Welcome to the Michael Hill FY2025 Results Update. Following the formal presentation, there will be a Q&A session for investors and analysts. Participants can ask a live audio question during today's call. To ask a live audio question, press the "Request to Speak" button at the top of the broadcast window. The broadcast will be replaced by the audio questions interface. Press "Join Queue," and if prompted, select "Allow" in the pop-up to grant access to your microphone. If you have any issues asking a question via the web, a backup phone line is also available. Dial-in details can be found on the "Request to Speak" page or on the homepage under "Asking Audio Questions." The audio queue is now open. I will now hand over to Andrew .
Good morning, and thank you for joining Michael Hill International 's FY2025 Full-Year Results Update. I'm Andrew Lowe, Interim CEO and Chief Financial and Supply Chain Officer. Rob Fyfe, our Chair, is here with me today and will be available to answer questions at the end of the presentation. Today, I'll be taking you through a review of our FY2025 results, a current trading update, and providing you with further insights on our current core priorities before ending with a Q&A session. FY2025 saw global economic uncertainty and challenging retail trading conditions persist across all markets, with conditions in New Zealand remaining particularly challenging. However, pleasingly, our two larger segments still delivered growth, with Canada delivering another record sales performance. The second half saw an improvement in same-store sales across all segments, with FY2025 half two group same-store sales up 2.4%. In addition, the business saw productivity lift, with sales per hour increasing by 5% for the year as the business maintained its focus on wage control. Our omnichannel offering continues to be a key strategic focus for the group, with further maturity across ship-from-store, click-and-collect, and virtual selling, which saw digital sales grow 6% to over $50 million for the first time. During this period of economic instability, the group's focus has been on embedding strong retail fundamentals to ensure the business is ready for economic recovery and to drive sustainable growth. This has seen a series of Michael Hill International Ltd initiatives implemented across the organization. The business opened our second global flagship store in Burke Street, Melbourne, which showcases the new brand icons and offers an elevated in-store experience for our customers. We refurbished our Queenstown store in New Zealand to reflect our new brand identity. The Michael Hill Pendant Bar concept was successfully launched. It has a focus on both 'build your own' and 'ready-to-wear' gifting, targeting both the gifting and self-gifting customers and providing them with a reason to return to purchase more pendants. We introduced an elevated quality in our certified sustainable lab diamonds, which is a high-growth category. Lastly, the establishment of a new distribution centre in Auckland, New Zealand. All three markets are now serviced by their own in-country, state-of-the-art warehouse and fulfillment infrastructure, reducing supply chain risk and logistic costs, while also improving speed to market of product for both stores and digital customers. Moving on to the FY2025 Group Financial Results. With full-year revenue, gross margin, and earnings broadly in line with prior year, The Group reported comparable EBIT of $15.3 million for the year ended 29 June 2025. For the year, The Group delivered revenue of $644 million, broadly flat on prior year. The impacts of continued aggressive promotional trading conditions and record-high gold prices were largely offset by the introduction and mix of high-margin products. Accordingly, gross margin of 60.5% was broadly flat to last year. Inflationary cost pressures continued to impact operating expenses across the business, particularly store labor and occupancy costs. During the second half, management took decisive action to reduce operating costs, discretionary spend, corporate roles, and overheads, which enabled full-year earnings to close broadly flat to prior year. Even with gold reaching multiple record highs throughout the year, continued active management of inventory, including the introduction of new product offerings, saw year-end inventory holdings close at $199 million. Year-end net debt closed broadly in line with prior year at $42 million. As noted in the FY2025 half-one results release, the existing $90 million debt facility has been increased by $20 million for the four-month period from 15 September 2025 to support seasonal working capital requirements for Christmas trade. Given continued compressed earnings in FY2025 and in conjunction with the commitment to prudent investment in operating and capital expenditure in FY2026, the Board has decided that no final dividend will be declared for FY2025. For Michael Hill, two new stores were opened during the year, two stores were converted to Bevilles, and 14 loss-making stores were closed. Pleasingly, Michael Hill sales productivity lifted, as demonstrated by sales finishing flat against prior year, even with the volume of store closures. For Bevilles, in addition to the two converted Michael Hill stores, one store closed, taking the net worth to 37. The group finished the year with 287 stores. In Australia, retail segment revenue increased by 1.4% to $364 million, and same-store sales increased by 1.2% for the year, with second-half same-store sales up by 2% on the prior comparable period. Gross margin for the year was 59.7%. Within this result, the recently acquired Bevilles business, while having expanded to 37 stores, including seven stores in the new market of Queensland, has seen challenging retail conditions suppress sales, growth, and margin. Trading conditions have also been particularly difficult in Victoria, where the brand was founded and the majority of the acquired stores are located. As a consequence, we have paused further store expansion to ensure the business model is optimized before we scale the network. Given this decision, the Bevilles brand intangible asset of approximately $20 million has been the subject of a non-cash impairment of $7.4 million. The Australian store network finished the year with 160 stores, including 37 Bevilles stores, with 11 store closures and two store conversions from Michael Hill to Bevilles. In Canada, retail segment revenue increased by 3.4% to CAD 162 million , and same-store sales increased by 4.4%, with second-half same-store sales up by 6.5% on the prior comparable period. This segment delivered another year of record sales, which is a credit to the resilience of the business and commitment of team members. Gross margin for the year was 60.1%. During the year, one store opened, four stores closed, resulting in 82 stores at year-end. In New Zealand, retail segment revenue decreased by 5% to $109 million New Zealand dollars. Same-store sales decreased by 5.5% for the year, while second-half same-store sales were down by 2.4% on the prior comparable period, an improvement in what remains a challenging economic environment. Gross margin for the year was 58.3%. During the year, one store opened, resulting in 45 stores at year-end. Moving on to our current trading update. For the first seven weeks of FY2026, group