
• Introducing third-party jewellery insurance and replacement solutions for customers


Outlook

Putting aside New Zealand’s severe weather events over the last few weeks, FY23H2 sales to date are in line with our
expectations. On the basis that retail trading conditions do not materially deteriorate, the Company anticipates full year
comparable EBIT will be ahead of prior year.

Managing Director & CEO of Michael Hill International Limited, Daniel Bracken said:

“Our thoughts are with those impacted by the sustained and severe weather events across the North Island of New
Zealand over the past few weeks. Based on current trading performance, we anticipate comparable EBIT for FY23 will
be ahead of prior year, as we maintain a watching brief on the macroeconomic environment across all markets. I’m
excited by the pipeline of brand and growth initiatives that will be progressively delivered to market in the coming
months.”


Analyst and investor call

An investor briefing on the results will be held on Monday 27 February 2023 at 9:30am (AEST). Please note that the
webcast page will not be available until 9:00am (Brisbane, Qld time) and it is advised that you join at least 5 minutes
before the meeting commences.
Webcast link:
The webcast link for the briefing call on Monday 27 February 2023:
https://web.lumiconnect.com/386435838

If prompted, please enter the meeting ID: 386-435-838
Important Notes

The above represents the current decisions and intentions of the Company. Further information will be provided if the
Company’s decisions or intentions change or the Company has new information, in accordance with the Company’s
disclosure obligations.

Comparable EBIT is unaudited, excludes the impact of AASB16 Leases and IFRIC SaaS guidance, and with normalisations.

This announcement is authorised for release by the Board.

– ENDS –

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For more information, please contact:
Investors:
Andrew Lowe
CFO & Company Secretary
+61 478 301 320
andrew.lowe@michaelhill.com.au


Investors:
Anthea Noble
Head of Investor Relations
+61 438 770 704
anthea.noble@michaelhill.com.au

Media:
Mark Rudder
+61 411 362 362


ABOUT MICHAEL HILL INTERNATIONAL
Michael Hill International was founded by Sir Michael Hill in 1979 when he opened his first jewellery store in Whangarei,
New Zealand. The Group currently has 282 stores globally across Australia, New Zealand and Canada. The Group’s global
headquarters, including its wholesale and manufacturing divisions, are located in Brisbane, Australia. The Company is
listed on the ASX (ASX:MHJ) and the NZX (NZX:MHJ).

For more information:
investor.michaelhill.com

michaelhill.com.au
michaelhill.co.nz
michaelhill.ca

Disclaimer

Certain statements in this announcement constitute forward-looking statements. Forward-looking statements are statements (other than statements
of historical fact) relating to future events 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 ongoing
operational 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 the Company’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 and end-
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 and international
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 as a result of governmental review of the Company’s transfer pricing policies, conflicting taxation claims or changes 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. Accordingly, you are cautioned not to place undue reliance on any forward- looking statements, particularly in light of the current economic
climate and the significant volatility, uncertainty and disruption caused by the COVID-19 pandemic.

The Company does not intend, and do not assume any obligation, to update any forward-looking statements contained herein, except as may be
required by law. All subsequent written and 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 to above and contained elsewhere in this announcement.


Michael Hill International Limited ABN 25 610 937 598
34 Southgate Avenue, Cannon Hill, QLD 4170