This company probably needs no further introduction – you may even be users of the Hong Kong-listed company’s namesake brand of products, which ranges from fragrances, skin and hair care, to bath and body products.

L'Occitane International S.A. is in the business of manufacturing, as well as retailing natural cosmetics and well-being products. Image Credit: Photo by Tokyo Kohaku on Unsplash
L’Occitane International S.A. is in the business of manufacturing, as well as retailing natural cosmetics and well-being products. Image Credit: Photo by Tokyo Kohaku on Unsplash

What you may not know about L’Occitane International S.A. is that the company also has 6 under brands, and they are (you can click on the respective brand names to learn more about them):

  • L’Occitane au Brésil – where its product portfolio consists of fragrances, hair, and body care products, and its products can be found in more than 180 sales outlets across 21 states in Brazil, as well as in its online store.
  • Melvita – with more than 180 products that are certified natural and organic, Melvita is one of France’s most recognised pioneering organic beauty brands.
  • Erborian – established since 1952, the skin care brand creates hybrid products, such as its iconic BB and CC creams that bridge the gap between skin care and makeup.
  • LimeLife by Alcone – which sells skin care and professional makeup products since 1952.
  • Elemis – it is the no.1 British skin care brand, where its award-winning skin and body care products are made available through prestige retailers, as well as through an elite network of over 1,600 spas and salons globally.

From my understanding in the company’s latest annual report for FY2019/20 ended 31 March 2020 (the one for FY2020/21 was not yet published at the time of writing), L’Occitane International has business operations in the following geographical locations:

CountryNo. of StoresNet Sales (%)
United States17218%
Japan16314%
China20312%
United Kingdom7210%
Hong Kong358%
France876%
Russia1124%
Taiwan553%
Other Geographical Areas51022%

Now that you have a good understand of the company’s business operations, let us look at its historical financial performance, debt profile, along with its dividend payouts to its shareholders over the last 5 financial years (period between FY2016/17 and FY2020/21) in the rest of this post:

Financial Performance (between FY2016/17 and FY2020/21)

The company has a financial year ending 31 March. In this section, let us take a look at some of the key financial statistics:

Total Revenue and Net Profit (€’mil):

FY
2016/17
FY
2017/18
FY
2018/19
FY
2019/20
FY
2020/21
Total
Revenue
(€’mil)
€1,323m€1,319m€1,425m€1,644m€1,537m
Net
Profit
(€’mil)
€132m€96m€118m€116m€155m

L'Occitane International S.A.'s Total Revenue and Net Profit between FY2016/17 and FY2020/21

Its total revenue saw year-on-year (y-o-y) declines in 2 out of the 5 financial years I have looked at – in FY2017/18, the dip was due to exchange rate fluctuation, while the decline in FY2020/21 was as a result of the Covid-19 pandemic. Over a 5-year period, its total revenue managed to record a 3.0% CAGR.

Similar to its total revenue, L’Occitane International’s net profit fell in 2 out of the 5 years I have looked at – in FY2017/18, it was due to an unfavourable foreign exchange translation, and consequences of the tax reform in the US; in FY2019/20, it was due to notional financial expenses under the IFRS 16 lease accounting and one-off tax effects. In terms of its 5-year CAGR, it was at 3.3% – similar to its total revenue growth rate.

Gross and Net Profit Margin (%):

The following is the company’s gross and net profit margin over the past 5 years I have computed:

FY
2016/17
FY
2017/18
FY
2018/19
FY
2019/20
FY
2020/21
Gross Profit
Margin (%)
83.3%83.2%83.2%81.6%83.0%
Net Profit
Margin (%)
10.0%7.3%8.3%7.1%10.1%

L'Occitane International S.A.'s Gross and Net Profit Margin between FY2016/17 and FY2020/21

While its gross profit margin saw a very slight decline over a 4-year period (between FY2016/17 and FY2019/20), it saw an improvement in the year thereafter. Personally, I am of the opinion that its gross profit margin is still pretty stable at around the 80+% range.

Its net profit margin, however, have fluctuated between 7% and 10% over the last 5 financial years.

