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Article Excerpt
HEINZ KROGNER, CHAIRMAN AND GROUP CEO, ESPRIT HOLDINGS LIMITED: Okay. Ladies and gentlemen, welcome to the half year's result presentation of Esprit. Welcome also to the people on the Internet.
Before Ernst and Thomas are going to make the presentation, I would like to introduce to you our new CFO and Executive Director, Fook Aun Chew, who has just joined recently. And besides his work as a CFO together with Ernst, he will be in future be your partner for information, because he also cares for our Investor Relations, together of course with Patrick you know. And I'm sure you join me in wishing him success in this challenging new job.
FOOK AUN CHEW, CFO, ESPRIT HOLDINGS LIMITED: Thank you.
HEINZ KROGNER: So, Ernst is going to give you first the figures and then afterwards Thomas gives you the background to the business. And I'll maybe, if you are nice to me, give you some expectations about the mid-term or short-term development of our Company. Okay? Thanks. Ernst.
ERNST VOGEL, DEPUTY CFO, ESPRIT HOLDINGS LIMITED: Good afternoon also from my side. I'm presenting to you now the financial summary for the first half of our fiscal year, before Thomas then speaks more in detail about operational performance during this period.
The summary of the financial highlights shows that, despite the current difficult macroeconomic environment, our Group still reports a top line growth for the first half of our fiscal year '08/'09. Our turnover grew by 3%, or 3.8% in local currency terms, to HKD19.1b. Gross profit increased by 2% to HKD10.1b. Our Group's operating profit margin decreased by 15% to HKD3.4b, while our effective tax rate was improved by 1.6 percentage points to 20%, contributing to a net income of HKD2.9b, which is 13% lower than last year's earnings for the half-year period and representing a net margin of 15%.
As of our balance sheet date, our balance sheet shows a net cash position of HKD3.8b.
The gross profit margin achieved remained stable at 53.2%, as we have not participated in the general trend to boost net sales by heavy discounting. However, our EBIT margin is in the current situation under pressure. For the period July to December, our Group EBIT margin achieved was 17.9%. The economic crisis affected our Group's EBIT margin in various ways.
As for the retail business, we have experienced elongation timeframe to reach maturity for our new stores. This affects stores that have been opened either in this financial year or last financial year and have not reached their regular productivity yet. But we are in particular encouraged by our achieved like-for-like growth rate of 6.3% with our comparable stores. Overall, our retail turnover went up by 10.3%.
Our wholesale turnover was negatively impacted by more cautious buying of our existing customers, as they have reduced their orders significantly due to the financial crisis. In addition, our credit insurance company has reduced its limits, which has caused, under our existing credit policy, an increasing of our non-shipment rate. Nevertheless, we continue to expand and opened 560 new store point-of-sales, adding more than 54,000 square meters to our controlled space area. This represents a selling space increase for our retail -- wholesale area, sorry, of 7%.
However, expansion wholesale slowed down because our partners did not gain sufficient financing, which even led to the situation that already agreed openings had to be cancelled. Therefore, the expansion could not fully offset the loss of sales with our existing customers. As a result of this, we recorded a decline of wholesale turnover of minus 2.9%, even though our order book has shown a flat order intake up to December.
The different sales developments at retail and wholesale resulted in a shift of channel mix between wholesale and retail. The share of retail increased from 43% to 46%.
In the retail channel, massive pre-opening costs as well as the additional costs for the implementation of the infrastructure for the newly entered retail markets in the Scandinavian countries and Spain has caused a reduction of the EBIT margin. We have opened in the first half-year 77 stores, adding more than 29,000 square meter new selling space, which increased our total selling space of our retail distribution network by 11%, to more than 300,000 square meters.
Due to the huge expansion in the first half of this fiscal year, the EBIT margin for retail was lower, with 14.2%, than last year. But this is still higher than the 13.3% we have reported for the full 12 months period of last fiscal year.
The wholesale EBIT suffered from the already explained decline of net sales. As a result, we report in the wholesale business an EBIT margin of 23.5%, compared to 26.9% of last year.
Our balance sheet remains strong. After returning more than HKD4.2b in cash to our shareholders in form of dividends or share buyback during the period from July to December, our Group still has a net cash position of HKD3.8b as of December 31. Besides the payout to our shareholders, we have significantly increased our capital expenditures by 75%, to almost HKD1.2b, to fuel our future growth and increase our operational efficiency by preparing our infrastructure for the next level of growth.
Out of these HKD1.2b, we invested almost HKD900m into our retail distribution network. In addition, we have spent HKD266m in our IT infrastructure, the majority of these spendings caused by a major IT project to replace our existing legacy systems. This project will run for the next two to three years and will account for the majority of our IT investments for the upcoming years.
Based on our strong cash position, we will maintain our interim dividend payout ratio of 35%. HKD0.8 per share will be paid out about April 8, 2009.
So far for the financial summary. Now, Thomas will give you a more detailed insight in our operational performance. Thank you very much.
THOMAS GROTE, PRESIDENT, ESPRIT BRAND, ESPRIT HOLDINGS LIMITED: Yes. Thank you, Ernst. And first of all, welcome to everybody. So I'm going to give you a little bit more color about the operations in this past half-year.
First of all, just our regional sales split. Each of the regions created growth in the past half-year, Europe growing 2%, Asia Pacific double-digit growth and North America also, in a difficult environment, 3% growth. Very encouraging for us...
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