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L'OCCITANE INTERNATIONAL S.A.

49, Boulevard Prince Henri L-1724 Luxembourg

R.C.S. Luxembourg: B80359

(Incorporated under the laws of Luxembourg with limited liability)

(Stock code: 973)

INTERIM RESULTS ANNOUNCEMENT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2019

HIGHLIGHTS

  • In FY2020 H1, the Group's net sales grew by 22.1% at reported rates and 19.0% at constant exchange rates.
  • Gross profit margin remained high at 81.2%.
  • Operating margin increased by 4.7 points to 5.7% of net sales, due mainly to ELEMIS, overall improvement in sales growth and control of expenses, as well as currency exchange tailwinds.
  • Reported net profit margin increased by 2.6 points to 3.5% of net sales. Note that the Company adopted the new IFRS 16 Leases accounting from April 2019 without restating last year's figures for comparison. If excluding the impact of IFRS 16 Leases, net profit for FY2020 H1 would have further increased by €4.1 million to €29.3 million, or 4.0% of net sales.

KEY INTERIM FINANCIAL INFORMATION

The board (the "Board") of directors (the "Directors") of L'Occitane International S.A. (the "Company") is pleased to announce the consolidated interim results of the Company and its subsidiaries (the "Group") for the six months ended 30 September 2019 ("FY2020 H1") together with comparative figures for the six months ended 30 September 2018 ("FY2019 H1"). The following financial information, including the comparative figures, has been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board and adopted by the European Union.

-  1  -

CONSOLIDATED INTERIM STATEMENT OF INCOME

For the period ended 30 September

Notes

2019

2018

€ '000

€ '000

Net Sales

2

727,157

595,385

Cost of sales

(137,047)

(104,857)

Gross profit

590,110

490,528

% of net sales

81.2%

82.4%

Distribution expenses

(366,245)

(327,346)

Marketing expenses

(92,703)

(87,068)

Research and development expenses

(10,312)

(8,387)

General and administrative expenses

(79,335)

(62,456)

Other gains, net

3

256

541

Operating profit

4

41,771

5,812

Finance costs, net

5

(10,691)

(1,687)

Foreign currency gains/(losses)

1,618

(1,536)

Profit before income tax

32,698

2,589

Income tax expense

6

(7,460)

2,999

Profit for the period

25,238

5,588

Attributable to:

Equity owners of the Company

24,992

6,814

Non-controlling interests

246

(1,226)

Total

25,238

5,588

Effective tax rate

22.8%

-115.8%

Earnings per share for profit attributable to equity owners

  • of the Company during the period (expressed in euros per
  • share)

Basic

0.017

0.005

Diluted

0.017

0.005

Number of shares used in earnings per share calculation

Basic

7

1,461,052,171

1,460,682,471

Diluted

7

1,465,920,083

1,462,556,482

-  2  -

CONSOLIDATED INTERIM BALANCE SHEETS

30 September

31 March

As at

Notes

2019

2019

€ '000

€ '000

ASSETS

Property, plant and equipment, net

193,974

198,662

Right-of-use assets

454,955

-

Goodwill

1,015,726

1,011,139

Intangible assets, net

51,331

80,109

Deferred income tax assets

77,713

61,051

Other non-current receivables

59,517

57,581

Non-current assets

1,853,216

1,408,542

Inventories, net

9

226,313

202,827

Trade receivables, net

10

161,429

143,392

Other current assets

57,323

64,758

Derivatives financial instruments

148

50

Cash and cash equivalents

80,379

144,442

Current assets

525,592

555,469

TOTAL ASSETS

2,378,808

1,964,011

EQUITY AND LIABILITIES

Share capital

44,309

44,309

Additional paid-in capital

342,851

342,851

Other reserves

(88,486)

(93,524)

Retained earnings

705,532

724,132

Capital and reserves attributable to the equity owners

1,004,206

1,017,768

Non-controlling interests

67,562

66,464

Total equity

1,071,768

1,084,232

Borrowings

495,494

569,378

Lease liabilities

335,360

-

Deferred income tax liabilities

3,884

4,050

Other financial liabilities

4,233

14,011

Other non-current liabilities

22,624

34,448

Non-current liabilities

861,595

621,887

Trade payables

11

158,632

141,247

Social and tax liabilities

68,994

70,078

Current income tax liabilities

24,954

10,731

Borrowings

8,186

8,562

Lease liabilities

103,372

-

Other current liabilities

77,729

19,301

Derivatives financial instruments

1,625

849

Provisions

1,953

7,124

Current liabilities

445,445

257,892

TOTAL EQUITY AND LIABILITIES

2,378,808

1,964,011

NET CURRENT ASSETS

80,147

297,577

TOTAL ASSETS LESS CURRENT LIABILITIES

1,933,363

1,706,119

-  3  -

NOTES TO THE KEY INTERIM FINANCIAL STATEMENTS

1. Basis of preparation

This condensed consolidated interim financial information (the "consolidated interim financial information") for the six-month period ended 30 September 2019 ("period ended 30 September 2019") has been prepared in accordance with IAS 34 Interim Financial Reporting issued by the International Accounting Standards Board. The consolidated interim financial information should be read in conjunction with the consolidated annual financial statements for the year ended 31 March 2019, which were prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board and adopted by the European Union.

The accounting policies and methods used to prepare this interim consolidated financial information are consistent with those used to prepare the consolidated annual financial statements for the year ended 31 March 2019, except as described below:

  • Taxes on income for an interim period are calculated using the estimated tax rate for the full year.

Interpretations and amendments to IFRSs effective for reporting periods beginning on or after 1 April 2019 have no material impact on the consolidated interim financial information.

A number of new or amended standards became applicable for the current reporting period. The Group also had to change its accounting policies and make adjustments as a result of the first-time application of IFRS 16 Leases.

The impact of applying these standards and the related new accounting policies are disclosed below. The other standards did not have an impact on the Group's accounting policies and did not require retrospective adjustments.

IFRS 16 Leases - Impact of the first-time application

The Group adopted IFRS 16 retrospectively from 1 April 2019 but has not restated comparatives for the prior year reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and adjustments arising from the new leasing rules have therefore been recognised in the opening balance sheet on 1 April 2019.

As a lessee, the Group now recognises:

  • A right-of-use asset in the condensed consolidated balance sheet, representing its right to use the underlying asset, and a lease liability representing its obligation to make future lease payments;
  • Depreciation of the right-of-use asset and interest on the related lease liability in place of the operating lease expenses previously incurred.

Adjustments recognised on the first-time application of IFRS 16

The Group has recognised lease liabilities in relation to leases that had previously been classified as operating leases under IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as at 1 April 2019.

The associated right-of-use assets have been measured at an amount equal to the lease liability, adjusted for any prepaid or accrued payments related to the lease and for the onerous lease contracts recognised in the Group's consolidated financial statements as at 1 April 2019.

For leases previously classified as finance leases, the entity recognised the carrying amount of the lease asset and the lease liability immediately before the transition as the carrying amount of the right-of-use asset, and the lease liability at the date of initial application. The measurement principles of IFRS 16 are only applied after that date.

Practical expedients

At the transition date, the Group has used the following practical expedients permitted by the standard:

  • The use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
  • Reliance on previous assessments on whether leases are onerous;
  • Operating leases with a remaining lease term of less than 12 months as at 1 April 2019 accounted for as short term leases;
  • The inclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application; and
  • The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date, the Group relied on its assessment made when applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease.

