THG Answers

S t r a t e g y P r e s e n t a t i o n

Alan Athena Chris Chris Qin Liang:: :: :: ::Sunday, July 11, 2010

Agenda

B ACKGROUND

ACTION PLAN

STRATEGIC ANALYS IS

CONCLUSION

03

1208

35

Sunday, July 11, 2010

3Background

60 BRANDS

25 BOUTIQUES

9 CIT IES

The Hour Glass Limited


Current IssuesThe Hour Glass Limited

3 RD QUARTER NET-LOSS OF S$7 .08MIL

LUXURY MARKET I S SLOWING

CONCENTRATION R ISK

4




-9-6.75

-4.5-2.25

02.25

4.56.75

9

2006 2007 2008 2009

Luxury Market Growth (%)

Source: Bain & Companys Luxury Goods Worldwide Market Study

CONCENTRATION R ISK


5




CONCENTRATION R ISK


6


Current StrategiesThe Hour Glass Limited

RELY ON RETAIL & MERCHANDIS ING EXPERTISE

FOCUS ON PREMIUM BRANDS & HIGH-GRADE WATCHES

MAXIMISE PROFITABIL ITY PER STORE & KEEP COSTS LOW

7


Present StateThe Hour Glass Limited

0

125

250

375

500

FY2004 FY2005 FY2006 FY2007 FY2008

Revenues (mil)

0

12.5

25

37.5

50

FY2004 FY2005 FY2006 FY2007 FY2008

Operating Income (MIL)

8


Process FlowThe Hour Glass Limited 9


ENHANCE BRAND REPUTATION

INCREASE OPERATING EFF IC IENCY

EXPAND INTO EMERGING MARKET


GOALS

INCREASE REVENUE C AGR BY 16 .66%

INCREASE OPERATING INCOME C AGR BY

45 .66%

AT LEAST 5% SHARE IN BOTH CHINA & INDIA

STRATEGY

10

Y-Tree


Forecasted StateThe Hour Glass Limited

0

275

550

825

1100

FY2004 FY2006 FY2008 FY2010 FY2012 FY2014

Revenues (MIL)

0

75

150

225

300

FY2004 FY2006 FY2008 FY2010 FY2012 FY2014

Operating Income (MIL)

11

CAGR 45

.66%CAG

R 16.66%


TacticsThe Hour Glass Limited

ALIGN ORGANIZATION CULTURE WITH BRAND VALUE

RE INFORCE CORPORATE VALUE & BEHAVIORS

INTERACTIVE CRM

SEDUCTION S IGNATURE EVENT

ACQUIRE MORE EXCLUS IVE DEALERSHIPS




STRATEGY

TA

CT

ICS

12


Align Org Culture With Brand ValueThe Hour Glass Limited

EXCELLENCE PASS ION CREDIB IL ITY

BRAND VALUES

BRAND MISSION

Deve lop & Promote Contemporar y Horo log i ca l Cu l ture

De l i ver Ex t raord inar y Cus tomer Ser v i ce

Prov ide Exc lus i ve , H i gh Qua l i t y& Innova t ion Product s

13


Brand Values

Create EXCELLENCE Work Groups

Encourage Emp loyees To Se t Career Goa l s & Act ion P l an


EXCELLENCE

14


Brand Values

Es tab l i sh Common Wik i P l a t form

Recogn i ze Emp loyee E f for t s When Mi l e s tones Are Reached

Inv i te Par tnered Renowned Watch Ar t i s ans To Share Exper t i se


PASSION

15


Brand Values

Imp lement Jo in t -Tra in ing Programs Under Watchmakers o f Sw i t zer l and

Tra in ing & Educa t ion Program

App ly To Be Cer t i f i ed -Tes ter Under The F l eur i e r Qua l t y Founda t ion Course


CREDIBILITY

16


Brand ValuesThe Hour Glass Limited 17

0

1

2

3

4

2008 2009 2010 2011 2012 2013 2014

Employee Turnover Rate

120

125

130

135

140

2008200920102011201220132014

Inventory Turnover


Reinforce Corporate Values & BehaviorsThe Hour Glass Limited

Create In t rane t Commun i t y To Enhance Commun ica t ions Between Management & Emp loyees

