Good evening, ladies and gentlemen. I'm delighted to welcome you to this presentation of the half year results. I believe you received the reports which Jean Jacques Guillenie passed around. I believe everybody got a copy of the report, so you got the figures. I imagine that comments are unnecessary because figures speak for themselves.
But I'll say a few words just to provide some comments on the figures. This was an outstanding half year because overall growth was 16%, encompassing all our business areas. We had double digit growth in all business areas. And in fact, we have profit from recurring operations up 33% 20% for the operating margin. So how can you account for such remarkable growth?
And here, I would like to pay tribute to all the teams that were involved in this half year's hard work because, of course, the figures are all very well, but they are the result of a lot of work by motivated teams but also creative artists and a fine production units. And we have to remember that these units are located in France, most of them and in view of the growing figures, we are extending capacity. Gradually, we are expanding our workshops. So this is sustained and intense work. We and of course, this is guided by creation creativity that is carried by a global market, which is quite different from last year because this year, we are enjoying resumed growth and therefore, business is buoyant, especially in a number of Asian countries, but also in the United States and indeed in some European countries, at least as far as we are concerned, we should also point out that the this performance reflects the specificity of our group because in this industry, very few groups can boast the same kind of success in their product line.
At LVMH, we have a well established strategy. We are very discriminating in choosing and determining our products and that this is what makes us unique in the luxury industry. Of course, referring to cash flow, cash flow again is excellent, so that the debt to equity ratio is down to 20%. And of course, we are down from the highest historical levels we had in previous years. So of course, this is all looking very good.
You might ask whether this good performance in H1 will be repeated in H2. Well, of course, I'm not about to give you a verdict on that. We have to remain cautious. But what I can tell you is that the trend in July has been very much the same as in the 1st 6 months of the year, but one has to remain cautious because, of course, the global economic outlook is uncertain. We know that there have been a number of hiccups over the past few years.
We do not know whether exchange rates will fluctuate. There is a high amount of volatility on the exchange markets. But having said all that, we are fairly confident on H2, and we believe that the success of our products and because our products, of course, have very unique qualities that attract a high end clientele, we have reason to believe that business will be buoyant as well. And indeed, we gained market shares in all business areas. Now in 2010, we shall pursue well, in the second half of the year, the same cost control policies, and that has enabled us to improve profit as a ratio to revenue.
We are also pursuing CapEx. We are investing both in distribution and production. And of course, our geographic distribution is aimed at the most promising countries. And in particular, we have opened a number of shops for our brands, including Louis Vuitton itself, very successfully indeed. We've started 2 new outlets in China, and we shall continue very selectively to expand our distribution network.
Now we'll have a number of products to be launched in the second half of the year. Of course, the one challenge we do have, and indeed, this is well, to some extent, it's a waiting list situation for many of our goods because demand is greater than supply. For certain products, our production capacity simply doesn't match demand. Of course, it's an enviable challenge, I would say. But at the same time, it does mean that we have to work out our production timetable more effectively if supply is to meet demand.
So now that's the general outlook, and I'll ask Jean Jacques to look at the figures more closely.
Thank you. Good evening. I'll begin with revenues. So revenues up 16 favorable exchange currency impact of 2%. You'll see how that developed during the quarter.
Organic growth by business segment, Wines and Spirits put in a remarkable performance, up 18%, a slight slowdown in the second half. Some destocking, Christophe will return that later if there are questions on that. Destocking effect was particularly marked in the first half, but organic growth of 16% in the Q2, so that's a favorable trend. Fashion and Leather Goods, 14%, a marked improvement, a marked acceleration, should I say, in Q2. Worth noting that Fashion and Leather Goods, same time last year, was already up.
So growth on growth, which isn't the case across the board. Very good performance of perfumes and cosmetics, up 10% organic. Watches and jewelry that experienced an early a challenging beginning of the year in 'nine are up sharply, 24%. Selective retailing, which was also up last year at the same period, is adding growth to growth, very respectable performance, up 13%. Overall, our top line growth that is indeed very interesting.
