Watching over the internet, particularly our Richemont colleagues in our shared service centers and our colleagues in all 20 of our Maisons. The business environment has continued to be subdued and contrasted by region. Momentum further improved in the U.S. and Japan, but this has not been fully reflected due to foreign exchange. Europe is still in a subdued environment. There is less enthusiasm to buy luxury goods in China. In this context, sales grew by 4% on a reported basis and 9% at constant currencies. This reflected growth across all segments, all regions, in particular the Americas, and however mitigated by five points negative on foreign exchange. The operating profit declined by 1% in value terms, leading to an operating margin of 25.7%.
We did enjoy a strong increase from cash flow from operations that more than doubled to approximately EUR 1.3 billion in the period, thanks to strong working capital management by all of our Maisons. Let's now look at sales first in Europe, and as usual, my comments will relate to the constant currency growth, and this will apply to all the other regions as well. Sales rose by 10%. This rate reflects primarily organic growth as only four new stores were opened in the period. Strength of tourism continued, albeit at a lower rate. We did have a pretty resilient domestic situation, particularly in the United Kingdom and Russia. Van Cleef & Arpels and the specialist watchmakers did particularly well. Sales in Russia grew in line with the region after significant high jewelry sales last year. Let's move to the Middle East and Africa.
Sales grew at 11% on a constant rate basis with good momentum across all major countries. Most sales, as you know, occur in Dubai and Abu Dhabi, and we did open up five stores between those two countries in the period. Sales growth was primarily reflected by premium watches, jewelry, and Montblanc. Let's move to sales in the Asia-Pacific region. It's our largest region, generating about 40% of our group sales. The low growth rate of 4% reflects a contrasted performance among the countries. China, mainland China, down 10%, with wholesale particularly affected while retail was stable. Macau, Hong Kong, and South Asian markets such as Thailand, Indonesia, and Malaysia grew by double digits. Korea was also strong with high single-digit growth. Growth was particularly driven by mainland Chinese traveling to other Asian markets to take advantage of price differentials.
Van Cleef & Arpels, Jaeger, and IWC were particularly noteworthy in the region during the period. Let's move to the Americas. With 17% growth, it enjoyed the strongest growth on par with Japan. All segments and all product categories enjoyed solid performance. Overall, the region benefited from two internal boutique openings. Domestic tourism again was strong, and the integration of Peter Millar certainly assisted the results since October 2012. Let's turn now to Japan. Remains our fourth-largest single market with 8% of group sales on par with mainland China. The 18% sales growth was broad-based across all Maisons and primarily organic. Of course, this is driven by attractive price positioning after the 29% depreciation of the euro.
This has only partially been compensated by price increases, which we took in April and May, and we will be taking price increases again in September and October. At actual exchange rates, thanks to the foreign currency situation, the reported results declined by 8%. Let's now look at sales by network. Retail generates 52% of group sales. Its 11% growth reflected the impact of 29 new internal stores, primarily in mainland China, the good performance of the Net-a-Porter group, and our Maison's existing boutique network. Within our wholesale partners, inventory levels are generally healthy. Let's now look at sales by product line. This sales underlines our core watch and jewelry segments, which enjoyed growth that accounted for 89% of the group's sales growth. The slide also shows the continued momentum of our jewelry business, which grew 14% at constant rates.
We had a more moderate growth on the watch product category at 7% after three consecutive outstanding years, primarily attributable to Cartier. It also shows the growing importance of clothing, mainly related to the Net-a-Porter Group and the integration of Peter Millar. Clothing is now our third-largest segment. Listed here on this slide are the main points to remember about the Maison's performance. Profitability is stable at exceptionally high levels at the jewelry Maison and specialist watchmakers. Results at Montblanc Maison were down on last year as a result of lower sales and one-off items, which we will comment on later. Results of other Maisons have been affected primarily by soft sales. The Net-a-Porter Group continues to show further progress in sales development and profitability.
Let's now look at the main developments on sales and product launches within each business segment and Maison, for which Sophie will now take you through.
