The Hour Glass buys Watches of Switzerland for S$13.3m


THE Hour Glass (THG) has paid S$13.3 million cash for Watches of Switzerland (WOS), extending the listed luxury watch group's reach from Orchard Road to less prime shopping malls outside the city.

The acquisition of the 50-year-old watch retail chain owned by Jay Gee Melwani, a Singapore-based privately held fashion and lifestyle group, also expanded THG's watch portfolio, which has exclusive high-end brands such as Hublot, MB&F, Parmigiani, De Bethune and Urwerk, to include mid-range names such as Breitling, Bell & Ross, Oris, Longines and Hamilton.

WOS would have been sold to Emperor Watch & Jewellery last year when the Hong Kong group expanded its retail chain for luxury timepieces into Singapore. But talks failed and the proposed sale fell through.

THG's filing with Singapore Exchange on Tuesday said that the deal with WOS, reached on a willing-buyer, willing-seller basis, was funded from internal sources. It took into account, among other factors, the net asset value of WOS - S$8.8 million as at Sept 30, 2014.

In a separate media release, THG said that the deal "was driven by the opportunity for The Hour Glass to tap into Singapore's suburban retail landscape and extend its reach into the prestige watch segment".

With the purchase, WOS will become a 100 per cent subsidiary of THG. The latter said that it would continue "to maintain and operate" the WOS retail brand through its five shops - one each in VivoCity, The Paragon, Centrepoint, Tampines Mall and City Square Mall.

"The custodial transfer of WOS to THG will bring about more developmental opportunities, strengthening the group's position in the watch retail sector," said THG executive director Michael Tay. "Given the synergies across various merchandising and operating platforms, we see tremendous potential in enhancing our overall business."

THG's boutiques will be boosted to 37, which are spread across the Asia-Pacific region - including Japan and Australia. The acquisition has come at a time when the luxury watch business in Singapore is still facing a challenging time, made all the tougher in recent months by the sharp drop in Chinese tourists.

With luxury watches becoming almost a dirty word in China, because of the crackdown on corruption in the country, Chinese consumers are shying away from the pricey luxury timepieces. They are going more instead for brands such as Breitling and Longines which carry watches with more down-to-earth price tags.

Shipments of luxury Swiss watches to Singapore - one of Switzerland's top 10 markets - indicate that sales here fell in the first six months of 2014. They dipped 2 per cent from a year ago to 515.8 million Swiss francs (S$694 million), according to the Federation of Swiss Watch Industry. Singapore was one of the four top Asian markets where Swiss watch exports fell in the first half; the others were China (-4.2 per cent), Taiwan (-2.9 per cent) and Thailand (-9.8 per cent).

While THG posted a 2 per cent rise in revenue to S$157 million for the three months ended June this year, net profit dipped 5 per cent to S$8.4 million. And it still sees global economic and political uncertainty affecting consumer sentiment and the demand for watches ahead. For the financial year ended March 31, 2014, THG reported revenue of S$682.79 million, up from S$601.94 million for the previous year. Net profit rose 4 per cent to S$54.9 million from S$52.8 million.

THG said that the purchase of WOS was not expected to have a material impact on the net tangible assets or earnings per share of the group for the current financial year ending March 31, 2015. Its share price last closed at S$1.90 on Monday. There was no trade in the stock on Tuesday.

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