Let's stay with the top line. So you have the breakdown here of group total group growth between the two quarters and the summary of the first half. You see in dark blue that organic growth of the group was pretty consistent across quarters, up 13% Q1, 50% Q2. Currency impact, it was negative in the Q1. As you see, it's positive by 7% in the second.
So growth in euros is, of course, far higher in Q2. The geographic breakdown of revenue by region drop in Japan, increase in Asia and this balance, 3 thirds between the 3 major continents, which one of the group's strengths, as you know. More interesting, the change of revenue by region, by local currency, you see that the U. S. Remain on a sustained level of business, 20% for the first quarter, plus up 18% for the first half, double digit growth for the first half.
Things looking very good. Japan figures less good even we saw the not satisfactory. We're still at minus 6% on a par for both quarters. Asia remains very good, up 21%, consistent across the two quarters, driven by China, which is up 27%, but also by other countries, Macau, Hong Kong or Korea to a lesser extent. And it's a pleasant surprise, well, not really a surprise because the number was at that level at the first half, up 11% for Europe.
Europe is viewed as the laggard in the economic situation, double digit growth in Europe. We're pleased with that. Turning now to the summarized income statement. I won't return to sales that I've already discussed. Gross margin up 19%, for sales up 16%, improved gross margin, 64.9 percent gross margin.
Selling and admin expenses growing not as fast as revenue. You may have questions on that number effects in terms of selling expenses. Clearly, it's the effect of the increase in the size of networks and also our increased spend in advertising behind our brands for admin expenses. There were a number of complicated effects that I won't detail here, but if you have questions, I'll take those later. This lag between the increase in the gross margin and the selling and admin expenses lead it to an improvement in our profit from recurring operations, up 33% over the period.
Other income and expenses down sharply over last year and are essentially the intangible depreciation. So the operating profit is up 40% earlier late on the financial income. Not much change there. Tax, 28.9 percent pretax income, slightly better than last year. Minority interest slight increase at DFS and White NC, the minority interest.
They have increased and in total net profit up 53%, which is quite remarkable and exceeds for the first time for a first half, tops the €1,000,000,000 mark without any specific positive one off exceptionals to account for that. A word on the profit from recurring operations by business group. Very good performance, as you can see on the right hand column. Everyone's posting double digits but higher than those in eurosales. So the operating margin by business is up over the first half.
Good performance by Wines and Spirits in spite of a way of accounting for the harvest, which is very unfavorable as champagne yields are down. Good results for Fashion and Leather Goods up 28%. Perfumes, Cosmetics putting an extraordinary result up 50%. I'm not sure we'll be able to repeat that performance in the second half. There are some phasing issues there between the two halves of ad spending in particular, but one, of course, must save at the moment.
Watches and jewelry more than doubled. We're talking 3 figure increase, more than doubled their result. Good performance by TAG Heuer, excellent performance by Zenith in those figures, beginning to reap the benefits of the efforts put in over a year ago. Very good performance by selective retailing, up 36% when whereas revenue increased only by 15%, give or take. So that's a very remarkable figure.
So in total, 33 percent increase in the profit from recurring operations. A word on the currencies. Here, it's generally negative. Here, it's positive. Here, that's very useful, €116,000,000 positive currency impact over the first half, not much of a dollar impact because the dollar bit on average over the half remained stable at around 1.33 over the same period last year, picked up at the end of the half, but on average, it's pretty much flat.
So essentially, on the yen and secondary currencies that we generated those impacts to the tune of 8% of profit from recurring operations. A word on the net financial expense. The first line, of course, cost of net financial debt, sharply down. The debt, average debt over the half is sharply down. Financial expense is down, interest rates also down.
2nd reason, to bring down the cost of net financial debt. It could have dropped more. At least the cost could have decreased further. But as with many companies, we're up to a certain rigidity of our gross debt that increased that declines according to the maturities. So the that leads to an increase in cash.
And in today's market conditions, it's more or less impossible to obtain significant return on cash. So a sizable part of our cash doesn't yield very much. Of course, we can't contend with that. We're going to use that cash to buy back debt and to reduce that gap that is affecting our financial expense. So, an ineffective portion of currency hedge.
