The Hour Glass Fell in Profit After Tax Partly due to Donation

The Hour Glass Logo

I invested in The Hour Glass in the year 2015 on the back of its strong cash position (My Personal Analysis of The Hour Glass).

On 24th May 2016, The Hour Glass announced its full year financial results (FY2016). Profit after tax fell by 10%.

What was surprising when I read the press release by the company was that the drop in profit after tax was partly due to a one time donation of S$5.0 million advance special needs, community and cultural causes in Singapore in conjunction with Singapore‟s 50th Anniversary. Although the donation partially caused the fell in profit before tax, I need to applaud the company for its philanthropic actions.

Below is the financial results that was released.

Unaudited Full Year Results

For the Year ended:

31 Mar ’16

$’000

31 Mar ’15

$’000

Change %
Revenue 707,525 734,938 (4%)
Profit Before Taxation 66,968 75,404 (11%)
Profit After Taxation 53,543 59,715 (10%)
Earnings per Share (cents) 7.42 8.22 (10%)

Will You Buy The Hour Glass?

A dividend of 2 cents was proposed. The Hour Glass last closed at S$0.805 on Friday, 3rd June 2016. At the closing price of S$0.805, the dividend yield translates to 2.48% which is not a fantastic yield. Thus if you are investing for its dividend, then you should take a look at other stock.

The current P/E stood at 10.85. My personal opinion is that the current economic remains weak and luxury goods businesses will suffer as tourists spend less. This will have an impact on The Hour Glass’s revenue where the main business lies in selling luxury watches. However, the Group’s balance sheet remains strong with consolidated net assets of $439.9 million and with cash and cash equivalents of $93.9 million.

I am currently vested and holding on to The Hour Glass for its potential growth when economy recovers and demand for luxury goods comes back.

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