Thank you, Gary. Good morning, everyone. As usual, we start with the jewelry Maisons. Jewelry as a product line enjoyed a remarkable performance, both at Cartier and Van Cleef & Arpels. It compensated for the slower performance of Cartier watches stable at constant currencies. Nonetheless, Cartier's profitability remained at a high level, while Van Cleef & Arpels profitability continued to improve. Overall, operating contribution grew by 3%, leading to a stable contribution margin of 37%. First, Cartier. Cartier enjoyed a moderate organic sales growth, primarily led by Japan, Southeast Asia, the Americas, and Brazil. Demand for jewelry continued to be particularly strong. This is all the more noteworthy as jewelry did not benefit from high jewelry sales since the new L'Odyssée de Cartier high jewelry collection was launched only last month.
Lower wholesale orders for Cartier gold and jewelry watches weighed on Cartier's overall watch performance. Cartier steel and diamond-studded gold and steel watches enjoyed a good performance, notably the Tank Anglaise pictured here on the slide. To increase capacity and control in jewelry, Cartier is integrating a jewelry maker. This is a long-term supplier of access jewelry for Cartier. For watches, a new watch movement facility just started operations in Switzerland. Van Cleef & Arpels. Van Cleef & Arpels generated an outstanding performance across regions and segments, supported by the Alhambra and Between-the-Finger-Rings jewelry line, by the Pierres de Caractère Variations high jewelry collection, and for watches, by the Charms and Poetic Complications pieces. Its distribution network is being further trimmed with the closure of all external watch front of sales and the selective opening of six internal stores, primarily in growth markets. The specialist watchmakers.
This segment, which accounts for 30% of sales and 36% of profits, saw a good increase in sales across most specialist watchmakers. Most of them improved their results, including Baume & Mercier. All in all, the 7% increase in operating contribution was achieved thanks to pricing power, distribution and product mix, and improved network performance, retail network performance, which largely compensated for substantial ForEx headwinds. As a result, healthier operating contribution margin was maintained at 32% of sales. We start with Piaget. Piaget's performance was positive in all regions, particularly in Europe and Japan. The strongest growth was achieved with jewelry and high jewelry. The half-year saw confirmation of the success of its iconic product, namely the ultra-thin Altiplano watches, as well as the Possession and Piaget Rose jewelry lines.
Part of Piaget's jewelry plan consists in renovating its retail network to the new boutique concept, which supports its focus on jewelry. Today, 27 stores out of the 89 have adopted this new concept. Moving on to Vacheron Constantin. The Maison's significant growth continues to be constrained by shortages. Vacheron Constantin inaugurated new manufacturing premises in the Vallée de Joux, while an extension of its manufacturing facility at Plan-les-Ouates is underway. Vacheron Constantin recorded a good performance at its 19 internal stores, partly driven by two new boutiques, including the new Paris flagship stores. Its Patrimony line continued to lead sales. Let's have a look now at A. Lange & Söhne. A. Lange & Söhne benefited from a strong demand for its complication and high complications, such as the Grand Complication and the Grand Lange 1.
It also enjoyed an excellent retail performance underpinned by the stores opened in fiscal year 2013. The extension of its manufacturing site is expected to become operational early 2015. Roger Dubuis, which posted substantial sales growth led by most regions, high-end complications, and the continued success of the Velvet line, which is a ladies line at Roger Dubuis. Within complication, the Excalibur Quatuor and Excalibur Double Tourbillon did particularly well. Now I would like to turn to Jaeger-LeCoultre. This Maison posted remarkable sales growth across geographies and channels driven by all collections, including the feminine line Rendez-Vous, which was just launched in fiscal year 2013. It is celebrating its 180th anniversary with a Jubilee Collection set and events around the world.
Retail was particularly successful, driven by the openings of Hong Kong Causeway Bay and Costa Mesa near Los Angeles, as well as a renovated Paris flagship store at Place Vendôme. Let's look at IWC. The Maison generated good growth across most geographies. The Portugieser, Pilot, and Portofino lines continued to be among the Maison's bestsellers, and the launch of a new Ingenieur also positively impacted sales. Officine Panerai, whose sales growth was robust, especially in Europe, the Middle East, and Japan, led by the Manifattura collection, in particular the Luminor 1950 collection. Its new manufacturing facility should be operational by March 2014. It will increase both capacity and integration levels. Let's turn to Baume & Mercier, which saw a notable increase in sales, primarily thanks to Europe and easier comparatives. The new Clifton and Classima are doing well.
