Annual Report

Annual reports and statements




Chairman’s Statement


DEAR SHAREHOLDERS,

For the financial year ended 31st March 2002, the Group recorded a turnover of $251 million, a marginal decline of 2.3% from the previous year. However, the Group operating profit fell from $12.4 million to $8.8 million, a significant decline of 29%. The result, due mainly to erosion of trading margins and lower sales, was despite several initiatives taken to combat the ongoing difficult economic conditions. On a more positive note, the Group was able to lower its operating expenses by $2.8 million.

The positive cashflow of $12 million generated from operations was ploughed back primarily into inventory to widen their base and depth. Proceeds from the sale of an investment property in Singapore, which gave rise to an exceptional gain of $1 million had been deployed to finance the Group’s ongoing programme of refurbishing its boutiques to the contemporary classic concept theme that was first introduced in the year 2000.

In addition to the net profit after tax of $6.5 million for the year, net tangible assets value was boosted by the write-back of $3.8 million. This relates to prior year provisions which were unutilised as at the end of the financial year and written back to revenue reserves in compliance with new accounting standards. Consequently, net tangible assets value per share increased to $1.09, up from $1.00 last year.

DIVIDEND

The Board of Directors recommends a first and final dividend of 5% per share less tax at 22% amounting to $1.06 million in respect of the financial year ended 31st March 2002.

SOUTH ASIA

Profitability for this territory declined from $10.7 million to $8.9 million for the financial year ended 31st March 2002. The weaker performance in the Malaysia and Australia watch operations was attributed to lower sales and margin due in part to a reduction in tourist arrivals and poor consumer sentiment.

Mondial, our jewellery subsidiary, also sustained a decline in profit before tax in tandem with a reduction in its wholesale business.

NORTH ASIA

The distribution activities in Hong Kong and Japan showed a combined improvement in sales of 8.1%. Despite improved sales, margins were lower due to higher product cost from principals.

The retail business in Hong Kong suffered from lower sales because of the strong Hong Kong Dollar resulting in uncompetitive pricing. Profit before tax was also lower due to depressed margins.

DEVELOPMENTS

During the year, the Group completed refurbishments to 3 more boutiques in Singapore, bringing the total to 5 boutiques that now exhibit the new concept. In addition, the Group expanded its boutiques in KLCC, Malaysia and in the Gold Coast, Australia. Plans for a retail boutique in Tokyo materialised with the opening of a flagship store located in the fashionable Ginza district on 3rd May 2002.

PROSPECTS

While the Group was able to turn in credible profits despite a very challenging trading environment, we are mindful that there can be room for improvement in our marketing efforts. Although margins are expected to continue to be under pressure, we believe that the outlook for the luxury watch industry will remain an attractive area of development in the medium and long term. We have taken steps in this direction, including growing our boutique locations through selective expansion in existing and new markets. In particular, the new Tokyo Ginza boutique will provide us a platform to tap into the long term potential in Japan, notwithstanding that it is expected to incur start-up losses as we break into this market.

In the coming year, more resources will be allocated in marketing activities in the region to grow our top line.

Nevertheless, given the political unrest in Asia and the Middle East and uncertain global economic outlook, we expect that the Group’s profit in the current financial year may be lower than the year just ended.

MANAGEMENT TEAM

We welcome to our management team, Dr Kenny Chan who has been appointed as the Group’s Chief Operating Officer with effect from 1st July 2002. Prior to joining the Group, he was managing director in charge of a distribution chain, marketing and retailing a prestigious European brand of fashion of apparel and accessories in the Asia Pacific region, a position he held for over 10 years. We look forward to the contribution of his wealth of experience and expertise to the development and expansion of the Group’s operations.

ACKNOWLEDGEMENT

On behalf of the Board of Directors, I would like to express our appreciation to our customers, suppliers and shareholders for their continuous support; and to our employees for their dedication and commitment to the Group.

Henry Tay Yun Chwan
Executive Chairman
8 July 2002

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