-  4  -

Accounting impacts of the first-time application of IFRS 16

The following table presents the impacts in the condensed consolidated balance sheet as at 1 April 2019:

ASSETS

31 March

Adjustment

1 April

In thousands of euros

2019

for IFRS 16

2019

Non-current assets

Property, plant and equipment (a)

198,662

(7,731)

190,931

Intangible assets (b)

80,109

(30,940)

49,169

Right-of-use assets (c)

-

476,094

476,094

Other non-current assets (d)

57,581

(1,711)

55,870

Current assets

Other current assets (d)

64,758

(4,927)

59,831

TOTAL IMPACT ON ASSETS

401,110

430,785

831,895

EQUITY AND LIABILITIES

31 March

Adjustment

1 April

In thousands of euros

2019

for IFRS 16

2019

Non-current liabilities

Borrowings (g)

569,378

(5,750)

563,628

Lease liabilities (c)

-

355,930

355,930

Other non-current liabilities (e)

34,448

(14,907)

19,541

Current liabilities

Borrowings (g)

8,562

(1,205)

7,357

Lease liabilities (c)

-

102,589

102,589

Provisions (f)

7,124

(4,456)

2,668

Other current liabilities (e)

19,301

(1,416)

17,885

TOTAL IMPACT ON EQUITY AND LIABILITIES

638,813

430,785

1,069,598

  1. Reclassification of finance lease assets previously classified in property, plant and equipment as an increase to right-of-use assets
  2. Reclassification of key money paid to a former lessee previously classified in intangible assets as an increase to right-of-use assets
  3. Following the adoption of IFRS 16, right-of-use assets have been recognised for an amount of €476,210,000, and lease liabilities (current and non-current) have been recognised for an amount of €458,519,000
  4. Reclassification of key money paid to a lessor recognised as prepaid expenses and previously classified in other current assets and in other non-current assets as an increase to right-of-use assets
  5. Reclassification of liabilities related to operating leases previously classified in other current and non-current liabilities as a reduction in right-of-use assets
  6. Reclassification of the provision for onerous lease contracts as a reduction in right-of-use assets
  7. Reclassification of current and non-current finance lease liabilities as an increase to lease liabilities

2. Net sales and segment information

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chairman & Chief Executive Officer (CEO) and the Managing Director that make strategic decisions.

They review the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports.

The Chairman & CEO and the Managing Director consider the business from both a channel and a geographic perspective by country. Financial information is available for both, however the channels are the operating segments.

-  5  -

From a channel perspective, management assesses the performance of two operating segments, which are Sell-out and Sell-in and Business to Business:

  • Sell-outcomprises the sales of the products directly to the final customers. These sales are mainly done in the Group's stores and/ or through the Group's website;
  • Sell-incomprises the sales of the products to an intermediate. These intermediates are mainly distributors, wholesalers, TV show channels and travel retailers;
  • Business to Business (B-to-B) comprises the sales of the Group's products to an intermediate who will provide them as free amenities to its final customers. These intermediates are mainly airlines companies and hotels.

In accordance with the aggregation criteria of IFRS 8, the operating segments Sell-in and B-to-B have been aggregated into a single reportable segment as the distribution channels and the credit risks are similar.

From a geographical perspective, management assesses the performance of the different countries.

The management also evaluates the sales performance by brand.

2.1 Performance by operating segment

For the period ended 30 September 2019

Other

Sell-In and

reconciling

In thousands of euros

Sell-Out

B-to-B

items

Total

Net sales

480,936

246,221

-

727,157

In %

66.1%

33.9%

-

100.0%

Gross profit

419,143

170,967

-

590,110

% of sales

87.2%

69.4%

-

81.2%

Distribution expenses

(286,661)

(45,896)

(33,688)

(366,245)

Marketing expenses

(29,206)

(7,027)

(56,470)

(92,703)

Research and development expenses

-

-

(10,312)

(10,312)

General and administrative expenses

-

-

(79,335)

(79,335)

Other gains/(losses), net

(102)

(3)

361

256

Operating profit

103,174

118,041

(179,444)

41,771

For the period ended 30 September 2018

Other

Sell-In and

reconciling

In thousands of euros

Sell-Out

B-to-B

items

Total

Net sales

435,924

159,461

-

595,385

In %

73.2%

26.8%

-

100.0%

Gross profit

378,919

111,609

-

490,528

% of sales

86.9%

70.0%

-

82.4%

Distribution expenses

(269,467)

(28,453)

(29,426)

(327,346)

Marketing expenses

(25,589)

(5,702)

(55,777)

(87,068)

Research and development expenses

-

-

(8,387)

(8,387)

General and administrative expenses

-

-

(62,456)

(62,456)

Other gains/(losses), net

(240)

(29)

810

541

Operating profit

83,623

77,425

(155,236)

5,812

-  6  -

2.2 Performance by geographic area

Net sales allocated based on the geographic area of the invoicing subsidiary are as follows:

Period ended 30 September

2019

2018

In thousands of euros

Total

In %

Total

In %

United States

133,555

18.4%

100,367

16.9%

Japan

107,255

14.7%

96,164

16.2%

United Kingdom

76,810

10.6%

23,173

3.9%

China

76,653

10.5%

67,845

11.4%

Hong Kong (1)

58,298

8.0%

58,436

9.8%

France

48,657

6.7%

45,450

7.6%

Luxembourg - Swiss branch (2)

36,863

5.1%

34,532

5.8%

Brazil

26,457

3.6%

23,869

4.0%

Russia

22,370

3.1%

18,614

3.1%

Taiwan

15,067

2.1%

14,360

2.4%

Other geographic areas

125,172

17.2%

112,575

18.9%

Net sales

727,157

100%

595,385

100%

  1. Includes sales in Macau and to distributors and travel retail customers in Asia.
  2. Sales invoiced by the Company to distributors and travel retail customers in Europe, Middle-East and the Americas.

2.3 Performance by brand

Net sales allocated based on product brand are as follows:

Period ended 30 September

2019

2018

In thousands of euros

Total

In %

Total

In %

L'Occitane en Provence

554,889

76.3%

511,454

86.0%

ELEMIS (1)

84,207

11.6%

-

0.0%

LimeLife

40,702

5.6%

41,049

7.0%

Other brands (2)

47,359

6.5%

42,882

7.0%

Net sales

727,157

100%

595,385

100%

  1. ELEMIS was acquired on 1 March 2019 but its sales and profits have not been consolidated by the Group until April 2019. ELEMIS's sales in March 2019 were then reported together in the first quarter ended June 2019.
  2. Others include the emerging brands Melvita, Erborian and L'Occitane au Brésil.

3. Other gains, net

30 September

2019

2018

€'000

€'000

Net (losses) on sale of assets

(447)

(271)

Government grants for research and development costs

703

696

Other items

-

116

Total

256

541

4. Depreciation, amortization and impairment

Operating profit is arrived at after charging the following:

30 September

2019

2018

€'000

€'000

Depreciation, amortization and impairment

95,427*

30,717

  • excluding the amount of €63,082,000 for IFRS 16, total depreciation, amortization and impairment is €32,345,000.

-  7  -

5. Finance costs, net

30 September

2019

2018

€ '000

€ '000

Interest on cash and cash equivalents

915

589

Finance Income

915

589

Interest expenses

(4,588)

(2,101)

Interest and finance expenses paid/payable for lease liabilities (IFRS 16)

(6,843)

-

Unwinding of discount and financial liabilities

(175)

(175)

Finance costs

(11,606)

(2,276)

Finance costs, net

(10,691)

(1,687)

6.

