CYCLICAL CONSUMER SERVICES + RETAILERS
The Hour Glass made a clean sweep in this year’s Billion Dollar Club (BDC). In the cyclical consumer services and retailers sector classification, the luxury watch seller emerged at the top in weighted return on equity (ROE) categories, growth in profit after tax (PAT) and returns to shareholders. It is the overall sector winner too. To top it all off, The Hour Glass AGS is also the overall BDC winner with a total score of 79.33%, followed by runner-up Frasers Logistics and Commercial Trust at 70.55%.
From 54 cents as at March 2020, its share price surged to as high as $2.33 as at March 2022 before dipping slightly to $2.18 as at March this year, translating into a CAGR growth of 59.2% over the three years.
In the three financial years taken into consideration for this year’s BDC, The Hour Glass grew its earnings from $70.4 million in FY2019 ended March 2019 to $154.7 million in FY2022 ended March 2022, representing a CAGR of 30%. ROE also increased from 13% for FY2020 to 21.6% for FY2022, giving a weighted ROE of 17.3% over the three years under consideration.
The Hour Glass has a presence in eight other key cities across Asia Pacific, with a network of 55 boutiques. The company carries leading brands such as Rolex, Patek Philippe, Audemars Piguet, Hublot, FP Journe, Breguet, Cartier, Girard-Perregaux, Omega, Panerai, TAG Heuer and Tudor.
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The Hour Glass scored big at this year’s BDC as its business enjoyed a multi-year growth amid surging global demand for high-end timepieces, thanks to higher disposable income that could not be spent on overseas vacations and dining out.
The company’s financial performance has further improved in the most recent financial year, which was not considered in calculating this year’s winners. In FY2023 ended March 31, The Hour Glass reported record earnings of $174.2 million, up 11% over the preceding year. Sales in the period were up 9% to $1.12 billion. Cash and bank balances stood at a healthy $244.6 million. As at March 31, the company’s net asset value was $774 million or $1.18 per share — a significant jump from 68 cents as at March 31, 2022.
The Hour Glass has been making investments elsewhere besides the core business of selling watches. For example, it spent $83.2 million buying a prime commercial property in Brisbane, Australia, whose key long-term tenants include Hermès and itself.
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To deliver value to its shareholders, The Hour Glass spent $55.3 million buying back shares from the market. On top of an interim dividend of 2 cents a share, the company declared a final dividend of 6 cents per share, bringing the total dividend for FY2023 to $52.7 million.
As Dr Henry Tay, executive chairman of The Hour Glass, describes in the annual report, the report card from the company “reflected developments in the watch market during an extraordinary period”.
However, he is careful not to get too carried away. “In a shifting rate environment with economic activity and consumer behaviour reverting to pre-pandemic norms, a sense of balance and moderation appears to return to the highend watch industry ... So, despite our solid operating performance, we remain vigilant as we head into this next macro-dynamic phase of uncertainty and decelerating growth for the world,” he says.
Beyond the short-term changes in business conditions, The Hour Glass shows it is closely watching the industry landscape with a long-term view. “As it is for watch brands, the path to becoming a successful retailer is clear. What matters is a long-term focus and our ability to execute our mission: We must do it better, not necessarily faster, than the competition.
“We will continue to invest with the next decade in mind and operate in a manner that may not maximise short-term financial gains and will extract future advantages. We shall continue to focus on being the best possible collaborator for the brands we represent, with a deliberate emphasis on offering high-quality watches with a high-quality personalised service to our clients. The short-term outlook has dimmed, but I am confident that the future will remain dynamic and prosperous,” says Tay.