Cost of our hedges is an unpredictable item, as you know. It increases hugely for those interested in the technicalities of the thing. The dollar has increased substantially over the half. Well, the value of currency hedges, or at least the time value of currency hedges, has reduced sharply. All the currency hedges have moved outside the currency.
So there, we booked a significant portion of this cost in the P and L, which accounts for the increase in this number. The other items are not particularly significant. We've got no specific comment. A word on the balance sheet, a solid financial structure, nothing new. It's very robust.
Just a word that struck me in preparing these slides is that equity accounts for over half the balance sheet. That's the strength assigned of the balance sheet. We've increased in inventories. We'll return to that. And of course, there was a currency effect.
We increased our equity during the half, but nothing exceptional apart from that. A word on cash flow. Cash from operations, as Mr. Arnoux said, is cause of satisfaction for the first half. During the half, we generated cash before changes in working capital of GBP 1,100,000,000 last year.
Over the full year, we generated over GBP 2,000,000,000 But if I recall well, in 2,008, I believe we generated CHF 1.350,000,000. So over a single half, we generated almost as much as during the full year, CHF 2,000,000,000. That's a commendable, remarkable performance indeed, attributable to various levels. Of course, cash from operations, which, of course, reflects the operating results that we saw earlier and also a change in working capital requirements. We're able to contain those, notably inventories.
Last year, let's not forget that we suffered from a number of nonrecurring items, such as the new economy modernization law, which brought down the supplier debt wasn't the case this year Operating investments, slightly up, but below what we had in the first half of twenty eighteen. But of course, that's up quite logically with the upturn over the full half. So free cash flow sharply up and in absolute terms very considerable. On the basis of the cash flow analysis, we considered that our dividend and interim dividend policy wasn't fully adapted. Our interim dividend, about 20% of the total.
We looked at CAC 40 companies that pay out interim dividends, aren't many, but it's of the order of 40%, 45% of the total. So in order to rebalance the cash flow of the year, not this one but the net cash flow after payment of the dividend, we elected to double the interim dividend to move from €0.35 to €70 per share, which will lighten the dividend burden in the first half and increase it in the second half and will redress the balance over the year. This, of course, doubling of the interim dividend is not necessarily significant of the final dividend number that we'll announce next year, but of course, we'll seek to reflect in the dividend trend the development of our business. On net financial debt, this is an untypical chart that we wanted to illustrate over several years. Generally, net debt at 30th June is higher than that of 31st December for reasons I just stated.
Payment of the balance of the dividend that is greater than that of the interim dividend, so we used up more cash during the first half. It was the case this year. But given the cash flow that saw earlier, debt at the 30th June is lower than that of 31, so EUR 2,000,000,000 €565,000,000 and Mr. Arnaud said, gearing at 16%, which is a relatively low level. That's what I wanted to say about the results.
Over to Tony. Thank you.
Good evening. Let us look at all the business areas. I will give you an overview, but then my colleagues can take specific questions. So let us start with Wines and Spirits, and we have this playful sleeve presentation of the Hennessy Cognacs. The sales, the revenue in this department were up 18% in organic growth, and the profits from recurring operations were up 35%, as Jean Jacques pointed out.
Good performance in all areas: the U. S. And Europe, about 20% and Asia, which held out beautifully in 2009, is still up 9%. The market shows signs of recovery after destocking in 2,009. Our brands have a consistent pricing policy.
They have their premium positioning, but of course, we have worked on advertising as well to maintain our prices. Champagne volumes are up 23% with a good development, good advance on the high prestige vintages. The cognac volumes are up 16%, thanks to dynamic Asian markets, but also the successful launch of Hennessy Black in the United States. For the 2nd part of the year, our brand portfolio is in a good position to take advantage of the recovery. Our strategy is to focus our efforts on the great classics Dom Perignon, Verve Clico yellow label, but also innovation programs at Hennessy, Glenmorengie and Belvedere, which got good response from the customers.
And we are rolling out new marketing efforts to secure new market shares. This is the new advertising campaign for Louis Vuitton to move on to fashion and leather. The revenue in this business is up in 14% in organic growth. The profits from recurring operations are up 28 percent. All regions are doing are growing rapidly except for Japan.