Taxation

Reconciliation between the reported income tax result and the theoretical amount that would arise using a standard tax rate is as follows:

Period ended 30 September

2019

2018

€ '000

€ '000

Profit before income tax excluding profit/(loss) from joint ventures

32,968

2,589

Income tax calculated at corporate tax rate (Luxembourg tax rate of 24.94%

  as at 30 September 2019 and 26.01% as at 30 September 2018)

(8,155)

(673)

Effect of different tax rates in foreign countries

7,479

8,031

Effect of unrecognised tax assets

(6,310)

(2,259)

Expenses not deductible for tax purposes

(572)

(2,234)

Effect of unremitted tax earnings

98

134

Income tax (expense)/credit

(7,460)

2,999

  1. Earnings per share
    The calculation of basic and diluted earnings per share is based on the profit attributable to equity owners of the Company of €25.0 million for the six months ended 30 September 2019 (as compared to €6.8 million for the six months ended 30 September 2018) and the weighted average number of shares in issue of 1,461,052,171 (basic) and 1,465,920,083 (diluted) for the period ended 30 September 2019 and 1,460,682,471 (basic) and 1,462,556,482 (diluted) for the period ended 30 September 2018.
  2. Dividends
    In line with its policy to declare and pay only a final dividend each year, the Board has recommended that no distribution would be made from the profits of the six months ended 30 September 2019.
  3. Inventories, net
    Inventories, net consist of the following items:

30 Sep 2019

31 Mar 2019

30 Sep 2018

€ '000

€ '000

€ '000

Raw materials and supplies

28,415

28,390

28,293

Finished goods and work in progress

208,713

184,059

171,709

Inventories, gross

237,128

212,449

200,002

Less: allowance

(10,815)

(9,622)

(9,941)

Inventories, net

226,313

202,827

190,061

-  8  -

10. Trade receivables, net

Ageing analysis of trade receivables from due date at the respective balance sheet dates is as follows:

30 Sep 2019

31 Mar 2019

€ '000

€ '000

Current and past due within 3 months

162,909

143,086

Past due from 3 to 6 months

376

1,335

Past due from 6 to 12 months

251

114

Past due over 12 months

337

310

Allowance for doubtful accounts

(2,444)

(1,453)

Trade receivables, net

161,429

143,392

The Group considers that there is no recoverability risk on the net receivables after allowance for doubtful accounts.

11. Trade payables

Ageing analysis of trade payables from due date at the respective balance sheet dates is as follows:

30 Sep 2019

31 Mar 2019

€ '000

€ '000

Current and past due within 3 months

157,555

140,323

Past due from 3 to 6 months

682

388

Past due from 6 to 12 months

59

462

Past due over 12 months

336

74

Trade payables

158,632

141,247

30 Sep 2018

€ '000

108,494

846

211

391

(1,270)

108,672

30 Sep 2018

€ '000

107,937

469

172

500

109,078

-  9  -

MANAGEMENT DISCUSSION & ANALYSIS

Summary:

For the six months ended 30 September

2019

2018

(€ million or %)

(€ million or %)

Net sales

727.2

595.4

Operating profit

41.8

5.8

Profit for the period

25.2

5.6

Gross profit margin (% to sales)

81.2%

82.4%

Operating profit margin (% to sales)

5.7%

1.0%

Net profit margin (% to sales)

3.5%

0.9%

Definitions:

Comparable Stores means existing retail stores which have been opened before the start of the previous financial year, including Company owned e-commerce websites.

Non-comparableStores & others means all stores that are not Comparable Stores, i.e. stores opened, closed and renovated during the previous or the current financial period under discussion, together with other sales from marketplaces, mail-orders, services, LimeLife and own e-commerce websites of ELEMIS.

Comparable Store Sales means net sales from Comparable Stores during the financial period under discussion. Unless otherwise indicated, discussion of Comparable Store Sales excludes foreign currency translation effects.

Non-comparableStore Sales means net sales from Non-comparable Store Sales during the financial period under discussion. Non-comparable Store Sales also include sales from a limited number of promotional campaigns usually held at temporary common areas of shopping malls. Unless otherwise indicated, discussion of Non- comparable Store Sales excludes foreign currency translation effects.

Same Store Sales Growth represents a comparison between Comparable Store Sales for two financial periods. Unless otherwise indicated, discussion of Same Store Sales Growth excludes foreign currency translation effects.

Overall Growth means the total worldwide net sales growth for the financial period(s) presented excluding foreign currency translation effects.

SEASONALITY OF OPERATIONS

The Group is subject to seasonal variances in sales, which are significantly higher in our third financial quarter (between 1 October and 31 December) in anticipation of and during the Christmas holiday season. For the six months ended 30 September 2018, the level of sales represented 41.7% of the annual level of sales in the year ended 31 March 2019 ("FY2019") and the level of operating profit represented 3.9% of the annual operating profit in FY2019. Yet these ratios are not representative of the annual results for the year ending 31 March 2020 ("FY2020").

Seasonality also has an impact on the production schedule and the use of working capital. We generally use a significant part of our working capital between April and November in order to increase the production in anticipation of increased sales and new product launches during the Christmas holiday season.

REVENUE ANALYSIS

In FY2020 H1, the Group's net sales grew by 22.1% at reported rates and 19.0% at constant exchange rates. The encouraging performance was due to decent growth in the second quarter of FY2020 ("FY2020 Q2") across all brands and all key geographic areas. Major channels recorded growth as well, with key contributions from retail, marketplace, web partners and wholesale sales.

-  10  -

The Group's total number of retail locations where its products are sold increased from 3,420 as at 31 March 2019 to 3,428 as at 30 September 2019, an increase of 8 locations or 0.2%. The Group maintained its selective global retail expansion strategy and increased the number of its own retail stores from 1,572 as at 31 March 2019 to 1,593 as at 30 September 2019.

In terms of geographic areas, the fastest-growing market was the UK with more than 200% growth, mainly contributed by ELEMIS. Excluding ELEMIS, growth in the UK was 10.8% in local currency. The US grew 26.0% in FY2020 H1, mainly contributed by ELEMIS. Excluding ELEMIS, growth in the US was -5.1%, resulted from the closure of 12 L'Occitane en Provence stores as well as the high base impact of LimeLife. China, Brazil and Russia all posted double-digit growth in FY2020 H1.

Performance by Business Segment

The following table provides a breakdown of the net sales year-on-year growth (including and excluding foreign currency translation effects as indicated) by business segment for FY2020 H1:

Year-on-year growth

Contribution

to Overall

Growth at

Growth at

Growth at

Growth

actual rates

constant rates

constant rates

€ '000

%

%

%

Sell-out

45,012

10.3

7.1

27.4

Comparable Stores

13,780

4.5

1.7

4.5

Non-comparable

  Stores & others (1)

31,232

24.0

19.8

22.9

Sell-in

86,760

54.4

51.5

72.6

Overall Growth

131,772

22.1

19.0

100.0

  1. Others include sales from marketplaces, spas, cafés, LimeLife and own e-commerce websites of ELEMIS.

Sell-out

In FY2020 H1, Sell-out sales accounted for 66.1% of the net sales and amounted to €480.9 million, an increase of 7.1% at constant rates. This growth was mainly contributed by Non-comparable Stores and others sales, including new stores opened or renovated in last year and this year, marketplaces, spas, cafés, LimeLife and own e-commerce of ELEMIS (non-comparable in FY2020), which altogether grew 19.8% at constant exchange rates. In FY2020 H1, sales of the Group's Web Sell-out channels grew by 40.8% (including ELEMIS) at constant exchange rates, equivalent to 16.2% of the total Sell-out sales. Excluding ELEMIS, sales of the Group's Web Sell-out channels grew by 17.0% at constant exchange rates, equivalent to 13.8% of the total Sell-out sales. The Group's Same Store Sales Growth for FY2020 H1 was 1.7%.

There was an increase of 21 own stores in FY2020 H1, mainly from L'Occitane en Provence.

Sell-in

Sell-in sales accounted for 33.9% of the Group's total sales and amounted to €246.2 million, posted an increase of 51.5% at constant exchange rates as compared to last year. The increase was primarily driven by wholesale of ELEMIS and dynamic growth in web partners, TV and department stores channels of L'Occitane en Provence and Erborian.

