Timex Group India (500414) Q4 97/98 earnings summary

Executive summary

• FY98 sales turnover fell 12% YoY amid weak durable-goods demand and lower-value watch mix; pre-tax loss was Rs. 155.45 lakh vs profit of Rs. 156.72 lakh in FY97.

• No dividend was recommended; management expected short-term pressure from the sales and distribution transition, while targeting longer-term gains from direct control and manufacturing capabilities.

Financial highlights

• Sales were Rs. 7,304.03 lakh vs Rs. 8,354.55 lakh; total income was Rs. 7,407.73 lakh vs Rs. 8,560.28 lakh.

• Operating and other expenses declined to Rs. 6,229.04 lakh from Rs. 7,099.50 lakh; net interest expense was Rs. 856.61 lakh vs Rs. 917.47 lakh.

• Net loss after tax was Rs. 155.45 lakh vs net profit of Rs. 136.50 lakh; FY98 tax provision was Rs. 20.22 lakh.

• Operating cash flow was Rs. 1,405.34 lakh vs outflow of Rs. 1,426.84 lakh in FY97.

• Closing inventory fell to Rs. 3,804.10 lakh from Rs. 4,130.89 lakh; average inventory was lower by ~Rs. 629 lakh.

Outlook and guidance

• New selling, distribution, marketing and after-sales infrastructure was being established; short-term unit volume and revenue could decline depending on market penetration.

• Management anticipated near-term profitability pressure but saw potential in smaller-town and rural demand, exports, modest price increases and lower capital expenditure.

• Low-cost manufacturing, faster response capability and access to promoter technology were expected to support multi-function watches and better capacity use.