As Mr. Arnaud pointed out, Louis Vuitton has been able to confirm its amazing its powerful appeal on this period. All the business areas are contributing to this growth from leather goods to shoes and indeed ready to wear. And our dealers network is have has extended to 4 51 stores. We opened 2 shops in Shanghai, and we inaugurated the house in New Bond Street.
And for the other brands, we have good recovery for Fendi, thanks to the peekaboo line. And profitability is up, and all other brands in their specific stores and boutiques are doing well. Now this is the London boutique, and this shows the brand's ability to combine its roots with modern modernity, with a modern look. And for the second half of the year, Rui Vito is looking at a dynamic plan to launch new products, in particular, looking at a new product line for leather goods in supple leather. And we also are looking at new territories, and we will start the tannery de la commite leather workshop, which will improve both production and quality.
Fendi is also innovating with new product lines, and Marc Jacobs is expanding or is speeding up its world expansion, but we remain selective in terms of costs and CapEx throughout the group. Perfumes and Cosmetics, revenue is up 10% in organic growth. Profit from recurring operations 50%. Revenue is climbing steeply in the U. S.
And Asia with the combined effect of stock replenishment and a small recovery in resumption, I meant, in final demand. Parfums Christian D'Or has performed outstandingly with its unique position in the universe of couture and developed its classic lines. We have good advertising with Miss Dior, Sherry and Eau Sauvage, and we are developing this new cosmetic line, Captur Total 1 Essential, which combines high effectiveness and technology. Now good performances as well for the French brands, Guerlain and Givenchy, with the innovations at the end of 2,009 turning into a real success. And Benefit and Make Up Forever are growing rapidly as well and proving to be very profitable worldwide.
For the second half of twenty ten, we are looking at new market shares through sustained innovation and new investment in advertising. Of course, the priority is on Parfums Christian Dior looking at lipstick, Rouge Dior. And internationally, we will be rolling out Eau Sauvage and a new figure for Miss Dior Sherry. And the other brands also are producing novelties. We have an anti aging cosmetic for Guerlain.
We are expanding the play product line at Givenchy and new fragrances at Fendi and Pucci. Now the charismatic charm of Steve McQueen and the presence of Hublot in football have enhanced our image for watches and jewelry. Revenue is up 24% and profits from recurring operations, 145%. Now revenue is up in all regions, mostly in the U. S.
And in Asia. Regarding watches, we have the double bound effect of restocking for our retailers but also an upturn in demand from our final end users, mostly in specific boutiques and the innovation programs looking at the emblematic lines of Maisons were also very successful. We have the chronographer and by El Primero and the rings by Josephine Dejermay, very successful. You have them up on the screen. Likewise, we worked on cost cutting and were able to improve operating profitability.
Now our ambassadors are very much involved in their work here. You have Leonardo DiCaprio working in our watchmaking workshop. Now for the second half of the year, we propose to strengthen our market shares. Restocking has been taken care of. And now the engine for growth was shown at the Basel Fair.
We were looking more mostly at the high potential markets, including China, where we have some ways to go. TAG Heuer has been celebrating its 150th anniversary, its 150th birthday, should I say, with advertising looking at its involvement in automotive in motorsports. And 2010 is also a year where watch brands will be speeding up their industrial integration. The NIO plant in Uber for Hublot watches is integrating high end expertise in the watchmaking industry. And then we have selective brands in for single brands to improve visibility in some of our key cities such as New York, Singapore and Paris.
And now to selective retailing, we have our organic growth is 13%, profit from recurring operations, 30 up 36%. Revenue outstanding throughout especially in Asia, partly particularly dynamic in Asia. DFS is growing remarkably with the Chinese clientele. We have Galleria de Macau, which is a real is a truly successful operation. And our flagship store at the Hong Kong Sun Plaza is expanding and develop and pursuing its renovation.
