Annual Report

Annual reports and statements




Chairman’s Statement


DEAR SHAREHOLDERS,

The financial year ended 31 March 2003 started off against a backdrop of global and regional economic weakness that further deteriorated during the last quarter of the year with the war in Iraq and the beginning of the SARS crisis.

Despite the severe impact these events have on consumers’ sentiment, our Group turnover only declined marginally, but was offsetted by the contribution from the new boutique in Ginza, Tokyo, to reach $256 million for the year.

Overall, Group profit after tax decreased by 57% to $2.6 million from $6.1 million in the previous year. This result was in part due to a provision to write down the carrying value of the Group’s leasehold premises in Hong Kong. The premises are held for the long term and house the distribution arm of the business in the territory. We maintain our intention to use Hong Kong as a springboard for expansion in North Asia, when the region’s economies stabilise. As this provision is capital in nature and unrealised, it is not available as a tax deduction, thereby affecting the Group tax charge against profits. The Ginza boutique, being in its start-up phase, incurred a small net loss for the year.

The Group balance sheet continues to be strong with cash of $11.5 million against total bank borrowings of $16.7 million. Taking advantage of the low interest rate regime, the Company applied gearing to increase its holding of popular fast moving stocks. This strategy was also used to finance working capital for our new Japanese retail subsidiary, where in addition, borrowing in the home currency would serve us a natural hedge against foreign exchange exposures.

DIVIDEND

The Board of Directors recommends a first and final dividend of 0.625 cents per share amounting to $0.68 million in respect of the year ended 31 March 2003.

DEVELOPMENTS

  1. The Hour Glass was conferred an Award for being one of the top 14 home-grown brands in Singapore in an inaugural ceremony in October 2002. This Award, organized by International Enterprise, Singapore is premised on the principle “that brands are separable intangible assets of the company that generate economic benefit for their owners over and above those derived from the tangible assets of the company.”
  2. Three staff members from separate boutiques of The Hour Glass, were presented with the Model Workers’ Award for 2003 in the Retail industry category. The Award is spearheaded by NTUC and is given “to recognise outstanding workers with good and consistent performance, exemplary conduct and attitude, which brings recognition to the company.” It is given to the top 100 workers in the chosen industries, and limited to not more than 3 workers per company.
  3. The Hour Glass (Australia) Pty Ltd secured distribution rights for Mont Blanc products in Australia with effect from May 2003.
  4. The refurbishment of the boutique at Lot 10, Kuala Lumpur was carried out in accordance with the Group’s planned program to upgrade all its boutiques to a contemporary classic concept to attract a younger base of customers.
  5. The relocation of the boutique at Peninsula Plaza, Bangkok to a new flagship store at Gaysorn Plaza, Bangkok was completed in May 2003. At 2,000 sq feet, this new flagship boutique is 3 times the size of the one in Peninsula Plaza and is situated in a high traffic flow area as Gaysorn Plaza is linked to the BTS. The Gaysorn Plaza houses all the niche high end brands in the luxury goods business.

PROSPECTS

Trading in the first quarter of the new financial year had been hard hit by the SARS crisis. Although the contagion is now under control, uncertainties still prevail with no clear sign of economic recovery in the USA. Modest rallies in stock markets give room for cautious optimism that the worst may be over, but it is still too early to predict how events will unfold and impact the Group. We expect competition to remain intense during the next three quarters as consumers seek to maximise the best value for their purchases.

In this unprecedented time, we are grateful to our loyal customers who are so supportive of the Group. To them, we express our thanks and our commitment to continue with our premier service, while we strive to widen our market reach.

We will also carry on with our efforts to contain operating costs and improve efficiency while actively exploring opportunities to expand in existing and new markets.

I am confident that with our extensive experiences accumulated over the past years, The Hour Glass would emerge from the current crisis a stronger company. We are on track with all the long term strategies to grow our business.

ACKNOWLEDGEMENT

On behalf of The Hour Glass, I would like to express my appreciation to our customers, suppliers and shareholders for their continuous support, to our employees for their dedication and commitment, and to my Board of Directors for their guidance and advice.

Henry Tay Yun Chwan
Executive Chairman
8 July 2003

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