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The Hour Glass Group FY2025 Press Release · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:08
  Okay, let's dive in. We're looking today at the world of luxury goods,
• 0:12
  specifically, you know, high-end watches.
• 0:15
  Always fascinating. Really is. And it's especially interesting right now to
• 0:19
  see how these top players navigate, well, let's just say uncertain economic waters. Exactly.
• 0:25
  Feels like the economy is not always smooth sailing these days. Mm-hmm.
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  Luxury sometimes seems bulletproof, but the reality is often more complex.
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  Consumer confidence, inflation, it all filters through, even at the top.
• 0:37
  Right. And we've got the perfect lens for this today. A whole set of source
• 0:41
  documents just landed, press releases, financial statements.
• 0:45
  Ah, yes, from the Hourglass Group. Yep, the Hourglass Group,
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  giving us a really clear look at their performance for the full financial year
• 0:51
  ending March 31st, 2025.
• 0:54
  That's FY 2025. So our job here for this deep dive is basically to unpack all of this, right?
• 1:01
  Cut through the jargon. Exactly. Get to the heart of it. What are the key numbers?
• 1:04
  Why do they look like that, the good and the challenging part?
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  And also, what are they saying about the future?
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  We want to give you the quick route to being really informed on this specific company's year.
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  Consider it your shortcut, straight from their own reporting, plus our take.
• 1:17
  Okay, so where do we start? Usually the big numbers, right? Revenue.
• 1:20
  Let's do it. Top line first.
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  For the full year, FY 2025, the Hourglass reported revenue of $1.16 billion. $1.16 billion.
• 1:30
  Okay. How does that stack up against the year before FY24? Good question.
• 1:35
  FY24 was $1.13 billion. So we're looking at an increase, but,
• 1:39
  well, a modest one, about 3%.
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  And I think the company itself called it modest sales growth in the documents,
• 1:45
  didn't they? They did, yes.
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  So, okay, modest growth on sales, but then we look at the bottom line, profit.
• 1:50
  That's where things get interesting. Ah, yes. Profit after taxation for FY 2025. What was that figure?
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  It came in at $136.1 million.
• 2:00
  $136.1 million. Okay. Comparing that to the previous year's profit.
• 2:04
  Big difference. FY 2024 was $157.6 million.
• 2:08
  Wow. Okay. So $157.6 million down to $136.1 million.
• 2:13
  That's a pretty significant drop. It is. It works out to a 14% decline year over year.
• 2:18
  14%. Right. So you've got this sort of paradox. Revenue up 3%.
• 2:21
  But profit down 14%, it's quite a gap.
• 2:23
  It really is. And that flows through to earnings per share, obviously. What happened there?
• 2:27
  Unsurprisingly, EPS followed profit down. It went from 23.87 cents per share in FY24. Okay.
• 2:35
  Down to 20.94 cents in FY25.
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  So that's a 12% decrease in earnings per share. 12%. Okay. So the headline story is.
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  They sold a bit more, which is, you know, positive given the market,
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  but something really hit the costs or expenses hard. Definitely squeezed the profit margin.
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  So let's get into the why. What's behind this? The company itself sort of sets
• 2:57
  the scene, right, talking about the market context. They do.
• 3:00
  The press release mentions the group managing director, Mr. Michael Tay,
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  talking about operating in a, and I quote, challenging luxury market marked
• 3:07
  by industry consolidation and inflationary pressures. Okay.
• 3:11
  Challenging consolidation, inflationary pressures. That's the backdrop.
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  But even with that backdrop, they managed that 3% revenue growth.
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  So what were they doing right?
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  What does the company attribute that to? Well, the sources point to a few things.
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  The strength of their brand portfolio, basically having the watches people want.
• 3:27
  Makes sense. The right brands matter.
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  Hugely. And also the depth of their client relationships. That's crucial in
• 3:34
  luxury. Repeat business, loyalty. High-touch service. Absolutely.
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  They also mentioned focusing on operational excellence. There are strategic
• 3:42
  partnerships with big names and also smaller artisanal makers and,
• 3:46
  importantly, ongoing investment in digital. So it's a mix.
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  Good products, good client service, running things well, key partnerships and keeping up digitally.
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  That explains pushing the top line up even slightly.
• 4:00
  Yeah, it seems like those factors help them navigate the headwinds on the sales
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  side. Okay, but that brings us back to the 14% profit drop. Let's dig into the costs.
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  What specifically went wrong or went up? Right. The financials and the release break it down.
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  Those inflationary pressures they mentioned. Yeah. They hit operating expenses directly.
• 4:17
  Like running the boutiques, rent, staff. Exactly.
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  The sources explicitly mention inflation impacting rents and wages across their stores.
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  And if you look deeper, selling and promotion costs actually rose by 5%.