In the short term, we have maybe less results to show for in Abu Dhabi and Mumbai, but these are very promising in the long term. We also have fast development for Sephora in a number of regions, in particular in China, but also in the Middle East where we have good visibility for Sephora, but also Internet sales, which are taking up a very powerful market because we also work hard on maintaining customer relationships. And the same concept we are developing we have decided to take a majority stake in Saks in Brazil, which is an opportunity to pursue to develop the brand, and we have as many as 1,000 shops open in the first half of twenty ten. And the beautiful glass ceilings of the glass roof, I beg your pardon of Maison de Dicien show, our effort to develop the identity of Bon Marche and that will be developed with the home Baltazar men's department there. And in DHF DFS, I beg your pardon, is also expanding its services to Chinese travelers.
And in particular, we will complete the 2nd Galeria in Macau, City of Dreams. And also, we have to continue our cost cutting policies. This was providential last year, and we will continue improved profitability next year. Now of course, for Sephora, our priority is to expand our market shares, to expand also our network of shops and boutiques, but we are also looking at new territories with high potential to improve our global leadership. We're working in developing those items that make us unique, make Sephora unique, and a strategic investment has been decided to have online sales producing technological support but also expanding our presence in Europe.
Thank you. Well, ladies and gentlemen, we're now open to take your Yes. Good evening. Antoine Belge, HSBC. Three questions.
Firstly, Mr. Arnaud, you mentioned waiting lists at Louis Vuitton and possibly a question of under capacity. Could you remind us how many factories Louis Vuitton has? And what are the expansion plans for the next 3 to 5 years? Secondly, free cash flow generation was very strong, especially for a first half without there being a projection to the end of the year, where we can estimate it.
Mr. Guoni, I think, mentioned net debt that should be below the €2,000,000,000 mark at the end of the year will no doubt be beyond that. I mean, can we expect a share buyback program or an exceptional dividend perhaps earlier than expected? And third question, the figures in Europe, which are very good, as you indicated, are they fully attributable to the boost in tourism, thanks to the currency impact? Or do you know local customers who continue to buy?
And if so, in what country? Well, Mr. Karsel will tell you about the factories, the plants. I mean, our workshops are many in number that we have a program, but this program we don't publish the program, so we can tell you about the workshop that's under construction because I mean, it's difficult to hide, but the rest is secret. So Yves Karsee will give you some details about the workshop that's under construction.
But that's very interesting.
All right. Well, as you may have noticed, we have enjoyed steadily growing demand, and we've decided to work at expanding our capacity for leather goods. Of course, it's only one item, but we have hired as many as 320 leather smiths leather makers, which is quite a number in itself. But we've started a new site that was slightly delayed because we had difficulties with the local authorities, but it is in in the dome. It's a beautiful site.
It of course, it is rather inconsistent with our this is a rendering, by the way. It's not a real thing. This is a 3 it is CGI. But the roof is all grass, and so we can not only this improves the thermal balance, but also it makes for better integration in the natural site. We've decided to open this out in the country.
And when you are in a beautiful area like this, people feel like making beautiful products. And in Dussay, we have leather workers in near the Mont Saint Michel, where they will be able to look at Vertcor outside the window, and that will be most inspiring. So this is a site worth mentioning. I believe that very few companies create such industrial sites, well, for workshops for manual workshops in France. And as we are mentioning this, Tony referred to the Tannery de la Comite.
This is, of course, where leather is stand. Here, the skins are dry. They remain there for 4 days. And this is natural well, this natural leather takes 4 days to change colors naturally from brown to white. We based on and this is a very environmental tanning factory.
We're working with it was a family owned business, and we've decided to start this joint venture. This is a vegetal leather tanning. It is wood, which is a groundwood, which slowly but surely provides this pigment to the leather. This is totally vegetal tanning technique, very user very environmental friendly. The weather the water is not polluted.
Of course, weather has sawdust in it, so it's not it cannot be consumed. But we are going to introduce a centrifuge to separate out the wood particles from the water so that the water can be used for natural consumption. So this is a vegetal processing of leather as part of our sustainable development.
So on cash flow, I didn't quite understand the question you were asking, whether we would be on the 2 €1,000,000,000 mark or below the €2,000,000,000 mark of debt at the end of the year. Was that your question? I mean, well, it's difficult to make a forecast because, I mean, thanks to the crisis, we don't do forecasts anymore. So we leave it as a surprise. We hope we'll still have some good surprises, but that's the advantage of the present situation.
