Michael Hill International Limited

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Contents

1. Company background research        

1.1 Operating Activity Comparison        

1.2 Financial factors        

1.3 Challenges and Growths        

2.0 Financial Ratio Analysis        

3.0 Lending Decision        

4.0 Investment Decision        

Bibliography        

1. Company background research

1.1 Operating Activity Comparison

Michael Hill International Limited (MHJ) began in New Zealand offering a range of high quality products in jewellery; including rings, necklaces, watches, broches and more. Their lucrative marketing and unique range of exclusive jewellery has seen theme expand rapidly in the Pacific region as well as extending into the Americas. 2014 saw a new range of products offered under Emma & Roe boutique (E&R), which focuses on diamonds, bridal and fine jewellery targeted towards customised looks that woman seek (Michael Hill 2016).

Blackmores (BKL) is an Australian company that began its operation more than 80 years ago with a focus on natural health products. They have continued investment in BioCeuticals and the Blackmores Institute, to supply the increased demand for natural health products in Australia and the emerging market in Asia (Blackmores 2016).

Both companies are focused on expanding their businesses as reflected in the 2015 annual reports despite tough market conditions (Blackmores 2015, Michael Hill 2015), however the approach differs. BKL is strengthening the platform in its Asia markets with growth in sales up substantially from 2014-2015 (BKL 2015, p.5), whereas MHJ has opened up a new branch of products under the E&R which targets a specific market (MHJ 2015 p.3).

1.2 Financial factors

Globally, the significant rise in the middle-class is expected to double in size by 2030 (Reuters 2012) which will see so many people escape poverty, that the balance of geopolitical power will have changed completely (EY 2016).  MHJ and BKL both have a large market in the middle-class (Annual Reports, 2014/15) and will need to strategize how to supply the new demands over the next 5 years, the shift in middle-class will greatly affect future interest and tax rates as the economy shifts on a global scale (EY 2016).

Industry factors can significantly influence how both companies perform in the future years as a result of shifting global conditions. MHJ has a smaller market-base and relies heavily on improved economic growth as hand-crafted jewellery is considered a ‘luxurious item’ only affordable to the middle and upper class. Another factor is the shift in prices on minerals, specifically; gold and diamond. The price of gold has soared in the past, while recently dropped (BullionVault 2016), is increasingly unstable in today’s economic conditions which can adversely affect the financial performance.