L'OCCITANE(00973) - 2024 - 中期业绩

Executive Summary The group's net sales grew by 24.9% at constant exchange rates, but operating profit decreased by 11.8% due to increased marketing investments Key Financial Highlights for H1 FY2024 | Metric | Six Months Ended September 30, 2023 (EUR thousand) | Y-o-Y Change | | :--- | :--- | :--- | | Net Sales (constant FX) | >1,000,000 | 24.9% increase | | Gross Margin | 78.3% | 1.9 percentage points decrease | | Operating Profit | 76,800 | 11.8% decrease | | Management Operating Profit Margin | 8.4% | 3.1 percentage points decrease | - Net sales at constant exchange rates grew by 24.9%, primarily driven by strong growth from Sol de Janeiro and significant growth from L'OCCITANE en Provence in the Chinese market[4] - Operating profit decreased by 11.8%, mainly due to the group's substantial increase in marketing investments for key brands in strategic markets and channels[4] Key Interim Financial Information This section presents the group's interim consolidated financial statements, including income, comprehensive income, and statement of financial position - The reporting period covers the six months ended September 30, 2023 (H1 FY2024), with financial data prepared in accordance with International Financial Reporting Standards[5] Interim Consolidated Income Statement In H1 FY2024, net sales increased by 19.0% to EUR 1,072,024 thousand, but profit for the period decreased by 38.0% to EUR 39,630 thousand, impacted by higher marketing and finance costs Key Data from Interim Consolidated Income Statement for H1 FY2024 | Metric | September 30, 2023 (EUR thousand) | September 30, 2022 (EUR thousand) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | 1,072,024 | 900,505 | 19.0% | | Gross Profit | 839,915 | 722,276 | 16.3% | | Gross Margin | 78.3% | 80.2% | -1.9pp | | Operating Profit | 76,762 | 87,031 | -11.8% | | Profit for the Period | 39,630 | 63,890 | -38.0% | | Basic Earnings Per Share | 0.023 | 0.042 | -45.0% | - Marketing expenses significantly increased by 47.8% to EUR 237,475 thousand, contributing to the decline in operating profit[6] - Finance costs grew substantially by 69.9% to EUR 26,388 thousand, further eroding profit for the period[6] Interim Consolidated Statement of Comprehensive Income Total comprehensive income for H1 FY2024 significantly decreased by 64.0% to EUR 70,109 thousand, primarily due to reduced currency translation differences Key Data from Interim Consolidated Statement of Comprehensive Income for H1 FY2024 | Metric | September 30, 2023 (EUR thousand) | September 30, 2022 (EUR thousand) | % Change | | :--- | :--- | :--- | :--- | | Profit for the Period | 39,630 | 63,890 | -38.0% | | Currency Translation Differences | 35,467 | 124,367 | -71.5% | | Total Comprehensive Income for the Period | 70,109 | 194,847 | -64.0% | - Currency translation differences primarily arose from the US dollar, particularly related to goodwill, trademarks, and right-of-use assets[7] Interim Consolidated Statement of Financial Position As of September 30, 2023, total assets increased by 4.3% to EUR 2,936,887 thousand, driven by higher inventories and trade receivables, while total equity decreased Key Data from Consolidated Statement of Financial Position as of September 30, 2023 | Metric | September 30, 2023 (EUR thousand) | March 31, 2023 (EUR thousand) | % Change | | :--- | :--- | :--- | :--- | | Total Assets | 2,936,887 | 2,816,428 | 4.3% | | Non-current Assets | 2,018,422 | 2,008,346 | 0.5% | | Current Assets | 918,465 | 808,082 | 13.7% | | Total Equity | 952,147 | 1,187,001 | -19.7% | | Non-current Liabilities | 1,214,144 | 978,609 | 24.1% | | Current Liabilities | 770,596 | 650,818 | 18.4% | - Inventories increased from EUR 317,197 thousand to EUR 390,951 thousand, and trade receivables from EUR 256,553 thousand to EUR 297,827 thousand, driving current asset growth[8] - Other financial liabilities significantly increased from EUR 338,650 thousand to EUR 589,257 thousand, leading to a substantial rise in non-current liabilities[8] Notes to the Interim Consolidated Financial Statements This section provides detailed notes on the preparation basis, new accounting standards, segment information, and specific income and expense items 1. Basis of Preparation This section outlines that the interim condensed consolidated financial information is prepared in accordance with IAS 34, with consistent accounting policies except for interim income tax calculation - The interim condensed consolidated financial information is prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting"[9] - Interim income tax is calculated based on the estimated annual effective tax rate, which is a key difference from the accounting policies for annual consolidated financial statements[9] Other New and Amended Standards This section lists new and amended IFRS standards effective from April 1, 2023, noting that IAS 12 amendments are expected to have a significant impact from FY2025 - Amendments to IAS 1 require entities to disclose "material accounting policy information" instead of "significant accounting policies"[10] - Amendments to IAS 8 clarify the distinction between changes in accounting policies and changes in accounting estimates[10] - Amendments to IAS 12, requiring companies to recognize deferred tax on transactions that give rise to equal taxable and deductible temporary differences on initial recognition, are expected to have a significant impact on the group from FY2025[10] 2. Net Sales and Segment Information This section identifies four operating segments—L'OCCITANE en