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The Hour Glass Ltd’s Latest Earnings: Strong Growth in Net Profit

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. The company announced its financial results for the six months ended 30 September 2018 yesterday. Let’s look at some key highlights from the announcement.

Financial highlights

Revenue for the first half increased by 5% year-on-year to S$355.4 million, driven by an upturn in the global specialty luxury watch retail market. Due to tighter business controls, gross margin improved to 24.9% from 21.7%.

Total operating costs inched up 2% to S$324.0 million, mainly due to higher cost of goods sold, staff costs and marketing expenses. Despite the higher expenses, net profit surged 57% to S$27.8 million.

As of 30 September 2018, the company had S$159.8 million in cash and cash equivalents, with S$25.7 million in total debt. This gives a net cash position of S$134.1 million. In comparison, at the end of March this year, it had S$130.8 million in net cash.

Free cash flow for the first half of the current financial year stood at S$16.4 million, an increase of 75% from S$9.4 million a year back.

The Hour Glass’ group managing director, Michael Tay, commented on the latest results:

“There has been some uplift in the global specialist luxury watch market due to improved consumer sentiment and desirability for the brands we partner with. This has provided the Group a mild boost in our first half performance though we remain mindful that the market is prone to swift swings in sentiment.”

The luxury watch retailer did not declare any dividend for the latest period, just like the previous year.

Outlook

With regards to its outlook, the company said:

“Looking ahead, the Hour Glass continues to drive its internal transformation programme centred on raising the organisational standards and deliver an improved service proposition to its customers across its network.”

The Foolish takeaway

The better sentiment surrounding the luxury watch retail market has improved earnings for The Hour Glass. Even though consumer sentiment can change suddenly, the company has a strong balance sheet to see it through any tough times. At the closing share price of S$0.625 yesterday, The Hour Glass had a trailing price-to-earnings ratio of around 7 and a trailing dividend yield of 3.2%.

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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 doesn’t own shares in any companies mentioned.