Emperor Watch & Jewellery Enters Strategic Alliance with L Capital, Subsidiary of LVMH Group

Aug 26, 2010 16:30 JST

Source: Emperor Watch & Jewellery Limited

HONG KONG, Aug 26, 2010 - (ACN Newswire) - Emperor Watch & Jewellery Limited (the "Group")(SEHK: 0887), a leading luxury watch and jewellery retailer, entered into agreements with L Capital EWJ Cayman Limited ("L Capital"), a Cayman investment holding company owned by L Capital Asia, L.L.C., a private equity fund advised by L Capital Asia Advisors and sponsored by LVMH Moet Hennessy Louis Vuitton S.A. ("LVMH"), for the issue of convertible bonds and warrants during a signing ceremony today.

Completion of the convertible bonds is expected to take place on 22 September 2010. Upon completion, convertible bonds in the principal amount of HK$140 million will be issued to L Capital, which can be converted into 259,259,259 shares at the price HK$0.54 per share. In addition, the Group will issue warrants in the principal amount of HK$100 million to L Capital, which can be converted into 161,290,322 shares at the price HK$0.62 per share.

LVMH is the world's largest luxury group, with strong market presence and leading position well established across Asia and within China. Being part of LVMH Group, L Capital will lend significant support to the Group for its expansion and will advise the Group on strategic initiatives for its further growth.

During today's ceremony, L Capital Asia Advisors, a 100% subsidiary of LVMH, and the Group signed a Memorandum of Understanding to set out the framework for their future cooperation. L Capital Asia Advisors will offer professional advice mainly in the aspects of sales expansion, brand building, advertising, marketing and cost management. The Group will also enjoy diamond supply stability and price benefit under the support of leading LVMH brands.

The Group's mother company, Emperor Group with its diversified business, enable the Group to enjoy a high level of brand awareness in China, built and shared together with its associate companies engaged in various industries that include property, financial services, entertainment and movies, etc. This partnership between the two parties will internationalise the regional branding of the well known household name in China and South East Asia.

Ms Cindy Yeung, Managing Director of Emperor Watch & Jewellery, said, "We are excited about our alliance with the global giant. It signifies that we live up to internationally recognised standards. I highly appreciate Mr. Ravi Thakran's vote of confidence in us. With your support, I am sure we will soon establish a strategic foothold in the international market, and I look forward to achieving mutual benefits for the both of us."

Despite the tremendous growth over the past decade, the watch and jewellery market in China is still at an early stage of development. The per capita ownership of luxury items and brand penetration are at relatively low levels. With the partnership, both parties expect to benefit from a very strong double digit market growth over a long period of time in future.

Mr. Ravi Thakran, Managing Partner of L Capital Asia and Group Director of South Asia, South East Asia and Middle East, LVMH Group, said, "Emperor Watch and Jewellery has a long heritage and a wealth of experience of operating in this industry. It is the number one player in Hong Kong, one of the world's most developed watch markets. Its long standing relationships with established brands will give it a great head start in the exciting duo journey with us. We at LVMH look forward to working very closely with Cindy. She is a dynamic leader with great vision and incredible drive and enthusiasm to lead the Group to its next stage of growth."

Besides L Capital, D.E. Shaw group will increase its holding in the Group's convertible bonds to the principal amount of HK$240 million, which can be converted into 444,444,444 shares at the price HK$0.54 per share. The global investment firm first invested in the Group in April 2010 by subscribing a principal sum of HK$80 million convertible bonds. If both L Capital and D. E. Shaw group fully exercise their convertible bonds and warrants, all expiring on 12 April 2013, the two companies' shareholding will be respectively 6.92% and 7.31%.

The D. E. Shaw group has invested in the Group since April 2010. Mr. Donald Tang, an executive director of D. E. Shaw & Co (Asia Pacific) Limited, said, "I am glad that LVMH shares our confidence in the Group's future development and Ms. Yeung's leadership, and has agreed to join us as a fellow stakeholder."

The Group also announced on the same occasion its latest interim results. It recorded revenue of HK$1,773 million for the six months ended 30 June 2010, 86% up from the same period last year. Its gross profit and EBITDA also respectively increased 79% and 160% to HK$431 million and HK$185 million. Net profit before fair value adjustment for convertible bonds was HK$128 million, representing a 151% growth from the same period last year. After taking into account such fair value adjustment of HK$30 million, reported net profit was HK$98 million. The Group declared an interim dividend of 0.75 HK cents per share.

The Group will continue to strategically enlarge its retail territory both in Hong Kong, Macau and China. Its strong base in Tsim Sha Tsui will be the centre of expansion in the coming months with 2 new stores soon opening in Ocean Terminal, whereas in China and Macau, even more new stores are on the way.


Financial Highlights
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HK$ million                2009 FY     1H2009      1H2010    Change
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Revenue                      2,686        954       1,773     +86%
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Gross Profit                   693        241         431     +79%
(GP%)                       (25.8%)    (25.3%)     (24.3%)
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EBITDA                         268         71         185    +160%
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Net Profit before CB           195         51         128    +151%
Adjustments                  (7.3%)     (6.3%)      (7.2%)
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Fair Value Adjustment          N/A          0          30     N/A
for CB (FV adjustment)
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Net Profit to Shareholders     195         51          98     +92%
(after CB FV adjustment)     (7.3%)     (6.3%)      (5.5%)
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Earning per Share before
CB Adjustment (HK cents)       4.3        1.1         2.5    +127%
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Earning per Share (HK cents)   4.3        1.1         1.9     +73%
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Dividend per Share (HK cents)  1.2       0.35        0.75    +114%
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Convertible bonds
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Investor          Amount  Exercise Expiry   No.shares to   %(Fully
                (HK$ mil)  Price    Date    be converted   diluted)*
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D. E. Shaw          240    $0.54  12 April   444,444,444     7.31%
  Group                             2013
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L Capital           140    $0.54  12 April   259,259,259     4.26%
                                    2013
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* After conversion of all convertible bonds and warrants.
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Warrants
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Investor          Amount  Exercise Expiry   No.shares to   %(Fully
                (HK$ mil)  Price    Date    be converted   diluted)*
--------------------------------------------------------------------
L Capital           100    $0.62  12 April   161,290,322     2.66%
                                    2013
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* After conversion of all convertible bonds and warrants.
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Contact:

Emperor Group,
Corporate Communications Department
Catherine Liu, +852 2835 6776 / 9621 7430, catherineliu@emperor.com.hk
Alice Chek, +852 2835 6786 / 9378 9225, alicechek@emperor.com.hk

Source: Emperor Watch & Jewellery Limited
Sectors: Retail & eCommerce, Daily Finance