-  11  -

Performance by Brand

The following table presents the net sales and net sales growth by brand for the periods indicated:

Growth at

Growth at

reported

constant

FY2020 H1

FY2019 H1

rates

rates

€ '000

%

€ '000

%

%

%

L'Occitane en Provence

554,889

76.3

511,454

85.9

8.5

5.7

ELEMIS (1)

84,207

11.6

-

-

n/a

n/a

LimeLife

40,702

5.6

41,049

6.9

(0.8)

(5.9)

Others (2)

47,359

6.5

42,882

7.2

10.4

7.6

Total

727,157

100.0

595,385

100.0

22.1

19.0

  1. ELEMIS was acquired on 1 March 2019 but its sales and profits have not been consolidated by the Group until April 2019. ELEMIS's sales in March 2019 were then reported together in the first quarter ended 30 June 2019.
  2. Others include the emerging brands Melvita, Erborian and L'Occitane au Brésil.

L'Occitane en Provence remains our core brand, with around €554.9 million sales and accounted for 76.3% of the Group's overall sales. Sales momentum continued in FY2020 H1, with strong supports from attractive new launches such as the new Herbae perfume and the Infusion range, as well as the continuous global success of Immortelle Reset serum. FY2020 H1 ended with 5.7% growth.

ELEMIS is now the second largest brand - with more than €84.2 million in sales and accounts for 11.6% of the Group's sales. Unaudited growth of ELEMIS for FY2020 H1 was around 25.0%. The strong growth was contributed by its digital-first strategy, which drove online sales with mid-double-digit growth in the UK, and high double-digit in the US. The launch of the first class amenity programme with British Airways and the development of department store partnerships further uplifted the growth of the period.

LimeLife returned to growth in FY2020 Q2 after a slow FY2020 Q1, the improvement is explained by the good results of new launches and fading out from the high base impact from the rebranding exercise last year.

The emerging brands together recorded a growth of 7.6% in FY2020 H1. The brands continued their good momentum, with Erborian performing particularly well, recording over 35.0% growth in FY2020 H1 at constant rates.

-  12  -

Performance by Geographic Area

The following table presents the net sales growth for FY2020 H1 and contribution to net sales growth (including and excluding foreign currency translation effects as indicated) by geographic area:

Contribution

to Overall

Growth at

Growth at

Growth at

reported

constant

constant

FY2020 H1

FY2019 H1

rates

rates

rates

€ '000

%

€ '000

%

%

%

%

Japan

107,255

14.7

96,164

16.2

11.5

4.2

3.6

Hong Kong (1)

58,298

8.0

58,436

9.8

(0.2)

(5.6)

(2.9)

China

76,653

10.5

67,845

11.4

13.0

12.7

7.6

Taiwan

15,067

2.1

14,360

2.4

4.9

2.5

0.3

France

48,657

6.7

45,450

7.6

7.1

7.1

2.8

United Kingdom (2)

76,810

10.6

23,173

3.9

231.5

234.7

48.1

United States

133,555

18.4

100,367

16.9

33.1

26.0

23.1

Brazil

26,457

3.6

23,869

4.0

10.8

10.2

2.2

Russia

22,370

3.1

18,614

3.1

20.2

15.3

2.5

Other geographic areas (3)

162,036

22.3

147,107

24.7

10.1

9.8

12.7

Total

727,157

100.0

595,385

100.0

22.1

19.0

100.0

  1. Includes sales in Macau and to distributors and travel retail customers in Asia.
  2. Growth in the UK included contribution from ELEMIS.
  3. Includes sales from Luxembourg.

The following table presents a breakdown, by geographic area, of the number of own retail stores, their contribution percentage to Overall Growth and Same Store Sales Growth for FY2020 H1 compared to FY2019 H1:

Own Retail Stores

% contribution to Overall Growth(1) (2)

Net

Net

openings

openings

Same

YTD

YTD

Non-

Store Sales

30 Sep

30 Sep

30 Sep

30 Sep

comparable

Comparable

Total

Growth

2019

2019

2018

2018

Stores

Stores

Stores

% (2)

Japan (3)

161

7

151

7

2.7

(0.2)

2.6

(0.3)

Hong Kong (4)

36

-

34

-

(0.8)

(1.7)

(2.5)

(19.0)

China (5)

194

4

194

(3)

(0.2)

2.1

1.9

5.7

Taiwan

52

(1)

51

(1)

0.3

0.1

0.4

1.9

France (6)

87

1

82

-

0.7

1.2

1.8

6.7

United Kingdom

72

(2)

74

-

6.2

0.4

6.6

2.7

United States

178

(6)

190

(6)

4.3

(1.5)

2.8

(4.0)

Brazil (7)

186

4

164

(2)

1.7

0.1

1.8

1.0

Russia (8)

110

3

104

1

0.6

0.4

1.1

4.1

Other geographic areas (9)

517

11

511

4

1.5

3.4

5.0

5.4

Total (10)

1,593

21

1,555

-

17.0

4.5

21.5

1.7

-  13  -

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

Represents percentage of overall net sales growth attributable to Non-comparable Stores, Comparable Stores and Total Stores for the geographic area and period indicated.

Excludes foreign currency translation effects.

Includes 34 and 35 Melvita stores as at 30 September 2018 and 30 September 2019 respectively.

Includes 3 L'Occitane stores in Macau and 8 Melvita stores in Hong Kong as at 30 September 2018 and 3 L'Occitane stores in Macau and 10 Melvita stores in Hong Kong as at 30 September 2019.

Includes 5 Melvita stores as at 30 September 2018.

Includes 4 Melvita and 1 Erborian stores as at 30 September 2018 and 7 Melvita and 2 Erborian stores as at 30 September 2019. Includes 75 and 84 L'Occitane au Brésil stores as at 30 September 2018 and 30 September 2019 respectively.

Includes 8 and 11 Erborian stores as at 30 September 2018 and 30 September 2019 respectively.

Include 5 Melvita and 2 Erborian stores as at 30 September 2018 and 9 Melvita and 2 Erborian stores as at 30 September 2019.

Include 56 Melvita, 75 L'Occitane au Brésil and 11 Erborian stores as at 30 September 2018 and 61 Melvita, 84 L'Occitane au Brésil and 15 Erborian stores as at 30 September 2019.

Japan

Japan's net sales for FY2020 H1 were €107.3 million, an increase of 4.2% at constant exchange rates as compared to the same period last year. After a strong FY2020 Q1, retail in Japan was tougher in July and August 2019, even though we had opened several new stores including the exciting spa-café-shop on Omotesando. Retail sales caught up in September 2019 before the consumption tax hike on 1 October 2019. Sell-in, on the other hand, performed well, in particular in local web partners and Amazon.

Hong Kong

Hong Kong's net sales for FY2020 H1 were €58.3 million, a decrease of 5.6% at constant exchange rates as compared to the same period last year. The continued social unrest seriously affected traffic and consumption sentiment in FY2020 Q2, which led to lower retail sales. Yet the retail sales decline was offset by higher travel retail sales elsewhere in the region, in particular Mainland China and Korea.

China

China's net sales for FY2020 H1 were €76.7 million, an increase of 12.7% at constant exchange rates as compared to the same period last year. Sales growth accelerated in FY2020 Q2, thanks to a recovering corporate gifting business in retail, and also dynamic online business with effective campaigns on Tmall, JD.com and the launch of WeChat mini programme and new official website. The Immortelle Reset serum was well received in the market.

Taiwan

Taiwan's net sales for FY2020 H1 were €15.1 million, an increase of 2.5% at constant exchange rates as compared to the same period last year. Same Store Sales Growth was 1.9%, thanks to the successful promotion of Immortelle Reset, the Divine Trilogy ranges and Verbena in FY2020 Q2. The store staff's productivity also improved as a result of the education and training investments.