Provence, Sol de Janeiro, ELEMIS, and Other Brands—and assesses their performance using net sales and operating profit/(loss) - The group identifies four operating segments: L'OCCITANE en Provence, Sol de Janeiro, ELEMIS, and Other Brands[11] - Management assesses the performance of each operating segment based on net sales and operating profit/(loss)[11] 2.1. Performance by Operating Segment Sol de Janeiro significantly increased its net sales and operating profit margin, becoming the second-largest brand, while L'OCCITANE en Provence's operating profit margin sharply declined Net Sales and Operating Profit by Operating Segment for H1 FY2024 | Brand | Net Sales (EUR thousand) | Sales Share | Operating Profit (EUR thousand) | Operating Profit Margin | | :--- | :--- | :--- | :--- | :--- | | L'OCCITANE en Provence | 595,638 | 55.6% | 746 | 0.1% | | Sol de Janeiro | 269,988 | 25.2% | 77,931 | 28.9% | | ELEMIS | 109,156 | 10.2% | 7,052 | 6.5% | | Other Brands | 97,242 | 9.1% | (8,967) | (9.2)% | | Total | 1,072,024 | 100.0% | 76,762 | 7.2% | - Sol de Janeiro's net sales significantly increased from EUR 94,605 thousand to EUR 269,988 thousand, becoming the group's second-largest brand with an operating profit margin of 28.9%[13][14] - L'OCCITANE en Provence's operating profit margin sharply decreased from 9.1% to 0.1%, despite remaining the largest brand by sales[13][14] 2.2. Performance by Geographical Region The Americas region became the largest sales contributor with a 57.4% year-on-year increase, driven by strong performance, while China remained a key market in Asia Pacific Net Sales by Geographical Region for H1 FY2024 | Region | September 30, 2023 (EUR thousand) | Sales Share | September 30, 2022 (EUR thousand) | Sales Share | | :--- | :--- | :--- | :--- | :--- | | Asia Pacific | 371,361 | 34.6% | 370,280 | 41.1% | | Americas | 442,381 | 41.3% | 280,990 | 31.2% | | Europe, Middle East & Africa | 258,282 | 24.1% | 249,235 | 27.7% | | Total | 1,072,024 | 100.0% | 900,505 | 100.0% | - The Americas region's net sales increased by 57.4% year-on-year, with its share of total sales rising from 31.2% to 41.3%, making it the largest sales region[15] - The Chinese market contributed 12.6% of the group's total sales, serving as a significant contributor to the Asia Pacific region[15] 3. Other Operating Income Other operating income for H1 FY2024 decreased by 35.6% to EUR 2,232 thousand, primarily due to the absence of capital gains from changes in equity interest recorded in the prior year Other Operating Income for H1 FY2024 | Item | September 30, 2023 (EUR thousand) | September 30, 2022 (EUR thousand) | | :--- | :--- | :--- | | Government grants | 675 | 552 | | Net gain on disposal of Duolab International SARL | 1,320 | – | | Gain on disposal of assets | 210 | 372 | | Capital gain from changes in equity interest in associates and joint ventures | – | 1,700 | | Total | 2,232 | 3,467 | - Prior year's other operating income included a EUR 1,700 thousand capital gain from changes in equity interest in Good Glamm Group, which was absent in the current period[15] 4. Other Operating Expenses Other operating expenses for H1 FY2024 significantly decreased by 83.9% to EUR 2,321 thousand, mainly due to the absence of capital losses from the Russia divestment in the prior year Other Operating Expenses for H1 FY2024 | Item | September 30, 2023 (EUR thousand) | September 30, 2022 (EUR thousand) | | :--- | :--- | :--- | | Net loss on disposal of CAPSUM | (1,993) | – | | Loss on disposal of assets | (328) | – | | Reclassification to income statement (currency translation differences) | – | (10,805) | | Capital loss on disposal of L'Occitane Russia | – | (3,632) | | Total | (2,321) | (14,437) | - Prior year's other operating expenses included EUR 10,805 thousand in currency translation differences and EUR 3,632 thousand in capital losses from the Russia divestment, which were absent in the current period[15] 5. Share of Profits/(Losses) of Associates and Joint Ventures Accounted for Using the Equity Method Net losses from associates and joint ventures expanded by 107.8% to EUR 8,464 thousand in H1 FY2024, primarily due to increased losses from Good Glamm Group Share of Profits/(Losses) of Associates and Joint Ventures for H1 FY2024 | Company | September 30, 2023 (EUR thousand) | September 30, 2022 (EUR thousand) | | :--- | :--- | :--- | | Good Glamm Group | (11,404) | (4,759) | | CAPSUM | 468 | 406 | | L'Occitane Middle East | 2,472 | 280 | | Total | (8,464) | (4,073) | - Losses from Good Glamm Group expanded from EUR 4,759 thousand to EUR 11,404 thousand, representing the primary driver of the increased losses[16] 6. Depreciation, Amortisation and Impairment Total depreciation, amortisation, and impairment for H1 FY2024 remained stable at EUR 76,711 thousand, consistent with the prior year Depreciation, Amortisation and Impairment for H1 FY2024 | Metric | September 30, 2023 (EUR thousand) | September 30, 2022 (EUR thousand) | | :--- | :--- | :--- | | Depreciation, Amortisation and Impairment | 76,711 | 76,816 | 7. Finance Income and Costs Net finance costs increased by EUR 9,300 thousand to EUR 23,737 thousand in H1 FY2024, driven by higher interest expenses and fair value changes related to the L'Occitane Russia divestment Finance Income and Costs for H1 FY2024 | Item | September 30, 2023 (EUR thousand) | September 30, 2022 (EUR thousand) | | :--- | :--- | :--- | | Finance income | 2,651 | 1,064 | | Fair value change of consideration for disposal of L'Occitane Russia | (8,645) | (7,885) | | Interest expense | (13,546) | (4,088) | | Interest