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Company Profile
Chairman Or Ching Fai Raymond
Share Issued (share) 1,912M
Par Currency HKD
Par Value 0.1
Industry Apparel
Corporate Profile Business Summary:
The Group is principally engaged in retail and wholesale distribution and licensing of quality fashion and non-apparel products designed under its own internationally-known Esprit brand name in Germany, Rest of Europe(The Rest of Europe region includes the group’s business in America and the Middle East.), Asia Pacific and via e-shop platform.

Performance for the year:
For the financial year ended 30 June 2017 (“FY16/17” or “Financial Year Under Review”), Group revenue amounted to HK$15,942 million (2016: HK$17,788 million), a decline of -8.7% year-on-year (“yoy”) in local currency (“LCY”), in line with the corresponding reduction in total controlled space of -8.5% yoy.

For FY16/17, the Group recorded a Gross Profit margin of 51.6%, representing a yoy increase of +1.4% points and resulting in Gross Profit value of HK$8,230 million (2016: HK8,929 million).

Net profit was HK$67 million, an improvement from HK$21 million last year.

Business Review:
The group's industry is undergoing very significant changes fueled by the proliferation of ecommerce and the intensification of price competition driven by both pure digital players and fully vertical retailers. In a moment when apparel consumption is lackluster in most markets around the world, the rapid growth of digital and vertical retailers implies a relevant loss of market share for other channels and for many other companies.

As a result, operating conditions remain difficult in the industry, especially for brick & mortar stores. Esprit is no exception to this dynamic and has continued to reduce its total controlled space (-8.5% year-on-year (“yoy”)) and, correspondingly, its topline (-8.7% yoy in local currency). But, beyond the necessary rationalization of the group's store network, the group have taken successful measures to achieve a financial result better than last year’s. These measures focused on profitability and included decisive action to improve gross profit margins as well as strict discipline to decrease the group's costs. Together, they resulted in a net profit of the Group to HK$67 million. Considering the relatively small net profit for the financial year, the Board does not recommend the payment of a final dividend at this time.

Although this net profit amount is modest in absolute terms, it is important to highlight that the main factor contributing to the better results this year was the significant improvement in the performance of the Group’s underlying operations, i.e. +HK$386 million EBIT excluding all exceptional items.

Finally, thanks to prudent cash management, the group's cash development has remained stable in FY16/17. The Group ended the year with a net cash balance of HK$5.2 billion, with zero debt. The group are proud to see that the Strategic Plan has been completed without significant consumption of cash these years, leaving the group with adequate funds to invest in sales growth and further cost restructuring initiatives.

Prospects:
FY16/17 has been a year of good bottom line improvement. At this stage, with improved bottom line and cash flow developments from operations, the group are reassessing the best possible use of the group's cash in order to create long term value for the group's shareholders through sales growth and further reduction of structural costs.

As previously guided, growth will only come progressively as the Group still faces a downsizing process in its wholesale and retail space (as loss-making retail stores still need to be closed). The group expect to partly counter this with growth in the group's online channels, with better sales and/or gross profit productivity improvements in the group's existing stores, with selective retail store openings and with new wholesale partnerships.

All in all, the group expect a single-digit decline of controlled space and a modest decline of total revenue.

Regarding gross profit margin, the group aim to achieve a modest increase as the group continue the group's decisive measures to reduce markdowns and promotions.

As for OPEX, the group believe that there is opportunity to further reduce costs, although not as fast as in FY16/17. As such, the group expect a single-digit decrease in operating expenses.

Overall, the improvement in gross profit margin and operating expenses is expected to outweigh the negative impact of revenue decline to produce similar improvement in EBIT (excluding exceptional items) as experienced in FY16/17.
Information from the financial statements of listed companies
Last Update: 2017/10/17
 
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