Financial Analysis of Cortina Holdings Limited: Net Profit Decline by 9%

Business Description

Cortina Holdings Limited is an investment holding company listed on the Singapore Exchange Securities Trading Limited. The company provides management services to its subsidiaries and associates. The core business operations are divided into two main segments:

• Wholesale: Involves the wholesale of timepieces and luxury branded accessories.
• Retail: Involves retailing of timepieces, branded pens, and accessories.

The company’s geographic footprint includes Singapore, South East Asia (excluding Singapore), North East Asia, and other countries.

Industry Position

Cortina Holdings operates within the luxury goods sector, specifically focusing on timepieces and branded accessories. The company faces competition from other luxury retailers and wholesalers in the region. Their market share is bolstered by a strong retail presence in high-traffic locations and a solid customer base comprising high-net-worth individuals and luxury brand enthusiasts.

Revenue Streams and Competitive Advantage

The company’s revenue streams primarily come from the sale of goods in both wholesale and retail segments. The customer base is diverse, spanning across multiple geographic regions primarily in Asia. Their supply chain includes strategic partnerships with renowned luxury brands.

The competitive advantage lies in their established brand reputation, extensive network of retail outlets, and strategic locations in prime shopping districts.

Financial Statements Analysis

Income Statement

For the half year ended 30 September 2024, Cortina Holdings reported a revenue of S\$412.982 million, a 6% increase from S\$391.300 million in the corresponding period of 2023. However, the profit before tax decreased by 9% to S\$42.479 million from S\$46.553 million. The net profit after tax also saw a decline of 9% to S\$31.089 million from S\$34.006 million in the previous year. This decline is attributed to increased operating expenses, primarily due to higher rental expenses and increased depreciation costs [[3]].

Balance Sheet

As of 30 September 2024, the total assets stood at S\$707.230 million, an increase from S\$702.253 million as at 31 March 2024. Current assets increased to S\$465.457 million, while current liabilities decreased to S\$200.917 million. The company’s net assets grew to S\$418.349 million from S\$406.172 million [[4]].

Cash Flow Statement

Net cash used in operating activities amounted to S\$6.703 million, compared to a net inflow of S\$2.487 million in the previous period. This is due to higher payments for inventories and other assets. Net cash from investing activities was S\$5.330 million, primarily from the disposal of assets classified as held for sale. Financing activities saw a net outflow of S\$37.149 million, mainly due to dividend payments and the decrease in financial liabilities [[5]].

Key Findings

• Net Profit Decline: The net profit after tax decreased by 9% to S\$31.089 million.
• Revenue Growth: Revenue increased by 6% year-on-year, reaching S\$412.982 million.
• Increased Operating Expenses: Operating expenses rose by 9.3% due to higher rental and depreciation costs.
• Dividend: No interim dividend was declared for the period ended 30 September 2024 [[16]].
• Healthy Balance Sheet: Total equity increased to S\$418.349 million.

Recommendations

For Current Investors

Hold: Despite the decline in net profit, the company shows potential for long-term growth with a healthy balance sheet and strategic expansion plans. Investors should monitor the company’s performance in the upcoming quarters.

For Potential Investors

Wait: Given the current decline in profits and increased operating expenses, it may be prudent to wait for more stable financial performance before investing.

Special Activities

The company struck off a wholly-owned subsidiary, Pacific Time Co., Ltd., and incorporated a new subsidiary, Time Emporium Pte. Ltd., with a capital injection of SGD 2.1 million [[17]].

Disclaimer

This analysis is based on the financial report for the half-year ended 30 September 2024. Investors should consider their own financial situation and consult with a financial advisor before making any investment decisions.