and finance charges paid/payable on lease liabilities | (4,197) | (3,555) | | Total Finance Costs | (26,388) | (15,528) | | Net Finance Costs | (23,737) | (14,464) | - Finance income increased by 149.2% year-on-year to EUR 2,651 thousand, primarily from interest on cash and cash equivalents[16] - Total finance costs increased by 69.9% year-on-year to EUR 26,388 thousand, mainly due to higher interest expenses on borrowings[16] 8. Income Tax Income tax expense for H1 FY2024 was EUR 11,113 thousand, with the effective tax rate increasing to 21.9% due to a higher proportion of taxable income in higher-tax jurisdictions Income Tax Expense and Effective Tax Rate for H1 FY2024 | Metric | September 30, 2023 (EUR thousand) | September 30, 2022 (EUR thousand) | | :--- | :--- | :--- | | Income Tax Expense | (11,113) | (7,781) | | Effective Tax Rate | 21.9% | 10.9% | - Excluding share of profits and losses of associates and joint ventures, the effective tax rate increased from 10.5% to 18.8%[49] 9. Earnings Per Share Profit attributable to owners of the company was EUR 34,000 thousand in H1 FY2024, resulting in basic and diluted earnings per share of EUR 0.023, a 45.0% decrease Earnings Per Share for H1 FY2024 | Metric | September 30, 2023 (EUR) | September 30, 2022 (EUR) | % Change | | :--- | :--- | :--- | :--- | | Basic Earnings Per Share | 0.023 | 0.042 | -45.0% | | Diluted Earnings Per Share | 0.023 | 0.042 | -45.0% | - The number of shares used for earnings per share calculation slightly increased, with basic shares rising from 1,471,333,800 to 1,472,169,550[6] 10. Dividends The Board does not recommend any distribution for H1 FY2024, aligning with the policy of declaring and paying only a final dividend annually - The Board does not recommend any dividend distribution for the profit generated in H1 FY2024[18] - The company's policy is to declare and pay only a final dividend annually[18] 11. Inventories As of September 30, 2023, total inventories increased by 23.2% to EUR 390,951 thousand, primarily in finished goods and work-in-progress, and raw materials Inventory Composition as of September 30, 2023 | Item | September 30, 2023 (EUR thousand) | March 31, 2023 (EUR thousand) | | :--- | :--- | :--- | | Raw materials and consumables | 64,884 | 55,104 | | Finished goods and work-in-progress | 354,695 | 285,379 | | Total inventories | 419,579 | 340,483 | | Less: Provision | (28,628) | (23,286) | | Net Inventories | 390,951 | 317,197 | - Net inventories increased by EUR 81,500 thousand or 26.3% compared to September 30, 2022, driven by strong growth from Sol de Janeiro and anticipation of Q3 holiday season sales[54] 12. Trade Receivables As of September 30, 2023, total trade receivables increased by 16.1% to EUR 297,827 thousand, with most receivables current or less than three months overdue Ageing Analysis of Trade Receivables as of September 30, 2023 | Ageing | September 30, 2023 (EUR thousand) | March 31, 2023 (EUR thousand) | | :--- | :--- | :--- | | Current and less than 3 months overdue | 278,490 | 236,155 | | 3 to 6 months overdue | 13,726 | 15,333 | | 6 to 12 months overdue | 5,408 | 3,464 | | Over 12 months overdue | 5,039 | 6,104 | | Less: Provision for doubtful debts | (4,836) | (4,503) | | Net Trade Receivables | 297,827 | 256,553 | - The group believes that the net amount of receivables after provision for doubtful debts does not involve unrecoverable risks[20] 13. Trade Payables As of September 30, 2023, total trade payables increased by 26.3% to EUR 265,408 thousand, with the majority being current or less than three months overdue Ageing Analysis of Trade Payables as of September 30, 2023 | Ageing | September 30, 2023 (EUR thousand) | March 31, 2023 (EUR thousand) | | :--- | :--- | :--- | | Current and less than 3 months overdue | 261,795 | 208,063 | | 3 to 6 months overdue | 1,762 | 812 | | 6 to 12 months overdue | 1,051 | 32 | | Over 12 months overdue | 800 | 1,196 | | Total Trade Payables | 265,408 | 210,103 | Management Discussion and Analysis This section provides an overview of the group's financial performance, including revenue, profitability, and key operational factors for H1 FY2024 - The group's net sales for H1 FY2024 grew by 24.9% at constant exchange rates, reaching EUR 1.072 billion[26] - Operating profit decreased by 11.8%, primarily due to a substantial increase in marketing investments in strategic markets and channels[4] - Net profit margin declined from 7.1% in the prior year to 3.7%[22] Overview In H1 FY2024, net sales grew by 24.9% at constant exchange rates to EUR 1,072.0 million, but operating profit decreased by 11.8% to EUR 76.8 million due to increased marketing investments Management vs. Reported Performance for H1 FY2024 | Metric | Management (2023) (EUR million or %) | Reported (2023) (EUR million or %) | Management (2022) (EUR million or %) | Reported (2022) (EUR million or %) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | 1,072.0 | 1,072.0 | 904.5 | 900.5 | | Operating Profit | 89.7 | 76.8 | 104.1 | 87.0 | | Profit for the Period | Not applicable | 39.6 | Not applicable | 63.9 | | Gross Margin | 78.3% | 78.3% | 80.3% | 80.2% | | Operating Profit Margin | 8.4% | 7.2% | 11.5% | 9.7% | | Net Profit Margin | Not applicable | 3.7% | Not applicable | 7.1% | - Management performance excludes losses/profits from joint ventures and associates (Good Glamm Group and CAPSUM) for a more appropriate comparison[22][23] Definitions This section defines key terms used in the report, such as "like-for-like sales growth" and "overall growth," both excluding foreign