Sales to Chinese are expected to improve thanks to the joint venture with Chow Tai Fook, which became operational this summer. We are now looking at the main developments of the Montblanc Maison this past six months. Sales momentum was supported by watch growth, negatively impacted by the weight of writing instruments down over last year and the weight of domestic Chinese and domestic Western European clientele. While sales in Asia-Pacific were weak, sales grew across all the other regions. Worth noting is the ongoing positive e-commerce development. It is small, but in the U.S. it would represent Montblanc's largest stores, and in the U.K., its third-largest. Operating contribution halved, bringing the contribution margin down to 7%.
Please bear in mind that this incorporates a EUR 30 million exceptional item, which is linked to the exit of the high-end ladies jewelry line and also to reposition certain organizational activities. Finally, the other business area where the operating contribution was a EUR 35 million loss. Improving results at Manufacture Genevoise de Haute Horlogerie , Richemont's unbranded watch component manufacturing facilities, and the positive contribution of Peter Millar have only partly offset underperformance at Alfred Dunhill, Chloé, and Lancel. The change in structure of the textile Maisons with further integration into the shared service organization should improve the performance of the fashion and accessories Maisons over time through better controls and better access to more operating leverage. Alfred Dunhill. The Maison suffered challenging trading conditions given China's environment. Its significant growth in Japan, its 2nd-largest market, was not enough to offset the strong depreciation of the yen.
A new management is now in place with a strong focus on Britishness and innovation as well as on bespoke, where they foresee a significant development both for menswear and for leather. Let us move on to Lancel, whose decline in sales derived from its exposure to the French market. However, new models like the 48/50 and the L de Lancel shopping bag generated strong demand and subsequent shortages. The management team transition is ongoing with the arrival of a new creative director and other key appointments. Chloé generated good sales except in Europe, 34% of sales, which weighed on overall sales momentum. Asia-Pacific and the Americas retail and ready-to-wear did well. In leather, the Baylee bag enjoyed a promising debut. Finally, the Net-a-Porter group. Growth rates remains well above group rates, driven by the Americas, Mr. Porter, and the outlet sites.
Worth mentioning is the continued improvement in the product offer of the Net-a-Porter sites and the Mr Porter sites with introduction of beauty care products both for men and women. I shall now hand over to Gary. Thank you.
Thank you, Sophie, for that update on all of the Maisons. Let's now grind through the numbers in detail. First, our operating profits. We experienced a slight decline over the period versus last year of 1% to EUR 1.37 billion. This, we believe, is a satisfactory performance given the currency environment which directly affects gross margin. Expenses grew in a controlled way, as expected, with most of the increases coming from new boutiques and increased IT spending. The half-year operating margin is marginally declined to 25.7%, which is still the second-highest half-year performance in Richemont's history. Let's now look at gross margin and expenses in more detail. In value terms, gross profit increased by 3% but experienced a 90 basis point decline to 63.9% of sales.
This is primarily due to negative foreign exchange, which contributed 80 basis points of the decline and 18 basis points related to the inventory charges at Montblanc that Sophie spoke of previously. We continued to benefit in the Maisons from pricing power and our increased share of retail. Let's now look at operating expenses in detail. Net operating expenses were up 5% in reported basis, broadly in line with sales. The ratio remains stable at 38% of sales. What were the increases in the cost base in the period? New boutiques added 4%, communication costs added 1%, all other S&D and admin costs rose by 4%, and this was offset by foreign exchange of 4%.
Selling and distribution costs, which were 57% of total operating expenses, rose by 5%, primarily reflecting sales growth, network developments, staffing of retail departments, and the opening of 29 internal stores. On a constant rate basis, S&D expenses rose by 10% in the period. This growth rate is below the 12%, which we had indicated for the full year in May. At this stage, we are guiding at 12% on a constant basis for the full year. Communication costs were flat in the first half, leading to a ratio of 8% of sales. As previously stated, we continue to expect communication costs for the full year to be between 9% and 9.5% of sales. Administration and other expenses grew by 13%.
