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The Hour Glass Ltd’s Latest Earnings: Net Profit More Than Doubles

The Hour Glass Ltd (SGX: AGS) is one of the world’s leading specialty luxury watch retailers with a presence in many key cities in the Asia-Pacific region. Recently, the company announced its financial results for the first quarter ended 30 June 2018.

Financial highlights

Revenue for the reporting quarter came in at S$180.7 million, up 10% as compared to the first quarter last year. The better showing was due to improved sentiment in some markets in the region.

As sales rose faster than the increase in the cost of goods sold, gross margin climbed from 21.2% to 24.4%. The higher gross profit, coupled with a 150% surge in the share of results of associates, resulted in profit attributable to shareholders rising 105% to S$14.3 million. A year ago, The Hour Glass clocked in a net profit of slightly below S$7 million.

Consequently, net profit margin increased to 7.9% from 4.2% a year ago.

As at 30 June 2018, the luxury watch retailer had S$188 million in cash and cash equivalents, and S$47 million in total debt. This translates to a net cash position of S$141 million. In comparison, at the end of March 2018, it had S$131 million in net cash.

Inventories for the period reduced by 1.7% to S$277.8 million. Net asset value per share at the end of the quarter stood at S$0.74, a 2.8% increase from S$0.72 as at 31 March 2018.

Free cash flow improved for the latest quarter, coming in at S$9 million. In comparison, a year ago, the company had negative free cash flow.

Outlook

Looking ahead, The Hour Glass commented:

“The watch sector is experiencing better consumer sentiment which has led to improved overall business of the Group. Barring any unforeseen circumstances, the Group expects to be profitable for the financial year.”

The Foolish takeaway

The Hour Glass posted growth in revenue, gross profit, net profit, and free cash flow for the first quarter. The industry that it is operating in seems to have turned the corner as well. It will be interesting to watch how both The Hour Glass and its listed peer, Cortina Holdings Limited (SGX: C41), perform in the near-term due to the improving consumer sentiment.

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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 in The Hour Glass Ltd.