same-store sales were up 3.2% on prior year, with same-store sales for the Australian segment up 3.4%, Canadian segment up 6.8%, and New Zealand segment down 3.2%. Total sales for the group were up 3% for the first seven weeks of FY2026. At the end of the first half, we outlined the following core priorities: one, embedding the repositioning of the Michael Hill brand across all markets; two, internal strategic review of New Zealand to improve performance; and three, reinforce retail fundamentals, brand identity, and awareness of the Bevilles brand. Learnings across each of these core priorities were identified through the second half, with continuing deployment of a series of targeted levers. Furthermore, there is now also an opportunity to revisit and reset the group strategy following the recent announcement of new CEO Jonathan Waecker . During this interim period, the group's primary focus has been on building strong foundations for margin recovery to drive sustainable growth. This has seen a series of initiatives implemented to support improved intake margin, to deliver uniquely Michael Hill product units and mix at high margins, and continued disciplined retail execution, all of which is underpinned by a reset of the business's operational rhythm and promotional cadence. The group also established an AI Centre of Excellence in the second half of the year, focused on educating and training team members on the opportunities presented by AI across all facets of the business. The group has also well advanced in an initial trial of a new consignment stock model with one of our major long-standing inventory suppliers. This will provide immediate and direct working capital benefits, with the ability to subsequently further scale this opportunity with additional suppliers. Prior to concluding this presentation, I would like to take a short moment to pause and reflect. It is with great sadness that we acknowledge the passing of our inspirational founder, Sir Michael Hill, in July. His vision and ambition, and now his enduring legacy, will continue to drive and motivate the Michael Hill team globally for the years ahead. We would also like to acknowledge the tragic and sudden loss of our former CEO, Daniel Bracken, in February. Thank you for taking the time to pause and reflect. This has brought us to the end of our presentation. Rob and I are now happy to take questions.
Thank you. If you have not yet joined the live audio queue, please do so now. I will introduce each caller by name and ask you to go ahead. You will then hear a beep indicating that your microphone is live. Our first question comes from Kade Madigan from E&P Capital. Cade, please go ahead.
Morning, Andrew and Rob. Can you hear me?
Yes, we can.
Yes, indeed.
Maybe just starting with Australia. The same-store sales growth momentum improved through the year and has gone from +2% to +3.4% in early FY2026. How do you feel about the overall consumer spending environment at present? Is that indicative you're starting to see a bit of an improvement in Australia?
Yeah, I think so, Cade. Thanks for your question. I think Australia, we are starting to see those green shoots. I think Canada for some time now has been performing exceptionally well and has been extremely resilient. We have been patient and waiting for those sort of first signals of the Australian economy to turn. I think we're finally seeing the benefit of the interest rate cuts flowing through and just that return of consumer confidence in the Australian market. I think, therefore, really pleasingly, that second half same-store sales growth lift. We've seen a continuation of that, albeit only seven weeks, but into July and August. Very pleased.
That's good to hear. Maybe just on the Canada comment there, did you see any benefits in the half from a shift away from U.S.-based competitors on the back of the tariff announcements between Canada and the U.S. at all?
Yeah, I think from a tariff point of view, Michael Hill is not directly impacted from the American tariffs. There has definitely been a shift in consumer behavior in Canada where to buy non-American products and goods is quite the priority for the consumer, and we have lent into that. We can proudly point to our New Zealand heritage in that space. I think the business too has just really gone from strength to strength just from a store presentation and productivity point of view. I think all of those things combined, some of our competitors in that market are directly impacted. With logistics and warehousing flowing through the U.S. and then into Canada, they will see some downside. We don't have that direct issue given our own warehousing arrangements in Toronto.
Okay, good. Sorry, I did hear you make a bit of a comment on this on the call, but I had some internet trouble. Sorry, I missed it. I just wanted to think about the store count. I mean, there were another 10 Michael Hill stores closed in Australia and four in Canada. There was also a Bevilles store closure as well as the significant impairment to the brand in 2H2025. I guess two parts to the question. Firstly, what's driven the high number of closures this year? Your thinking on the store network as it stands now for the two brands and what we can expect across the next few years. Thanks.
I think we've always been pretty disciplined with our store network. When a lease is at its end of life, we have a critical assessment to make about whether to renew, to close, or to consider the conversion or flip to Bevilles. Admittedly, while the volume of store closures in the year was high, from an overall productivity point of view, sales are still up. There is a piece here that in certain parts of Australia, we probably were and are over-networked and we've been taking steps to address that, which has seen the closures in Australia. Going forward on the store network from a New Zealand point of view, there are a couple of closures to occur within the year, more around centre redevelopments and the like. Canada will broadly hover flat. We've got a new opening and potentially a closure. That sort of mid to low 80s in Canada is about right. For Australia, and talking to the two brands, there are still some loss-making stores in Australia that we have a watching brief on. If we can't strike the right deals with landlords and be comfortable with those stores renewing, there will be some closure decisions there. From a Bevilles point of view, we've been very careful and disciplined in the current economic and retail environment not to be pushing ahead at the pace we'd originally planned with new stores. We do want to take the time to make sure the business model is right and at the right time we will look to expand. At the moment, I think it's safe to say that the Australian store network won't be growing. There will be those decisions around some of those borderline Michael Hill stores in the coming months.
Excellent. That's really helpful. Thanks.
No worries. Thanks, Ken.
To ask a live audio question, press the 'Request to Speak' button at the top of the broadcast window. Follow the instructions on your screen to join the queue. Seeing no further questions in the queue, I'll now hand back to you, Andrew.
Thank you. I would like to thank everyone for their continued interest in Michael Hill International . Thank you very much, and we'll close the call.