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The Hour Glass Ltd’s Latest Earnings: What Investors Need to Know

The Hour Glass Ltd (SGX: AGS) is a luxury watch retail group with a presence in nine key cities throughout the Asia-Pacific region.

On Friday, the firm announced its earnings for the third quarter ended 31 December 2017. Here’s a quick rundown of the financial figures from the latest quarter:

1. Quarterly total revenue fell 7% year-on-year to S$182.9 million. The decline was due to a contraction in supply from the firm’s principal partners.

2. Net profit, however, grew from S$13.4 million to S$14.2 million, up 6%. Lower cost of goods sold mainly contributed to the improvement in the bottom line.

3. Earnings per share for the quarter was at 2.01 Singapore cents, an improvement from last year’s 1.90 Singapore cents.

4. The Hour Glass’ balance sheet strengthened for the quarter. As at 31 December 2017, the firm had S$146.4 million in cash and cash equivalents, and S$51.7 million in total debt. This translates to a net cash position of S$94.7 million. In comparison, at the end of March 2017, it had S$73.7 million in net cash.

5. Quarterly cash flow from operations was S$30.3 million and S$2.7 million was spent on capital expenditure. Therefore, the retailer generated around $28 million in free cash flow for the latest quarter, a vast improvement from some S$8 million brought in a year ago.

For the nine-month period, revenue rose 3% to S$520.4 million while net profit went up 7% to S$31.9 million. Free cash flow soared from S$22 million to around S$37 million.

The company ended the latest financial period with a higher net cash position and this is pleasing to see. The improving sentiment in the luxury watch industry should have helped The Hour Glass to sell off its inventory at a faster rate.

Looking ahead, the firm had the following cautionary note though:

“Despite improving consumer sentiment, the watch sector continues to remain volatile. Barring any unforeseen circumstances, the Group expects to be profitable for the financial year.”

Shares of The Hour Glass ended Friday at S$0.655 apiece. This translates to a trailing price-to-earnings ratio of 9.1 and a dividend yield of 3.1%.

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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 Sudhan P owns shares of The Hour Glass Ltd.