Message by the Chairman and Group Managing Director
A year of strong revenue growth with the strategic merger with Peace Mark.
Sincere has recorded yet another year of sterling performance. The Group’s revenue increased by 25.5% to a record $451 million. Net profit for the year was down 8.2%, translating an earnings per share of 10.47cents, a fall of 11% year-on-year. The results had been impacted by a foreign exchange adjustment of $20 million and an one-off professional fee of $5.6 million.
Business Review
Growing affluence in Asia drives luxury watch demand. Singapore is ranked the world’s eighth biggest market in terms of the import of Swiss watches. Statistics from the Federation of Swiss Watch industry show that Singapore import grew by 26% in 2007 to Sfr66.1 million.
The Group’s revenue growth was mainly driven by the improved local demand and increased tourist traffic in our key markets. Other factors included the opening of new stores, refurbishment of key outlets and innovative marketing strategies. Sincere also benefited from the expanded distribution network with its retail partners, particularly in North Asia.
This year, the Group further expanded its retail presence in the region. Three Franck Muller boutiques and two multi-brand stores were added to make up a total of 39 point-of-sales.
The South East Asia region has been registering strong growth across the region. During the year, in addition to the existing retail points of sales, two boutiques were added in Singapore to strengthen our market position. We launched the new Franck Muller concept boutique at Delfi Orchard and the Omega boutique at Raffles City.
In Malaysia, in order to satisfy the exacting taste of our customers, the biggest-ever flagship Sincere Fine Watches store with a floor space of 3,500 square feet was opened. This showed our confidence in the luxury watch demand in Malaysia.
To capitalize in the travel retail business, a duty-free travel outlet at the Indira Grandhi International Airport in New Delhi commenced operation in the first quarter of the financial year.
On the distribution side, the first office in Melbourne commenced distribution of Franck Muller in October 2007.
China has been one of the fastest-growing areas in the region. With a further expansion plan in China, two new Franck Muller boutiques were set up in Shin Kong Place in Beijing and Plaza 66 in Shanghai.
To balance a healthy mix of wholesale and retailing business, more dealers were appointed to compliment its self-operated retail network and to speed up its geographical coverage in China.
In Hong Kong, a Franck Muller boutique was opened in Ocean Terminal in Kowloon and the Franck Muller flagship shop in Hong Kong was given a total refurbishment with an increased shop space.
In Macao, an exponentially growing entertainment centre in Asia, the Group has established its foothold by setting up a Franck Muller boutique in the Venetian.
On brand management, in July 2007, Sincere was appointed as the exclusive distributor of Ebel in Singapore, Malaysia and Thailand. This brand compliments the current Sincere brand staple and targets the mid-luxury segment. This helps the Group to gain a larger market share.
The earnings momentum was extremely strong but the results had been impacted by the one-off professional fee of $5.6 million and the foreign exchange adjustment of $20 million. The professional fee was related to the General Offer made by Peace Mark (Holdings) Ltd in March 2008. Out of the $20 million foreign exchange adjustment, $14.2 million was provided for to reflect the strengthened Swiss-Franc at the balance sheet date, which was non-cash flow in nature. Excluding this foreign exchange related adjustment and one-off expenses, the operating financial performance was indeed very strong.
Dividend
A first and final cash dividend at 5 cents per ordinary share (tax exempt) was declared. Subject to the approval in the forthcoming Annual General Meeting which is to be held on 28 July 2008, the final dividend is payable on 27 August 2008.
Board
Mr. Tay Liam Wee, as the Group Managing Director, demonstrated his vision and strategic capability in managing Sincere and his leadership has been well-recognized by the industry, financial community and regulatory bodies alike. The Singapore Corporate Awards 2008 granted him the CEO of the Year for the mid-cap category in recognition of Mr. Tay’s leadership in bringing the Group to a new height.
We would like to take this opportunity to express our sincere appreciation to all our shareholders, business associates, and employees for their contributions to the success of the group.
With respect to the change of the Board of Directors after the completion of the Peace Mark's participation as the controlling shareholder, we would like to extend a welcome to the new board members, Mr. Chau Cham Wong, Patrick, Mr. Leung Yung and Mr. Tsang Kwong Chiu, Kevin as well as express our sincere thanks to the outgoing board members, Mr. Tay Boo Jiang, Mr. Tay Chok Yan, Mr. Tay Ngiap Jiang, Mr. Cecil Vivian Richard Wong, Mr. Khong Teck Kim and Ms. S Chandra Das.
Going forward
The completion of the recent general offer by Peace Mark (Holdings) Ltd in March is a key milestone in the recent corporate development of Sincere. The merger of Sincere and Peace Mark should create one of the largest fully-integrated watch companies in Asia, well-positioned in the industry to capture the future growth opportunities in Asia.
High-end watch demand in Asia (excluding Japan) remains strong amidst the general slowdown in the global economy caused by the US-led financial crisis and recent inflation issues. Nevertheless, China and Singapore, the seventh and eighth largest importers of Swiss watches, recorded a 66% and 51.5% year-on-year growth from January to April 2008, respectively.
It is anticipated that Peace Mark's established platform in China will facilitate the expansion plan of Sincere in China. Additional point-of-sales for brands represented by Sincere will be established in networks within the Peace Mark group and independent dealers. The two boutiques set up in the year are expected to benefit from the upcoming Olympics 2008.
Hong Kong has been a beneficiary of the strong purchasing power of Mainland tourists. In order to capture the demand of Hong Kong’s retail market, three more shops are scheduled to open in the coming financial year.
The Sincere management is optimistic that with the backing of Peace Mark for the China expansion and the various synergies to be realized from a larger scale and the integrated platform as well as strategic operations across the South East Asia region, another set of good financial results will be delivered.