This 13% includes a EUR 23 million charge relating to the increase year-on-year in our Social Security charges related to our stock option program due to the increase in the share price performance in the first half of the year. If you go back and check, it was actually a decline last year, so that's why the significant swing. If we exclude this charge, costs grew by 7% or 12% on a constant basis. The underlying growth reflects the development of our backbone operations in IT generally, and more specifically in the platforms in growth markets. Excluding the charge I just mentioned, we continue to expect administration and other expenses to grow 12% on a constant rate basis for the full year. Let's now look at finance costs. Net financial expense grew primarily due to our US dollar long-term loan.
We did benefit from a EUR 112 million gain in our hedging program in the first six months compared to a EUR 108 million charge in the previous period. The depreciation of the Swiss franc versus the euro meant that in the period under review, we recorded non-cash gains in respect of our group investments in the amount of EUR 15 million. This was against a slight gain last year. In summary, financial income amounted to EUR 69 million for the period versus a cost of EUR 99 million a year ago. Let's now focus on the items of net profit. Net profit for the year, for the first six months grew by 10% to approximately EUR 1.2 billion.
This was driven by a reversal in the finance cost, as you've previously seen, and offset, however, by a rise in our tax rate, which was 17.5% for the year, for the period. We continue to expect a sustainable underlying tax rate of 17%-19%, we expect 17.5% for the full year. Let's now look at our cash flow. We enjoyed strong cash flow from operations at EUR 1,292 million. The stability in our operating profit was augmented by strong management of working capital in the first six months. Inventory grew by only EUR 56 million compared to a EUR 369 million growth in the previous year. Rotations remained stable at 16.6 months. Our receivable portfolio continues to be healthy. We are 96% current of all balances.
This compares to 94% at September last year. The build was EUR 202 million compared to EUR 289 million in the previous period, and this reflects the overall performance of the wholesale channel generally. Finally, the settlement of our derivative contracts generated cash inflows of EUR 49 million in the period compared with a EUR 175 million outflow in the previous period. Now let's provide some color on CapEx. CapEx were broadly in line with last year's level, EUR 257 million, and represented approximately 5% of sales. As previously noted, we've increased our investments in manufacturing facilities. We've continued our investments in our internal and external boutique networks as well as our third-party distribution partners. We've expanded and improved our distribution platforms and IT systems. We will continue our investment program as planned.
We expect to spend about EUR 800 million this year in CapEx. The next slide will provide some details on the type of investments we made in the six months. Over 40% of the increase was dedicated to investments in manufacturing expansion and integration. They included a new Cartier watch movement component factory in Switzerland, which is now operational. The Panerai new manufacturing facility above Neuchâtel is expected to be operational at the end of this fiscal year. Vacheron Constantin's capacity expansion for its movements manufacturing, that was also opened this year. Lange capacity expansion continues. That facility is expected to be open in autumn 2014. Our Marin project for high-end movements is due to be completed on schedule in early 2015. Retail and external point-of-sale investments continued but at a slower rate.
The most notable projects were 11 new stores for our specialist watchmakers, notably IWC, Vacheron, and Panerai, new Cartier projects in Paris and Abu Dhabi, and several boutique renovations worldwide, such as the Cartier flagships in Geneva and Moscow and Van Cleef & in New York City, Fifth Avenue. Investments in other primarily related to continued investment in systems, distribution platforms, and the Net-a-Porter group. Now let's move to free cash flow. Cash flow from operations financed, as you would expect, higher taxes and significant but stable capital investments as we've just seen. Free cash inflow amounted to EUR 849 million for the period, which was substantially above the prior year. Now let's look at our balance sheet. We continue to enjoy a strong balance sheet with equity representing 70% of the total.
Net cash and investments at September 30th amounted to EUR 3.9 billion compared to EUR 3.2 billion at March 2013. Of our cash and investment positions, cash holdings in Swiss francs amounted to EUR 1.9 billion. Let's now have some concluding slides. First, October sales. October sales grew by 6% on a reported basis and 12% on a constant rate basis. All regions experienced growth in reported terms, except for Japan, which continues to be affected by negative foreign exchange. Asia-Pacific improved during the month, thanks to robust high jewelry sales. Our directly owned retail stores continue to outperform the wholesale channel globally. While comparatives will start to ease this month, bear in mind that the environment remains subdued and that currencies remain unfavorable at the present time, most notably the yen.