• 4:30
  Employee costs stayed sort of
• 4:32
  stable in dollar terms, but what was a percentage of a shrinking profit?
• 4:36
  That stable number becomes a bigger slice. Right, right.
• 4:40
  Higher core running costs. That's pretty clear. What else was putting pressure on the profits?
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  Depreciation was another factor. It increased. Okay. Depreciation,
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  that's like the accounting cost of their assets aging, right?
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  Buildings, store fit outs. Precisely. And it was up 18% for property,
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  plant, and equipment, and up 6% for what they call right-of-use assets,
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  often related to leases.
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  So more investment in their physical stores and assets recently.
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  It suggests that, yeah. And the cost of those investments flows through as higher
• 5:09
  depreciation now. Got it.
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  Higher operating costs, higher depreciation. But wasn't there one specific kind
• 5:15
  of unusual item that had a really big impact this year? Ah, yes.
• 5:19
  You're thinking of the fair value adjustment on investment properties. That was significant.
• 5:23
  Explain that simply. What is it? Okay, so the Hourglass owns some property not
• 5:27
  just for its stores, but as investments.
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  Think real estate holdings. Periodically, these get valued by independent experts.
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  And the change in value, up or down, hits the profit and loss statement.
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  And how did that play out this year versus last year?
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  Well, that's the key. In FY 2024, the valuation resulted in a gain of $1.2 million.
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  So the value went up, boosting reported profit. Okay, a positive $1.2 million. But in FY 2025...
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  It swung the other way. The valuation resulted in a loss of $6.5 million.
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  Wow. From a $1.2 million gain to a $6.5 million loss, that's a $7.7 million negative swing.
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  Exactly. Just on that one line item, that change alone explains a really substantial
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  part of that overall 14% profit decline we saw.
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  And it's a non-cash thing, right? They didn't sell anything.
• 6:17
  Correct. It's an accounting adjustment based on valuation, but it hits the reported
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  profit figure your heart.
• 6:22
  Okay. That fair value swing is clearly a major piece of the puzzle.
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  Any other expense bumps worth noting?
• 6:27
  Yeah. The other expenses also saw a pretty big jump of 27%. 27%. What was in there?
• 6:32
  The sources specify it included a higher net loss on the disposal of property, plant, and equipment.
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  So basically selling off old assets, maybe old fixtures, equipment for less than their book value.
• 6:44
  Ah, okay. So getting rid of older stuff resulted in a bigger loss this year compared to last?
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  Seems like it. Yeah. And one more smaller factor, their share of results from
• 6:54
  associate companies, these are firms they partly own, that contribution decreased
• 6:58
  by 22%. So less profit coming in from those investments too.
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  Mm-hmm. It all adds up. So putting it all together, the 14% profit drop wasn't just one thing.
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  It was higher running costs due to inflation.
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  Yep. Higher depreciation from investments. That big swing from a gain to a loss
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  on property valuations.
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  For sure what? Higher losses when selling off old assets and less contribution
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  from associated companies. That paints a much clearer picture. It really does.
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  It shows how even with sales holding up okay, a combination of cost pressures
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  and specific adjustments can really impact the bottom line. Okay,
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  let's shift to yours slightly.
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  Beyond profit, what about the company's overall financial health?
• 7:37
  Cash, debt, assets, the balance sheet stuff.
• 7:40
  How did their cash position end up? Right, cash. As of March 31st, 2025,
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  They had cash and bank balances of $178.7 million.
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  $178.7 million. How does that compare to the year before? It's down.
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  It was $237.6 million previously.
• 7:59
  Okay, so cash decreased. But I think the source material is still called the ending balance robust.
• 8:03
  Yes, and $178.7 million is still a pretty healthy cushion. But it's key to see
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  why cash went down. It wasn't just frittered away.
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  One big positive move was paying down debt. Ah, okay. Reducing borrowings, how much? Quite a bit.
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  Bank borrowings went from $83.9 million down to $54.8 million.
• 8:21
  Yeah, that's a significant reduction. Generally a good sign,
• 8:23
  right? Less debt, less interest to pay. Absolutely. Strengthens the balance
• 8:26
  sheet. So cash down, debt down.
• 8:28
  Where else did the money go? You mentioned investments earlier.
• 8:30
  Yes, that was a big use of cash. The sources are specific.
• 8:33
  They acquired properties in Singapore and Hong Kong during the year.
• 8:35
  Yeah. Total cost, $80.3 million.
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  $80.3 million on property. Okay, so that explains a lot of the cash usage.
• 8:44
  And that would show up as increased assets, right? Right. Property,
• 8:47
  plant, equipment, investment properties.
• 8:48
  Exactly. Those lines on the balance sheet went up. They were converting cash
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  into tangible assets as part of their strategy.
• 8:55
  Any other major uses of cash? Returning value to shareholders, maybe? Yes.
