Revenue Jump of 26% to HK$470.8 Million Riding on the Wealth Boom in Asia
HONG KONG, May 23 /Xinhua-PRNewswire/ --
KEY HIGHLIGHTS:
-- Revenue jumped 26% to HK$470.8 million and gross profit surged 40% to
HK$151.9 million.
-- Excluding exchange difference, operating profit before tax increased
91% to HK$71.0 million.
-- To open new Franck Muller ("FM") boutique at the Venetian Macao in
August and newly located FM boutique in Shanghai in July
-- Healthy financial position with no gearing
-- Proposed final dividend of HK 6 cents per share
Sincere Watch (Hong Kong) Limited ("the Group"; HKEX: 0444), the leading watch specialist in Asia, today reported a 26% growth in revenue to HK$470.8 million while gross profit surged 40% to reach HK$151.9 million for the full year ended 31 March 2007 ("FY07"). The Group reported improved gross margins of 32.3%, compared with 29.0% in FY06. The Group maintained a healthy financial position and has no bank borrowings as at 31 March 2007. In view of the Group's improved performance and in line with its continuous efforts to enhance shareholder value, the Group has proposed a final dividend of HK 6.0 cents per share for FY07, representing 56% of net profit for the year.
The sterling performance was attributed to the Group's successful marketing and brand management, the opening of new stores in Hong Kong, Macau and Beijing, as well as the luxury products boom in North Asia. Swiss watch exports to China, Taiwan and Hong Kong are valued at a total of 264.2 million Swiss Francs (approximately HK$1,678 million), making them the largest Swiss watch market in the world, according to the Swiss Watch Federation's March 2007 statistics.
The Group added to its network in Hong Kong, Macau and PRC a total of 7 retail outlets and 4 independent watch dealers. This brings the Group's total number of outlets and dealers to 41 and 23 respectively.
The Group's operating PBT before exchange difference rose by 91% to HK$71.0 million. The Group registered realised and unrealised foreign exchange loss of HK$17.7 million for the year as compared to realised and unrealised gain of HK$20.5 million for FY06. The exchange difference arose from trade payables denominated in foreign currencies, which were translated at the exchange rates prevailing at the balance sheet dates and any differences in valuation were then recognised in the income statement as unrealised gains or losses.
Group net profit after taking into account the unrealised forex loss, stood at HK$43.6 million which is 6.4% lower as compared to FY06.
Group Earnings Per Share (EPS) stood at 10.7 cents in FY07. Net asset value amounted to approximately HK$211.9 million, representing 51.95 cents per share as at 31 March 2007.
Mr. Kevin Chau, the Executive Vice-Chairman of Sincere Watch (HK) said: "The economic boom of the past two decades has contributed to growing affluence in China, which is expected to become the world's top consumer of luxury goods by 2015. Asia's rich is also growing at a rate that exceeds the rest of the world. Merrill Lynch / Capgemini projected that individuals with at least US$1 million of assets in Asia would increase to US$10.6 trillion by 2010. As the number of wealthy people increase, so will be the demand for luxury products."
"The Group will continue to leverage on its position as a leading luxury watch specialist by ramping up our brand management activities. We have plans to open up to 3 new boutiques in the key cities of Macau, Beijing and Shanghai in the coming months. Our stronger presence in Beijing and Shanghai will allow us to capitalize on the tourism boom that is expected during the upcoming Olympics 2008 to be held in China."
Enhanced Brand Management Activities
The Group has stepped up advertising and promotion efforts, including advertising in newspapers, magazines, billboards, dealer promotions and store promotions for new product launches and store openings.
To cater to the expected growth in the luxury market in North Asia, the Group has re-opened the newly expanded and refurbished Franck Muller flagship store in Hong Kong Island in February 2007. Two other new Franck Muller boutiques were also opened in Macau's Landmark Hotel in June 2006 and Kowloon's Ocean Terminal Mall in February 2007.
These mono-brand boutiques form a vital part of the Group's brand management strategy, as they are located in prime shopping areas and act as a showcase for the exclusive luxury brands that the Group represents. Currently, the Group operates six single-brand boutiques - three in Hong Kong, and one each in Macau, Beijing and Taiwan, retailing under the brands of Franck Muller and de Grisogono.
