MHJ - Michael Hill International.

[peat]

Shame global domination didn't work out

Yes it goes to show what a difficult market the USA is as we all know MHJ is a fierce business competitor
I wont conflate this with the retirement of Michael himself.

[winner69]

Market doesn’t seem to like recent announcements. Reading between the lines even normal trading hasn’t been to brilliant either

All that and a bad market not good as share price sinks below 120

[hardt]

Market doesn’t seem to like recent announcements. Reading between the lines even normal trading hasn’t been to brilliant either

All that and a bad market not good as share price sinks below 120

From 144 back down to 118 due to one off costs impacting a single year of reporting while the group itself is moving steadily... exacerbated by the selloff one could see the ~20% dive a big fat overreaction.

The market really enjoyed the solid results they posted earlier this year... this is including the $12m EBIT loss courtesy of the US operations which they are looking at either cutting out or downsizing.

At the end of the day the bottom line will benefit greatly.

[upside_umop]

I always liked MHI as a scaleable business model but was surprised they didn't do things differently with the US and Emma & Roe (and exit the US earlier):
- US : They spread themselves too thin for effective marketing. Why didn't they concentrate on one state, and once that model was refined, roll it out across the rest of the states?
- E&R : This has been unprofitable from the beginning and even on contribution margin level. Why would you roll-out hoping for scaleability? Poor performance IMO.

The recent announcement shows that on a normalised basis (excluding the anticipated $20m restructuring hit), EBIT will be down c. $5m year on year. No explanation was given which gives a lot of uncertainty?

The other challenge for me, and a key indicator if MHI can survive the retail model is if they can obtain same store sales increasing at least at the rate of CPI. It's one of their KPI's in their annual report and they didn't meet this or give any reason to believe they are even looking at this.

Disc: Don't hold.

[hardt]

The recent announcement shows that on a normalised basis (excluding the anticipated $20m restructuring hit), EBIT will be down c. $5m year on year. No explanation was given which gives a lot of uncertainty?

As they said, increased losses from their US operations.


"The key contributing factors were the deterioration in the performance of the US

and Emma & Roe businesses, which underpinned the Company’s strategic actions recently announced"


Theoretically by disregarding the fat losses from the US business ( which hopefully wont be there next year ) from this half you would be seeing a sizeable increase in earnings.

[upside_umop]

As they said, increased losses from their US operations.


"The key contributing factors were the deterioration in the performance of the US

and Emma & Roe businesses, which underpinned the Company’s strategic actions recently announced"


Theoretically by disregarding the fat losses from the US business ( which hopefully wont be there next year ) from this half you would be seeing a sizeable increase in earnings.

Apologies, I only glanced the announcement. It still implies the rest of the business is not performing as strongly by saying "contributing factors"?

Agree though, I think this is a good move. Earnings will increase significantly and they can cut this loose - an expensive lesson!

One of my other concerns is with E&R - will they successfully rebrand or will this end up costing and be a drag on earnings....

[Balance]

From 144 back down to 118 due to one off costs impacting a single year of reporting while the group itself is moving steadily... exacerbated by the selloff one could see the ~20% dive a big fat overreaction.

The market really enjoyed the solid results they posted earlier this year... this is including the $12m EBIT loss courtesy of the US operations which they are looking at either cutting out or downsizing.

At the end of the day the bottom line will benefit greatly.

The fallacy with that of course is that write-offs or downsizing have real bottom line impacts - the non-performing assets and businesses are gone but the debts remain, and the debts have to be serviced by the good operations.

[hardt]

The fallacy with that of course is that write-offs or downsizing have real bottom line impacts - the non-performing assets and businesses are gone but the debts remain, and the debts have to be serviced by the good operations.

As well as propping up the loss making US operations, the good operations were already servicing the groups debts ( roughly $40m of debt )

US contributed a lovely -13M to EBIT last year and by the sound of things these losses are growing... therefore one can comfortably assume cutting this huge loss maker will positively impact earnings.

Disc: I do not hold, but at this price I am thinking of jumping in.

[winner69]

As well as propping up the loss making US operations, the good operations were already servicing the groups debts ( roughly $40m of debt )

US contributed a lovely -13M to EBIT last year and by the sound of things these losses are growing... therefore one can comfortably assume cutting this huge loss maker will positively impact earnings.

Disc: I do not hold, but at this price I am thinking of jumping in.

All makes sense hardt

But the majority of the US losses came from E&R. MH ebit -$3.8m and E&R ebit -$6.9m

The US bit will go but how much of a drag will E&R continue to be even if losses might reduce or turn into profit. Big gamble I reckon even though demi-fine stuff might be the trick

Wonder if Rob Fyfe’s 16 grand a month support is paying dividends?

[blackcap]

I guess they are saying... stick to the knitting!!