France

France's net sales for FY2020 H1 were €48.7 million, an increase of 7.1% as compared to the same period last year. Retail sales remained strong with 6.7% Same Store Sales Growth; and e-commerce was particularly dynamic, thanks to the successful Herbae and Verbena promotions, as well as the relaunch of the Immortelle Precious range. Sell-in sales in FY2020 Q2 recovered from a slow Q1, mainly contributed by wholesale of Erborian as well as L'Occitane en Provence brands.

-  14  -

United Kingdom

The United Kingdom's net sales for FY2020 H1 were €76.8 million, an increase of 234.7% at constant exchange rates as compared to the same period last year. The fantastic growth in the UK was mainly explained by ELEMIS. ELEMIS grew more than 30% in FY2020 H1 as compared to the same period last year (unaudited). The growth, excluding ELEMIS, was still strong at 10.8%, showing a further acceleration in FY2020 Q2. While retail remained sluggish, Sell-in posted robust growth, thanks to the successful QVC campaigns and dynamic momentum in department stores.

United States

The United States' net sales for FY2020 H1 were €133.6 million, an increase of 26.0% at constant exchange rates as compared to the same period last year. The growth was mainly driven by ELEMIS. The launch of the digital- first strategy posted encouraging initial results, with a high double-digit growth in ELEMIS's e-commerce sales. The further expansion in the department stores channel also contributed to the good overall results. Excluding ELEMIS, growth in the US was -5.1% in FY2020 H1, mainly affected by the closure of 12 L'Occitane en Provence stores and the high base impact of LimeLife.

Brazil

Brazil's net sales for FY2020 H1 were €26.5 million, an increase of 10.2% at constant exchange rates as compared to the same period last year. Both L'Occitane en Provence and L'Occitane au Brésil brands slowed down in FY2020 Q2 after a dynamic Q1, as the economy was sluggish and retail and online traffic were weak.

Russia

Russia's net sales for FY2020 H1 were €22.4 million, an increase of 15.3% at constant exchange rates as compared to the same period last year. Erborian continued its exceptional growth and posted high double-digit growth, in both retail and wholesale channels. L'Occitane en Provence also posted healthy growth in both Sellout and Sell-in.Sell-in sales recorded good growth in FY2020 Q2, mainly contributed by B2B, distribution and chain wholesales.

Other geographic areas

Other geographic areas' net sales for FY2020 H1 were €162.0 million, an increase of 9.8% at constant exchange rates as compared to the same period last year. Retail and Sell-out sales remained strong, with 5.4% Same Store Sales Growth. L'Occitane en Provence sales were dynamic in continental Europe and South East Asia. Highest contributing markets were Korea, Malaysia, Germany and Italy with impressive growth rates at constant rates of 19.4%, 25.4%, 12.6% and 16.8% respectively.

PROFITABILITY ANALYSIS

Cost of sales and gross profit

Cost of sales increased by 30.7% or €32.2 million to €137.0 million for FY2020 H1 as compared to the same period last year. The gross profit margin decreased by 1.2 points to 81.2% for FY2020 H1, mainly due to the following factors:

  • brand mix effects, mainly from inclusion of ELEMIS which has slightly lower gross margin than the Group's for 1.7 points;
  • increase in use of promotion tools in particular Mini Products and Pouches ("MPPs") and boxes for 0.2 points; and
  • new factory in Brazil and others for 0.1 points.

-  15  -

The decrease in gross profit margin was partly offset by the following favourable factors:

  • favourable foreign exchange rates ("FX") impact for 0.4 points;
  • continuous improvement in production efficiency and lower freight charges for 0.2 points;
  • favourable price and product mix for 0.1 points; and
  • improvement in obsolescence and others for another 0.1 points.

Distribution expenses

Distribution expenses increased by 11.9% or €38.9 million to €366.2 million for FY2020 H1 as compared to the same period last year. As a percentage of net sales, the distribution expenses decreased by 4.6 points to 50.4% of net sales for FY2020 H1. This improvement was attributable to a combination of the following:

  • favourable brand mix effect, mainly contributed by ELEMIS for 3.6 points. ELEMIS's wholesale business model has lower distribution costs as compared to the Group's;
  • favourable channel mix for 0.5 points as a result of higher share of e-commerce, marketplace and Sell-in channels;
  • lower personnel costs growth together with higher leverage on fixed costs for a total of 0.3 points;
  • adoption of IFRS 16 Leases resulted in lower distribution costs for FY2020 H1 for 0.3 points;
  • phasing of consumables, wrapping materials and bags for 0.2 points; and
  • lower store opening and closing costs and others for 0.1 points.

The improvement was partly net off by:

  • investment in LimeLife distribution networks for 0.3 points; and
  • unfavourable foreign exchange impact for 0.1 points.

Marketing expenses

Marketing expenses increased by 6.5% or €5.6 million, to €92.7 million for FY2020 H1 as compared to the same period last year. The marketing expenses as a percentage of net sales decreased by 1.9 points to 12.7% of net sales for FY2020 H1. The improvement was attributable to the following:

  • targeted and controlled investments in advertising, marketing events, promotion tools and Customer Relationship Management tools for a reduction of 0.8 points in total as a result of better resource allocation and tighter cost control, in particular in China, travel retail and the US;
  • leverage of higher sales in existing brands for 0.6 points;
  • phasing for 0.3 points; and
  • brand mix effects for another 0.3 points.

The improvement was partly net off by others and rounding for 0.1 points.

-  16  -

Research & development expenses

Research and development ("R&D") expenses increased by 23.0%, or €1.9 million, to €10.3 million for FY2020 H1 compared to the same period last year. The R&D expenses as a percentage of net sales remained at 1.4% for FY2020 H1.

General and administrative expenses

General and administrative expenses increased by 27.0%, or €16.9 million, to €79.3 million for FY2020 H1 compared to the same period last year. As a percentage of net sales, general and administrative expenses increased by 0.4 points to 10.9% for FY2020 H1. The increase is attributable to a combination of the following:

  • acquisition costs on ELEMIS for 0.7 points;
  • investment in emerging brands, IT projects and sustainability projects for 0.3 points; and
  • one-offitems and litigation reversal in last year for 0.1 points.

This was partly offset by favourable brand mix for 0.5 points and FX effects and others for 0.2 points.

Operating profit

Operating profit increased by 618.7%, or €36.0 million, to €41.8 million for FY2020 H1 and the operating profit margin improved by 4.7 points to 5.7% of net sales. The increase in operating profit margin is explained by a combination of:

  • brand mix effect for 2.3 points, mainly from ELEMIS which has a more profitable wholesale business model;
  • leverage and efficiency for 1.4 points, mainly from leverage of personnel costs and rent with higher sales;
  • more targeted and controlled marketing investments for 1.2 points;
  • favourable FX impact for 0.5 points;
  • favourable channel mix for 0.4 points;
  • phasing for 0.4 points; and
  • IFRS 16 impact for 0.3 points.

This was partly offset by further investments in LimeLife, R&D, HR and IT for 0.9 points; the one-off acquisition costs and fees on ELEMIS for 0.8 points and other factors and rounding for 0.1 points.

Finance costs, net

Net finance costs were €10.7 million for FY2020 H1, €9.0 million higher than the same period last year. The net finance costs comprised €6.8 million relating to IFRS 16 Leases, €3.7 million relating to net interest expenses and finance costs on loans and revolving facilities and €0.2 million relating to unwinding of discount on other financial liabilities.

Note that the Company adopted IFRS 16 Lease accounting from 1 April 2019 without restating last year's figures, there were then no comparative figures for the same period last year in this regard.