The newly secured brands under the Group's stable of exclusive luxury watch brands, including CVSTOS, de Grisogono and Pierre Kunz, made a successful entry into the market. The addition of these new brands, which cater to specific niches in an increasingly sophisticated luxury watch market, have enhanced the Group's competitive edge. The Group will continue to build alliances with new watch brands that show good growth potential.
Expansion of Distribution Network
The Group has also strengthened its presence in North Asia by expanding the list of quality watch distributors in the region. In this financial year, the Group added to its network in Hong Kong, Macau and PRC a total of 7 retail outlets and 4 independent watch dealers. With the acquisition in October 2006 of Sincere Watch Co., Ltd. ("SWTW"), a luxury watch distribution company in Taiwan, the total strength of the Group's distribution network in North Asia stands at 41 retail outlets and 23 independent watch dealers as at end March 2007.
Geographical markets
Hong Kong is the Group's major market, contributing more than 80% of Group revenue. Riding on its robust economic outlook and rising consumer sentiment, the Group is highly optimistic that the growth of its distribution and retail business in Hong Kong will continue.
The Group opened its first Franck Muller boutique in Macau in June 2006. With the fast growing gaming and hospitality sector and the increasing number of visitor arrivals from China, Macau will be a key growth market for the Group. To capture the booming market, the Group will open a Franck Muller flagship boutique at the Venetian Macao in August 2007.
To ride on rising luxury demand in the PRC, the Group opened the first Franck Muller boutique in Beijing in April 2007. To grow the PRC market, the Group will strengthen Franck Muller's position in the luxury market segment. It also plans to re-open the Franck Muller boutique in Shanghai in September 2007 at Plaza 66 Nanjing Xi Lu, the premier luxury shopping mall in Shanghai. The Group is also exploring opportunities to form strategic alliances with potential business partners.
Following the acquisition of SWTW, the Company will be able to extend the Group's business operations into Taiwan. The Group's wealth of experience in the luxury business and its established distribution network in Taiwan places it in a strong position to grow its business further - although contributions to the overall group may not be significant in the next year. The Group has exclusive distribution rights for Franck Muller in Taiwan.
Mr. Chau added: "We are in a strong position to capitalise on Asia's growing wealth market. The Group will continue to build on its established goodwill with the Swiss watch principals and work together to promote a strong and robust culture of horology. We will continue to launch innovative retail concepts and marketing platforms in North Asia, and will diversify our portfolio to include new luxury brands that have good growth potential. In view of the overall healthy economic trends and the Group's dynamic growth plans in place, we expect to remain profitable for the coming year."
About Sincere Watch (Hong Kong)
Sincere Watch (Hong Kong) Limited, the leading watch specialist in Asia, is the sole exclusive distributor of Franck Muller watches and accessories in Hong Kong, Macau, Taiwan and China, and has established Franck Muller as one of the most desired and popular fine watch brands in the luxury watch segment. Leveraging on its success with Franck Muller, the Group has expanded its brand portfolio and now carries four other brands, namely de Grisogono, European Company Watch, Pierre Kunz and Cvstos.
The Group has a large network of independent watch retailers through which the luxury timepieces are distributed. As at 31 March 2007, the Group distributes through 41 retail outlets operated by 23 independent watch dealers in Hong Kong, Macau, Taiwan and China.
In addition to its dealer distribution network and as part of its brand management strategy, the Group currently has six mono-brand boutiques: three in Hong Kong, and one each in Macau, Beijing and Taipei. Retailing under the brands of Franck Muller and de Grisogono, these boutiques are located in prime shopping areas and showcase the full collection of these very exclusive brands.
For more information, please contact:
Ms Tham Moon Yee / Mr Lee Yew Meng / Ms June Yong
Stratagem Consultants Pte Ltd
Tel: +65-6227-0502
Fax: +65-6227-5663
Email: tmy@stratagemconsultants.com / yewmeng@stratagemconsultants.com /
june@stratagemconsultants.com
