EMPEROR WATCH & JEWELLERY LTD.

Emperor Watch & Jewellery Announces 2012 Annual Results Revenue Grows 11% to HK$6,531 Million

Mar 18, 2013

EMPEROR W&J ANNOUNCES 2012 ANNUAL RESULTS
REVENUE GROWS 11% TO HK$6,531 MILLION

 
Financial Highlights (Audited):

HK$’ million 2011Per Reported 2011Excluding the netloss on derivativefinancial instruments1 2012 Per Reported Changes
Revenue 5,862 5,862 6,531 +11.4%
Gross Profit 1,686 1,686 1,697 +0.7%
Gross Profit Margin 28.8% 28.8% 26.0% -2.8 ppts
EBITDA2 825 834 572 -31.4%
Profit for the Year 627 636 404 -36.5%
Basic Earnings per Share HK9.7 cents HK9.9 cents HK6.0 cents -39.4%

1 Net loss on derivative financial instruments was a non-cash item recognised in consolidated statement of comprehensive income which was in relation to fair value loss on initial recognition and fair value change of derivative financial instruments at year end.

2 EBITDA represents earnings before interest, taxation, depreciation and amortisation of the Group.

(Hong Kong, March 18, 2013) Emperor Watch & Jewellery Limited (the “Group” or “Emperor W&J”) (Stock code: 887), a leading retailer of luxury watch and fine jewellery, today announces its 2012 annual results for the year ended 31 December 2012 (the “Year”).

 

Despite the unfavourable market conditions and an extraordinary high base comparison from 2011, the Group was still able to achieve a revenue growth of 11.4% to HK$6,531million (2011: HK$5,862 million) during the Year. The Hong Kong market continued to be the Group’s key revenue contributor, with its revenue increased by 13.5% to HK$5,520 million (2011: HK$4,863 million), accounting for 84.5% (2011: 83.0%) of the total revenue. During the Year, 81.5% (2011: 82.4%) of the Group’s total revenue is generated from watch segment. Gross profit amounted to HK$1,697 million (2011: HK$1,686 million). Gross profit margin was 26.0% (2011: 28.8%).

 

The Group faced a high base when compared with 2011. This was driven by two factors, namely (1) revenue boosted in Hong Kong market in 2011 triggered by a shift of luxury shopping destination from Tokyo to other Asian regions (including Hong Kong) following the Great East Japan Earthquake in March 2011; and (2) gross profit margin was relatively high in 2011 due to the substantial and frequent price hikes implemented by watch suppliers as a result of Swiss Franc’s appreciation and rising raw material costs.

 

EBITDA and net profit were HK$572 million and HK$404 million respectively, as compared to HK$834 million and HK$636 million respectively in 2011 excluding the net loss on

derivative financial instruments. The decrease of EBITDA and net profit were owing to the decrease in gross profit margin and rising rental expenses. Basic earnings per share were HK6.0 cents (2011: HK9.9 cents). The Board of the Company is pleased to recommend the payment of a final dividend of HK0.8 cent (2011: HK1.6 cents) per share. Together with the interim dividend of HK0.98 cent per share, the total dividend per share for the Year was HK1.78 cents (2011: HK2.8 cents).

 

During the Year, a total of 6 new stores were opened in Hong Kong and the PRC. As at 31 December 2012, the Group had 80 stores in Hong Kong, Macau and the PRC. The Group’s retail stores in Hong Kong are strategically located at the major high-end shopping places, namely, Russell Street in Causeway Bay, Canton Road in Tsim Sha Tsui and Queen’s Road Central in Central. In terms of shop rental rate per square feet during the Year, these three streets were ranked as world-class top five most valuable shopping streets. Through its extensive presence in these extremely prime areas, the Group enjoys a high penetration rate amongst the mainland visitors and excellent brand visibility.