For the increase in interest expenses and finance costs from €1.5 million in FY2019 H1 to €3.7 million in FY2020 H1, this was mainly explained by the interests and costs related to loans and credit facilities drawn for acquisition of ELEMIS.

-  17  -

Foreign currency gains/losses

Net foreign currency gains amounted to €1.6 million for FY2020 H1, as compared to net currency losses of €1.5 million for FY2019 H1. The net foreign currency gains comprised €0.3 million realised losses, €0.4 million unrealised losses relating to IFRS 16 Leases and €2.3 million unrealised gains.

The unrealised gains of €2.3 million mainly came from conversion of balance sheet trade related items denominated in Great British pound, Japanese yen and Taiwanese dollar.

Income tax expense

Income tax resulted in a tax expense of €7.5 million for FY2020 H1, as compared to a tax credit of €3.0 million for the same period last year, representing an effective tax rate of 22.8% for FY2020 H1. The increase in income tax this year was mainly due to the increase in profit before income tax, certain tax adjustments in Brazil and a one-time gain last year.

Profit for the period

Net profit for FY2020 H1 increased by 351.6% or €19.7 million to €25.2 million, as compared to the same period last year. The Group adopted IFRS 16 retrospectively from 1 April 2019 but has not restated comparatives for the prior year's reporting period, as permitted under the specific transitional provisions in the standard. If excluding the impacts of IFRS 16, the net profit for FY2020 H1 would have further improved by €4.1 million to €29.3 million. See details in the following table:

2019

Excluding

Growth %

For the period ended

2018

2019

IFRS 16

IFRS 16

Growth %

excluding

30 September

reported

reported

impacts

impacts

reported

IFRS 16

€ '000

€ '000

€ '000

€ '000

Net Sales

595,385

727,157

727,157

22.1%

22.1%

Cost of sales

(104,857)

(137,047)

(137,047)

Gross profit

490,528

590,110

590,110

20.3%

20.3%

Distribution expenses

(327,346)

(366,245)

1,891

(368,136)

Marketing expenses

(87,068)

(92,703)

(92,703)

Research and development

  expenses

(8,387)

(10,312)

(10,312)

General and administrative

  expenses

(62,456)

(79,335)

60

(79,395)

Other gains, net

541

256

256

Operating profit

5,812

41,771

1,951

39,820

618.7%

585.1%

Finance costs, net

(1,687)

(10,691)

(6,843)

(3,848)

Foreign currency gains/(losses)

(1,536)

1,618

(405)

2,023

Profit before income tax

2,589

32,698

(5,297)

37,995

1163.0%

1367.6%

-348.7%

-389.0%

Income tax expense

2,999

(7,460)

1,208

(8,668)*

Net profit

5,588

25,238

(4,089)

29,327

351.6%

424.8%

  • assumed the same effective tax rate percentage as in the reported profit for FY2020 H1.

-  18  -

BALANCE SHEET REVIEW

Liquidity and capital resources

As at 30 September 2019, the Group had cash and cash equivalents of €80.4 million, as compared to €299.4 million as at 30 September 2018 and €144.4 million as at 31 March 2019.

As at 30 September 2019, the aggregate amount of undrawn borrowing facilities was €228.2 million; and the total borrowings, including term loans, bank borrowing and revolving facilities, current accounts with minority shareholders and related parties, amounted to €503.7 million, as compared to €577.9 million as at 31 March 2019.

The financings were mainly arranged with commercial banks and based on Euribor or Libor rates plus a margin. There is one 11-year term loan for an amount of €21.0 million arranged with a bank at fixed interest rate of 0.97% per annum. This term loan is secured by a pledge on business assets related to the shop 86 Champs- Elysées.

Investing activities

Net cash used in investing activities was €38.7 million for FY2020 H1, as compared to €55.9 million for the same period last year, representing a decrease of €17.2 million. The decrease was mainly related to the financial investment of €10.8 million in last year. The capital expenditure also decreased by €6.3 million.

The capital expenditures during the period were primarily related to:

  • addition of key money, leasehold improvements and other tangible assets relating to stores for €17.8 million;
  • work-in-progressand purchases of machinery and equipment for the factories in Brazil and Manosque and office setup cost of the incubator for €12.1 million; and
  • investments in various information technology projects for stores, e-commerce, order management, websites redesign and hardware equipment for €8.8 million.

Financing activities

Financing activities resulted in a net outflow of €67.6 million (excluding the impact of IFRS 16) for FY2020 H1. During the same period last year, it was a net outflow of €1.9 million. The net outflow this year was related to net repayment of borrowings during the period.

Inventories

The following table sets out a summary of the average inventory days for the periods indicated:

For the six months ended 30 September

2019

2018

Average inventory turnover days(1)

286

302

  1. Average inventory turnover days equals average inventory divided by cost of sales and multiplied by 182.5. Average inventory equals the average of net inventory at the beginning and end of a given period.

Inventory net value was €226.3 million as at 30 September 2019, an increase of €36.2 million or 19.0% as compared to €190.1 million as at 30 September 2018. The decrease in inventory turnover days by 16 days was primarily due to ELEMIS having much lower inventory turnover (mainly wholesale business) than the Group's and contributed 40 days.

This improvement was partly offset by:

  • higher finished goods, MPPs and boxes of L'Occitane en Provence, LimeLife and others for 11 days; and
  • unfavourable FX impact for 13 days.

-  19  -

Trade receivables

The following table sets out a summary of the turnover of trade receivables for the periods indicated:

For the six months ended 30 September

2019

2018

Turnover days of trade receivables(1)

38

33

  1. Turnover days of trade receivables equals average trade receivables divided by net sales and multiplied by 182.5. Average trade receivables equals the average of net trade receivables at the beginning and end of a given period.

The increase in turnover days of trade receivables by 5 days for FY2020 H1 was attributed to inclusion of ELEMIS (mainly wholesale sales with similar trading terms as the Group's) for 7 days, unfavourable FX impact for 2 days and partly net off by lower turnover days of comparable brands for 4 days.

Trade payables

The following table sets out a summary of the turnover of trade payables for the periods indicated:

For the six months ended 30 September

2019

2018

Turnover days of trade payables(1)

200

204

  1. Turnover days of trade payables equals average trade payables divided by cost of sales and multiplied by 182.5. Average trade payables equals the average of trade payables at the beginning and end of a given period.

The decrease in turnover day of trade payables by 4 days for FY2020 H1 was attributed to the decrease in existing brands for 28 days and partly net off by inclusion of ELEMIS for 9 days and unfavourable FX impact for 15 days.

BALANCE SHEET RATIOS

The Group's profitability ratios for FY2020 H1 improved significantly as compared to the same period last year. Return on capital employed for FY2020 H1 increased to 1.7% as compared to 1.3% for the same period last year. The increase was a net result of an increase in net profit and also an increase in capital employed. After the financing for ELEMIS acquisition, the Group's liquidity and capital adequacy ratios deteriorated yet remained healthy.