exchange impacts - Like-for-like sales growth refers to the comparison of sales from comparable stores over two fiscal periods, excluding the impact of foreign exchange translation[24] - Overall growth refers to the increase in total global net sales for the reported fiscal period, excluding the impact of foreign exchange translation[24] Seasonal Factors of Operations The group experiences significant seasonality, with Q3 (October 1 to December 31) showing substantially higher sales and operating profit due to the Christmas holiday season - The group's sales significantly increase in the third fiscal quarter (October 1 to December 31) due to the Christmas holiday season[25] - In FY2023, Q3 sales accounted for 42.2% of annual sales, and operating profit for 36.4% of annual operating profit[25] - The group typically utilizes most of its working capital from April to November to increase production in anticipation of Christmas holiday sales growth[25] Revenue Analysis In H1 FY2024, net sales reached EUR 1.072 billion, growing 19.0% at reported rates and 24.9% at constant exchange rates, driven by Sol de Janeiro and L'OCCITANE en Provence in China Net Sales Growth for H1 FY2024 | Metric | H1 FY2024 (EUR million) | H1 FY2023 (EUR million) | Reported FX Growth | Constant FX Growth | | :--- | :--- | :--- | :--- | :--- | | Net Sales | 1,072.0 | 904.5 (restated) | 18.5% | 24.9% | - Growth was primarily driven by the outstanding performance of Sol de Janeiro and the steady growth of L'OCCITANE en Provence in the Chinese market[26] - The total number of group retail locations increased by 18.7% from 2,774 to 3,292, with directly operated retail stores increasing by 2 to 1,364[27] Performance by Brand Sol de Janeiro continued its strong growth, increasing by 188.8% at constant exchange rates to EUR 270 million, while L'OCCITANE en Provence saw 3.5% growth, primarily in China Net Sales and Growth by Brand for H1 FY2024 | Brand | H1 FY2024 (EUR million) | H1 FY2023 (EUR million) | Reported FX Growth (%) | Constant FX Growth (%) | | :--- | :--- | :--- | :--- | :--- | | L'OCCITANE en Provence | 595.6 | 610.3 | (2.4) | 3.5 | | ELEMIS | 109.2 | 105.1 | 3.8 | 7.6 | | Sol de Janeiro | 270.0 | 98.6 | 173.9 | 188.8 | | Other | 97.2 | 90.5 | 7.5 | 10.7 | | Total | 1,072.0 | 904.5 | 18.5 | 24.9 | - Sol de Janeiro recorded triple-digit growth across all regions, with sales reaching EUR 270 million, surpassing its full-year FY2023 sales[30] - L'OCCITANE en Provence achieved double-digit sales growth in the Chinese market, driven by marketing investments in key product categories like face, body, and hair care[29] - ELEMIS sales in China grew by over 200%, primarily propelled by social media marketing investments in its best-selling products[30] Performance by Region The Americas region grew by 63.6% at constant exchange rates, becoming the largest sales region, while Asia Pacific grew by 9.2%, with China contributing significantly Net Sales and Growth by Region for H1 FY2024 | Region | H1 FY2024 (EUR million) | H1 FY2023 (EUR million) | Reported FX Growth (%) | Constant FX Growth (%) | Like-for-like Sales Growth (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | Asia Pacific | 371.4 | 371.1 | 0.1 | 9.2 | 4.4 | | Americas | 442.4 | 284.1 | 55.7 | 63.6 | 15.8 | | Europe, Middle East & Africa | 258.3 | 249.2 | 3.6 | 4.1 | 4.1 | | Total | 1,072.0 | 904.5 | 18.5 | 24.9 | 7.8 | - The United States is the largest single market, accounting for 36.4% of the group's net sales, primarily driven by the rapid growth of Sol de Janeiro[34] - The Chinese market recorded substantial growth of 28.0% at constant exchange rates, largely due to contributions from L'OCCITANE en Provence and ELEMIS[34] Performance by Channel Wholesale and other channels grew by 44.9% at constant exchange rates, becoming the largest channel, while online channels also saw robust growth, and retail sales increased by 3.7% Net Sales and Growth by Channel for H1 FY2024 | Channel | H1 FY2024 (EUR million) | H1 FY2023 (EUR million) | Reported FX Growth (%) | Constant FX Growth (%) | | :--- | :--- | :--- | :--- | :--- | | Retail | 313.2 | 321.7 | (2.6) | 3.7 | | Online Channels | 321.1 | 268.6 | 19.5 | 26.9 | | Wholesale & Other | 437.7 | 314.2 | 39.3 | 44.9 | | Total | 1,072.0 | 904.5 | 18.5 | 24.9 | - Wholesale and other channels' sales share significantly increased from 34.7% in the prior year to 40.8%, mainly due to increased contributions from brands with higher wholesale sales, such as ELEMIS and Sol de Janeiro[35] - Online channel growth was driven by the strong performance of Sol de Janeiro and ELEMIS, as well as the new Douyin online store channel launched by L'OCCITANE en Provence in China[36] Profitability Analysis In H1 FY2024, profitability was impacted by a 1.9 percentage point decrease in gross margin and a significant 4.4 percentage point increase in marketing expenses, leading to lower operating profit - Gross margin decreased by 1.9 percentage points to 78.3%, primarily due to an unfavorable brand mix with an increased sales share from Sol de Janeiro, which has a higher proportion of wholesale sales[38] - Marketing expenses significantly increased by 47.8% year-on-year, with its percentage of net sales rising by 4.4 percentage points to 22.2%, mainly due to increased strategic marketing investments in traditional and social media[40] - Operating profit decreased by 11.8% year-on-year, and the operating profit margin declined by 2.5 percentage points to 7.2%, influenced by increased marketing and organizational investments, rising costs, and inflation[45] Cost