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Research Tree provides access to ongoing research coverage, media content and regulatory news on SWATCH GROUP AG THE-BR. We currently have 5 research reports from 1 professional analysts.
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SWATCH GROUP AG THE-BR
SWATCH GROUP AG THE-BR
Margins fall to their lowest in decades
02 Feb 17
Unlike rival Richemont which posted pretty good growth in the last quarter, Swatch confirmed once again the deteriorating momentum in the watch industry. A slight recovery in the last two months mitigated the downfall in H2 to 9.9% (CHF3,837m). Full-year sales were down 10.8% at constant exchange rates (-10.6% reported) to CHF7,553m. The core business of Watches & Jewellery (97% of sales) dropped by 10.7% to reach CHF7,305m. The weak momentum was experienced in Europe apart from the UK which benefited from higher tourist inflows lured by the devalued pound. France, Belgium and Germany were hit by terrorist threats, while Switzerland struggled from a strengthening CHF. Asian countries have performed better with strong growth in major markets, except for Hong Kong where the situation has normalised according to management. Oddly, Swiss watch exports to Hong Kong fell by 15.7% in December. In the Americas, the central countries posted positive growth although the northern markets were hit by the slump in demand. Margins have slightly improved in H2 thanks to strengthening momentum in Mainland China in the last quarter. The operating margin was up to 11.8% in H2 vs. 9.5% in H1. The full-year operating profit almost halved (-44.5%) to CHF805m, equivalent to an operating margin of 10.7% vs. 17.17% a year earlier. Watches & Jewellery activities generated an operating profit of CHF894m (-41.9%), i.e. an operating margin of 12.2% compared to 18.8% in 2015. Net income amounted to CHF593m (-47%). Investments amounted to CHF563m, equivalent to 7.5% of net sales. Inventories stood unchanged at CHF6.259m. Gross cash was slightly lower at CHF1,136m vs CHF1,280m in 2015. The proposed dividend retreated to CHF6.75 per bearer share and CHF1.35 per registered share. The company is bullish on the 2017 outlook on the back of the positive signs in the last quarter.
Q2 performance: a trough
21 Jul 16
Consolidated sales were down 11.4% in H1 16 to reach CHF3,716m (-12.5% at constant rates). Watches & Jewellery sales (including Production) dropped 11.3% to CHF3,586m. The Electronic Systems segment generated net sales of CHF136m, i.e. down 12.8%. The operating profit retreated 53.6% to CHF353m bringing the operating margin to 9.5% compared to 18.2% a year earlier. The operational performance was pulled down by Electronic Systems as Watches & Jewellery posted a higher operating margin of 11.2%. Net income amounted to CHF263m, generating a poor net margin of 7.1%. Capex across all segments came to CHF285m in H1 vs. CHF355m in H1 15. Operating cash flow was reduced from CHF821m to CHF381m in the current period, due to the deteriorating profitability and ballooning inventories backed by further investment in diamonds for Harry Winston.
The watches are turning backward
10 Mar 16
Swatch FY15 sales struggled in the weakening worldwide demand for the Swiss watches as well as the strengthening CHF. In fact, revenues decreased by 0.9% on a lfl basis, while the currency impact was -2.1%. Indeed, finished products’ inventories surged by 11.3% to CHF2,959m. On the whole, the group’s sales slightly outperformed the overall Swiss industry in that they decreased by 3% to CHF8,451m whereas Swiss exports declined by 3.6% in 2015. The watches & jewellery segment contributed 96.8% to the group’s sales (flat compared to 2014) at CHF8,177m. The segment posted a 17.3% declining operating profit to CHF1,539m, delivering a decreasing operating margin for the third successive year, at 18.8% (-330bp yoy). Electronic systems delivered CHF292m, i.e. a slight decrease of 1.4%. In addition, it showed a good operating performance with an operating margin of 3.1% (CHF9m) after two successive years of losses. Corporate services reported a net operating loss of CHF97m. In general, the operating profit amounted to CHF1,451m, leading to a modest operating margin of 17.2%. The net profit dropped by 21% to CHF1,119m. Operating investments amounted to CHF755m which were incurred in the geographical expansion and the development of production facilities. Gross cash impressed with a 6.5% surge to CHF1,280m, despite a rise in inventories of 3.5%. The financial structure remains sound with high equity ratio of 84.7%. For the outlook, management is confident for 2016, expecting to deliver 5% growth in local currency, despite the challenging context. Swatch proposes a dividend of CHF7.50, a bearer share and CHF1.50 per registered share.
The bad Chinese sales’ momentum weighs on FY15 figures
04 Feb 16
The Swiss watchmaker has seen its sales decrease by 3% in 2015, for the first time in six years, worth CHF8,451m. At constant currencies, the decline is 0.9%. The Watches & Jewellery segment reported CHF8,177m sales, down by 3%. The operating profit was significantly impacted, dropping by 17% to CHF1,451m and pulling down the operating margin to 17.2%. The Watches & Jewellery segment, including Production, outperformed slightly with an 18.8% operating margin. The bottom line disappointed with a 21% decline to CHF1,119m.
The Slide Rule
12 Jan 17
What is The Slide Rule? The Slide Rule has been designed to dramatically simplify the identification of the best companies in the UK small/mid-cap sector by making a quantitative assessment of the relative potential of each company. At its core, The Slide Rule aims to identify those companies that create genuine shareholder value through strong returns on capital and solid growth, but also present a value opportunity with the potential tailwind of earnings momentum. Companies are assessed within a Quality, Value, Growth and Momentum (QVGM) framework.
A compelling global brand roll-out story
22 Feb 17
We believe that SuperGroup remains one of the most undervalued global brand roll-out stories within the UK retail sector. The stock trades at c20% discount to its UK peers on a 1YF EV/EBITDA basis despite best-in-class revenue growth and profit margins. SuperGroup operates a leading multi-channel proposition, has strong sales momentum across each channel and forecast risk remains on the upside. We initiate coverage on the shares with a buy recommendation and price target of 1898p, implying upside of 27.8% over the prevailing market price.
Root & branch review – early margin positive
23 Feb 17
Unilever (ULVR LN, HOLD, T/P 3800p) announced yesterday that it will publish the findings of a root and branch review in April 2017. This is stated as being a result of the recent approach made to them by KraftHeinz (KHC US, N/RO), an offer which quickly lapsed.
High single digit EPS growth remains on track
17 Feb 17
BAT (BATS LN, HOLD, T/P 5300p) announce their preliminary 2016 results on Thursday 23rd February. We forecast revenue to increase 13% to £14.8bn, in line with Bloomberg consensus, and adjusted diluted EPS to continue its positive momentum to 249p (232p FY2015). Analyst consensus is 246p.
Small Cap Breakfast
16 Feb 17
Saffron Energy—Schedule One update. Raising £2.5m, expected Mkt Cap £7.7m. Admission due 24 Feb. Italian Oil & Gas Play Guinness Oil & Gas Exploration—Publication of prospectus. Seeking to raise £50m and invest in 15 exploration companies at launch, with plans to grow the portfolio to 30 positions during its lifetime. Issue closing 23 Feb. Arix Bioscience — Intention to float on the main market from the global healthcare and life science Company supporting medical innovation. Raised £52m in Feb 16 with investors including Woodford Investment Management