Excluding

Reported

IFRS 16

Reported

Reported

For the period ended

30 September

30 September

31 March

30 September

2019

2019

2019

2018

€ '000

€ '000

€ '000

€ '000

Profitability

EBITDA

138,816

77,563

217,480

34,993

Net operating profit after tax (NOPAT)(1)

33,490

32,297

120,421

9,229

Capital employed(2)

1,977,201

1,549,669

755,397

735,721

Return on capital employed (ROCE)(3)

1.7%

2.1%

15.9%

1.3%

Return on equity (ROE)(4)

2.5%

2.9%

11.6%

0.8%

Liquidity

Current ratio (times)(5)

1.2

1.5

2.2

2.6

Quick ratio (times)(6)

0.7

0.9

1.4

1.8

Capital adequacy

Gearing ratio(7)

39.6%

25.9%

29.4%

7.1%

Debt to equity ratio(8)

84.5%

44.0%

40.0%

net cash

position

-  20  -

  1. (Operating profit + foreign currency net gains or losses) x (1 - effective tax rate)
  2. Non-currentassets - (deferred tax liabilities + other financial liabilities + other non-current liabilities) + working capital. Note that working capital excludes financial liabilities such as dividends and acquisition payment.
  3. NOPAT/capital employed
  4. Net profit attributable to equity owners of the Company/shareholders' equity at period end excluding minority interest
  5. Current assets/current liabilities
  6. (Current assets - inventories)/current liabilities
  7. Total debt/total assets
  8. Net debt/(total assets - total liabilities)

FOREIGN EXCHANGE RISK MANAGEMENT

The Group enters into forward foreign exchange contracts to hedge anticipated transactions, as well as receivables and payables not denominated in our presentation currency, the Euro, for periods consistent with our identified exposures. As at 30 September 2019, the Group had foreign exchange derivatives net liabilities of €1.5 million in the form of foreign exchange forward contracts and interest rate derivatives (in accordance with fair market valuation requirements under IFRS). The notional principal amount of the outstanding sales forward exchange derivatives were €108.1 million.

DIVIDENDS

At the Board meeting held on 17 June 2019, the Board recommended a distribution of a gross final dividend of €0.0297 per share for an aggregated sum of €43.4 million or 36.7% of the FY2019 net profit attributable to the equity owners of the Company. The amount of the final dividend was based on 1,461,052,171 shares in issue as at 25 September 2019 excluding 15,912,720 treasury shares. The shareholders of the Company approved the final dividend at the annual general meeting held on 25 September 2019. The dividend was paid on 18 October 2019.

In line with its policy to declare and pay only a final dividend each year, the Board has recommended that no distribution would be made from the profits of FY2020 H1.

POST BALANCE SHEET EVENTS

On 17 October 2019, the Group signed a letter of intent with the current distributor for the Middle East region to create a new company that would be held by L'Occitane International S.A. for 51% and by the distributor for 49%. The objective is to acquire the existing business of the distributor and to develop the business in this region. The cost of acquisition of the existing business, to be borne by the new company, is estimated to be $74.5 million.

A new financing is in place since 17 October 2019 on the NEU CP market which is a commercial paper market in the Euro zone ruled by the Banque de France. The maximum amount that L'Occitane International S.A. will issue will be around €300 million.

STRATEGIC REVIEW

The Group saw clear advances in FY2020 H1. Compared to the same period in FY2019, sales accelerated briskly, especially in the second quarter. Most importantly, each of the Group's brands and geographic areas contributed positively to this result.

This broad-based outcome was enabled by the Group's 'Pulse' strategy, now in its second year, to build trust, pursue sustainable growth and drive profitability. The strategy is anchored by five pillars: empowering teams; executing fundamentals especially in a retail context; adopting an omni-channel, mobile and digital approach; engaging customers; and strengthening brand commitments.

-  21  -

In addition, the Group's largest acquisition to date - ELEMIS, was a strong driving force. It unlocked new higher-margin markets and sales channels while contributing to the Group's flourishing skincare image. Another important driver was the continued growth of the Group's namesake brand, L'OCCITANE en Provence, despite prevailing factors in the global macroeconomy.

Although the Group achieved strong financial performance in FY2020 H1, the holiday season falls within its third financial quarter (between 1 October and 31 December), towards which its historical sales patterns are normally positively skewed. As a result, the Group's performance in FY2020 H1 should not be representative of its annual results.

Encouraging performance of ELEMIS demonstrates effectiveness of targeted skincare investments

ELEMIS was the biggest contributor to the Group's growth during FY2020 H1, with sales in the second quarter in particular exceeding expectations. A global distributor and innovator in premium beauty and skincare, ELEMIS's wholesale and distribution channels, including digital, retail distribution, QVC, professional spa and maritime, both complemented and expanded the Group's existing omni-channel strategy.

The brand also provides new and growing revenue streams in the developed markets of the U.S. and U.K. - currently 80% of its revenue - with the U.K. delivering in excess of 30% growth. Sales in the U.S. grew even faster as a result of the brand's 'digital-first' strategy, which the Group is confident of sustaining.

ELEMIS is also further bolstering the Group's growth through materialising synergies with L'OCCITANE en Provence's existing distribution in a disciplined manner, notably in Asia and Russia as first steps. For instance, the Group plans to extend ELEMIS's successful digital-first strategy into several markets in Asia, having already opened a store on TMall Global (with plans to launch domestically in China sometime in 2020), alongside selective retail presence in the near future.

Unique identities underpin the multi-brand strategy

With six brands under the Group's portfolio, L'OCCITANE en Provence accounted for 76% of the Group's sales in FY2020 H1, down from 86% in the same period last year. This diversification is expected to continue as each brand continues to build on their unique identities.

For L'OCCITANE en Provence, the Group continued to strengthen its face care image, leveraging the global success of the Immortelle Reset serum hero product. It recently launched a 50mL version to re-animate the range and offer a value proposition for repeat customers. In FY2020 H1, the Group sold over 500,000 units of the Immortelle Reset serum, on track to exceed 1 million units for the full year. The brand's dynamic sales growth was also supported by attractive new product offerings, such as the Herbae and Cherry Blossom ranges.

LimeLife returned to growth in the second financial quarter after overcoming the impact of its earlier rebranding, as well as other challenges related to its growth and expansion into new markets. The Group remains optimistic about LimeLife's innovative and scalable social media-based business model.

Meanwhile, the Group's emerging brands, Melvita, Erborian and L'OCCITANE au Brésil continued to progress according to plan. Melvita saw a tougher first half, due to some specific issues on recruitment of frontline staff and new customers with its specialised product portfolio. However, its signature beauty oils and floral waters, such as the Argan Oil and Rose Floral Water, continued to be fan favourites and recorded a high level of repurchases.

Erborian's Korean roots and French flair continued to prove its appeal in western countries. The brand occupies a niche positioning that bridges skin care and makeup, helping it achieve over 35% growth in FY2020 H1, and maintaining its profitability.

Meanwhile, L'OCCITANE au Brésil helped drive overall sales growth for the Group in Brazil in FY2020 H1. The brand continued to delight customers with its evocative visual brand identity, inspired by the Brazilian approach to creating cosy, simple and hospitable homes. The brand was also introduced into Japan as a limited collection, which excited customers and drove traffic.

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Engaging content creation and collaborations

The Group continued to bolster its performance in key markets with highly visible and innovative marketing campaigns. This year, the Group hosted a new edition of its 'Balloon Journey' brand event, bringing L'OCCITANE en Provence's true stories and natural ingredients to an expanded number of cities. In China, the event is currently at its third stop in Wuhan, and will have toured at a total of five Chinese cities by January 2020. The Group invited its brand ambassadors Chen Duling and Zhu Yilong, alongside KOLs, to appear at the stops Shanghai and Hangzhou, drawing crowds and extensive media exposure. Similarly in Japan, the Group held the 'Balloon Journey' event in Yokohama this year, and invited a Japanese director to produce a second mini- movie to showcase the wonders of Provence.

In North America, the Group launched a content-led campaign poking fun at common mispronunciations of the word "L'Occitane". Featuring engaging video and 'branded memes', the campaign starred the Group's own retail and corporate employees.

The Group also continued to work closely with beauty bloggers and vloggers, as well as with social media platforms to reach different streams of customers.

Delivering memorable omni-channel customer experiences

The Group continued to invest in its omni-channel distribution, which aims to provide a seamless experience for customers to discover the Group's products and brands, making the path-to-purchase fun, memorable and convenient.