Now to conclude, I wanna focus on a couple of points. At Piaget, we are allocating additional resources to further develop Piaget's jewelry, now just below 15% of sales. We've begun to renovate the existing retail network, as Sophie said, to a new concept better suited to the jewelry offer. As she mentioned, we have 27 boutiques already in the new concept. At Montblanc, the new management team has decided to focus on more accessible price points with watches, leather, writing instrument, and men's jewelry as its core focus. In addition, a number of stores which do not fit with the new strategy will be allocated internally to other Maisons.
We will continue to invest in Cartier by launching significant multi-year projects late in this fiscal year. These projects include the renovation of the New York and Tokyo flagship locations, as well as the construction of a new jewelry manufacture in Switzerland. Our ERP Gemini project continues. Europe and North American distribution systems are now completed, with Japan to be up and running next year. Manufacturing systems were upgraded at IWC this year and will be installed in Piaget at the beginning of next year. I also want to reiterate the statement that we made this morning in that we have completed the review of all of our Maisons. We will invest in all to ensure their long-term prosperity. No disposals are under consideration at this time or for the foreseeable future. We believe that this approach is the best way to increase value for our shareholders.
Bernard, Richard, and I are fully committed to seeing that all 20 of our Maisons prosper. Thank you. Now I'm sure you all have some questions for Sophie and I.
Before you start asking questions, may I kindly ask you to announce yourself and also your company? Thank you. Good.
Thank you very much. Luca Solca from Exane BNP Paribas. I have a few questions on demand. You seem to have a relatively prudent view, and you're talking about a subdued environment. I wonder if you could tell us how you see demand trends, possibly going deeper into mainland China on the one hand, Hong Kong and Macau and the greater China markets, as well as the United States that has been a very strong support this year and what kind of outlook do you have for that side of the market? Going into your actions, I seem to understand that you were concerned a few months back about retail productivity. Retail productivity seems to be one of the supporting factors in your performance today.
Would you be expecting to push retail forward at this stage even more? Given the good results from e-commerce, what are your plans to expand e-commerce and generate like-for-like growth on the back of that? I think you were on a different subject reporting that the Cartier watches pipeline is prepared. If you could tell us about what you have coming from that front, that would be also great.
Luca, maybe you should leave a few for your colleague.
That's it.
I know you have a few.
I'm not sure I got all the questions, Luca, we'll try, yeah?
First caller on the-
Yeah.
First caller on the latest round.
I think the numbers in October, excluding the high jewelry sales in Asia were pretty much on trend. I will say maybe the mix in Asia, mainland China, within those numbers are changing a bit. I think the lower price points, Montblanc and Accessories Dunhill continue to struggle. I think the watches are getting a little better. We're not there to call a bottom. We don't do that. We don't know what's gonna happen. The numbers seem to be just a bit better. In terms of the retail expansion, you know, we're opening up less stores this year. We'll open up 50.
Net.
Net, net 50. It's a little too early for me to comment on next year. Certainly, if we believe in certain of the fashion and accessory brands, Dunhill as an example, we're gonna have to allocate some capital to them. Now, does that mean more stores? I'm not sure. Does it mean maybe more square footage? Probably. In terms of e-commerce, you know, last year, we opened up a call center in Europe for all of the brands. That's starting. It's small, but there's business there. The platform in America continues. If you think about the contact center as a store, it's Montblanc's number one store in America.
We're preparing the field to start e-commerce in Asia and Japan sometime next year. Did I get everything, Luca or?
The Cartier pipeline, the Cartier watches.
I think the product's coming. You know, most of it will be at SIHH.
By November as well.
Yeah, a bit November. I mean, if you look at Cartier in the first half, watches were flat.
At constant rates.
You know, I think, pretty much Asia was flat. Europe was flat. Japan was great, although that's on a constant rate basis, it's obvious. America was a bit down, you know. It was a mixed environment. I think, you know, it's been pretty stable. The, you know, the comparables are gonna get easier, but who knows? Let's see. Let's see.
I think there was.
Oh, okay. Sorry.
Sorry.
