Hour Glass Ltd’s Latest Earnings: What Investors Should Know

Hour Glass Ltd (SGX: AGS) reported its fiscal second-quarter earnings report yesterday evening for the fiscal year ending 31 March 2016 (FY2016). The reporting period was for 1 July 2015 to 30 September 2015.

Hour Glass is in the business of luxury watch retail. It has a network of more than 40 stores in Singapore, Malaysia, Thailand, Japan, Hong Kong, Australia and more. You can read more about Hour Glass in here and here.

Financial highlights

The following’s a quick rundown on the financial figures for Hour Glass:

  1. Revenue for the reporting quarter was $175 million, up 6% compared to the same quarter a year ago.
  2. Profit attributable to shareholders, though, was down 18% year-on-year to $9.9 million. The bottom-line was crimped by higher operating expenses, which in turn came about partly because of an expanded retail network and a $3.0 million donation made for Singapore’s 50th anniversary.
  3. Consequently, earnings per share (EPS) saw an 18% decline from 1.67 cents in the same quarter last year to 1.37 cents in the reporting quarter.
  4. Cash flow from operations came in at $37.1 million with capital expenditures clocking in around $6.6 million. This puts the luxury watch firm in positive free cash flow territory to the tune of $30.5 million.
  5. As of 30 September 2015, Hour Glass had $98.3 million in cash and equivalents and borrowings of about $64.7 million. This is a decrease from a year ago when the group had $88.6 million in cash and equivalents and borrowings of about $42 million.

In summary, Hour Glass had showed solid growth, but its profit had lagged due to a unique one-off expense. The firm is still reporting positive free cash flow and while the balance sheet is still strong, it has grown slightly weaker compared to the year before.

Operational highlights

Revenue for the first-half of FY2016 was higher from positive organic sales contribution from Hour Glass Australia and Japan, the successful opening of multi-brand stores in Singapore and Malaysia, and the newly acquired industry peer, Watches of Switzerland.

Michael Tay, the Group Managing Director of The Hour Glass, had the following short commentary in the earnings release for the reporting quarter:

“The Hour Glass has aptly negotiated the region’s economic turbulence and retracement in consumer confidence in the greater world of luxury. We have expanded organically and tapped into pockets of growth in our territories.”

Foolish take away

At its closing price yesterday of $0.74, Hour Glass traded at nine times its trailing earnings with a dividend yield of 2.9%.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.