 

The Group continued to closely collaborate with watch suppliers to host a range of joint promotions, sponsorships and exhibitions during the Year, all of which received positive results. The Group also implemented various specified marketing and public relation campaigns to strengthen its advertising and marketing efforts on high income group. During the Year, the Group fully utilised the spacious area in Emperor Jewellery Flagship Store in 1881 Heritage and continuously hosted joint promotion events with investment banks,insurance companies, charity organisations and academic institutions in order to widen the customer base and strengthen a sense of signature on the flagship store.

 

The Group is able to enjoy the synergies effect with companies of Emperor Group. Emperor International Holdings Limited (Stock code: 163), a separate listed company under Emperor Group, owns many premium retail properties at renowned shopping districts. By leasing the prime retail locations from it, the Group is able to generate higher sales productivity. As one of the synergies brought by Emperor Entertainment Group, the Group also invited VIP guests to its movie premiere and sponsored jewellery for the artistes. Such exposure opportunities, with pop artists and high profile celebrities, serve as an important tool to enhance the reputation of the brand of “Emperor”, particularly in the Chinese-speaking communities.

 

To celebrate the 70th anniversary of Emperor Group during the Year, companies within Emperor Group had initiated a series of promotional campaigns. Benefited from the enhanced “Emperor” brand exposure, the Group had enjoyed extensive media coverage and strengthened brand image in cost-effective manner.

 

The recent Hong Kong retail sales data reveals that luxury goods sector has driven the overall retail sales up-tick. Leveraging on the significant regional price differential set by the watch brands, authenticity assurance, better assortments and absence of sales tax on luxury goods, Hong Kong has long been one of the hot-pick destinations for luxury goods consumption. It should also be one of the most leveraged places against recovery in consumer sentiment. As majority of its sales are originated from Hong Kong, the Group stays positive to capture the opportunities from the recovery.

 

Looking ahead, the Group believes that Southeast Asia will become a new revenue

contributor. In early 2013, the Group has successfully expanded the coverage beyond

Greater China to Southeast Asia by initiating a presence in Singapore. The Group will

continue to look for other expansion opportunities in Southeast Asia in order to fully capture the luxury consumption growth momentum.

 

Ms. Cindy Yeung, Chairperson of Emperor W&J, said, “We had successfully navigated 2012, a year full of challenges. As a result of new store openings and effective inventory and cash management in response to market changes, the Group was still able to maintain a healthy financial position and deliver a satisfactory topline growth. Riding on Hong Kong’s competitive edges as a luxury shopping destination, we are looking forward to a better recovery sign in 2013. Being a prominent retailer offering luxury watches and self-designed fine jewellery, the Group will fully utilise its core competencies and seek to achieve a desired product and geographic mix in order to achieve a sustainable profit.”

 

- End –

 

About Emperor Watch & Jewellery Limited

With long establishment history of over 70 years in Hong Kong since 1942, Emperor W&J (887.HK) is a leading retailer principally engages in the sale of European made luxurious international branded watches, and self-designed fine jewellery products under its own brand, “Emperor”. Through its comprehensive watch dealership, unique marketing campaigns and extensive retail network at prime locations in Hong Kong, Macau, the PRC and Singapore, Emperor W&J established a strong brand image amongst its target customers ranging from middle to high income group from all over the world. Emperor W&J has become a constituent stock of Hang Seng Composite Index in Consumer Goods sector (HSCICG.IND) since 10 September 2012. It is also included in the investment portfolio of the PureFunds ISE Diamond/Gemstone ETF (GEMS.US), which is freely traded on New York Stock Exchange Arca.

 

For more information, please visit its website: www.emperorwatchjewellery.com.

 

Investor/Media Enquiries

Ms. Winnie Kwong, Assistant Manager,

Investor Relations Department of Emperor Group

Tel: +852 2835 6791

Email: winniekwong@emperorgroup.com

 

Ms. Anna Luk, Director,

Investor Relations Department of Emperor Group

Tel: +852 2835 6783

Email: annaluk@emperorgroup.com

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