Good day, welcome to the SMCP 2023 H1 results call. Today's call is being recorded. Your lines will be on listen only. However, you will have the opportunity to ask questions at the end. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero, and you'll be connected to an operator. I will now hand you over to your host, Amélie Dernis, Head of Investor Relations, to begin today's conference. Thank you.
Thank you. Good evening, everyone. This is Amélie Dernis, in charge of investor relations speaking. Thanks for being with us today for the publication of SMCP H1 results. I'm here with our CEO, Isabelle Guichot, and our CFO, Patricia Huyghues Despointes. As usual, we will go through the presentation, and then we'll have the Q&A session. Before I hand it over to Isabelle and Patricia, I invite you to go through our usual disclaimer on page 2, and I think we can start now.
Thank you, Amélie. Good evening, everyone. Thank you all for joining us today to talk about 2023 half year results, with first the key highlights on results and business initiatives, Patricia will detail our financial performance. Let's move on to page 4, with the key highlights of the semester. In a challenging environment, the group delivered a dynamic sales performance, with a record level of revenue and a resilient profitability. Sales at the level of EUR 610 million, up 8% on an organic basis, growing 9% at constant foreign exchange rate, driven both by like-for-like, +5%, and network expansion. The network continued to grow in Q2 with 23 net opening of POS, reasonable and selective openings in key area to fuel future growth.
The adjusted EBIT at EUR 36 million represents 6% of net sales and is 2 points below H1 '22, impacted by inflation, off-season liquidation plan, Maje underperformance, and higher weight of IT projects in H1. However, net profit remains positive at EUR 14 million. Page 5, you can see the evolution of the first semester sales since 2019. H1 '23 level of sales reached an historic level, with +8% organic growth, in line with the guidance, after a double-digit growth 2 years in a row. Globally, at group level, the discount rate in H1 is stable for the current season, with some progress in Asia and digital, which compensates an increase in North America. I've already said we're satisfied by the level we reached for in-season discount.
Digital sales grew slightly faster than the rest, resulting in a slight increase of digital sales share. Page 6 now. The group growth is driven by APAC, with a 43% increase in Q2, resulting in a global H1 growth of 19%, and Europe with 5% in France and 9% in EMEA. After 2 years of double-digit growth, America is slightly decreasing in H1 in a very challenging and promotional environment, which is a good performance for our brands compared to market trends. Canada is explaining the major parts of the slight decrease, U.S. being more resilient. It is key also to highlight the double-digit growth of Sandro, and also of our other brands, Claudie Pierlot and Fursac, in H1. The good performance of APAC leads to an increase of 2 points for this area in the mix of sales.
By brand, other brands also make progress in the mix, obviously. The split retail/wholesale remains quite stable, at circa 90% retail and 10% wholesale. Let's talk now about sustainability on page seven. I'm proud to announce some key achievement of the first semester. First, on the product side, we increased from 50% in fiscal year 2022 to 56. Today, the share of sustainable materials and products in our collections. As a reminder, we communicated on the full traceability project in Q1 publication, with 33% of spring/summer 2023 fully traceable. On the planet side, we continue to preserve our planet and its natural resources, with the objective to have more responsible stores. For that, we have switched the stores of 8 countries to green energy, France, Germany, Spain, you can tell it to name but a few, and more to come.
On people side, we're very proud to announce that we've been certified by Choose My Company as a Happy at Work Place. I will now present to you the most recent key initiatives of our different brands, to highlight all the work that we're doing on desirability. First, Sandro on page 8. We invite the French artist and designer, Louis Barthélemy, to express his universe in a capsule collection. Louis Barthélemy is an illustrator and textile designer, who likes to travel between Paris, Egypt, and Morocco. He places at the heart of his practice, a deep commitment to the preservation and revival of traditional crafts. The love of Morocco is an intimate and an intimate attachment with craftsmanship are the points of encounter with Evelyn Chetrite, who grew up in Morocco. Let's move on to Maje.
We highlighted the collaboration with key opinion leaders to emphasize the brand desirability. Maje has a great exposure on social media over the world. For example, you can see the middle of the, of the slide, page 9, the very influential Sofia Richie, wearing a dress and a bag from the Maje new collection. Page 10, let's move on to Claudie Pierlot. For the spring/summer 2023 collection, Claudie Pierlot invites customers to a pool party from photoshoot in the street of Paris, the iconic store of Pierre Molitor, and through a corner at La Samaritaine. The dress code is timeless, white, and shades of blue, summer in the city, cool and casual. Fursac, page 11, made a very elegant first appearance at the red carpet in Cannes Festival, where the brand expressed its amazing offer of evening wear.