While physical store expansion has become much more selective, the Group continued to create fresh and exciting retail experiences. In Japan, the Group recently opened a store that also houses a boutique café and petit spa in Tokyo's stylish shopping boulevard Omotesando. On the other side of the world in London, the flagship store on Regent Street recently debuted an exclusive café in partnership with EL&N, known for its all-pink interiors and photogenic lattes. Meanwhile in New York, the flagship store on Fifth Avenue regularly transforms itself along with the seasons, currently transporting customers to an enchanted forest to discover holiday limited editions.

The Group also expanded its online presence, for example on Chinese online marketplaces through effective TMall campaigns, introducing a WeChat mini program, and launching a new official website for the China market. In FY2020 H1, the Group's Web Sell-out channels grew 40.8% at constant exchange rates, equivalent to 16.2% of total Sell-out sales.

Driving profitability through targeted investments

As part of the focus on profitability under the Pulse strategy, the Group has made the conscious effort to concentrate marketing investments on major projects. In FY2020 H1, close to half of its total marketing spending supported major campaigns, such as the holiday campaign and celebrities campaigns; major products - Immortelle Reset serum and Immortelle Precious range; as well as major channels, such as TMall and JD in China.

The Group's effort to invest in a disciplined and targeted manner has been rewarded with improved profitability in FY2020 H1. Notwithstanding unforeseen circumstances, the Group expects enhanced profitability in FY2020 and beyond.

Sustainability lies at the heart of L'OCCITANE

The Group remains firmly committed to reducing plastic use, respecting biodiversity, supporting fair trade, promoting craftsmanship, caring for eyesight, and empowering women, driven by a deep passion and respect for nature that has been part of its DNA for more than 40 years.

In February 2019, the Group signed a multi-year supply agreement with Loop Industries to transition to 100% sustainable PET plastic packaging by 2025. Recently in November 2019, the supply agreement has been expanded, which will allow the Group to meet its 100% recycled bottles goal earlier than expected. This represents a significant step in the Group's efforts to achieve a circular economy that gives polluting materials a second life.

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For more information on the Group's social responsibility and environmental sustainability, please refer to its annual Environmental, Social and Governance report.

OUTLOOK

Looking forward to the second half of FY2020, the Group will continue to implement differentiated strategies for each of its brands, encouraging them to stay agile and autonomous, while still capitalising on synergies. The Group will further build on the initial achievements it has made in attaining sustainable growth and profitability, in line with its Pulse strategy.

The Group is confident that the upcoming holiday season will help energise its profitability drive, given the strong marketing calendar and disciplined investments.

Despite the ongoing risk to consumer sentiment posed by macroeconomic developments, the Group is convinced that the steps it has taken to improve its fundamentals, prioritise an omni-channel approach and empower its teams will safeguard its future profitability and ability to deliver value to its shareholders.

AUDIT COMMITTEE

As required under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, (the "Listing Rules"), the Company has an audit committee ("Audit Committee") comprising of three non- executive Directors, two of whom are independent non-executive Directors. The Audit Committee has reviewed the accounting principles and practices adopted by the Group and has also discussed auditing, internal controls and financial reporting matters including the review of the consolidated results of the Group for the six months ended 30 September 2019.

CORPORATE GOVERNANCE

The Board reviews its corporate governance practices regularly in order to meet the rising expectations of shareholders, to comply with increasingly stringent regulatory requirements and to fulfil its commitment to excellence in corporate governance. The Board is committed to maintaining a high standard of corporate governance practices and business ethics in the firm belief that they are essential for maintaining shareholders' returns.

The Company has complied with all of the code provisions of the Corporate Governance Code and Corporate Governance Report (the "CG Code") set out in Appendix 14 to the Listing Rules throughout the six months ended 30 September 2019 save as disclosed below:

Code provision A.2.1 of the CG Code provides that the roles of chairman and chief executive should be separate and should not be performed by the same individual.

The role of the Chief Executive Officer (the "CEO") of the Group has been assumed by Mr. Reinold Geiger ("Mr. Geiger"), the Chairman of the Board. This deviation is deemed appropriate as it is considered to be more efficient to have one single person to be the Chairman of the Company as well as to discharge the executive functions of a CEO and it provides the Group with strong and consistent leadership. The Board believes that the balance of power and authority is adequately ensured by the operations of the Board which comprises highly experienced individuals. There are four independent non-executive Directors in the Board. All of them possess adequate independence and therefore the Board considers the Company has achieved balance and provided sufficient protection of its interests. Moreover, Mr. Geiger is not a member of any of the committees (Audit Committee, Nomination Committee, and Remuneration Committee) and each committee is composed of a majority of independent non-executive Directors. Nevertheless, the Board will regularly review the management structure to ensure that it meets the business development requirements of the Group.

Furthermore, Mr. Geiger is supported by the Group Managing Director, Mr. Silvain Desjonquères ("Mr. Desjonquères"), appointed on 25 April 2018. Mr. Geiger is responsible to the Board and focuses on Group strategies and Board issues, ensuring a cohesive working relationship between members of the Board and management. Mr. André Hoffmann ("Mr. Hoffmann"), Vice-Chairman of the Board, works closely with Mr. Geiger on all important Board issues. Mr. Hoffmann and Mr. Desjonquères have full executive responsibilities in the business directions and operational efficiency of the business units under their respective responsibilities and are accountable to Mr. Geiger.

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Code provision F.1.3 of the CG Code provides that the company secretary should report to the Chairman and CEO.

Mr. Karl Guénard ("Mr. Guénard"), company secretary of the Company, is based in Luxembourg and reports to Mr. Thomas Levilion ("Mr. Levilion"), an executive Director and the Group's Deputy General Manager whose primary responsibility is to oversee the Group's finance functions worldwide. The Company believes this is appropriate because Mr. Guénard and Mr. Levilion work closely together on a day-to-day basis including dealing with matters relating to corporate governance and other Board-related matters.

DIRECTORS' SECURITIES TRANSACTIONS

The Company has adopted the Model Code for Securities Transactions by the Directors of Listed Issuers (the "Model Code") set out in Appendix 10 of the Listing Rules. Having made specific enquiry of all Directors, they have confirmed that they have complied with the Model Code during the six months ended 30 September 2019.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES

Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed securities during the period under review.

GENERAL INFORMATION

The interim consolidated financial statements of the Group for the six months ended 30 September 2019 have been reviewed by the Audit Committee.

PUBLICATION OF INTERIM REPORT

The interim results announcement of the Company is published on the websites of the Hong Kong Stock Exchange (www.hkexnews.hk) and the Company (group.loccitane.com). The interim report will be dispatched to the shareholders of the Company and will be available on the websites of the Hong Kong Stock Exchange (www.hkexnews.hk) and the Company (group.loccitane.com) in due course.

By Order of the Board

L'Occitane International S.A.

Reinold Geiger

Chairman

Hong Kong, 25 November 2019

As at the date of this announcement, the executive Directors are Mr. Reinold Geiger (Chairman and Chief Executive Officer), Mr. André Hoffmann (Vice-Chairman), Mr. Silvain Desjonquères (Group Managing Director), Mr. Thomas Levilion (Group Deputy General Manager, Finance and Administration) and Mr. Karl Guénard (Company Secretary), the non-executive Director is Mr. Martial Lopez and the independent non- executive Directors are Mrs. Valérie Bernis, Mr. Charles Mark Broadley, Mr. Pierre Milet and Mr. Jackson Chik Sum Ng.

Disclaimer

The financial information and certain other information presented in a number of tables have been rounded to the nearest whole number or the nearest decimal. Therefore, the sum of the numbers in a column may not conform exactly to the total figure given for that column. In addition, certain percentages presented in the tables reflect calculations based upon the underlying information prior to rounding and, accordingly, may not conform exactly to the percentages that would be derived if the relevant calculations were based upon the rounded numbers.

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L'Occitane International SA published this content on 25 November 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 November 2019 08:32:00 UTC