of Sales and Gross Profit Gross margin decreased by 1.9 percentage points to 78.3%, primarily due to an unfavorable brand mix with increased wholesale sales from Sol de Janeiro Cost of Sales and Gross Profit for H1 FY2024 | Metric | H1 FY2024 (EUR million) | H1 FY2023 (EUR million) | % Change | | :--- | :--- | :--- | :--- | | Cost of Sales | 232.1 | 178.2 | 30.2% | | Gross Margin | 78.3% | 80.2% | -1.9pp | - A 2.0 percentage point decrease in gross margin is attributed to an unfavorable brand mix, mainly due to the increased sales share of Sol de Janeiro, which has a higher proportion of wholesale sales[38] - The decrease in gross margin was partially offset by improved commercial terms (0.8 percentage points), price increases (0.3 percentage points), and reclassification of sales commissions (0.3 percentage points)[38] Distribution Expenses Distribution expenses as a percentage of net sales improved to 36.5%, driven by a favorable brand mix with higher shares from Sol de Janeiro and Erborian Distribution Expenses for H1 FY2024 | Metric | H1 FY2024 (EUR million) | H1 FY2023 (EUR million) | % Change | % of Net Sales | | :--- | :--- | :--- | :--- | :--- | | Distribution Expenses | 391.7 | 353.1 | 10.9% | 36.5% | - A favorable brand mix contributed 5.6 percentage points of improvement, mainly due to increased shares from Sol de Janeiro and Erborian, which have lower distribution costs[39] - This improvement was partially offset by increased investments in organization and personnel, IT (1.5 percentage points), and higher commission rates for resale partners (1.2 percentage points)[39] Marketing Expenses Marketing expenses significantly increased by 47.8% to EUR 237.5 million, representing 22.2% of net sales, primarily due to strategic marketing investments in key brands and markets Marketing Expenses for H1 FY2024 | Metric | H1 FY2024 (EUR million) | H1 FY2023 (EUR million) | % Change | % of Net Sales | | :--- | :--- | :--- | :--- | :--- | | Marketing Expenses | 237.5 | 160.6 | 47.8% | 22.2% | - Increased strategic marketing investments contributed 4.0 percentage points of growth, with L'OCCITANE en Provence accounting for 3.6 percentage points (of which China was 2.2 percentage points)[40] - Investments in personnel, salary increases, and higher fees contributed 0.7 percentage points, and brand mix contributed another 0.7 percentage points[40] Research and Development Expenses Research and development expenses increased by 11.5% to EUR 11.3 million, maintaining a stable percentage of net sales at 1.1% Research and Development Expenses for H1 FY2024 | Metric | H1 FY2024 (EUR million) | H1 FY2023 (EUR million) | % Change | % of Net Sales | | :--- | :--- | :--- | :--- | :--- | | Research and Development Expenses | 11.3 | 10.2 | 11.5% | 1.1% | General and Administrative Expenses General and administrative expenses increased by 18.4% to EUR 114.1 million, representing 10.6% of net sales, with improvements from sales leverage partially offset by higher bonuses and operating costs General and Administrative Expenses for H1 FY2024 | Metric | H1 FY2024 (EUR million) | H1 FY2023 (EUR million) | % Change | % of Net Sales | | :--- | :--- | :--- | :--- | :--- | | General and Administrative Expenses | 114.1 | 96.3 | 18.4% | 10.6% | - Increased sales leverage contributed 2.1 percentage points of improvement, with a favorable brand mix and phasing effects contributing 0.3 percentage points[42] - These improvements were offset by higher bonuses and incentives (0.7 percentage points), increased operating costs (0.7 percentage points), and higher organizational and IT investments (0.7 percentage points)[42] Other Operating Income/Expenses and Share of Losses of Associates and Joint Ventures Other operating income decreased, other operating expenses significantly reduced, and net losses from associates and joint ventures expanded, primarily due to Good Glamm Group Other Operating Income/Expenses and Net Losses of Associates and Joint Ventures for H1 FY2024 | Metric | H1 FY2024 (EUR million) | H1 FY2023 (EUR million) | % of Net Sales (2024) | % of Net Sales (2023) | | :--- | :--- | :--- | :--- | :--- | | Other Operating Income | 2.2 | 3.5 | 0.2% | 0.4% | | Other Operating Expenses | (2.3) | (14.4) | (0.2)% | (1.6)% | | Share of Net Losses of Associates and Joint Ventures | (8.5) | (4.1) | (0.8)% | (0.5)% | - Prior year's other operating income included capital gains from changes in equity interest in Good Glamm Group, which were absent in the current period[43] - Prior year's other operating expenses included capital losses from currency translation differences due to the Russia divestment, which were absent in the current period[43] - Increased losses from Good Glamm Group were the primary reason for the expanded losses from associates and joint ventures[44] Operating Profit Operating profit decreased by 11.8% to EUR 76.8 million, with the operating profit margin declining to 7.2%, mainly due to increased marketing and organizational investments Operating Profit and Margin for H1 FY2024 | Metric | H1 FY2024 (EUR million) | H1 FY2023 (EUR million) | % Change | Operating Profit Margin | | :--- | :--- | :--- | :--- | :--- | | Operating Profit | 76.8 | 87.0 | -11.8% | 7.2% | - Increased marketing and organizational investments led to a 7.0 percentage point decrease in operating profit margin[45] - Fixed cost leverage from increased sales contributed 3.3 percentage points of improvement, and optimized brand mix contributed 3.1 percentage points[45] - On a management basis, the operating profit margin was 8.4% this year, compared to 