Fursac also dresses celebrities in a more casual occasion, as you can see on the right, and mingles with Tahar Rahim , Rami Malek, with a very nice jacket, casual jacket from Fursac. In Q2, Fursac also presented its spring/summer collection at Paris Fashion Week. The items from the new collection are expressive, yet more accessible. It is the perfect embodiment of the Fursac philosophy, clothes are made to last and age gracefully before becoming the coveted vintage of future generations. Page 12, the group continues its expansion with some very nice openings in the second quarter.
Two examples of important openings in China, one in Nanjing Deji, which is one of the top malls in the city of Nanjing, and also in China, and one in Shenzhen, which is, as you know, one of the most dynamic cities in the south of China. As you can see also on the slide, Fursac continues to open beautiful stores. Here, we have example of the newly opened store of Toulouse. We continue, of course, our expansion, page 13, through partners in Turkey, Mexico. You can see here on page 13, the example of the new Maje store in Nisantasi in Istanbul, has been very successful, already a big success. Also, we continue to extend our digital presence. After Sandro and Maje, we now have Claudie Pierlot and Fursac live on Farfetch.
This is a very important partner for the group, delivering worldwide, so we are very happy to have now our four brands offered on the Farfetch platform. Thank you, everyone, for listening to me, and then let's ask Patricia comment to you the financial results.
Thank you, Isabelle. Good evening, everyone. Let's start with a bit more granularity on the sales performance on slide 15. Starting with France, with sales at EUR 204 million, +5% versus last year. The environment was quite difficult in Q2, especially on the social side, strikes impacting customers' morale and touristy flows, and calendar effects, with notably the official sales period pushed by one week compared to last year. That being said, many good points can be underlined in the performance of our brand for the first semester. By brand, with good figures for Sandro and other brands, positive in France, both in Q1 and Q2. By channel, with a strong progression of digital sales, positive in Q1 and Q2, and in terms of like-for-like, positive both in brick-and-mortar and in digital.
Openings of the semester to smooth in Q2 with 7 new stores. EMEA, now, with sales at EUR 189 million, progressing 9% organic and 7% like-for-like. Once again, a very strong semester in this area, and except in the UK, most of the big markets performed really well. In retail, Spain, Germany, Italy, the Portugal, grew double or strong double digits during the semester. Regarding partnered markets, Middle East is extremely strong in all the countries of the area. Openings also contribute with 15 additions in Q2. On slide 16, in America, EUR 18 million sales for the semester, slightly negative versus last year, at minus 4% organic, after two years in a row of outstanding performance, and EUR 18 million is way higher than pre-COVID. Just like in Q1, the decrease in the first semester is mainly due to Canada.
USA sales are resilient, low single digits negative versus last year. The market was more promotional than last year, but the performance of Sandro was pretty good, with a positive like-for-like in the U.S. this semester. In Asia, H1 posts a +19% organic growth, with a much better trend versus last year on Q2 versus Q1, +3% in Q1 and +43% in Q2. Continental China is +52% organic versus last year in the second quarter. Other markets perform also very well. Some are listed on this slide, Hong Kong, Macau, Singapore, and Malaysia. Strong like-for-like performance of more than 13% for the region this semester. Finally, the performance is also sustained by the integration, as you know, of Australia. Now, let's go to P&L on slide 17. Management growth margin came from 74% to 73% in S1.
Retail growth margin in season remained quite stable for the current collection. The in-season discount rate remained in line with last year for most of the brands, except Maje, and for most of the areas, except America. The total growth margin was affected by a bigger share of off-season, with some liquidation operations. In China, related to 2022 collections, which were pretty hit, as you remember, by COVID restrictions, and also in Claudie Pierlot for the spring/summer 22 collection. We'll see later in the presentation that those liquidations, which were a bit higher than anticipated, also helped us to decrease more than anticipated, the level of inventories. As far as OpEx were concerned, we lose one point of absorption, mostly in staff costs and also in relation with IT investments.
