Giordano International (709) H1 2024 earnings summary

Executive summary

• Revenue declined 3.4% year-over-year to HK$1,903 million, mainly due to underperformance in Greater China, while Southeast Asia, Australia, and GCC saw modest growth at constant exchange rates.

• Net profit attributable to shareholders dropped 36.8% to HK$120 million, impacted by one-off non-recurring expenses, lower joint venture income, and Greater China underperformance.

• Gross margin improved slightly to 58.9% (+0.2pp), driven by a favorable channel mix, but gross profit fell 3.1% year-over-year.

• Operating expenses as a percentage of revenue rose to 49.5% (from 46.6%), reflecting non-recurring costs from a corporate requisition and CEO severance.

• Quick Win initiatives in Q2 showed early positive results, narrowing Greater China’s Q2 revenue decline to -2.8% from -12.8% in Q1.

Financial highlights

• Operating profit fell 26.3% to HK$202 million; operating margin contracted to 10.6%.

• EBITDA fell 14.4% to HK$457 million.

• Basic EPS was 7.4 HK cents (2023: 12.0 HK cents); interim dividend declared at 8.0 HK cents per share (2023: 17.0 HK cents).

• Net cash balance at period end was HK$720 million, down from HK$1,014 million; net cash flow from operations was HK$265 million.

• Inventory turnover increased to 119 days (2023: 111 days); inventories rose to HK$514 million.

Outlook and guidance

• New CEO since April 2024 is leading a five-year “Beyond Boundaries” strategy focused on resetting fundamentals, revitalizing the brand, digital transformation, and reconnecting with consumers.

• Management targets flat full-year revenue for 2024 and high single- to low double-digit CAGR in revenue from 2025–2030.

• Quick Win initiatives are expected to drive positive growth in 2H2024, with IT upgrades and product innovation supporting future sales.

• Strategic priorities include IT upgrades, organizational restructuring, and a shift to digital channels, especially in Mainland China.

• Focus on digital transformation, eCommerce acceleration, and market share gains in Mainland China and Southeast Asia.