Hi, Helen Norris from Barclays. A couple of questions from me. I think firstly, on Japan, you said you increased prices in September, October. Can you quantify that price increase?
Six.
Have you seen any slowdown in demand since that price increase?
No.
Okay, that was quick. Secondly, I may have missed it, but on gross margin, you were guiding to 64%, I believe, for the full year previously. Given the FX moves, is that still a sensible assumption?
No.
What was the guidance at constant currencies?
Yeah.
if you remember?
I mean, I think, okay, I don't know what the exchange rates are gonna be. You know that, right? If we use the closing rates as of September, and you projected that through, we'll probably lose one point for the full year. Who knows?
Just on Net-a-Porter, I think your aim was to break even on that business. How is the profitability? Obviously, the sales were very good. How was the profitability in the first half and your expectations for the year?
I mean, they're on the way. Certainly, they're profitable without the amortization. That's for sure. They're hitting their plan this year. I'm not cranky anymore.
Finally, just on the portfolio review, can you just elaborate a little bit more around the thinking and what went on on that and your decision there on the portfolio review, so in terms of shareholder value and the returns, et cetera, that we talked about previously?
I think I was pretty clear, Helen, what I said up there, but maybe some color. The press reports and everything were frankly astonishing to us. The only thing that we considered our strategic options on was Lancel . I'm happy to say that because we told our employees specifically that we're considering options. We concluded that the best way to increase shareholder value was to retain not only Lancel , but all the brands. I think, you know, Richard, Bernard, and I we're fairly new in our seats together. I think Bernard Fornas knows what he's doing from a, from a marketing perspective. I think if you look at the changes we've made at Dunhill, we have a great new management team.
I mean, we believe they're product people, which is nice and maybe refreshing. With the strength of our balance sheet, we've always said we should invest in our brands. If we believe we should do that, and we think we can increase value. You know, as I said this time last year, you know, are the operating margins gonna approach watch and jewelry levels? No. Do we think we can invest and get a decent return for us? We believe we can do that, and we're committed to that.
Good morning. Jon Cox with Kepler Cheuvreux. A couple of questions for you. Obviously, a lot of stuff on the manufacturing rollout in the watches. Do you think you're still on track to be self-sufficient in financial 16? That's the first question. Second question, can you just remind us on the split in Cartier? Is it roughly 50/50 watches and jewelry? The third question, just given the fact that this review hasn't really led to any disposals, should we really be thinking about you, maybe you need more scale in terms of buying other businesses in sort of fashion and others to build critical mass, which is probably something you've been missing? Is that now a more of a strategic option for you?
Jon, first, I can't really remind you what the split between Cartier watches and jewelry is because I've never told you that before. I'm not gonna.
That was a good try.
It was a good try. You know, I think we have 20 children. We wanna put the best management teams in all of those 20 businesses. We believe we've done that in Dunhill. We believe we've done that in Montblanc now. Just because I mentioned those two, don't read into, I think, poorly of anyone else. We need to add capital in that. I mean, you know, our structure is such that the operating talent really should be resident in the brands. If we can attract and retain talent in those individual maisons, we should be okay. Your third what was the third question, Jon Cox? On the self-sufficiency, yeah. I mean.
Concern on-
You know, the ruling is out. We've always said that we're comfortable with where we are, and we are still comfortable. I mean, it's something, you know, in terms of my ERM process or what have you, frankly, we don't even think about anymore.
Just following up on Luca's question about greater China.
Actually, can you just wait because otherwise.
Oh.
The webcast viewers won't hear you.
Just on.
Thank you.
You missed a part of the question earlier on. You talked about Mainland China, maybe trends slightly improving. Just in Hong Kong and Macau, there's some sort of stuff coming out. Maybe it's actually slowing down there, but you would say you've not seen anything like that in Hong Kong and Macau more recently?
Well, let's be clear. For Mainland China, what I said is the numbers are still the numbers, and the headline trends are still the same, but the mix is changing. Okay? In terms of Greater Southeast Asia, we're on trend.
Still growth.
Yeah.
Decent growth.
