The Hour Glass (SGX: E5P) is one of Singapore’s oldest and largest luxury retailers. The company now operates in nine cities around Asia and focuses on selling high-end timepieces. With the company’s latest full-year earnings released on Wednesday, let’s take a look at how it fared. The Hour Glass’s operating results For the financial year ended 31 March 2014 (FY2014), revenue is up 13% to S$682.8 million compared to a year ago. Over the course of FY2014, the company had faced intense competition, resulting in a lower gross margin of 23% as compared to 23.9% a year ago. Furthermore,…
With the company’s latest full-year earnings released on Wednesday, let’s take a look at how it fared.
The Hour Glass’s operating results
For the financial year ended 31 March 2014 (FY2014), revenue is up 13% to S$682.8 million compared to a year ago. Over the course of FY2014, the company had faced intense competition, resulting in a lower gross margin of 23% as compared to 23.9% a year ago. Furthermore, due to startup-related expenses for its Laduree business and new storefronts, the company ended the year with a net profit of S$56.4 million, which is just 4% higher than the previous year.
The Hour Glass still derives the majority of its sales from Southeast Asia, with the region (including Australia) contributing about 82.4% of the company’s total revenue. Northeast Asia makes up the rest of the company’s sales.
During FY2014, The Hour Glass was still able to strengthen its balance sheet despite a weakening in consumer sentiment around the region; its net cash (total cash minus total debt) had increased from S$38.3 million a year ago to S$76.7 million.
What’s next for The Hour Glass?
The company shared in its earnings release that it expects the luxury retail market to “remain difficult over the current financial year.” But even so, the company’s laying down plans for “a new growth engine through its [new] Luxury Enterprise Division.” The division would focus on luxury retail markets that are non-watch related.
During FY2014, The Hour Glass had become a franchisee of Laduree, a luxury French bakery that’s well-known for its macaroons. The deal, which is part of the company’s plans for its Luxury Enterprise Division, sees the company holding the franchise rights for Laduree for Southeast Asia. There are “plans to scale” the Laduree business and that could be another avenue of growth for the company.
The company also has plans to expand its reach in Thailand and Malaysia with more luxury-watch boutiques. All told, the company“expects to remain profitable” in the current financial year.
The Hour Glass has recommended a dividend of S$0.06 per share, which is 9% higher than the previous year. The company’s currently trading at S$1.82, giving its shares a Price to Earnings ratio of 7.5 times.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.