Debt, I recall a few years back in this very room when we were giving these presentations, people were saying, well, there's too much debt. So now basically, what to do with the cash flow? Well, do we need to buy back shares, payout? I can't really I can't answer. We'll see.
In any event, there's still some debt left. So let's allow a year or 2 to pass until the debt's disappeared. And then we'll see customers in Europe. Well, here, I can we can say that across our points of sale in the Vuitton stores, cosmetic stores, it's very cosmopolitan. It's very local.
I mean, if you stroll down the Champs Elysees in Paris and you look in the Vuitton store, the line waiting outside of people, I mean, you'll see that very varied population, French people, urines, and that's the case in European countries. I mean, we have customers, I mean, for our brands. And in Europe, Italy, U. K, Spain, there's a strong increase in local customers. So it's not just linked to tourism.
Further questions? Mr. Guillenie is, of course, available to take questions or to respond to matters pertaining matters financial, perhaps, which are perhaps less competent.
I'm from the Financial Times. And could you say something about possible acquisitions? Are you expecting to pursue an aggressive acquisition policy? And if L'Oreal is up for grabs, might you be interested?
Well, on your second question, the answer is no. On the first part of your question, difficult for me to answer. I mean, either we have plans and I can't reveal them or we don't have any, in which case I don't have anything to say. So it's difficult to answer.
Further questions? Lucas Ottar from Cinfoin Duijsien. Could you give us details about the actual results of Wines and Spirits? There are some items that are that only come into H2. Chateau d'Yquem, in particular, is only accounted for in H2.
And then on cost cutting, you said that you are looking at cutting operating costs. Can you give us details about that, especially as regards advertising? Well, Mr. We could tell you about Wines and Spirits. But regarding the Chateaus, 2,009 was an outstanding year.
And Cheval Blanc, which we sold the new Cheval Blanc premier wine was sold at 600 euros a bottle and we sold out in 10 minutes. This is has a huge potential because when you look at the development of emerging markets and the taste for high quality wine, there's a huge demand and production is limited. And that unlike workshops that we can hire new workers there, we are limited in terms of winemaking. Yes, but and of course, there's the Primer ICAM sales in the first half. But of course, this is still consistent with what Mr.
With our friend Baloney just said. This will not affect the other lines or the other areas of wines and spirits. Are there other questions? Melanie Fouquet, JPMorgan. Would you share with us specifics on your strategic outlook looking at an aging population?
Are you going to adapt your policies or your strategies? You're looking, for instance, into the hospitality industry. I know you have a small project there, but are there some large industries you are thinking of expanding in the coming years?
Well, population aging, I mean, it depends on what country you're referring to. I mean, in India, the average age is 25 in the population. So if you take China, also very, very young. Japan, the situation there is different. Europe, ditto.
So for us, emerging countries are rather young countries with growth potential in customers, young customers, and our capacity to grow that within our brands is considerable. And so we must attract young people and try and retain them for a significant part of their lives. New activities, hotel, I mean, that's really very small. I mean, we launched that from the Cheval Blanc brand. We have a number of plans.
What we can say what distinguishes this business that's still in its infancy is that unlike other brands that licensed their brand on hotels managed by other companies, we've opted for a different strategy. And when we bring the LVMH brand to a hotel, we cover not just the design of the hotel but its operation with all the service that, that requires without having to do the investment, except in la Samaritan, where thanks to the work of Mr. Beauvoir, achieved and produced 1 of the finest hotels in Paris along the Seine River, but saved from some buildings that are quite historic. And we don't actually invest in the freehold. We provide the concept and the overall management.
So that's a diversification that's just starting as something of a start up. We already have a Cheval Blanc hotel in a French resort that's doing well. And on the basis of that concept, we'll seek to expand it. But it's not a diversification. Figures will disrupt the operating balance of LVMH before a few years.
Well, ladies and gentlemen, if there are no further questions, thank you. And of course, we're available, Mr. Guilleniers, after and over refreshments to answer any more detailed questions.