Return on Equity (%):

In layman terms, Return on Equity, or RoE, refers to the percentage of profits a company was able to generate for every dollar of shareholders’ money it uses in its businesses. Personally, I would prefer this statistic to be maintained at 15.0% and above consistently.

So, did L’Occitane International’s RoE meet this criteria of mine? Let us find out in the table below:

FY
2016/17
FY
2017/18
FY
2018/19
FY
2019/20
FY
2020/21
Return on
Equity (%)
14.3%10.0%11.5%10.6%12.9%

L'Occitane International S.A.'s Return on Equity between FY2016/17 and FY2020/21

Just like how its net profit margin moved over the years, the company’s RoE have also fluctuated over the last 5 financial years.

Debt Profile (between FY2016/17 and FY2020/21)

Moving on, let us take a look at the company’s debt profile in this section – As far as a company’s debt profile is concerned, my selection criteria is one that has minimal or no debt (of course the latter is very much preferred), along with the company being in a net cash position.

The following table is L’Occitane International’s debt profile over the last 5 financial years – between FY2016/17 and FY2020/21:

FY
2016/17
FY
2017/18
FY
2018/19
FY
2019/20
FY
2020/21
Cash & Cash
Equivalents
(€’mil)
€453m€386m€144m€166m€421m
Total
Borrowings
(€’mil)
€73m€88m€578m€475m€522m
Net Cash/
Debt
(€’mil)
+€380m+€298m-€484m-€309m-€101m

The company has been in a net cash position in 2 out of the last 5 financial years; while it sank into a net debt position in the most recent 3 financial years (i.e. between FY2018/19 and FY2020/21), but it has improved every single year, as a result of improvements in the company’s cash and cash equivalents over the same time period.

Dividend Payout to Shareholders (between FY2016/17 and FY2020/21)

L’Occitane International pays out a dividend to its shareholders on an annual basis.

The following table is the company’s dividend payout over the last 5 financial years, along with its payout ratio:

FY
2016/17
FY
2017/18
FY
2018/19
FY
2019/20
FY
2020/21
Dividend
Per Share
(€/share)
€0.0316€0.0297€0.0297€0.0228€0.03687
Net
Profit
(€’mil)
38.5%42.3%35.5%29.4%34.9%

L'Occitane International S.A.'s Dividend Payout to Shareholders between FY2016/17 and FY2020/21

I noticed that its dividend payouts are somewhat in-line with its net profit growth (you can read about it in the previous section) – where its payouts go up if its net profit records a y-o-y improvement, and down if otherwise.

From the dividend payout ratios over the years, it seems that the company has been maintaining its payout at under 40.0% – meaning the company pays out no more than 40.0% of its earnings to its shareholders as dividends, while keeping the rest of its business/es.

Closing Thoughts

After studying the company’s financial performance, debt profile, as well as dividend payouts to its shareholders over the past 5 years, there are good, as well as ‘not so good’ aspects to note.

First, the good aspects – its business operations are well-diversified geographically (where no one particular country accounting for a huge bulk of the company’s revenue), which is desirable in my personal opinion. As far as its financial statistics is concerned, despite its top- and bottom-line dipping in 2 out of the 5 years I have looked at, it still managed to see some growth over a 5-year period. Its gross profit margin more or less remained the same throughout the years, which implies that the company manage to contain its costs well – another ‘plus’ in my opinion. Another thing to note is its debt profile – no doubt the company is in a net debt position in the latest FY2020/21, but its has improved compared to 2 years ago.

On the other hand, the ‘not so good’ aspects include its fluctuating net profit margin and RoE. The same can also be said about its dividend payouts (as such, investors who are looking for companies that are able to pay out a steady dividend may not find this one ideal.)

With that, I have come to the end of my analysis of the Hong Kong-listed L’Occitane International S.A. Please note that everything I have just shared above is for your own informational purposes only, and that they do not represent any buy or sell calls for the company’s shares.

Disclaimer: At the time of writing, I am not a shareholder of L’Occitane International S.A.

 

Click here to join The Singaporean Investor's Telegram group to receive updates whenever a new post is added to the site.

Click here to learn about a quick and easy way to study about a company (and make a more informed investment decision) without the need to browse through its annual reports.