• 9:00
  They did show buybacks, bought $3.5 million of their own shares.
• 9:04
  Okay. Share buybacks. And they paid out dividends.
• 9:07
  $51.8 million distributed to shareholders. Right.
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  So cash was used for property investment, paying down debt significantly,
• 9:14
  buying back shares and dividends.
• 9:16
  Makes sense why the balance decreased. It wasn't just absorbed by operations.
• 9:20
  So the overall balance sheet picture then, cash is lower, yes,
• 9:24
  but debt is way down and net assets actually increased, right,
• 9:27
  to $926.7 million. Correct.
• 9:31
  Net assets, what they own minus what they owe, grew.
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  So despite the profit dip for the year, the underlying financial structure seems
• 9:39
  pretty solid, maybe even stronger in some ways with less debt.
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  That seems like the key takeaway from the balance sheet side.
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  Financially stable. Yeah.
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  Strong asset base, improved capital structure. All right. We've looked back
• 9:51
  at the year. Let's look forward now. What are they saying about the outlook the year ahead?
• 9:55
  Well, they seem pretty realistic, maybe cautious. The sources say they expect
• 10:00
  ongoing macroeconomic uncertainties, volatile conditions.
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  Usual headwinds we're hearing about. Pretty much.
• 10:07
  Yeah. And they expect that to keep weighing on consumer sentiment,
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  especially in their specific niche, the special watch sector.
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  So don't expect the market challenges to just vanish overnight.
• 10:19
  No. And they also specifically mentioned market and industry consolidation continuing.
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  You know, bigger players getting bigger, maybe some smaller ones struggling.
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  Right. That trend persists.
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  So given all that continued uncertainty, consolidation, what's their bottom
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  line expectation for themselves in the next financial year?
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  The key phrase from the source is that they're positioned to maintain profitability
• 10:40
  in the next financial year.
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  Maintain profitability. That doesn't exactly scream rapid growth is coming back.
• 10:47
  No, it doesn't. But it does suggest they believe they're solid enough,
• 10:51
  resilient enough to navigate these challenges and stay profitable.
• 10:54
  Yeah, it signals confidence in their current position and strategy to,
• 10:58
  well, weather the storm, even if things don't dramatically improve market-wise.
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  Okay, let's wrap this up. Let's crystallize the main takeaways for you listening. Okay.
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  First, the Hourglass managed modest 3% revenue growth, heading $1.16 billion.
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  Shows they can still sell desirable watches even when the market's tough.
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  But, and it's a big, but profit took a significant 14% hit down to $136.1 million.
• 11:24
  And that was due to a mix of things. Inflation boosting costs.
• 11:29
  Yep. Higher depreciation. And especially that big negative swing on the investment
• 11:33
  property valuation. Don't forget the other smaller items too. Right.
• 11:37
  Second takeaway, look beyond the profit dip. The balance sheet looks strong.
• 11:41
  Cash is down, but they slashed debt significantly. And they invested heavily
• 11:45
  over $80 million in physical properties, boosting their net assets overall.
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  Financially quite robust.
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  And finally, the outlook. They see the challenges, continuing uncertainty, consolidation.
• 11:58
  No rose-tinted glasses there. But they state their position to maintain profitability.
• 12:04
  So confidence in their resilience, even if growth is muted.
• 12:08
  Seems like it was a year focused maybe less on explosive growth and more on
• 12:12
  managing costs and making smart strategic moves with their assets and debt. Well put.
• 12:17
  Shoring up the foundations, perhaps. Okay, so here's a final thought for you
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  to chew on, some things stemming directly from what we've discussed.
• 12:23
  The hourglass made this really significant $80 million investment in physical
• 12:29
  properties, brick and mortar, right?
• 12:31
  Yeah, a very deliberate move mentioned in the sources.
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  At the same time, they talk about investing in digital and they acknowledge
• 12:36
  the market is going to remain challenging, uncertain with consolidation happening.
• 12:41
  So doubling down on physical assets in that environment. Exactly.
• 12:46
  So how might this specific strategy, this heavy investment in physical stores
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  alongside digital efforts, how might that position them uniquely,
• 12:54
  perhaps, to maintain that profitability they're aiming for in the next tough
• 12:58
  year? It's a really interesting question.
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  What are the risks of leaning so heavily into physical retail when things are
• 13:05
  consolidating and uncertain?
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  Or what are the potential rewards?
• 13:09
  Does it give them an edge in that high-end personal service space that digital
• 13:13
  can't fully replicate? Does it make them more resilient or potentially less flexible?
• 13:18
  Something to think about regarding their long-term play in this luxury space.
• 13:22
  Definitely something to ponder.
• 13:23
  That wraps up our deep dive into the Hourglass Group's FY 2025 results. Thanks for joining us.