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Hour Glass Ltd’s Latest Earnings: Closing Out A Tough Fiscal Year

Yesterday, Hour Glass Ltd (SGX: AGS) reported its full year earnings for its fiscal year ending 31 March 2017 (FY2017).

Hour Glass is in the business of luxury watch retail. It has a network of 40 stores in Singapore, Malaysia, Thailand, Japan, Hong Kong, and Australia. You can catch up with the results from the company’s previous quarter here.

Financial highlights

The following’s a quick rundown on some of Hour Glass’s latest financial figures for FY2017:

1. Revenue was $696.1 million, down 2% compared to FY2016.

2. Profit attributable to shareholders was down 7% to $48.7 million.

3. Earnings per share (EPS) was also down 7% to $0.0691.

4. Cash flow from operations was $66.5 million and capital expenditure was $9.4 million. This meant the luxury watch retailer produced free cash flow of $57.1 million, up significantly from the free cash flow of $10.5 million seen a year ago ($21.3 million in cash flow from operations and $10.9 million in capex).

5. As of 31 March 2017, Hour Glass had $124.8 million in cash and equivalents and borrowings of $51.2 million. This is an improvement from FY2016 when the company had around $93.9 million in cash and equivalents and borrowings of about $63.4 million.

It has been a tough year for Hour Glass with both its revenue and profit suffering declines. However, the firm also reported growth in free cash flow and a stronger balance sheet. The board of directors proposed a dividend of $0.02 per share, unchanged from a year ago.

Operational highlights and a future outlook

Michael Tay, Hour Glass’s co-group managing director, shared his thoughts about the company’s performance in FY2017:

“The Group wrapped up FY2017 against one of the most challenging conditions in recent years. Some of the negatives like weakening consumer sentiment and spending continued to accelerate. To counter these externals winds, the Group focused on managing its retail network more astutely, while continuing its employee development initiatives.

These have contributed to the Group’s stronger financial position, resulting in benefits to all stakeholders.”

In its earnings release, Hour Glass provided this outlook:

“Operating conditions continue to remain challenging in key markets like Singapore and Hong Kong, where visitor arrivals remain subdued. Discretionary consumption for luxury and specialty watches remains soft while a glut of inventory continues to persist in the supply chain. These will impact the market for luxury timepieces.

The Group will continue to operate its 40 boutiques across the nine key cities, namely in Australia, Hong Kong, Japan, Malaysia, Thailand and Singapore.”

At its closing stock price on Thursday of $0.69, Hour Glass traded at about 10 times trailing earnings with a 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.