11.5% last year, both excluding specific one-off items[46] Net Finance Costs Net finance costs increased by EUR 9.3 million to EUR 23.7 million, primarily driven by higher interest expenses on borrowings Net Finance Costs for H1 FY2024 | Metric | H1 FY2024 (EUR million) | H1 FY2023 (EUR million) | Change (EUR million) | | :--- | :--- | :--- | :--- | | Net Finance Costs | 23.7 | 14.4 | 9.3 | - An increase of EUR 7.9 million in interest expenses on borrowings was the main reason for the rise in net finance costs[47] Foreign Currency Gains/(Losses) Net foreign currency losses increased to EUR 2.3 million, mainly related to the impact of IFRS 16 Foreign Currency Gains/(Losses) for H1 FY2024 | Metric | H1 FY2024 (EUR million) | H1 FY2023 (EUR million) | | :--- | :--- | :--- | | Net Foreign Currency Losses | (2.3) | (0.9) | - Net foreign currency losses are primarily related to the impact of IFRS 16[48] Income Tax Expense Income tax expense increased to EUR 11.1 million, with the effective tax rate rising to 21.9% due to a higher proportion of taxable income in higher-tax regions Income Tax Expense and Effective Tax Rate for H1 FY2024 | Metric | H1 FY2024 (EUR million) | H1 FY2023 (EUR million) | Effective Tax Rate (2024) | Effective Tax Rate (2023) | | :--- | :--- | :--- | :--- | :--- | | Income Tax Expense | 11.1 | 7.8 | 21.9% | 10.9% | - Excluding share of profits and losses of associates and joint ventures, the effective tax rates were 18.8% (H1 FY2024) and 10.5% (H1 FY2023)[49] Profit for the Period Profit for the period decreased by 38.0% to EUR 39.6 million, resulting in a 45.0% decline in basic and diluted earnings per share Profit for the Period and Earnings Per Share for H1 FY2024 | Metric | H1 FY2024 (EUR million) | H1 FY2023 (EUR million) | % Change | | :--- | :--- | :--- | :--- | | Profit for the Period | 39.6 | 63.9 | -38.0% | | Basic Earnings Per Share | 0.023 | 0.042 | -45.0% | | Diluted Earnings Per Share | 0.023 | 0.042 | -45.0% | Balance Sheet Review This section reviews the group's liquidity, capital resources, investing and financing activities, and key balance sheet ratios - As of September 30, 2023, the group's cash and cash equivalents were EUR 104.0 million, a decrease from EUR 147.3 million as of March 31, 2023[51] - Total borrowings amounted to EUR 525.2 million, a net increase of EUR 6.3 million compared to March 31, 2023[51] - Net debt was EUR 735.2 million, representing a 10.7% decrease compared to September 30, 2022[51] Liquidity and Capital Resources As of September 30, 2023, cash and cash equivalents decreased to EUR 104.0 million, while total borrowings slightly increased, and net debt decreased year-on-year Liquidity and Borrowings as of September 30, 2023 | Metric | September 30, 2023 (EUR million) | March 31, 2023 (EUR million) | September 30, 2022 (EUR million) | | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents | 104.0 | 147.3 | 150.6 | | Total Borrowings | 525.2 | 518.9 | 624.8 | | Net Debt | 735.2 | Not applicable | 823.1 | | Total Undrawn Borrowing Facilities | 465.3 | 461.5 | 343.2 | - Net debt decreased by EUR 87.9 million or 10.7% year-on-year[51] Investing Activities Net cash used in investing activities decreased by EUR 29.9 million to EUR 21.0 million, primarily due to the sale of CAPSUM shares, while capital expenditures increased Cash Flow from Investing Activities and Capital Expenditures for H1 FY2024 | Metric | H1 FY2024 (EUR million) | H1 FY2023 (EUR million) | Change (EUR million) | | :--- | :--- | :--- | :--- | | Net Cash Used in Investing Activities | 21.0 | 50.9 | -29.9 | | Capital Expenditures | 28.7 | 21.2 | 7.5 | - The sale of CAPSUM shares generated total proceeds of EUR 25.0 million, which was the main reason for the decrease in net cash used in investing activities[52] - Capital expenditures primarily focused on leasehold improvements (EUR 11.3 million), production lines and warehouses (EUR 9.4 million), and information technology (EUR 7.9 million)[52] Financing Activities Net cash outflow from financing activities significantly decreased to EUR 61.3 million, primarily due to lower lease principal payments, non-controlling interest acquisitions, and net repayment of borrowings Cash Flow from Financing Activities for H1 FY2024 | Metric | H1 FY2024 (EUR million) | H1 FY2023 (EUR million) | Change (EUR million) | | :--- | :--- | :--- | :--- | | Net Cash Outflow from Financing Activities | 61.3 | 176.0 | -114.7 | - Key outflows included principal portions of lease payments of EUR 49.4 million, payments for acquisition of non-controlling interests in non-wholly owned subsidiaries of EUR 11.1 million, and net repayment of borrowings of EUR 1.5 million[53] Inventories As of September 30, 2023, net inventories increased to EUR 391.0 million, a 26.3% year-on-year growth, while average inventory turnover days decreased by 15 days to 278 days Inventory Turnover Days | Metric | September 30, 2023 | September 30, 2022 | Change (Days) | | :--- | :--- | :--- | :--- | | Average Inventory Turnover Days | 278 | 293 | -15 | - The increase in net inventories was primarily driven by strong growth from Sol de Janeiro and anticipation of Q3 holiday season sales[54] - The decrease in turnover days was mainly due to faster turnover of finished goods and mini-products (-12 days) and favorable foreign exchange impacts (-10 days)[54] Trade Receivables In H1 FY2024, trade receivables turnover days increased by 1 day to 47 days, mainly due to increased resale sales, especially from Sol de Janeiro to customers with longer payment terms Trade Receivables Turnover Days | Metric | September 30, 2023 | September 30, 2022 | Change (Days) | | :--- | :--- | :--- | :--- | | Trade Receivables Turnover Days | 47 | 46 | +1 | - The increase in turnover days was primarily due to higher resale sales, particularly from Sol de Janeiro to resale customers with longer payment terms[55] Trade Payables In H1 FY2024, trade payables turnover days decreased by 12 days to 68 days, mainly due to reductions in accrued expenses, trade payables, and other liabilities, along with foreign exchange impacts Trade Payables Turnover Days | Metric | September 30, 2023 | September 30, 2022 | Change (Days) | | :--- | :--- | :--- | :--- | | Trade Payables Turnover Days | 68 | 80 | -12 | - The decrease in turnover days was mainly due to reductions in accrued expenses, trade payables, and other liabilities (-2 days) and foreign exchange impacts (-10 days)[55] Balance Sheet Ratios Profitability ratios slightly changed year-on-year, with return on capital employed decreasing to 3.4% and return on equity to 3.8%, while liquidity and solvency ratios remained stable or improved Balance Sheet Ratios for H1 FY2024 | Metric | September 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | EBITDA (EUR thousand) | 151,191 | 162,953 | | Return on Capital Employed | 3.4% | 3.5% | | Return on Equity | 3.8% | 4.8% | | Current Ratio (times) | 1.2 | 1.1 | | Quick Ratio (times) | 0.7 | 0.7 | | Debt-to-Asset Ratio | 27.0% | 28.5% | | Debt-to-Equity Ratio | 77.2% | 60.8% | - Capital employed changed by EUR 488.7 million year-on-year, primarily due to a significant increase in the valuation of the put option granted for non-controlling interests in Sol de Janeiro[56] Foreign Exchange Risk Management The group hedges foreign exchange risk for anticipated transactions and non-Euro denominated receivables/payables using forward foreign exchange contracts, resulting in a net derivative liability of EUR 1.2 million - The group enters into forward foreign exchange contracts to hedge foreign exchange risk for anticipated transactions and non-Euro denominated trade receivables and payables[59] - As of September 30, 2023, the group had a net foreign exchange derivative liability of EUR 1.2 million from forward foreign exchange contracts and interest rate derivatives[59] Dividends The Board does not recommend any dividend distribution for H1 FY2024, consistent with the company's policy of declaring only a final dividend annually - The Board does not recommend any dividend distribution for the profit generated in H1 FY2024[60] - The final dividend for FY2023 of EUR 0.03129 per share, totaling EUR 46.0 million, was paid on October 20, 2023[60] Events After the Reporting Period The group signed a 10-year lease for a US warehouse, with an estimated right-of-use asset and lease liability of EUR 37.0 million, and assesses no significant impact from the Middle East conflict - The group signed a 10-year lease agreement for a US warehouse, with an estimated right-of-use asset and lease liability of EUR 37.0 million[61] - Management believes the conflict between Israel and Palestine will not have a significant impact on its Middle East operations[61] Strategic Review This section outlines the group's strategic initiatives, focusing on marketing investments, brand performance, omnichannel strategy, and commitment to sustainable growth - The group's net sales grew by 24.9% at constant exchange rates, exceeding EUR 1 billion, primarily driven by Sol de Janeiro and L'OCCITANE en Provence in the Chinese market[62] - The group significantly increased marketing investments in key markets and channels to capitalize on growth opportunities and protect market share[62] - The group is committed to strengthening its position as a competitive multi-brand organization with intergenerational appeal and geographical balance[62] Strong Marketing and Flexible Product Strategy to Enhance Core Brand Awareness and Relevance in Key Markets The group significantly increased marketing investments in H1 FY2024, particularly in China, to boost brand awareness and average transaction value for L'OCCITANE en Provence - The group substantially increased marketing investments for its core brands, especially in strategic markets and channels such as China, the US, Japan, Korea, and travel retail[63] - L'OCCITANE en Provence's sales in the Chinese market grew by 22% at constant exchange rates, primarily through marketing investments in face, body, and hair care categories[63] - In China, brand awareness and sales significantly improved through collaborations with Xiaohongshu for the Almond series, the launch of the White Lavender series, and the re-launch of Immortelle Divine Cream[64][65] Sol de Janeiro's Outstanding Performance Driven by Core Product Success and New Launches Sol de Janeiro maintained strong momentum in H1 FY2024, growing 188.8% at constant exchange rates to EUR 270 million, with an operating profit margin of 28.9%, becoming the group's second-largest brand - Sol de Janeiro's sales grew by 188.8% at constant exchange rates, reaching EUR 270 million, with an operating profit margin of 28.9%[66] - The brand is now the group's second-largest, accounting for 25.2% of net sales[66] - In its home market, the US, Sol de Janeiro maintained its 1 skincare brand ranking at both Sephora North America and Kohl's[66] ELEMIS Advances Premiumization Strategy ELEMIS grew by 7.6% at constant exchange rates in H1 FY2024, continuing its premiumization strategy by reducing investment in certain online partners to drive direct-to-consumer website traffic - ELEMIS grew by 7.6% at constant