Mario Ortelli of Sanford Bernstein. Three questions for me. The division that was more resilient in the margin was the Jewelry Maison division, which slightly increased the margin. I would like to understand what was the price increase that you applied to sustain the margin despite the negative effects environment. The second one is, as a result of your portfolio assessment, in which brand you will make the major investment going forward? The last one is about Montblanc. You mentioned a change of strategy. How long will it take this repositioning of Montblanc towards lower pricing points?
In terms of investment, we believe in all 20 of the brands, so we're gonna invest in all 20 of them. I think we need to give the management teams a time to execute their strategy. I think Montblanc is still profitable, but to put a timeline on that, I think is inappropriate. We certainly believe in the strategy that Jerome is gonna execute with his new team. You'll see for the first time I have a Montblanc pen in my hand. I And being an old Dunhill guy, you know, you never saw that before.
Well, Jerome will be happy. Not too sure about Fabrizio.
Well, well, okay.
Did I see this as that?
Huh?
By your own plan?
No, no, that's fine. That's fine.
Margins.
Discuss-
The margins.
pricing.
You know, I think we said in the first half. Okay, I have to check my notes on that now. Hold on. Yeah, I mean, generally, we were. You know, we only raise our prices once a year unless there's currency problems, right? We were 3%-4% on most of the brands worldwide at the beginning of the year. 9% in Japan. We adjusted Japan in September at 6%.
If I may, just a clarification. You will invest in all the 20 brands.
We-
But, uh-
Can you repeat, Mario, please? Because we didn't hear.
My apologies.
Yeah.
You will invest in all the 20 brands, but the sort of priority would be you have done something. I think you mentioned Piaget, you will invest in jewelry. Any other hot areas of investment?
I think with EUR 3.8 billion in cash sitting on your balance sheet, priorities aren't a problem.
Yeah. Patrik.
Patrik Schwendimann
Patrik, I tried to answer all of your questions in my presentation, so I'm surprised you have a couple.
Yeah, really. Lots of my question answered.
Yes.
Regarding your October sales, you're mentioning that excluding these high jewelry sales, it was more or less the same trend, meaning plus 9% in local currencies. Did I get this right?
I think then if you exclude the high jewelry, then the trend continued.
+ 9%.
The way it was. The trend continued.
Mm-hmm. Secondly, regarding admin costs, you were mentioning it plus 12% in local currencies for the full year.
Twelve.
Yes, 12. What about next year in terms, is there another substantial IT spend, or is then it's coming down to a more reasonable level?
Should be. Yeah, I think so. I mean, you know, we have invested quite a bit, that, you know, has to end, I would say, at some point. You know, it all depends on what the sales are, you know, from a budget standpoint, which I don't know. It should be less.
It should be less.
Okay. Thirdly, regarding your financial result, as expected, high hedging gains. On the other hand, you had some losses on monetary items.
What was behind this?
Well, I think, what we do is, and we've been quite open about it, we generally, our hedging program, we hedge net cash flows, one year out, and we target 70% of those cash flows. That's one thing. When our distribution platform sells product, so to America, let's say, they invoice in local currency, and the payment terms tend to be 60 days. When they book that invoice, they hedge that. We had a gain in the previous period and a loss in this period. That's what that is.
Okay. My last question, could you give us some flavor how much have been the losses at Dunhill, Chloé, and Lancel in H1?
I think you look at the portfolio. I mean, clearly the movement, I would say relates mostly to Chloé and Dunhill.
Okay. Thanks a lot.
I think this is it. Is there any last question, or have we answered everything?
Have a go, Shane.
You're not obliged.
You're not obliged, Shane.
Thanks.
I'll come back for some moment. Just on this, the social security payment.
I guess in nature that would be one-off, provided your stock remains the same level.
Yeah. I mean, certainly a large portion of that has crystallized in the first half. Okay, if all things being equal, if the stock price didn't move from September thirtieth to That's it, right? It wouldn't move at all.
Yeah. Okay. Just your guidance is the wrong word, but you see a 100 basis point impact on the gross margin.
For the full year.
Just on the FX. You don't see any offsetting gains from lower gold and diamond prices?
I think, as we've said, that takes 12-18 months to come through. you know, we'll see that next year.
You don't think you'll see any in the second half?
I don't think so, no.
Okay. All right.
Okay. Well, thank you. I think this is the end of presentation.
Thanks for your time.
Thank you.
Okay, great.
Thank you.