The rate of GMA remains quite stable, all in all, EBIT margin comes from 8% in 2022 to 6% in 2023. We expect a very different profitability profile between H1 and H2. First, our Maje spring/summer collection underperformed versus last year versus expectations, leading to an under absorption of costs. We know that this should change very quickly, as the reception of the fall/winter collection, which is more commercial, is very good in our stores. Second, some one-off effects, not significant one by one, but not helping when you add them. For example, the that had been received in H1 last year, and some saving of marketing expenses. On slide 18, I won't go into too much detail in the bridge between 2022 net income and 2023 net income. Nothing really special to mention, we have already talked about EBIT.
Nothing special in non-recurring, nor in financial results. A slight lower working capital expense lead us to EUR 40 million revenue net, which is lower than in 2022, but remains very positive. On slide 19, a few details on inventories and CapEx. After a year, 2022, a significant increase in inventory, the level goes down by 5% in H1, despite the increase of revenue of just 8%. This is something very important for us, and we are happy about this change, as it was important to reverse the trend, especially in China. CapEx amounts to EUR 24 million for our operating investment, i.e., 3.9% of sales, completely in line with our target and not very different from last year. Good control on the two very important aspects. Net debt now on page 20.
The amount of net financial debt remains quite stable at circa EUR 300 million. We have negotiated an extension of our core financing for additional years, as you can see in the chart on the right. As you may remember, we have 3 main lines of financing. A term loan issued in 2019, the maturity of which was in May 2024. A revolving credit facility has also exactly the same maturity. We have extended this total facility, loan plus RCF, by 2 additional years until 2026. Second, a state-guaranteed loan issued in 2020, due in 2026, remains unchanged. Third, another one issued in 2021, which was due to mature in 2024, has also been extended and has now maturity in June 2027. Consequently, our liquidity significantly improves.
We are very happy about this extension, which demonstrates the commitment and support of our pool of banks, which unanimously approved this extension, and we are fully secured in terms of liquidity for our future development in the coming years. Moving on to slide 21. The first semester was marked by a challenging environment. By that, we are 100% focused on achieving the targets, and in this respect, we have built a solid action plan to deliver the performance we expect, and thus we expect more operating leverage in H2 than in H1. Two main pillars in this action plan, one about top line levers and one about securing profitability. In terms of top line, we anticipate a more homogeneous performance by brand.
As already expressed in this presentation, all corrective measures have been taken at Maje to ensure the success of the fall winter collection, and make the underperformance of Printemps nothing but a parenthesis in the history of this brand, which remains highly profitable and actually the most profitable of the group. We also count on our international footprint. It's obvious that the world is with beyond one region. It has been true over the past four years, and navigating through several continents is extremely helpful to maximize sales and mitigate risk. H2 last year was marked by a very complex environment in greater China, which is now normalizing, and this will help both sales and profit for this area. We will, of course, continue our full price strategy and for example, we expect Claudie Pierlot to improve in this respect, and the collections and performances get a strong attraction.
Most of the opening plan of Bijou is concentrated in H2, meaning that perimeter effect will be more visible in the second semester. This was for top line. Bottom line-wise, we have already activated a savings plan on all discretionary costs. We also prioritize our investments within marketing and IT. Finally, all the leadership team is fully focused on productivity to better absorb all costs. In particular, we work on optimizing staff allocation and talent in store to increase productivity.
Thank you, Patricia. I think this latest slide you presented is really important, I can only confirm that we are completely concentrated on delivering performance. The good sales performance of H1 demonstrates once again the strength of our brands. We managed to keep a resilient profitability despite a very challenging environment. Thanks to the action plan that you just saw, we strongly believe that we can achieve and confirm our 2023 ambitions. Our next update will be at the end of October for Q3 sales. Before we move on to the Q&A, I just wanted to answer before you ask it, obviously. Usual questions about shareholding. There is no update to share on this topic as of now. The sales process, initiated by the receivers of Glass in March, is still in progress.
You will understand that we cannot share or comment more about this topic. I think now we can move to the Q&A.
Thank you, Isabelle.
Operator, I think we have one question.
Yes, thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. A voice prompt on the phone line will indicate when your line is open. Please state your name before posing your question. Please go ahead.
Hello, it's Ella from ODDO BHF. I have two questions on my side. The first one is about the lower level of gross margin. How much of this is due to the stocking? The second one is about the EUR 6.1 million in other in the others, in the cash flow statement on page 11, under the investment expenses. Could you please give us some color on that? Thank you.
