Hour Glass Ltd’s Latest Earnings: Sluggish Start to the New Fiscal Year

Hour Glass Ltd (SGX: AGS) reported its first-quarter earnings for its fiscal year ending 31 March 2017 (FY2017) last Friday. The reporting period was from 1 July 2016 to 30 September 2016.

Hour Glass is in the business of retailing luxury watches. It has a network of over 40 boutique 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 some of the latest financial figures for Hour Glass:

  1. Revenue for the first-quarter was $148.2 million, down 7% compared to the same quarter a year ago.
  2. Profit attributable to shareholders was also down, but by 22% to $8.3 million. Hour Glass’s bottom-line was crimped by lower sales and lower contributions from associates (the latter sank by 53% year-on-year).
  3. As a result, earnings per share (EPS) saw a 22% decline from 1.49 cents in the corresponding quarter last year to 1.16 cents in the reporting quarter.
  4. Cash flow from operations was a negative $9.97 million with capital expenditure clocking in at $4.45 million. This puts the luxury watch firm in negative free cash flow territory to the tune of $14.4 million, an improvement from the negative $24.6 million seen a year ago (negative $24 million in cash flow from operations and $0.6 million in capex).
  5. As of 30 June 2016, Hour Glass had $80.7 million in cash and equivalents and borrowings of about $64 million. This is a decrease from a quarter ago when it had $93.9 million in cash and equivalents and borrowings of $63.4 million.

In all, both Hour Glass’s top-line and bottom-line declined for the reporting quarter. The firm also reported negative free cash flow. The good thing is it still has a balance sheet with a net cash position.

Operational highlights and the road ahead

Revenue for the first-quarter of FY2017 was marred by a slowdown in the region as well as increased competition. Hour Glass also had the following outlook in the earnings release which pointed to some difficulties ahead:

“The continuing global economic uncertainty is expected to affect consumer sentiment and the demand for watches and luxury goods. Barring any unforeseen circumstances, the Group expects to remain profitable for the financial year.”

At its closing share price of $0.72 last Friday, Hour Glass traded at about 10 times trailing earnings with a dividend yield of 2.8%.

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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.