Employee & Mgmt Blogs

Forums d

Weekly Newsletters

Company & Industry Updates

18


Interact ive CRMThe Hour Glass Limited

Soc i a l Network ing & V i ra l Market ing Campa i gns

19

Source: Value Partners Analysis Report 2008

98% of HNW Consumers Research Their Purchases Online Daily



Soc i a l Network ing & V i ra l Market ing Campa i gns

20



SEDUCTION Fash ion Event

21

SEDUCTION


Acquire More Exclusive DealershipThe Hour Glass Limited

Audemars Piguet Vacheron Constantin IWC Rolex

Breguet

Franck Muller

Harry Winston Patek PhilippePiaget Ulysee-Nardin

22


Acquire More Exclusive DealershipThe Hour Glass Limited

Audemars Piguet Vacheron Constantin IWC Rolex

Breguet

Franck Muller

Harry Winston Patek PhilippePiaget Ulysee-Nardin

23


Impact on RevenueThe Hour Glass Limited

0

250

500

750

1000

FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

Without Improvement With Improvement

CAGR

14.24

%

24

Revenue


Impact on Operat ing IncomeThe Hour Glass Limited

0

50

100

150

200

FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

Without Improvement With Improvement

CAGR

33.24

%

25

Op Income



ANCHORING OF NEW RETAIL SPACE

HEDGING WITH DERIVATIVES

DIVEST INVESTMENT ARM




STRATEGY

TA

CT

ICS

26

Tactics


Anchor New Retai l SpaceThe Hour Glass Limited

Di f f i cu l t For Newcomers To Dup l i c a te Market Dominance

Overn i gh t

27


FX Risk ReductionThe Hour Glass Limited

Source: Bloomberg

Not Exposed to Forex Ga in / Loss

Bu lk Of I t s Purchases From Swi s s Brand Pr inc ipa l s

28


Divest Investment ArmThe Hour Glass Limited

3 RD Quar ter Net -Loss Of S$7 .08Mi l

29


Impact on RevenueThe Hour Glass Limited

0

275

550

825

1100

FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

Without Improvements With Improvements

CAGR

16.66

%

30

Revenue


Impact on Operat ing IncomeThe Hour Glass Limited

0

75

150

225

300

FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

Without Improvements With Improvements

CAGR

45.66

%

31

Op Income


EXPAND INTO CHINA & INDIA





32

Tactics


GDP Growth

-9-6.75

-4.5-2.25

02.25

4.56.75

9

2009 2010 2011 2012 2013

Singapore China India AustraliaMalaysia Thailand


Source: ISI Emerging Markets Forecasts

(%)

33


Real Disposable Income

-8-6-4-202468

2009 2010 2011 2012 2013

Singapore China India AustraliaMalaysia Thailand


Source: ISI Emerging Markets Forecasts

(%)

34


CorporateThe Hour Glass Limited

Source: World Wealth Report 2008

China

No. of HNWI

% Growth

415,000

20.3%0

105

210

315

420

2006 2007

415345

0

32.5

65

97.5

130

2006 2007

123100

India

No. of HNWI

% Growth

123,000

22.7%

No. Of HNWI

35


China

Fundamenta l s a re ver y sound

Al ready have a presence i n Ch ina

Leverage our s t a tus a s As i a s Premier Watch Reta i l e r


Reasons

36


India

Exce l l en t Knowledge o f I nd i a s Luxur y Reta i l Market

Leverage our s t a tus a s As i a s Premier Watch Reta i l e r


Reasons

37


ImpactThe Hour Glass Limited

0

375

750

1125

1500

FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

Southeast Asia & Australia Northeast Asia / Central Asia

38

Revenue (0000)


ImpactThe Hour Glass Limited

0

6

12

18

24

30

FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

China India

39

No. of Stores


ConclusionThe Hour Glass Limited 40




STRATEGY


CONCLUSIONThe Hour Glass Limited 41




STRATEGY

GOALS

INCREASE REVENUE C AGR BY 16 .66%

INCREASE OPERATING INCOME C AGR BY

45 .66%

AT LEAST 5% SHARE IN BOTH CHINA & INDIA


Q U E S T I O N S & A N S W E R S

Alan Athena Chris Chris Qin Liang:: :: :: ::Sunday, July 11, 2010

B A C K U P S L I D E S

Alan Athena Chloe Chris Qin Liang:: :: :: ::Sunday, July 11, 2010

PEER ANALYSISThe Hour Glass Limited 44


WORLD DISTRIBUTIONThe Hour Glass Limited 45


Virtuous Communicat ions CycleThe Hour Glass Limited 46


Market Opportunity

2009 2010 2011 2012 2013

China 8.2 8.1 8.1 8.1 8.1

India 7.6 7.6 7.6 7.6 7.6

Market Opportunity (Out of score of 10)

Source: Economist Intelligence Unit

The Hour Glass Limited 47



Forecasted Wealth Growth

Source: World Wealth Report 2008

48


SWOT AnalysisThe Hour Glass Limited 49


SWOT TOOLSThe Hour Glass Limited

The timeframe 2000s was chosen as that was the period when the luxury watch retailers were able to benefit from the booming luxury watch market underpinned by the rising affluence in Asia which was well supported by a high level of employment. The SWOT analysis shows that Hourglass is a clear winner when it comes to internal management of the firm. Hourglass has the most numbers of exclusive distributor/dealer rights and most of the exclusive brand relationship has been ongoing for over a decade which are supported by a strong recognition of Hourglass shrewd execution luxury watch retailing. Hourglass astute business strategy has proven to be more effective as compared to its peer evidence of the company ability to achieve industry leading earnings momentum (a five-year earnings CAGR of 63.5% versus 15% for Sincere and 1.3% for Cortina) and doubling up of its operating margin to 5.5% while ensuring active cost management. All these gave Hourglass more business opportunities through first-hand strategies which its peers have not been able to do so.

50


SWOT PLOTThe Hour Glass Limited

00

100

200

300

100 200 300

OP

PO

RT

UN

ITIE

S/T

HR

EAT

S (

EX

TE

RN

AL

)

STRENGTHS/WEAKNESSES (INTERNAL)

SINCERE

CORTINA

HOUR GLASS

51


Porter s 5 AnalysisThe Hour Glass Limited 52


Key MilestonesThe Hour Glass Limited 53


Create Online platform for watch lovers

Raise Foothold in

emerging markets, China & India

Eliminate Non-core business

(investment securities)

Reduce Decrease COGS

Through hedging of forex exposure

Sole agent of

Luxury brand

Blue Ocean The Hour Glass Limited 54


Transnational Strategy

Multi-domestic Strategy

Global Strategy

International Strategy

Pr

essu

res

to

Lo

wer

Co

sts

Pressures For Local Adaptation

Global Market CompetivityThe Hour Glass Limited 55


Business StandardThe Hour Glass Limited 56


Documents

THG Answers