exchange rates and continued its premiumization strategy by reducing investment in certain online partners to drive direct-to-consumer website traffic[67] - In China, ELEMIS sales grew by over 200%, primarily through social media marketing investments, especially for its best-selling Pro-Collagen Cleansing Balm[67] - Despite softer growth in Q2, the US domestic business grew by 18%, with strong performance in e-commerce channels[67] Optimizing Omnichannel Strategy to Enhance Brand Image The group is refining its omnichannel strategy by refocusing on direct-to-consumer channels to enhance brand image, discontinuing L'OCCITANE en Provence's distribution in French pharmacies - The group is refocusing on direct-to-consumer channels and discontinuing L'OCCITANE en Provence's distribution in French pharmacies to enhance brand image[68] - Wholesale and other channels grew by 44.9% at constant exchange rates, becoming the group's largest channel, accounting for 40.8% of net sales[69] - Online channels grew by 26.9% at constant exchange rates, driven by Sol de Janeiro, ELEMIS, and the Douyin online store channel in China[69] Certified B Corporation™ The group achieved Certified B Corporation™ status in August 2023, demonstrating its ongoing commitment to a triple bottom line of people, planet, and profit - The group became a Certified B Corporation™ in August 2023, reflecting its continuous commitment to a triple bottom line of "people, planet, and profit"[70] - B Corp certification measures and verifies a company's overall social and environmental performance across five pillars: governance, workers, community, environment, and customers[70] Outlook The group maintains a cautiously optimistic outlook for H2 FY2024, anticipating opportunities during the holiday season, while acknowledging that increased marketing investments will pressure profit margins - The group holds a cautiously optimistic outlook for H2 FY2024, expecting opportunities during the holiday and gifting season[71] - Additional marketing investments will exert pressure on profit margins but are crucial for building brand equity and seizing strategic market opportunities[71] - The group will leverage its strong portfolio of premium beauty brands and long-term investment commitment to achieve sustainable growth and profitability[71] Other Information This section covers corporate governance matters, including the Audit Committee's review, compliance with corporate governance codes, and directors' securities transactions - The Audit Committee has reviewed the group's accounting principles, internal controls, and financial reporting matters, including these interim consolidated results[72] - The company has consistently complied with all applicable code provisions of the Corporate Governance Code set out in Appendix 14 of the Listing Rules during the reporting period[73] Audit Committee The Audit Committee reviewed the group's accounting principles, internal controls, and financial reporting, including the consolidated results for the six months ended September 30, 2023 - The Audit Committee comprises three non-executive directors, two of whom are independent non-executive directors[72] - The Audit Committee has reviewed the group's accounting principles, internal controls, and financial reporting matters, including these interim consolidated results[72] Corporate Governance The Board regularly reviews corporate governance practices, committed to maintaining high standards of governance and business ethics, and confirmed compliance with all applicable code provisions - The Board is committed to maintaining high standards of corporate governance practices and business ethics[73] - For the six months ended September 30, 2023, the company has complied with all applicable code provisions of the Corporate Governance Code set out in Appendix 14 of the Listing Rules[73] Directors' Securities Transactions The company adopted the Model Code for Securities Transactions by Directors of Listed Issuers, and all directors confirmed compliance during the reporting period - The company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules[75] - All directors confirmed compliance with the Model Code during the reporting period after specific enquiry[75] Purchase, Sale or Redemption of the Company's Listed Securities During H1 FY2024, the company transferred 560,300 treasury shares under employee share and option schemes, with no other purchases, sales, or redemptions of listed securities - The company transferred 560,300 treasury shares under its employee gratuitous share and share option schemes[76] - As of September 30, 2023, the company held 4,795,341 treasury shares[76] - Save as disclosed, neither the company nor any of its subsidiaries purchased, sold, or redeemed any other listed securities during the reporting period[76] Publication of Interim Report The interim results announcement is available on the HKEX and company websites, and the interim report will be dispatched to shareholders and accessible online - The interim results announcement has been published on the HKEX website (www.hkexnews.hk) and the company's website (group.loccitane.com)[78] - The interim report will be dispatched to shareholders and will also be available on the aforementioned websites[78] Disclaimer This section advises readers that financial data and information presented in the report may contain minor discrepancies due to rounding - Financial data and other information presented in the report may contain minor discrepancies due to rounding to the nearest unit or percentage[80]