You want
I can take both questions. I will start with the second one, which is a very easy answer. It corresponds to the acquisition of the Australian and New Zealand network, and you will see more details in the
That require the January first.[crosstalk]
The half year fuller report that will be issued very shortly, so be patient. On the first question on gross margin ratio, so at the one point, you can consider that half is linked to discount rate increase from liquidation of old collection. There is a little bit of mixed channel impact. We mentioned quite a stable ratio or retail sale, but when you look at the figures after the corona, there is a little bit of more wholesaler versus retailer. The rest, various various impacts, including the slightly higher rate of outlet sales.
On the semester.
On the semester.
Thank you.
Thank you. I think we have another question.
Thank you. Yes, we do. Please go ahead. I think the question just dropped. Another reminder, please remember to press star one to ask a question. Yes, we have another one here. Please go ahead.
Marilyne Denis , Schneider. Can you hear me?
Yes. Yes. Yes, Marilyne
Okay. Now, it's okay. First question is about China. How things are going on on the start of Q3? Do you see any improvement in terms of momentum? Because we know that consumption is probably not as high as expected. The second question is about your OpEx, that increased significantly in H1, plus 11%. Could you tell us what is it linked to? Also, mention what the amount of the saving plans that you intend to put for the second half. Thanks.
I think on China, Marilyne, what are our views on H2 in China? As I see, it's gonna be a bit like H1, very contrasting the set of trends between Q3 and Q4. Remember that last year, Q4 was almost a frozen quarter in China with not only in China, in China and Hong Kong, Macao, Taiwan, with the big wave of COVID and stores being closed and traffic being almost zero. It's true that definitely Q3 and Q4 will have a very different profile.
What we can see also, what we clearly monitor in the coming weeks, is the recent announce of the government to start looking at what can be done to boost consumption in China. We will be carefully watching any, each and any measures. I know that they will start with the real estate, for instance. We'll be extremely careful to look at that on Q3, hoping that Q4, which mechanically is gonna be much easier to do than last year, hoping that the whole curve will accelerate on the semester.
Just because it's important that we give some qualitative comments, we have a very strong action plan. I'm going again in China in September before H2, we have a lot of marketing initiatives, but they are all targeted at driving top line, live streaming and communication expenses, very with ROI intention. Digital merchandising actions to trigger desirability and excitement in store. On the other questions regarding the OpEx, maybe I can answer on the rate of OpEx of the sales. You can consider, Mariline, that the increase is roughly equally spread between infrastructure investment and staff costs.
In terms of staff costs, let's say that one third is linked to inflation, high pay rises, just like everyone. A bit of the perimeter effect with the integration of Australia with 40 stores, so quite a lot of people. The rest is investment in staff to support the sales growth. I would say that the rate of all these increases, also because we have this collection at Maje that underperformed in H1. In terms of absolute value, the amount of OpEx is completely in line with our expectations. Regarding the savings plan, let's say that we have secured between EUR 5 million and EUR 10 million to make sure that we achieve our targets.
The saving cost plan, is it staff? Is it brand support? What is it related on?
Well, you can see it on the presentation. It's a mix of several actions. Of course, a discretionary actions, P&E, et cetera. It's also about being quite cautious on the cost of marketing. Not canceling marketing, but making it less expensive in terms of the cost of each shooting, et cetera. Prioritizing infrastructure projects, this is something that we can do and roll out at a slightly different pace.
In terms of staff productivity, yes, we have planned some savings, and especially in terms of hiring.
Just one question, last question on Maje: What makes you such confident that H2 will be better than H1? Why, I suspect, that the first feedback from the winter collection are still small at this stage of the year.
What makes us confident is our expertise on the market and our fashion expertise. We know, and we can see, and we have also the feedback from our partners, franchise partners in the Middle East, in Korea, and all those places that have seen the collection and that have been praising the collection, the collection balance and the commercial aspect of the collection. I would say that H1 was a kind of a bump on the road, the perfect storm of misalignment, of missing position and some management issues that we dealt with as you know at the end of last year.
Knowing somehow that we would have a tougher season and that the results and the way the company was managed was not to our standards. We now see that the fall-winter collection, as expected, is starting to deliver in stores, and we know that the waves coming in store are going to be successful, and we have no doubts about it.
Okay, thank you.
Thank you very much. I think we are done with the question now, so, I wish you a good evening.
A good summer for those of you who are taking a well-deserved summer break.
Thank you.
Thank you.
Thank you!
That concludes today's event. Thank you for your participation. You may now disconnect.